As Maltese legal practitioners, we have for years been harping on the high standards of and comfort which Maltese law offers the mortgagee however it was the recession of 2008 which tested whether the system was as robust as we had been saying it was.
In 2006, our Code of Organisation and Civil Procedure underwent a radical shake up when it came to laws governing the jurisdiction of our courts in rem, arrest of ships and enforcement mechanisms. As far as the latter is concerned, 2006 saw the introduction of the "Court Approved Private Sale". The advantage was that the mortgagee (who under Maltese law can proceed directly with enforcement) could himself source a private buyer at the highest possible agreed price; enter into an MOA with the private buyer, request the court to approve the sale and on court approval, the vessel would be sold free and unencumbered. This is a huge advantage because it enables the mortgagee to negotiate the best price for the benefit of creditors and owners whilst giving the buyer peace of mind because he is purchasing the vessel free and unencumbered
The first to test the new procedure was Danske Bank in 2010 in Ann Fenech for and on behalf of Danske Bank A/S v Thor Spirit (App. no 1135/2011). Since then there have been 11 applications before the court for the approval of a private sale, 10 of which were granted and one revoked after it was granted. Applicants must provide two valuations based on a physical inspection and must show that a genuine effort was made to get the best price for the vessel and that known creditors were made aware of the procedure.
The system has worked exceptionally well with all the applications coming before the same judge Mr. Justice Mark Chetcuti who has been instrumental in developing a process of the highest standard, totally transparent and in synch with the spirit of the law as drafted.
The end result has been an evolving yet consistently speedy, efficient and transparent remedy for mortgagees in the face of a defaulting owner. Applicants who have benefitted from this remedy include some of the largest maritime lenders such as, Danske Bank A/S, Commerzbank Aktiengesselschaft, Pireaus Bank AE, Rietumu Banka, Amsterdam Trade Bank N.V, Hyundai Heavy Industries Co. Ltd, Macquarie Bank Limited and Bank of America.
One series of sales that hit the international headlines was those relating to vessels in the beneficial ownership of Today Makes Tomorrow – TMT.
Three of the ships in the TMT operated fleet, the A Ladybug, the B Ladybug and the D Ladybug found themselves abandoned in Maltese territorial waters. The crew was effectively abandoned and remained unpaid with no provisions or fuel. This led to a serious concern on the part of the Maltese port authorities because these state of the art car carriers of circa 72,400 gross tons each were anchored 12 miles out exposed to the elements. Applications were filed by Macquarie Bank Limited, Hyundai Heavy Industries and Bank of America respectively and it is thanks to their financial strength and seriousness that they were in a position to appoint managers who took care of the crew and ensured that the vessels were provisioned and fuelled and who gave the port authorities peace of mind with regard to their own safety and the safety of other vessels also at the same anchorage. These cases showcased the optimum results that can be achieved for the good of the owner, creditors, crew, ITF and port authorities when things are done in an orderly and organised fashion which ultimately was possible thanks to the procedure available under Maltese law.
The Ladybug cases also showcased another interesting element which was how the US Bankruptcy court can and will grant leave for the court approved private sales of such vessels even when the assets of the bankrupt are part and parcel of US Chapter 11 procedures.
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