The Ministry of Transport has amended the Turkish Ports Regulation ("Regulation") and expanded the duties and powers of Harbour Masters in several ways. The Regulation has attracted particular attention given that it purports to fill in the loopholes as to early sale procedure of vessels, under the Turkish Commercial Code ("TCC") and the Enforcement and Bankruptcy Code ("EBC").
Why the Early Sale of Vessels Matters?
The early sale of vessels is a remedy already offered to creditors by the TCC and can be initiated by (i) the creditors themselves, (ii) the Bailiff or (iii) in some circumstances by the Harbour Master. However in some cases the application and sale procedures under the said codes were found to be insufficient. Especially the fate of vessels under arrest or attachment were uncertain. This is why on the one hand the inclusion of the early sale of vessels in the Regulation is a welcome development for some whereas on the other, it has raised concerns for shipowners or other parties with rights over the vessel.
Pursuant to Article 1386(2) of the TCC, a creditor of an arrested or attached vessel or the Bailiff can apply to the execution court for the early sale of the said vessel, regardless of her flag. The remedy is available in circumstances where the vessel's value plummets, her maintenance proves to be too expensive or new or more maritime claims are expected to arise. The execution court's decision for an early sale is open to appeal which will have the effect of staying the execution of the sale.
The Regulation complements these provisions of the TCC by providing a relatively more detailed procedure for the early sale of unattended, abandoned or inactive vessels that are considered to be of "high risk" to voyage, life, property or environment.
Under the Regulation, unattended, abandoned or inactive vessels are to undergo an on board inspection by the relevant Harbour Master's Offices. The Harbour Masters would make an assessment as to whether the relevant vessel poses a threat to safety of voyage, life, property or environment and issues an official report. If a risk is found to exist, the Harbour Masters have the power and duty to take or oblige others to take all necessary precautions to prevent or remove such threat. These precautions may include the transfer of the said vessel to another location or removal of her bunkers, as long as they are in proportion to the degree of risk.
All of the expenses arising out of the precautions would be borne by the vessel interests. However, if it is found that there is a high level of risk and the relevant vessel is detained pursuant to an arrest or attachment order, the Harbour Master is obliged to apply to the relevant execution court for the vessel to be put up for early sale. This application must be made within 7 days from the date of the official report.
Two Concerns for Shipowners or other parties with rights over the vessel
Presumption of High Risk
The Regulation brings a presumption of "high risk" for arrested or attached vessels that are laid up at a port for over 1 year without a crew or 2 years with a crew. The presumption is that once a vessel meets these requirements (i.e. arrested or attached and laid up for 1 or 2 years) she will be deemed to be a vessel posing a high risk and will not require an inspection by the Harbour Master. This provision also implies that when deciding for the early sale of the said vessel the execution court may not have the discretion to request an inspection to be carried out or an expert's report to be obtained. Thus these vessels may automatically be subject to an early sale following a non-contentious hearing where those who oppose the early sale may not be heard in light of the presumption of risk introduced by the amended Regulation.
Furthermore, it is yet to be clarified how the terms "with crew" and "without crew" will be interpreted in practice. The Regulation does not define the crewing requirements for a vessel under arrest or attachment, therefore, it is uncertain whether the Regulation refers to minimum safe manning or the existence of a part of the crew or whether the presence on board of the master alone would suffice.
Bargain Sale for less than the market value
The early sale of a vessel under the Regulation is to be carried out by way of a "bargain sale". While the general method of sale applicable under the EBC is an auction where the final purchase price cannot be less than 50% of the market value of the property, this requirement does not apply to early sales. Given that the early sale decision is rendered pursuant to the above TCC provisions or the Regulation, the vessel can be sold via a bargain sale and will not be subject to the requirement of a minimum sale price. What this means for the vessel interests is that the vessel can be sold for the highest price offered regardless of how much lower the offer is from her market value. It follows that objections to the sale price will not be heard and the sale will be completed notwithstanding.
The Regulation introduces other amendments that are also worth noting. For instance a pollution fine is stipulated which can be applied in addition to existing fines of the same kind that are provided under other legislation, in particular the Environmental Code. Under the Regulation, the Harbour Master can impose a fine of up to TRY 5,000,000 (approximately USD 1,400,000 at the time of publishing of this article) for pollution caused by a vessel that is sailing or operating in Turkish territorial waters in circumstances that require emergency intervention due to collisions, breakages, fires, explosions or similar incidents. Every instance of pollution of the marine environment by oil or other noxious substances1 as defined by the Code No. 53122 shall be subjected to this fine. We should stress again that the fine to be imposed by the Harbour Master is not subject to a tariff and the Harbour Master has discretion in determining the quantum of the fine up to the TRY 5,000,000 limit. This is different from the fines stipulated under the Environmental Code which are calculated pursuant to a tariff based on the vessel's tonnage. The extent of the discretion granted on Harbour Masters by the Regulation may be seen by some as excessive.
The Regulation also provides that for a vessel to be allowed to undertake loading/discharging operations at a port, the pier or dock must be at least 10% longer than the length of the vessel and the minimum depth of water at these facilities must be at least 0.5 m more than the draft of the vessel in fully laden condition,. If these requirements are not fulfilled, a vessel can still moor to the facilities with the written approval of the Harbour Masters subject to additional safety measures that may be imposed. On a final note, a vessel can now remain anchored at a location only for a maximum period of 15 days except at designated anchorage areas and permitted facilities. Harbour Masters can allow the extension of this period for another 15 days. At the end of the permitted period, the Harbour Master is under an obligation to remove the vessel from the area.
The Regulation concerns all vessel and shore facility interests, however shipowners and parties having claims against vessels must take special notice of the above amendments.
The Regulation came into full force and effect on 8 April 2017.
1 Substances listed under MARPOL 73/78 Annex II Chapters 2 and 3 and any other substance that causes pollution once mixed into the marine environment, except for radioactive substances.
2 The Code on the Rules of Emergency Response and Indemnification of Damages in Cases of Pollution of the Marine Environment by Oil and Other Noxious Substances
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.