This paper is intended to explain how law can serve as a means to an end and a successful one at that. Apart from presenting the reader with a cursory view of the law regulating ship registration in Malta, the authors have also strived to illustrate how the law assisted in making the Maltese merchant fleet a force to be reckoned with. The paper has been written with the purpose of presenting an overview of this success. Indeed, the focus of this paper is to illustrate this success by demonstrating the intimate nexus between the law and its practical application within a commercial environment, which sees legal professionals working in tandem with their clients and the relevant industry.
It is fair to say that owing to its strategically placed geographic position and its natural harbours, Malta has always found itself at the heart of the Mediterranean's commercial activity. Providing a point of convergence for trade between the European and African continents, Malta has developed a strong maritime tradition which has seen it evolve into an international centre for the maritime and shipping industries. Indeed, Malta's maritime legacy continues up till this very day, with the island boasting a reputation as one of the world's most reliable and effective centres for maritime services.1
Today, not only does Malta host a number of international institutions, inclusive of the International Maritime Law Institute, the International Ocean Institute and the Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea, but it also continues to strive to consolidate its position as one of the leading players in the highly competitive environment of the global shipping industry. For this reason Malta attempts to offer a holistic complement of diversified international maritime services including ship registration services, bunkering, ship repair, cargo operations, transhipment and yachting. Indeed, Malta has also managed to 'reinforce its position as a cruise port'.2
In a world where there are an increasing number of available flags for ship registration,3 however, Malta has also sought to become one of the globe's largest ship registries.4
The importance of the right of shipowners to register their ships and fly the flag of the State where the ship is registered should not be underestimated. First and foremost, it is a fundamental corollary to the freedom of ships to roam the high seas. This is because ship registration allows for the regulation of vessels 'via' the laws of the flag State when the vessel is on the high seas and, thus, prevents lawlessness and anarchy. Secondly, ship registration vests the vessel with the national character of the flag State to which it belongs. Indeed, it is often the registration of a vessel within the registry of a particular State which allows for the creation of a genuine link between the vessel and the State; thus vesting the vessel with national character.5
Where vessels are registered largely depends on the rules and regulations which a particular State decides to impose upon vessels as requisites for registration. In fact, the conditions for the entry of vessels into a States' register could ultimately be viewed as the pre-conditions for the attribution of such State's nationality to such vessel, the hoisting of its flag and the issue of documents attesting its nationality.6
Registration of vessels also serves a number of both public and private law functions inclusive of publicity, the right to engage in certain activities within the territorial waters of the flag state, the protection of the title of the registered owner and the protection of title and preservation of any ranking of priorities between persons holding securities over the ship.7
Following the birth of the Malta Flag with the enactment of the Merchant Shipping Act in 1973,8 Malta began a process which today sees it sitting in a position which belies its size. This is because Malta now boasts the largest maritime registry in the European Union and has established itself as a leading flag administration State.9
There is no doubt, that this success has been achieved as a result of Malta's deep rooted traditions with the ocean, hands on expertise and a solid set of values. There is equally little doubt, however, that this success is also largely owed to Malta's enactment of a robust regulatory structure, one which has laid strong legislative foundations on the basis of which Malta's success in the sector has been built. In a nutshell, Malta has managed to bring together – thanks to its laws – many of the factors which attract the industry.
Indeed, when it comes to shipowners searching the global playing field for potential flags, there are a number of choices which are available. Shipowners may, for example, wish to make use of a flag with which they have national or economic ties, as was the case for the so-called traditional registries. In the alternative, however, one may choose to register one's vessel within an open or international register.
Incidentally, it should be noted that whilst open registries were traditionally perceived as sub-standard flags of convenience, the wealth of international conventions which are in force and adhered to by such registers today means that the validity of such perception is now questionable.10 Indeed, it is traditionally open registries which have been those associated with some of the worst and most notorious maritime disasters, the Torrey Canyon 1967, the Exxon Valdez 1989 and the Sea Empress 1996 being some of the most noteworthy. This being said, commentators today are of the view that 'much of the criticism of against international registers on safety grounds is unjustified'. In fact, various factors, such as the fact that most vessels registered in such registries are owned and operated by some of the world's largest multinational undertakings, mean that this is one traditional prejudice which is no longer 'based in objective analysis'.11
Either way, the point is that there will be a number of factors which will undoubtedly play no small part in influencing a shipowner's choice of flag. These include economic factors, operating costs, political factors and miscellaneous factors inclusive of technical expertise and the ability to repair anywhere in the world without being bound to national shipyards.12 Similarly, shipowners will be on the lookout as to which vessels are eligible for registration within a particular register, whether there are any requirements as to ownership, what manning and certification requirements are in force as well as whether the flag is plagued with labour troubles or enjoys Government stability. Additionally, however, a shipowner will also want to look out for a flag which is both accessible and enjoys a good reputation.13
It is precisely sensitivity to the aforementioned factors and its ability to take them on board, both legislatively as well as practically, that has placed Malta on the world map when it comes to the maritime and shipping industries.
Other than this, however, one must also bear in mind that Malta's membership with the European Union and its placement on the Paris Memorandum of Understanding White List also means that it benefits from all associated advantages14 – such as the reduced frequency with which Maltese vessels are subjected to port state inspections.15 Malta has also bolstered its regulatory framework by ratifying and adopting, transposing or incorporating within its legislative corpus all major international maritime conventions.16
2. Robust, User Friendly Legislation
The enactment of the proper legislative instruments has been fundamental to making of Malta a hub of maritime services and ship registration. Malta has looked towards the Common law legislative legacy,17 itself the result of strong maritime traditions and likewise towards the various regional and international conventions, in order to be able to draft into our statute book the proper tools for this success. The policy decision taken by Malta to adhere to all major maritime conventions ensures that it remains an attractive flag to the international maritime industry.
In seeking to enact the appropriate legislative framework it was understood by the Maltese legislator that legislation had to be mindful of the realistic needs of the industry. In a hyper competitive sector, where millions of monies are transacted across the globe on a daily basis and where multiple factors continuously come into play to create a very dynamic and fluid environment, it was evident that legislation had to be user-friendly, cater for the commercial need of the industry and provide a tool which helps, rather than hinders, the stake holders. The aim, therefore, was for legislation to provide clear, simple and swift procedures and regulations, and not to create unnecessary obstacles or burdensome bureaucracy.
It is for this reason that local procedures for the registration of a vessel, for example, are relatively straightforward.18 It is precisely because Malta wished to attract vessels to the jurisdiction and with them all the economic activity that inevitably follows, that our law was drafted so as to prescribe flexible procedures. The same could be said for the deletion of a vessel from the registry19 or the discharge of a mortgage.20 Such procedures should, and do, not operate as a barrier to entry, but rather as an additional advantage offered by the Maltese flag.
Every State has ultimate discretion in prescribing the conditions for registration, with the validity of any such registration being solely within the remit of such State.21 For this reason, Malta, like every other flag State, has determined which categories of vessels it will accept to register. This is fundamental due to the fact that the determination of a vessel as an internationally 'registrable' asset has crucial legal consequences. These include the determination of the applicable peremptory or prescriptive periods, whether the object is subject to arrestment for the securing of a claim, the imposition of international safety requirements and the limitation of liability in respect of things such as the causing of damage to property or pollution.22
On a practical level, the flexibility of procedure adopted by Malta when it came to prescribing the legislative conditions and standards for registration has permeated throughout the corpus of applicable laws. It is in evidence, for example, in the fact that the law enables ownership of a vessel to be proven, by means of a declaration, in the process of its being registered in Malta. This is a feature which saves both time and costs. Similarly one is not initially required, upon registration, to submit evidence that the vessel has been taken off any registry where it might have been previously registered. Of course, such allowances are only provisional and more concrete evidence will be required at a later stage. Indeed, both a Bill of Sale and a Deletion Certificate23 from the previous registry will subsequently need to be produced to the Registrar. Nonetheless, this approach enables individuals to register their vessel within the Maltese registry without having to wait for the relevant paperwork and bureaucratic procedures.24 One can understand this advantage better when one remembers that the shipping and maritime industries are industries which operate almost exclusively on an international dimension, and hence such transactions often involve several entities and administrative bodies from different States.
Another clearly useful legal mechanism that Maltese law offers shipbuilders or owners of vessels is the possibility to register various forms of 'vessels', from super yachts to barges, or even vessels still under construction.25 The latter refers to vessels that are still in the process of being constructed or equipped. The registration of ships under construction offers a number of advantages to shipowners and operators,26 including the suspension of various legal requirements ordinarily relating to registration, until such time the construction is completed or delivery of the vessel made.27
Indeed, the possibility of registering vessels under construction is a seriously underutilised mechanism and something practitioners should take up and promote with their clients. This observation is particularly pertinent locally in light of the fact that not all open registries provide for such a possibility.
The flexibility of procedures and the industry sensitive approach which has been taken by the legislator when it comes to regulating the sector may also be seen in the fact that there are no specific regulations delineating the nationality of the master, officers and crew members serving on Maltese vessels.28
This being said, one should not confuse the legislative intent to provide for a comfortable legislative environment with the somewhat less scrutinous approach characteristic of less reputable flags of convenience. The Maltese legislation in force today, in fact, means that the Maltese flag is recognized and respected as a serious flag having regard for a wide variety of regulations ranging from technical management and seafarer's rights to matters concerning the environment and maritime pollution.29 Even if one looks towards the necessary requirements for the operation of a vessel one notes that this depends on, a priori, conformity of the vessel with all relative manning, safety and pollution prevention standards and certification.30 Indeed,
flag authorities have, necessarily to strike a balance between the requirements of the international conventions and the exigencies of the market. The overriding consideration remains safety of life at sea.31
The success of the balance which has been struck between serious regulation and an industry friendly approach has also been helped by the delegation of authority by the Administration to a network of consuls and classification societies, both of which are in a position to offer owners of vessels an integrated system of cross border services.32 Indeed, a ship may only operate under a Maltese flag if it carries all the requisite certificates as prescribed at law, commonly referred to as the ship 'trading certificates' or 'ship's papers'.33 Such certificates, inclusive of survey, tonnage and convention certificates, may be issued on behalf of the Administration by recognized organizations such as the American Bureau of Shipping, Lloyd's Register of Shipping, the Registro Italiano Navale and the China Classification Society, amongst others.
Moreover, when considering the factors which have contributed to the status quo one must also keep in mind that the relative small size of the country means that interested parties are in a position to communicate directly with decision and policy makers.34
This article was originally published in Id-Dritt, Vol XXV.
1 Transport Malta, 'Ship Registration'(http://www.transport.gov.mt/ship-registration) accessed 19 August 2013
2 Andrew Spurrier, 'Malta Feature' (2013) Fairplay 19
3 Jotham Scerri-Diacono, 'A Guide to Ship Registration in Malta' (2013) Lawyer Monthly 83
4 --, 'Malta Flag now Europe's Top Shipping Register and Endorsed as a Low Risk Flag' (2012) Hellenic Shipping Worldwide
5 Richard Coles and Edward Watt, Ship Registration: Law and Practice (2nd edn., Informa 2009) 1
6 Ibid 2
7 Ibid 7-9
8 Merchant Shipping Act, Chapter 234 of the Laws of Malta
9 Transport Malta, 'Vision and Mission' (http://www.transport.gov.mt/ship-registration/merchant-shipping/vision-and-mission) accessed 19 August 2013
10 'Open registers are nowadays considered to be an important feature of modern shipping. The concept of opening up the national register to allow and make it feasible for ships owned by foreign nationals to fly a particular flag is a widely accepted practice in the world's drive to internationalise commodity markets, including shipping which has become a global industry in all respects'; Combined Maritime Services Group, 'Ship Registration: Benchmarking Costs and Comparing Selected Factors Governing Choice of Flag' (October 2013) 5
11 Coles and Watt (n 5) 28 et seq
12 Ibid 61
13 Ibid 61-66
14 Phax Services Co. Ltd. Shipping & Corporate, 'Phax Services Company Limited' (http://www.phax.com.mt/index.pl/information_on_the_malta_flag) accessed 16 November 2013
15 Scerri-Diacono (n 3)
16 These include the International Regulations for Preventing Collisions at Sea 1972, the International Convention on Civil Liability for Oil Pollution Damage 1992, the Convention on Limitation of Liability for Maritime Claims 1996, the International Convention for the Prevention of Pollution From Ships 1978, the International Convention for the Safety of Life at Sea 1974, the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924, Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972 and, recently, the Maritime Labour Convention 2006; European Community Shipowners' Association, Annual Report 2008-2009 (http://www.ecsa.eu/images/files/downloads_annualreports/Rapport%202008-2009.pdf) accessed 14 October 2013
17 Alan E Branch, Elements of Shipping (8th edn., Routledge 2007) 162; Vernon Valentine Palmer Ed., Mixed Jurisdictions Worldwide (2nd edn, Cambridge) see Chapter 9 dealing with 'Malta' at page 528 by Ando, Aquilina, Scerri-Diacono and Zammit where it is explained further that in the maritime field, the Common Law influence, specifically English Law, came soon after Malta's involvement with Britain. There was pressure made by the British on Malta to adopt English-based legislation: this insistence was made because the British felt that it was advisable for Malta, as one of the main ports of call of the British Empire to follow English Law and practice in maritime matters.17 As for the rest, pressures to have the law changed came from within the country following political decisions taken to upgrade Malta's laws in order to generate or encourage business activity. This very often translates into pressure on legal drafters to adopt models that are attractive to the players (particularly the financiers) in the industry to which those models apply in order to ensure success. See also J M Ganado, Malta: A Microcosm of International Influences, Studies in Legal Systems, Mixed and Mixing (Kluwer Law International, 1996)
18 Merchant Shipping Act, Chapter 234 of the Laws of Malta, article 3 et seq. (Part I)
19 Referred to in the law as the closure of the register of a ship, vide article 28 of the Merchant Shipping Act, which specifically goes out of its way to spell out that a vessel cannot be deleted unless any registered mortgagees consent thereto. Cf. Council Regulation of 1991 concerning The Transfer of Ships from One Register to Another Within the Community – Council Regulation (EEC) No 613/91 of 4 March 1991
20 Merchant Shipping Act, article 46; Vide Scerri-Diacono (n 3)
21 Lauritzen v Larsen US Supreme Court 345 US 571 (1953)
22 Coles and Watt (n 5)
23 Or an equivalent document
24 Merchant Shipping Act, article 10 et seq.
25 Transport Malta, 'Ships under Construction'
(http://www.transport.gov.mt/ship-registration/ship-registration/ships-under-construction) accessed 11 September 2013; See also article 2 of the Merchant Shipping Act
26 For example, the requirement to declare the ownership of the vessel at the time of registration as per article 3 of the Merchant Shipping Act.
27 Transport Malta (n 25)
28 Transport Malta, 'Ship Rgistration' (http://www.transport.gov.mt/ship-registration/ship-registration) accessed 11 September 2013. Amongst other Conventions Malta ratified the Maritime Labour Convention and most Annexes to MARPOL. With regard to the EU position, the freedom of movement was acknowledged by the European Court of Justice in the case Commission of the EC v French Republic (Case 167/73). The EU Guidelines of State Aid to Maritime Transport encourage member states to have their nationals recruited as seafarers on their vessels whenever possible (section 2 of the said Guidelines) albeit there is no legislation at EU prohibiting the employment as crew of non-EU seafarers. Had it been any different the EU fleet would be fraction of what it is today. Meanwhile the EU and Malta have ratified the Maritime Labour Convention consolidating and at times upgrading the various pieces of legislation including various EU Directives concerning seafarers' working conditions.
29 European Community Shipowners' Association (n 15); Malta partakes of the various EU and International Conventions concerning pollution prevention.
30 Scerri-Diacono (n 3)
31 Combined Maritime Services (n 10)
32 Jotham Scerri-Diacono, 'Malta Flag Determined to Retain its International Status as a Quality Flag of Confidence' (Corporate Live Wire) (www.corporatelivewire.com)
33 Merchant Shipping Act, article 13
34 Jotham Scerri-Diacono and Karl Grech Orr, 'The Malta Flag: A 40-Year Success Story' (2011) Mondaq Business Briefing
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.