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Brexit’s impact on Malta as a choice of maritime flag

May 12, 2021 Leave a Comment

The United Kingdom officially left the European Union on 1 January 2021. However, the uncertainty surrounding Brexit led many vessels and yachts to leave the United Kingdom’s shipping registry much earlier than the country’s official departure from the European Union, and even before the implications of Brexit were fully understood. The rationale behind such a decision was that shipowners wanted to adopt a cautious approach and retain an EU flag rather than being faced with the risk of instability which Brexit was expected to create for future commercial arrangements within the European Union. From a Maltese perspective, Brexit has given rise to a new opportunity for the Malta Ship Registry to consolidate its position as the largest flag in Europe and the sixth largest in the world – a position it has consistently held for several years.

Increased popularity of Malta flag

French shipping giant CMA CGM, then the largest owner of container ships under the UK flag, was one of the major shipowning companies which transferred its fleet to other European countries as a consequence of the Brexit referendum, with the vast majority of its fleet reflagged to Malta in 2019. As the world’s fourth largest container shipping line, CMA CGM constitutes one of the more high-profile reflagging cases that the Malta Ship Registry has witnessed as a direct result of Brexit. Several factors influenced the French company’s decision to reflag to the Malta and other EU flags, principal among which was the fact that it had traditionally always used EU flags and complied with the EU regulatory framework. Consequently, CMA CGM viewed an EU flag as an integral part of the dynamics of its business, as well as a means to ensure that it remains competitive.

Other notable reflagging cases during this period involved Norwegian vehicle carrier Wallenius Wilhelmsen, which completed the transfer of its UK-registered vessels to Malta towards the end of 2019. Further, the Naples-based Grimaldi Group staggered the reflagging of its fleet of roll-on, roll-off vessels to the Malta flag over several years, with the most recent reflaggings completed in the first few months of 2021.

The Malta Ship Registry saw an unprecedented increase in the number of new registrations between 2019 and 2020, with Malta’s registered tonnage increasing by 7%, the largest increase in the world at the time.

Benefits of Malta flag

The uncertainties caused by Brexit are not the only reason why Malta is a popular flag choice. Many shipowners view the Malta flag as a strict flag which maintains high standards and quality tonnage and are attracted to its experience, versatility and good reputation. Further, the Malta flag is white listed in the Paris and Tokyo Memoranda of Understanding on Port State Control. This means that Malta-flagged vessels are subjected to fewer port state inspections, which translates to smoother and more time-efficient port operations for shipowners. Moreover, the financing aspect has a contributary affect, since shipowners are a priori often required by their financiers to register their vessels with an EU flag. In such instances, financial conditions in loan documentation typically stipulate that vessels must be registered with an EU flag or even with certain specific flags where the jurisdiction is deemed to be creditor friendly.

Malta is one such jurisdiction which is generally considered as providing additional creditor confidence. This is because Maltese law stipulates that a registered mortgage grants a watertight executive title in favour of the mortgagee. In practical terms, an executive title enables creditors to swiftly enforce their mortgage upon an event of default simply by tendering a notice of default. These facets collectively render the Malta flag an attractive option to financiers and shipowners alike.

Benefits of Brexit

In addition to the immediate impact that Brexit has had on increasing Malta’s registered tonnage, it has also given rise to other opportunities. Principal among them is the potential for attracting UK-based maritime organisations, such as protection and indemnity clubs and ship management companies, which want to set up an outpost to maintain access to the EU financial market. Malta may be considered an attractive jurisdiction for the relocation of UK-based organisations due to its:

cultural connection to Britain;
high availability of English-language proficient individuals specialised in a variety of areas, including:
- shipping;
- finance;
- insurance; and
- law

shipping law that is broadly based on English common law; and
approved tonnage tax and corporate tax system that offers a favourable fiscal environment.

Overall, Brexit may have a lasting positive impact on the growth of the Malta maritime flag and increase the presence of UK shipping organisations in Malta. This bodes well not only for the consolidation of Malta’s impressive maritime flag standing, but also for strengthening its maritime services industry as a whole and its status as a leading maritime hub in the Mediterranean.

by Peter Grima of Fenech & Fenech Advocates

Source: International Law Office

Court affirms scope and effect of Section 37 injunctions where security has been placed

April 22, 2021 Leave a Comment

In the recent case of Dr Ann Fenech as mandatory for and on behalf of Clearlake Shipping Pte Ltd v Global LNG Limited, the creditor obtained a Section 37 order on a provisional basis from the Maltese courts as security for a claim arising from a dispute under a charterparty concluded between the parties regarding the MV Portovyy (for further details please see “Court orders extension of effects of flag injunction to security deposited by debtor“). The purpose of the order was to prohibit the vessel’s sale, transfer or deregistration while the merits of the case were being determined in the appropriate fora – in this case, arbitration in London.

On 18 March 2020 the Maltese courts granted the Section 37 order on a provisional basis. This ex parte application seeking an immediate provisional order was filed, as is customary, together with the statutory sworn application containing the same demands. Such an application is then served on the other party which has 20 days to defend the application. The object of an ex parte application leading to an interim provisional order is to protect the status quo until the request is decided in due course. In this case, the owners eventually opted to file a cash deposit in the amount claimed by the charterers in the court registry, together with a request for the court to order that the Section 37 order be revoked.

By means of a 26 November 2020 decree, which was delivered in open court with the agreement of both parties, the court held that rather than ordering the revocation of the Section 37 injunction, it was, in terms of the law regulating the procedure (ie, Section 37 of the Merchant Shipping Act), ordering that the effects of said order would cease to exist insofar as the vessel itself was concerned, but would continue to apply exclusively to the cash deposit provided by way of security by the owners pending the final determination of the merits or settlement being reached by the parties.

The charterers subsequently filed an application before the Maltese courts requesting that the effects of the order be extended for a further year. This would align with the law, which envisages that any order of this nature granted by the courts expires within one year, unless a request for an extension is made by the creditor on the basis that such order was still required. The court granted this request by means of a decree of 8 February 2021.

Challenge to decrees

Given the above, it was of considerable surprise to the charterers when the owners subsequently filed a further application before the Maltese courts requesting revocation of both the 26 November 2020 and 8 February 2021 decrees.

The owners based their request for the revocation of the 26 November 2020 decree on the argument that, following the cash deposit made by the owners, the courts had never granted a final order and therefore procedures had effectively been extinguished. They further argued that when the law refers to the effects of the order applying to any amount deposited as security by the owners, reference is being made to a final order as opposed to a provisional order as had been granted in this case. The owners argued that there was no legal basis for revocation of either the 26 November 2020 or 8 February 2021 decree. In fact, there was every reason, given the purpose of the procedure provided by Section 37 of the Merchant Shipping Act, to extend:

the validity of the decrees by one year; and
the effects of the order to the cash deposit.

The charterers responded that it was indeed necessary for the court to extend the effects of the 18 March 2020 order to the security deposited by the owners pending the determination of the merits of the case. The charterers noted that when dealing with the extension of the effects of the order to the security deposited by the owners, the law makes no distinction between provisional and final orders. Further, if an order extending the effects of a prohibition from the transfer of the vessel to the free circulation of the security deposited instead of the vessel is not granted when an owner opts to deposit security, not only would such security remain unregulated, but the owners could effectively proceed with the withdrawal of the deposited sum pending the determination of the merits. The charterers argued that this interpretation contravened the scope of the Section 37 injunction, which provides a creditor with the possibility of obtaining security, pending the determination of the merits of the case, for the entire duration of the case.

Decision

By means of a 17 March 2021 decree, the court denied the owners’ requests and agreed with the charterers’ arguments in their entirety. The court held that the law made no distinction between provisional and final orders in allowing the effects of the Section 37 injunction to be extended to security deposited by the owners in the context of a Section 37 action. The court held that any differing interpretation would render Section 37 totally redundant, leading to circumstances where, if an owner deposited a cash security instead of leaving the attachment on the transfer of the vessel, the owners could freely withdraw the cash deposit irrespective of the fact that the action on the merits is ongoing and the security is still required. The court further denied the request for the revocation of the decree, extending the order for one year for the same reasons.

Comment

This case confirms what is already stated clearly in Article 37(4) of the law, which reads as follows:

Where the respondent either deposits in court the amount of the claim… or gives security… where the court has issued the order, it shall revoke the same with respect to the ship or the share therein, and the provisions of this article shall thereupon be applicable with respect to the amount so deposited or the security so given as the case may be.

This decision illustrates the effectiveness of the Section 37 injunction as a tool available to creditors seeking to obtain security for a claim pending the determination of the merits of the case. While the law allows owners to opt to deposit security, thereby removing the effects of the injunction from the vessel itself, the legislature has catered for these instances to ensure that creditors’ rights are not prejudiced.

by Dr Ann Fenech and Dr Alison Vassallo, Fenech & Fenech Advocates

Source: ILO

The Grimaldi Group strengthens its presence in Malta

April 8, 2021 Leave a Comment

Naples, 6th of April 2021: In recent months, the Naples-based Grimaldi Group has proceeded to significantly strengthen its presence in Malta through various initiatives, showing its full commitment in promoting the country’s maritime vocation.

Following the effects of Brexit, Atlantic Container Line (ACL), a Grimaldi Group company, has proceeded to reflag its fleet in the last six months, leaving the Union Jack and opting for the Malta flag. A total of nine vessels of ACL are currently under Maltese flag while another one is due to be added in the next few months. ACL operates the biggest con/ro vessels in the world, offering a liner service between various North European and North American ports for the transport of rolling units and containers.

Moreover, Malta Motorways of the Sea Ltd (MMOS), a Grimaldi Group company, has recently strengthened its fleet with the purchase of two additional vessels: the ro/ro units Eurocargo Catania and Eurocargo Sicilia. Currently, Valletta-based MMOS has a fleet of six modern ro/ro vessels and operates various regular maritime services in the Mediterranean.

Particularly, MMOS runs, in cooperation with the Grimaldi Group, a regular service between mainland Italy (Genoa, Livorno, Salerno and Catania) and Malta, under a Public Service Obligation contract with the Maltese Government, thus guaranteeing the shipment of essential commodities into the country.

With a view of promoting maritime education in Malta, MMOS has a permanent cooperation agreement with MCAST – Maritime Institute for the training of sea cadets onboard its vessels. Hundreds of young Maltese cadets have received training so far, many of whom have also been hired by Grimaldi Group companies.

Finally, in the course of the month, the Grimaldi Group will further strengthen the maritime connections it offers between Italy (Genoa, Livorno, Catania) and Malta. In fact, in the second half of the April, Malta is due to be served with one of the 12 GG5G-class (Grimaldi Green 5th Generation) ro/ro vessels, currently under construction in Asia, four of which already delivered to the Group. A second vessel of the same class will be deployed on the same route at the beginning of June.

C O M U N I C A T O S T A M P A

The GG5G-class vessels are the biggest short sea ro/ro units in the world as well as the most ecofriendly. They have a length of 238 meters, a beam of 34 meters, a gross tonnage of 67,311 tonnes and a service speed of 20.8 knots. Their loading capacity is twice that of the previous class of ro/ro ships deployed by the Grimaldi Group: each vessel can carry over 500 trailers as well as 180 cars. Their quarter stern ramp allows the loading of freight units weighing up to 150 tons.

At the same speed, the GG5G-class vessels consume the same amount of fuel compared to the previous generation vessels and are therefore able to halve CO2 emissions per unit transported: this was made possible through the adoption of several innovative technological solutions that optimize fuel consumption and ship performance. Moreover, they are equipped with an exhaust gas cleaning system for the reduction of sulphur and particulate emissions.

During port stays, the GG5G-class vessels are capable of cutting emissions to zero by using the electricity stored in mega lithium batteries with a total power of 5 MWh, which are recharged during navigation thanks to shaft generators and 350 m2 of solar panels.

“We are very proud to contribute to strengthening our long affiliation with the Maltese Islands, its people and its industry”, states Emanuele Grimaldi, Managing Director of the Grimaldi Group and Vice-President of the Malta International Shipping Council. “Having been present for over half a century in Malta is a demonstration of our commitment to the wellbeing of this nation whom we intend to serve with increasingly modern and ecofriendly vessels”, concludes Emanuele Grimaldi.

Court orders extension of effects of flag injunction to security deposited by debtor

February 12, 2021 Leave a Comment

Creditors’ ability under Maltese law to file an application before the courts for an injunction prohibiting the sale, transfer or deregistration of Maltese-flagged vessels has proven to be a useful and effective tool to protect maritime claims.

Section 37 injunction

In essence, the Section 37 injunction allows creditors, in certain circumstances which give rise to a maritime claim attracting the jurisdiction of the Maltese courts in rem, to obtain a court order which prohibits the vessel from being sold or entering any further mortgages until the merits of the case have been decided in the appropriate jurisdiction. When granted, the order is served on the registrar of Maltese ships and is recorded against the vessel’s entry in the registry. This obliges the registrar to refrain from:

recognising any transfer of ownership;
recognising any further mortgages; and
issuing any deletion certificate for the vessel.

Further, if a transcript of register is issued, the injunction will appear on the transcript.

The law provides that the demand for the order must be made by sworn application as though the party were commencing an action. As with all such applications, this must be served on the defendant, which has 20 days to file a defence. The matter is also given a hearing date. Submissions and ultimately a court decision follow. The court will decide whether to agree to the request to order that no further transfers can be effected until the matter on the merits is decided. As this will take time and because any forewarning in the issuing of the injunction may defeat the object of the exercise, the law allows creditors to file an ex parte application together with the statutory sworn application, containing the same demands and requesting that the court agree to the order immediately and on an interim basis until the statutory sworn application has been heard and decided definitively. This caters for the element of urgency which often accompanies the necessity of obtaining such injunctions to ensure timely protection of creditors’ interests.

Case law

In the recent case of Dr Ann Fenech as mandatory for and on behalf of Clearlake Shipping Pte Ltd v Global LNG Limited, the creditor followed the above procedure in seeking security for a claim arising from a dispute under a charterparty concluded between the parties in relation to the MV Portovyy. While the merits were, in terms of the arbitration clause contained in the charterparty, subject to arbitration in London, the charterers were keen to ensure that their rights would be secured in the eventuality of them obtaining a favourable award.

The Maltese courts granted the Section 37 order on a provisional basis on the same day as the filing of both the statutory sworn application and the ex parte application (as described above). The owners eventually filed a cash deposit in the amount claimed by the charterers in the court registry, together with a request for the court to order that the Section 37 order be revoked.

By means of a 26 November 2020 decree, the court held that rather than ordering the revocation of the Section 37 injunction, the effects of said order would cease to exist insofar as the vessel itself was concerned but would continue to apply exclusively to the cash deposit provided by way of security by the owners, pending the final determination of the merits or a settlement being reached by the parties.

Comment

This case illustrates the practical efficacy of these procedures, which are an efficient tool for obtaining security while allowing owners to continue to make full use of their vessels. Further, the law allows owners to shift the effect of such an injunction from the vessel itself onto adequate security that may be provided by them in terms of law.

By Alison Vassallo, Fenech & Fenech Advocates

Source: ILO

Maritime Labour Convention amendments incorporated into Maltese law

January 23, 2021 Leave a Comment

Amendments to the Maritime Labour Convention (MLC) 2006 recently came into force after having been adopted in 2018. Malta, as a signatory to the MLC, implemented the changes into domestic law on 18 December 2020, with said changes having effect as of 26 December 2020. As one of the largest ship registries in the world, these changes will have a significant impact on the world’s shipping workforce.

Maltese law

The MLC was transposed into Maltese national law and introduced as the Merchant Shipping (Maritime Labour Convention) Rules, Subsidiary Legislation 234.51.

Under Maltese law, all employment relationships are governed by the Employment and Industrial Relations Act (EIRA), Chapter 452 of the Laws of Malta, and its subsidiary legislation. Although the rights and obligations of all employees are defined in the EIRA, it is the EIRA itself which states that some provisions within it do not apply to seamen.(1) It is thus understood that when referring to seafarers and their rights or obligations, the Merchant Shipping Act (MSA), Chapter 234 of the Laws of Malta, and its subsidiary legislation should be applied first as the lex specialis, followed by the EIRA should the MSA be silent on specific matters.

MLC and its amendments

The new amendments transposed into Maltese law can be divided into two parts introduced in the form of standards:

the first refers directly to seafarers’ employment agreements; and
the second refers to wages.

That said, a third amendment introduced in the form of a guideline within the MLC, which refers to specific entitlements, was not incorporated into the Merchant Shipping (Maritime Labour Convention) Rules. As a common denominator, these amendments deal directly with the threat of piracy and armed robbery, which has been on the rise in recent years.

Prior to these amendments, there was no definition of ‘piracy’ or ‘armed robbery against ships’ within the rules or the MSA. The only definition of ‘piracy’ within Maltese law was found within the Criminal Code(2) and was introduced in 2009. This definition is almost identical to that given in the United Nations Convention of the Law of the Sea 1982.

These terms have now been introduced directly into the Merchant Shipping (Maritime Labour Convention) Rules under Article 2(1). Specifically, ‘armed robbery against ships’ has been defined as:

any illegal act of violence or detention or any act of depredation, or threat thereof, other than an act of piracy, committed for private ends and directed against a ship or against persons or property on board such a ship, within a State’s internal waters, archipelagic waters and territorial sea, or any act of inciting or of intentionally facilitating an act.

On the other hand, ‘piracy’ has been given “the meaning assigned to it by the United Nations Convention on the Law of the Sea, 1982”.

Seafarers’ employment agreements Under Maltese law, seafarer’s employment agreements are regulated by Part III of the Merchant Shipping (Maritime Labour Convention) Rules – specifically, Articles 20 to 28. The amendments to the MLC state:

that a seafarer’s employment agreement shall continue to have effect while a seafarer is held captive on or off the ship as a result of acts of piracy or armed robbery against ships, regardless of whether the date fixed for its expiry has passed or either party has given notice to suspend or terminate it.(3)

This has been incorporated verbatim into the rules as Article 28A.

There are no similar provisions to the abovementioned one in the EIRA or its subsidiary legislation.

Wages Part III of the Merchant Shipping (Maritime Labour Convention) Rules also regulates wages and when and how these should be paid to seafarers (Articles 49 to 67). Article 67A has been introduced and states as follows:

Where a seafarer is held captive on or off the ship as a result of acts of piracy or armed robbery against ships, wages and other entitlements under the seafarers’ employment agreement or relevant collective bargaining agreement, including the remittance of any allotments as provided in rule 64 (1), shall continue to be paid during the entire period of captivity and until the seafarer is released and duly repatriated or, where the seafarer dies while in captivity, until the date of death.(4)

The introduction of this obligation for employers codifies rights for seafarers which were not previously clear under Maltese law, thus strengthening the already privileged position of seafarers’ wages by extending the obligation to these situations out of their control.

Notably, under the EIRA, any illegal deductions to an employee’s wages constitutes an offence on the part of the employer. The introduction of this amendment therefore clarifies any doubt which may have been present in situations where a seafarer could not have performed their duty due to piracy or armed robbery. It also enforces the understanding that a situation such as this could never be considered as being a form of abandonment of work.

Entitlement Curiously, the third and final amendment, which found its way into the MLC in the form of a guideline, relates to entitlements and was not incorporated into the Merchant Shipping (Maritime Labour Convention) Rules. The guideline states as follows:

The entitlement to repatriation may lapse if the seafarers concerned do not claim it within a reasonable period of time to be defined by national laws or regulations or collective agreements, except where they are held captive on or off the ship as a result of acts of piracy or armed robbery against ships.(5)

Notably, while Part A of the MLC contains standards which are mandatory to all signatories of the MLC, Part B contains guidelines, such as the aforementioned one, which are non-mandatory. This begs the question as to whether the Maltese courts will take this guideline into consideration when contemplating prescriptive periods or the quantification of damages in situations regarding the repatriation of seafarers. However, this would be unlikely, and perhaps the only relevant time periods would be the general prescriptive periods under Maltese law. Where prescription is concerned, from a Maltese law perspective, the general rules would apply – namely:

a two-year prescriptive period for actions in tort; and
a five-year prescriptive period for any contractual claims.

Comment

It is refreshing to see that such protection will now be given to seafarers including those employed on Maltese-flagged vessels – especially those who regularly traverse areas which may be considered high-risk zones.

Over the coming months, it will be interesting to see how these new provisions will be interpreted by the Maltese courts and tribunals and also whether these could lead to the consideration of similar rules or laws to be implemented in instances of agreements with crew engaged on ships which do not fall within the scope of the Merchant Shipping (Maritime Labour Convention) Rules (eg, fishing vessels, small ships, yachts in non-commercial use and warships or naval auxiliaries), or more widely, in other employment agreements in other industries where similar risks could exist.

By Michael Paul Agius, Fenech & Fenech Advocates

Source: Lexology

Endnotes

(1) Article 39 of the EIRA states as follows:

The provisions of article 36 shall not apply in respect of seamen employed on ships under the provisions of the Merchant Shipping Act; and in the event of any conflict between any of the provisions of the said Act and any of the provisions of this Act, the former shall apply.

(2) Criminal Code, Chapter 9 of the Laws of Malta.

(3) Standard A2.1 – Text of the amendments adopted on 27 April 2018, third meeting of the Special Tripartite Committee established by the governing body in accordance with Article XIII of the Maritime Labour Convention 2006, as amended (MLC 2006).

(4) Standard A2.2 – Text of the amendments adopted on 27 April 2018, third meeting of the Special Tripartite Committee established by the governing body in accordance with Article XIII of the Maritime Labour Convention 2006, as amended (MLC 2006).

(5) Standard B2.5.1 – Text of the amendments adopted on 27 April 2018, third meeting of the Special Tripartite Committee established by the governing body in accordance with Article XIII of the Maritime Labour Convention 2006, as amended (MLC 2006).

Member of the Comité Maritime International

Brexit’s impact on Malta as a choice of maritime flag

Court affirms scope and effect of Section 37 injunctions where security has been placed

The Grimaldi Group strengthens its presence in Malta

Court orders extension of effects of flag injunction to security deposited by debtor

Maritime Labour Convention amendments incorporated into Maltese law

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