ARTICLE
7 November 2024

Revamping Malta's Maritime Law: Amendments To Enhance Ship Registration And Financing

Late last year a bill with the intention of amending the Merchant Shipping Act (hereinafter the "Act") was read for the first time in Parliament.
Malta Transport

Malta's Maritime Law

Late last year a bill with the intention of amending the Merchant Shipping Act (hereinafter the "Act") was read for the first time in Parliament. It aims to amend the Act to reflect the progress made in international standards and practices in maritime law whilst facilitating a more competitive Malta Ship Register (hereinafter the "Register").

To enhance the efficiency of the Register, the amendments introduce electronic methods for document submission. The Ship Registry is also being granted the discretion to accept and store electronic versions of documents.

The proposed amendments shall also affect the restriction of registration of elder ships. This is because the express permission from the Registrar-General shall now be required for ships whose first construction occurred more than 20 years before the beginning of the year the application is made. This provision would enable the Registry to have greater control over the ships being registered, while ensuring that only vessels of a high standard are accepted for registration.

Markings of ships are proposed to be better outlined. This would mean that a ship shall have the following markings:

  • Name;
  • Official number;
  • Registered tonnage;
  • International Maritime Organization Identification Number; and
  • Draught.

This bill aims to strongly integrate the notion of a bareboat charterer into the provisions of the Act. Firstly, by defining a bareboat charterer as lessee or a sub-lessee who by virtue of a contract shall acquire the full control and complete possession of the ship. This whilst allowing the lessee the right to appoint the master and crew for the duration of the charter. Nonetheless, such definition shall bar the lessee from the right to sell or mortgage the ship.

This can be seen throughout the multiple amendments which enable the bareboat charterer to be considered on the same ground as the owner and master. Examples of such are the covering of medical expenses and the payment of fines which are due to contraventions owing to the lack of the crew's knowledge of English.

Provisional registration provisions are proposed to be further enhanced. The Registrar-General shall have the ability to extend provisional registration of a ship until its completion, at the request of the applicant or his authorised representative and for periods of 3 years at a time. This would be an attractive approach by the Registry as they look to attract and facilitate an easier onboarding process to ships provisionally registered whilst under construction.

Ships under construction are provided further in this bill by introducing provisions for the registration of mortgages over such ships. All applicable provisions within the Act governing mortgages will apply in these cases. The Registry shall have discretion whether to ask for a declaration of ownership to verify ownership. The declaration will extend to cover ownership of the ship even after its construction is completed. Furthermore, the provision as proposed acknowledges the right to accession, ensuring that ownership rights apply continuously from the ship's construction through to its completion.

The endorsement of a certificate of ownership in the event of a change in ownership is proposed to no longer be required. Moreover, the need to surrender the certificate of registry, whether provisional or not, are proposed to no longer prevent the closure of the registry.

The provisions of change in ownership effecting the closure of registry on sale of ship by virtue of a court sale or sale by mortgagee in possession are also affected by the bill. The proposed amendments propose that the Registry must close the registration of a ship when it is sold to a person not competent to own a Maltese ship. The registry will be wholly closed in cases when the competent court approves or orders the sale, while partial closure will occur in instances of sales through mortgages.

In the event of a sale by court order, the registry shall be closed with respect to any mortgage, encumbrance, or financial charter instrument. Conversely, when a sale occurs through a mortgage, the registry will remain open for any unsatisfied mortgages. Additionally, the amendments extend the scope of registry closure to encompass all financial charter instruments, not limited to mortgages and encumbrances.

The bill proposes clarification that the absence of a monetary value does not invalidate the mortgage. Under the current law this is not something expressly stated. Additionally, it sets three conditions for a mortgage to secure future obligations:

  1. The mortgage must explicitly state the obligation it is meant to secure;
  2. The obligation must be contingent upon a future event; and
  3. The future obligation must be clearly defined to ensure it can be determined with reasonable certainty.

The proposed article 49B introduces provisions for the registration of financial charter instruments with the Registry. For a financial charter instrument to be registered, the consent of any existing creditors, such as mortgagees, is required. The registration of a financial charter instrument does not affect the rights of existing mortgagees, regardless of whether their mortgages were registered before or after the financial charter instrument.

The mortgagees' rights remain intact, and the registration is without prejudice to certain provisions. Furthermore, the registration of a financial charter instrument does not prevent the registration, amendment, or discharge of other interests related to the ship, nor does it hinder the transfer of the ship itself. In such cases, the lessor shall either transfer the financial charter instrument with the ship or discharge it. Financial charter instruments will rank after mortgages and certain debts listed in the Act, but before debts specified in hypothecs, privileges, and other debts listed in the Act.

In the event of default, it is proposed that the lessor shall have the right to take possession of the ship after providing notice to the financial charterer. During judicial proceedings, the lessor may serve notifications to the ship's master or, if the master is abroad, to the local agent appointed for the ship. Additionally, the provisions in this article are without prejudice to those related to the ship's certificate of registry. Definitions for key terms, such as finance charter, financial charter instrument, and lessor, are also included.

Amendments to a financial charter instrument shall be able to be made, but its priority will remain the same as before the amendment. Amendments are permitted to increase the amount of capital secured or to extend the instrument to secure other obligations in favour of the lessor. However, no amendments can be made after the obligation has been fully satisfied, and any amendments must be acknowledged by a certificate.

With the introduction of a financial charter instrument, amendments to the Act allowing ships to also provide security by virtue of a finance charter interest are also being proposed. In addition to the proposed amendment on securities provided by ships, it is also proposed that mortgages registered in foreign jurisdictions, but recognized in Malta, be included and registered in the Registry.

Collectively, these amendments aim to streamline administrative procedures, enhance regulatory clarity, and bolster Malta's position as a leading European shipping registry.

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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