Maltese law Archives

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

Revised Non-Convention Vessel (NCV) Code

April 20, 2021 Leave a Comment

The Malta Non-Convention Vessel (NCV) Code which previously came into force on the 1^st January 2019, has been revised and updated following consultation with interested parties by Transport Malta. The revised code comes into force on the 1^st September 2021 and is intended to better reflect and serve the needs of the industry and market.

The NCV Code applies to all Non-Convention Vessels ≥ 15m Length Overall, including commercial vessels ≥ 15m Length Overall which are certified and operating on domestic navigation including those vessels operating exclusively within Maltese waters and which are engaged in or intended for use in any trade, business or calling or operating for hire or reward, in the carriage of cargo/supplies/passengers or providing port services or services to other vessels.

Existing vessels which already hold an NCV Certificate must comply with the revised code by the vessel’s first periodical survey carried out on or after the 1st September 2021.

The Code can be downloaded from https://www.transport.gov.mt/NCV-Code-Rev-2.pdf-f6200

By Martina Farrugia and Lara Saguna Axiaq, Fenech & Fenech Advocates

Source: Lexology

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).

Commercial Yacht Code 2020

December 1, 2020 Leave a Comment

We are pleased to announce that the Merchant Shipping Directorate within the Authority of Transport in Malta has rolled out its 4th edition of the Malta Commercial Yacht Code 2020 (Code) which updates and replaces the Commercial Yacht Code 2015 (CYC 2015).

The substantial increase in the number of superyachts which the Malta flag has continued to lure to its Register has seen the Merchant Shipping Directorate being sensitive to the fast-changing technological developments which this particular industry attracts. Drawing on its own experience of an already well established yachting industry and heeding the technical and commercial advice of yacht builders, repair yards, Classification Societies and industry stakeholders at large, the Merchant Shipping Directorate has come up with an improved Code that mirrors the yachting industry’s realities and ensures a greener and safer commercial yacht fleet for the Malta flag.

The Code comes into effect as of the 1st January 2021 however for existing yachts certificated in accordance with the CYC 2015, compliance with the new Code shall be by not later than the yacht’s first periodical survey carried out after the 1st June 2021.

The amendments and additions introduced by the Code are several and varied and largely seek to enhance the safety aspects of commercial yachting as well as to cater for the particular technological market demands of the industry – all this in conformity with safety and international regulations and standards.

The revisions, all of which are conveniently listed in Annex 1 of the Code, provide, inter alia, for improvements on the safety of passengers at sea, the well-being of the seafarers engaged onboard, the enhancement of the structural aspects of yachts, the provision for innovative designs and requirements covering electrically powered and/or hybrid engines and plants. The Code further provides for the improvement of the protection of the marine environment by introducing the requirements of the Ballast Water Management Convention and furthermore dedicates a section of the Code to the design, construction and safety of Helicopter Landing Areas.

More specifically, amendments made relate to the following sections:

• Definitions (Section 2), • Application and Interpretation (Section 3), • Structural Strength and Watertight Integrity (Section 4), • Rigging on Sailing Yachts (Section 5) • Machinery (Section 6), • Electrical Installation (Section 7), • Intact and Damage Stability (Section 8), • Life Saving Appliances (Section 10), • Fire protection (Section 11), • Equipment (Section 12), • Maritime Labour Convention 2006 (Section 13), • Protection of Personnel (Section 14), • Navigation and Communication (Section 15), • Marine Pollution Prevention section (Section 16), • Manning and Crew Certification (Section 17), • Medical Stores (Section 19), • Survey and Certification (Section 20), • Tenders and Ancillary Craft (Section 22), • Static Chartering (Section 23), • Helicopter Landing Areas (Section 24).

By Rowena Grima and Stephanie Farrugia, Fenech & Fenech Advocates

Source: Lexology

Member of the Comité Maritime International

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

Revised Non-Convention Vessel (NCV) Code

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

Maritime Labour Convention amendments incorporated into Maltese law

Commercial Yacht Code 2020

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