Because of its geographical location in the centre of the Mediterranean, Malta has since time immemorial served as a maritime centre. Straddling major shipping routes, Malta has attracted ships to its shores, whether for supplies, repairs or to load or discharge cargo. This tradition has continued in more recent times and developed further when large transhipment facilities were constructed, turning Malta into a maritime hub. Maltese law and court practice operate together in such a manner that renders Malta an interesting and attractive jurisdiction for the arrest of ships and, in some cases, for their judicial sale. Judicial sales of vessels in Malta are either carried out through the traditional open auction method1 or, alternatively, through private treaty,2 which is a more recent legal development.
In recent cases concerning judicial sales, the courts have looked at the question as to what precisely is included in a judicial sale of a ship that is sold in Malta – is everything on board acquired by a buyer, irrespective of who owns those items at the time of the sale? The question is particularly relevant with respect to bunkers that are on board the vessel when sold, with bunker suppliers typically claiming that ownership of the bunkers was not transferred to the shipowner and that, as a consequence, since ownership did not pass, they retain rights over those bunkers that are not impacted by the judicial sale. The Maltese courts have also looked at this question with respect to specialised equipment that, although on board the vessel did not belong to the shipowner at the time that the vessel was sold. When considering the sale of a yacht by private treaty, the court was faced with the question of whether personal items of the ultimate owner and his guests that were on board at the time of the sale were included in the sale or not.
The Orca II
The principle that, for the purposes of forced judicial sales, a vessel must always be taken as a whole was established in local jurisprudence some time ago. The Orca II3 is the landmark judgment on this point. In its judgment, the Commercial Court stated as follows:
The arrested vessel is one unit with all its equipment and accessories and she cannot be broken up into pieces for the purpose (the enforcement) of a warrant (of arrest).4 For the purposes of the said warrant (of arrest), it is one object only that has been seized: 'A ship and any other Vessel is a res connexa; it is a whole which is made up of various distinct parts'.5 As Targa6 points out, habent et naves quasi membra. When one therefore refers to a ship or vessel, one includes by that word not merely the body or frame of the ship, but its tackle, apparel, munition, ordnance, which, though temporarily separated therefrom are destined for her permanent use because, as Mancini points out, it would be prejudicial to navigation to deal in a ship as distinct from its appurtenances as this would lessen considerably the value of the one and of the others.
The Commercial Court went on to confirm that the warrant of seizure on the vessel did not need to be issued on the individual parts of the ship and that the forced sale could, therefore, proceed with regard to the ship as a whole.
However, what is more relevant is the point made by Professor Cremona7 that 'the parties may ... distinguish, in any transaction effected by them, the ship from any article or from the articles which are an accessory thereof provided however they do so by means of an express declaration' – clearly indicating that it would be acceptable as a matter of Maltese law for, say, a provider of equipment for the ship to retain ownership over the equipment provided to that ship until full payment is received by the creditor. This all comes to the fore in a forced sale of a vessel, where such creditors will vie with competing creditors to have 'their' equipment removed from the ship, excluded from the forced sale and returned to them. In jurisdictions such as Malta's, where 'self-help' is generally frowned upon, such creditors will need to seek recourse from the courts to recover their 'belongings'. They will succeed in their action only if: (i) as will be seen in the following judgment, they bring their action before the forced sale takes place; and (ii) they demonstrate successfully to the court that the arrangement described by Professor Cremona was indeed entered into between them and the shipowner. Such creditors will carry the burden of proof as well as the related costs and risks of having such equipment removed from the ship.
Success in off-loading items of a ship in the circumstances described above will only succeed if the rules of 'accession'8 do not apply. If the equipment or other item provided to the ship becomes 'untied to or incorporated' with the ship and cannot be separated without 'considerable damage', the creditor will not succeed in claiming the item back. In such cases, the creditor will enjoy a claim for compensation9 and will have no choice but to compete with the other creditors for the proceeds of the sale of the vessel. Whether the debt owed to such a creditor will enjoy the status of a special (maritime) privilege over the ship or otherwise10 will depend on the nature of the debt.11
1. In accordance with arts 313–57 ff of the Code of Organization and Civil Procedure (ch 12 of the Laws of Malta).
2. The procedure for a court-approved private sale of a vessel or aircraft in Malta has been discussed in previous editions of this journal. See (2014) 20(4) JIML 474–76 and (2012) 18(3) JIML 356–58.
3. Doctor of Laws Hugh Peralta as special attorney on behalf of the foreign entity Valkyrie Shipping Corporation of Panama, as owners of the vessel Orca II v Louis Muscat Baron as special attorney of Ronasons International Limited (Commercial Court) (4 November 1986) 942/86 JH.
4. At the time, it was a warrant of seizure that was used to serve (in part) the purpose of a warrant of arrest and allow the judicial sale of a vessel in Malta.
5. The Court is quoting here from Felice Cremona in F Cremona Notes on Maltese Maritime Law (Part I) revised edn 1974 by George Schembri, University of Malta Press, 10 ff.
6. Carlo Targa Ponderazioni sopra la contrazzione marittima, Part II, n.i. Genoa, Stamperia del Casamara (1750).
7. Cremona (n 5) 10.
8. Civil Code (ch 16 of the Laws of Malta) arts 566 ff.
9. ibid art 573(2).
10. Under the Merchant Shipping Act (ch 234 of the Laws of Malta) art 50.
11. If the equipment qualifies as needed for the 'preservation of the ship', then such debt will qualify as a privileged debt in certain circumstances. See Merchant Shipping Act (n 10) art 50(g).
First published in the Journal of International Maritime Law (JIML) vol 25 (2019) Issue 2 at 156-60 by Lawtext Publishing Limited (www.lawtextpublshing.com)
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