Ukraine: Ukraine Joins International Convention On Maritime Liens And Mortgages

On 22 November 2002, the Ukrainian Parliament (Verkhovna Rada) enacted the Law of Ukraine "On the Accession of Ukraine to the 1993 International Convention on Maritime Liens and Mortgages", whereby Ukraine acceded to the 1993 International Convention on Maritime Liens and Mortgages (the "Convention").

At the present time, maritime liens and mortgages on sea vessels, which are registered in Ukraine, are created in accordance with the relevant provisions of the Maritime Code of Ukraine. When the Convention enters into force on 22 February 2003, the provisions of the Convention will supersede and supplement the provisions of the Maritime Code of Ukraine.

In order to establish international uniformity in the field of maritime liens and mortgages, the Convention provides, inter alia, that:

1. mortgages, "hypothèques", and charges over sea vessels will be recognizable and enforceable in the states party to the Convention, provided that such instruments have been effected and registered in accordance with the laws of the state in which the vessel is registered;
2. any deregistration of vessels registered in the states party to the Convention will be permitted only if all registered mortgages, "hypothèques", and charges have been discharged or released, or the written consents of all of the holders of these instruments have been obtained;
3. maritime liens (as set out in Article 4 of the Convention) will have priority over registered mortgages, "hypothèques", and charges;
4. in the event of a forced sale, a notice will be provided to (a) the registration authorities, (b) all of the holders of registered mortgages, "hypothèques", and charges, (c) all of the holders of maritime liens, and (d) the registered owner of the vessel; and
5. in the event of a forced sale, all registered mortgages, "hypothèques", and charges and all liens and other encumbrances will cease to attach to the vessel, provided that the conditions set out in Convention are met.

The Convention further defines the cases where a right of retention may be granted in respect of a vessel, sets forth the concept of the extinction of maritime liens due to the operation of time, and specifies the legal consequences of a temporary change of flag with respect to maritime liens, mortgages, "hypothèques", and charges.

The accession of Ukraine to the Convention will create more favorable conditions for the financing of the maritime merchant fleet flying the Ukrainian flag.