Turkey: Ship Mortgages Under The Commercial Enterprise Pledge

Introduction

The commercial enterprise pledge, which is of great importance in business transactions as a type of security, is regulated under the Commercial Enterprise Pledge Act ("CEPA") No. 1447. In this article, pledges containing ships that are elements of a commercial enterprise regarding which a commercial enterprise pledge will be established will be examined considering the provisions regulating the commercial enterprise pledge and ship mortgages.

Commercial Enterprise Pledge

The commercial enterprise pledge agreement is defined in Art. 2 of CEPA. As per this article: "The commercial enterprise pledge agreement is concluded by and between credit institutions having legal personalities and which are established as corporations, real persons or enterprises having legal personalities active in sale of goods on account and cooperatives on one side and real persons or legal entities owning a commercial enterprise on the other." The scope of this agreement should detail, as specified in Art. 3 CEPA, the trade name and enterprise name, machinery, instruments, tools and motor transportation vehicles owned at the time of the registration of pledge and allocated to the activities of the commercial enterprise, intellectual property rights such as patents, trademarks, models, diagrams and licenses.

Some of these elements must be included in the scope of the commercial enterprise pledge; otherwise, the pledge agreement will be deemed invalid. Within that scope, the parties cannot exclude the trade name, company name and movable facilities of the enterprise from the scope of the agreement. However, intellectual property rights such as patents, trademarks, models, diagrams and licenses can be excluded from the commercial enterprise pledge by agreement of the parties.

Under Art. 4 CEPA, if there is no exclusion of any elements, as stated above, all the movable facilities of the enterprise must be included in the pledge agreement and a full list of the pledged elements representing their natures must be attached thereto.

The commercial enterprise pledge is a special regulation that establishes a pledge, which is a limited real right, on the whole of the movable facilities of the enterprise without the delivery of their possession.

Further studies must be carried out as to the legal question regarding ship mortgages listed amongst the movable property of a commercial enterprise. Where a ship registered in the ship registry is pledged under the commercial enterprise pledge, the Ship Registry authorities reject requests for registration. It would be convenient to study the provisions of the Turkish Commercial Code No. 6102 ("TCC") and CEPA together in order to clarify this issue.

The Ships under the Scope of the Commercial Enterprise Pledge

Art. 3 CEPA sets forth the elements falling within the scope of the commercial enterprise pledge agreement. Pursuant to this provision: "machinery, instruments, tools and motor transportation vehicles possessed at the time of the registration of the pledge and allocated to the activities of the commercial enterprise", which are also classified as the movable facilities of the enterprise are considered elements of the pledge, and their inclusion is mandatory according to Art. 4 CEPA.

Since Art. 936 TCC qualifies all vessels as movables, whether or not they are registered to the Ship Registry, the ships of an enterprise shall be included in the movable facilities of the enterprise as well. As a result, it may be concluded that a ship may be pledged without the delivery of its possession under commercial enterprise pledge agreements.

Consequently, as a general rule, ships also have to be added to the list when concluding a commercial enterprise pledge agreement. Otherwise, if an enterprise forgets to include a ship (which is a motor transport vehicle) within the agreement, it would not be possible to claim that the agreement is valid on the basis of the good faith principle, due to the importance of ships in business transactions.

The Distinction between Registered and Non Registered Ships under the Scope of the Commercial Enterprise Pledge

The last sub-article of Art. 3 CEPA stipulates that the provisions regarding ship mortgages in the TCC are reserved. Consequently, the legal nature of registered and non-registered ships should be examined separately. Under Art. 1014 TCC, it is stipulated that an agreement can establish a pledge on a registered ship only through ship mortgage.

Considering the clear provisions of the TCC and CEPA, it may be derived that it is necessary to establish a ship mortgage as a separate pledge and not within the scope of the commercial enterprise pledge, as in real estate.

One can conclude that the purpose of the legislator is to regulate ship mortgages in more detail, and to make sure the parties establish limited real rights on ships, which have a high economic value, same as real estate. Otherwise, it could be suggested that the purpose of Art. 1014 TCC was disregarded, taking into account the number of ships owned by commercial enterprises and the importance of their economic value.

Due to the above-mentioned provisions, even if the parties agree to establish a pledge on a registered ship through a commercial enterprise pledge agreement, no limited real rights can be established on said ship. This is because registered ships cannot be shown as an element included in the pledge agreement.

On the other hand, a pledge can be established on non-registered ships via a commercial enterprise pledge agreement regardless of their size and type. Furthermore, in the event the non-registered ships are not included within the scope of the pledge agreement, all commercial enterprise pledges may be deemed void. However, the fact that a pledge right is not established on registered ships shall not influence the validity of the commercial enterprise pledge agreement.

Conclusion

As a general rule, ships are considered as part of the movable facilities of an enterprise as a result of their nature as a movable property, and they can be subject to the commercial enterprise pledge. Nevertheless, the special provisions of the TCC and CEPA, which stipulate the provisions related to ship mortgages that are reserved, require making a distinction between registered and non-registered ships with respect to commercial enterprise pledge agreements. As a result of Art. 1014 TCC, which sets forth that a pledge can only be established on a registered ship via a ship mortgage, commercial enterprise pledge agreements cannot establish a pledge on registered ships. Where the parties agree to take out a security over the registered ships, they shall do so with a ship mortgage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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