Maltese law Archives

Wrecks – Obligation and legal duties

August 25, 2021 Leave a Comment

We sometimes hear of stories of people going out to sea on one boat and returning to port with another boat or part of another in tow. Several years ago, I personally witnessed a small fishing boat towing in a 30-foot plus wooden sailing boat in Mġarr Harbour, which the owner of the fishing boat claimed to have found drifting a couple of miles off Gozo with no one on board.

How does the law regulate such a situation? Can the person who finds a vessel adrift make it his own? What about vessels which have washed up ashore or have sunk? Is it truly a case of ‘finders keepers’? What if the owners turn up?

Unmanned vessels found adrift are generally considered to be items of ‘wreck’ as are vessels found washed ashore, sunken or otherwise stranded. Any object belonging to, or cargo carried on board such a vessel which is stranded, sunken or adrift at sea, are also considered to be part of a wreck. Therefore, the law does not limit a ‘wreck’ to the wrecked vessel itself and seeks to include all associated objects or cargo.

While not an everyday occurrence, finding a wreck at sea sets off a specific process and creates several legal obligations. The subject matter is primarily regulated by the Merchant Shipping Act (chapter 234 Laws of Malta) and the Wreck Removal Convention Regulations (Legal Notice 83 of 2015). The regulations transpose the Nairobi International Convention on the Removal of Wrecks (2007) into Maltese law.

The above body of laws address various aspects of this subject, including what is considered to be a wreck; obligations upon finding one, including reporting its whereabouts to the relevant authorities, marking a wreck considered to be a navigational or environmental hazard; on removing it, who is responsible for the costs involved; and the obligation of owners to insure against wreck-related liability.

The focus here shall be on the rules applicable upon finding a wreck.

These rules apply whenever a wreck is found on Malta’s coasts or elsewhere within Malta’s territorial seas. They also apply when a wreck is found outside Malta’s territorial confines and is brought into Malta’s jurisdiction.

A key figure in this area is that of the ‘receiver of wreck’, which person is appointed on an ad hoc basis by the minister responsible for shipping. There is no permanently appointed ‘receiver of wreck’. The Merchant Shipping Act generally empowers the ‘receiver of wreck’ to administer the findings of any wrecks in Malta, including the preservation of the wreck, cargo and of any persons on board.

Any person who finds or takes possession of any wreck is firstly obliged to notify the ‘receiver of wreck’. The procedure set out at law then varies according to whether the finder is the owner of the wreck or a third party, as follows:

• if it is the owner, then notice to the receiver of wreck must include a description of the wreck, including the marks and other features based on which the owner has recognised the vessel as his own. It is expected that the owner would also need to provide documentary proof of ownership;

• if it is not the owner but a third party, then said third party must deliver the wreck to the ‘receiver’ as soon as possible.

The Merchant Shipping Act generally empowers the ‘receiver of wreck’ to administer the findings of any wrecks in Malta

Cargo from a wrecked vessel appears to be treated slightly differently and must be delivered to the ‘receiver’, irrespective of whether the person finding the wrecked cargo is the owner of the cargo or a third party.

Non-observance of these rules is considered as an offence and any offender shall be liable to a fine (multa). Harsher penalties may be imposed when a wreck or any part thereof (including cargo) found in Malta is delivered to a foreign port and sold there. On such occasions, the offending party may be liable to imprisonment for a period of not less than three years and not more than five.

Salvage also comes into play here. Indeed, a wreck may be considered as an object of salvage.

Salvors of wrecks may, therefore, be entitled to claim salvage fees from the owner of a wreck, provided all the elements of salvage are present.

Failure by a salvor to notify and/or deliver a wreck to the ‘receiver of wreck’ as soon as possible may result in the forfeiting of any claim to salvage. This is a sanction which all potential salvors should be aware of.

Our courts have, however, held that failure to notify the ‘receiver of wreck’ upon finding and taking possession of a wreck may indeed be delayed or not necessary at all should valid reasons be present and that, therefore, the right to salvage is not automatically forfeited (see ‘Charles Grech u Brian Galea v Paul Azzopardi’, Court of Appeal – Superior, 2015).

Once the wreck is in the possession of the ‘receiver’, a description of the wreck is to be published in the Government Gazette. It is suggested that the requirement for publication is not limited to the Government Gazette and is extended to at least two local newspapers and any other place considered adequate by the ‘receiver’.

Within one year from the publication of this notice, a rightful owner is entitled to have the wreck returned in his favour, provided all salvage fees and other expenses due to the ‘receiver’ or the salvor, are paid.

The law also allows the ‘receiver of wreck’ to proceed with the immediate sale of the wreck in those cases when the value of the wreck is insignificant, is substantially damaged, of a perishable nature or is not worth enough to be stored. The proceeds from such a sale shall go towards any expenses incurred by the ‘receiver’ and any excess is thereafter held by the receiver. The excess proceeds remain subject to the same claims, rights and obligations of interested parties, as if the wreck was not sold. It is not clear for how long the ‘receiver’ should hold on to these proceeds, however it is understood that this ought to be for the same period of one year had the wreck not been sold and remained within the receiver’s possession.

Any wreck which remains unclaimed by its owner for more than one (1) year from the notice published in the Government Gazette or which is not sold to a third party, shall be passed unto the Maltese government.

Certain practices which are not directly referred to in the law must also be considered. For instance, the role of the ‘receiver of wreck’ is, in part, carried out by the Ports & Yachting Directorate, Transport Malta. It is suggested that the role of this directorate is provided for through an amendment in the law addressing those instances where the government fails to appoint a ‘receiver’.

Finders of wreck are sometimes permitted to keep wreck objects subject to the approval of Transport Malta.

Transport Malta generally requests such finders to lodge a police report, describe and confirm the discovery of the wreck in an affidavit and submit any other supporting documentation. Additionally, the finding of the wreck is still advertised, adopting the three-month period for lost items before the wreck is released to the finder.

The above practices are generally applied for those wrecks which are of little or insufficient value and which, therefore, do not justify the expenses associated with the formal process of a sale as described above. In effect, such measures are an extension of the power granted to the ‘receiver of wreck’ to proceed with the immediate sale of a wreck.

Discovering a wreck or an object of wreck out at sea leads to a set of procedures and obligations.

Wreck owners, finders, salvors, port authorities and other navigating vessels, among others, each have their own reasons and interests why a wreck should be reported, marked, returned or eventually removed or sold. The law seeks to address all of these interests and it is surely not a case of ‘finders keepers’.

by Jan Rossi, senior associate, Ganado Advocates’ shipping team

Source: Times of Malta

The new Malta Passenger Yacht Code

May 31, 2021 Leave a Comment

On the 24^th May 2021 the Merchant Shipping Directorate of Transport Malta published Merchant Shipping Notice 171 notifying the industry that the Malta Passenger Yacht Code (PYC) will enter into force on the 25^th May 2021. The code was drawn up following consultation with industry stakeholders.

Prior to the entry into force of the PYC, commercial yachts registered under the Malta flag and carrying more than 12 passengers were required to satisfy requirements similar to those for passenger ships since they fall outside the scope of the Malta Commercial Yacht Code. Due to the increasing size of commercial yachts and the onerous requirements applicable to passengers ships, the Merchant Shipping Directorate recognised the need to develop a code which specifically caters for larger commercial yachts carrying more than 12 passengers. The PYC caters for a number of equivalencies specifically designed for passenger yachts which carry more than 12 passengers and up to 36 passengers, do not carry more than 200 persons, do not carry cargo and are engaged on international voyages.

This is a welcome development since it addresses technical issues and concerns faced by whoever wishes to register larger commercial yachts under the Malta flag.

The PYC may be found here: https://www.transport.gov.mt/Passenger-Yacht-Code-PYC.pdf-f6340

By Lara Saguna Axiaq, Fenech & Fenech Advocates

Source: Lexology

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

Member of the Comité Maritime International

Wrecks – Obligation and legal duties

The new Malta Passenger Yacht Code

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

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