MMLA Admin, Author at Malta Maritime Law Association

Malta – Recent Changes to Laws Regulating Shipping Companies

May 13, 2020 Leave a Comment

The Merchant Shipping (Shipping organisations – Private Companies) Regulations (Subsidiary Legislation 234.42 of the Laws of Malta, “the Regulations”) have recently been amended by Legal Notice 31 of 2020 published in the Government Gazette on the 21st of February 2020.

Originally promulgated in 2004, the Regulations address the establishment and corporate workings of what is typically referred to as the Maltese shipping company.

Well known by players in the international shipping industry, shipping companies incorporated under the Regulations are used for the ownership, operation, and management of merchant vessels (both Malta-flagged or flagged elsewhere) as well as other maritime-related activities.

Legal Notice 31 of 2020 has now further improved the legislative and regulatory position in the area.

Continuation of foreign companies in Malta and vice-versa

Continuation (sometimes referred to as re-domiciliation) entails the transfer of a corporate entity’s ‘seat of incorporation’ or registration from one jurisdiction to another, thus ensuring the continuing corporate existence of the migrating entity.

Continuation seeks to ensure the continued existence of the same legal person. Accordingly, the company retains all the assets, rights, liabilities and obligations previously held or due by it.

Re-domiciliation into Malta is a useful and advantageous route for those existing shipping companies or shipping groups wishing to move their corporate seat to Malta. Existing shipping companies incorporated elsewhere may retain their corporate existence, instead of incurring winding up costs or leaving them idle whilst incurring costs to keep them in good standing, combined with the cost of incorporating a new company in Malta.

The continuation of a foreign shipping company into Malta may also be considered in connection with the simultaneous flagging of new tonnage or the re-flagging of existing tonnage under the Malta flag. Indeed, the whole re-domiciliation exercise, combined with the registration of the underlying owned or operated vessels in Malta, may well serve as a point of entry into the Maltese tonnage tax system.

Whilst re-domiciliation laws for non-shipping companies have been enacted in Malta a number of years ago, Legal Notice 31 of 2020 has brought about a novel faculty for Maltese shipping companies. Prior to 21st February 2020, a foreign shipping company wishing to re-domicile to Malta would first need to do so as a non-shipping company and subsequently convert to a shipping company post re-domiciliation.

This time consuming and burdensome procedure has now been removed through the introduction of Legal Notice 31 of 2020.

The Regulations now govern both the continuation in Malta of a foreign corporate entity as well as the continuation of a Maltese company in a country or jurisdiction outside Malta.

Re-domiciliation is only possible if the laws of the concerned jurisdiction (other than Malta) allow so.

Additionally, re-domiciliation may only take place when the foreign jurisdiction is considered as an “approved country or jurisdiction”. In this regard, the Registry relies on the Financial Action Task Force (FATF) country evaluations and treats as an approved jurisdiction a country that is not on the FATF blacklist.

Reporting & filing obligations for shipping companies

Starting from financial year 2020, shipping companies are requested to keep accounting records in accordance with the Regulations and will be subject to the exemptions and disclosure requirements as detailed in the said Regulations. Shipping companies will, therefore, need to prepare financial statements in accordance with the Regulations and the relevant applicable financial reporting standards such as GAPSME or IFRS.

Shipping companies will now submit audited financial statements to the Registrar of Companies. Submission must be made within 42 days from the end of the period for the laying before and approval by the company in general meeting of the annual accounts, that is 10 months after the end of the applicable and relevant accounting reference period.

Simply put, the large majority of shipping companies having their respective year-end in December must make their first filing of their audited accounts for financial year 2020 towards early December 2021.

A “small” shipping company is exempt from the general requirement to prepare a directors’ report. A “small” shipping company is one which, in terms of Regulation 64 of the amended Regulations, does not exceed two of the below thresholds:

A balance sheet total of € 6,000,000
Turnover of € 12,000,000
Not more than fifty employees

At a parent company level, exemptions from the preparation of consolidated accounts are also present. A parent shipping company incorporated under the Regulations can qualify as a “small company” in terms of the foregoing only if the group of which it is parent qualifies as a small group, meaning that, on a consolidation basis, it does not exceed the limits of two of the following criteria:

An aggregate balance sheet total of € 6,000,000 net or € 7,200,000 gross
An aggregate turnover of € 12,000,000 net or € 14,400,000 gross
An aggregate number of fifty employees

The above-described size exemption applicable to the preparation of consolidated accounts does not seem to apply in the event that the parent shipping company, or any of its undertakings to be consolidated, have their securities listed on a regulated market and in the event that none of the group companies are public interest entities.

Other

An additional Schedule – the Tenth Schedule – has been added to the Regulations. This Schedule lists a number of administrative penalties which may be imposed by the Registrar of Companies in the event of a number of defaults concerning failure by a shipping company and its officers to abide by their notification and filing obligations with respect to annual accounts as well as other matters concerning corporate governance.

by Ganado Advocates

Source: Lexology

Effect of COVID-19 on Maltese shipping industry

April 1, 2020 Leave a Comment

Europe is presently facing its most testing challenge since World War II. Faced with the threat of the COVID-19 pandemic, many EU states are increasingly adopting stringent measures to ensure that the spread is, to the extent possible, contained. Malta is no exception in this regard.

Conscious of the fact that Malta is a small island with one of the highest population densities per square kilometre in the world, local authorities have been busy implementing various staggered restrictive measures aimed at social distancing. These measures range from the closing of all schools to stopping all commercial flights in and out of the island.

As a result, most sectors of Malta’s economy have to some extent been affected by this epidemic. The local shipping industry has also been hit with several restrictions in recent weeks.

Restrictions on shipping

In early March 2020, all passenger vessels travelling from Italy were prohibited from entering Maltese ports. By virtue of Port Notice 05/20, the Authority for Transport informed the shipping community that it was imposing an immediate temporary ban on the entry of cruise liners and passenger vessels to Maltese ports. This restriction has now been extended. On 21 March 2020, the superintendent of public health extended the order of a travel ban on persons entering or leaving Malta to and from all countries, including by sea. However, an exception was made for all cargo ships, including container ships and ro-ro vessels carrying goods and essential commodities and tankers loaded with essential fuels.

Legal notices affecting court procedures

The measures taken to date have also affected the legal community. By means of Legal Notices 97 and 65 of 2020, the superintendent of public health has ordered the indefinite closure of:

any of the courts of justice, that is the superior courts and the inferior courts including appellate courts irrespective of their competence or jurisdiction, and includes also any tribunal established by law which operates from the building of the Courts of Justice, and any boards, commissions, committees or other entities which operate from the building of the Courts of Justice before which any proceedings are heard or procedures undertaken which are subject to legal, judicial or administrative time limits for filing any claims, defences or other acts.

The closure order came into effect on 16 March 2020 and will remain in force until it is revoked. Legal Notice 97 of 2020 also sets out the time frames in which an appeal of a decision by any other administrative tribunal, board or body may be filed in court once the latter reopens.

Notwithstanding the above, for now, the court registry is still accepting filings in situations where any delay could be seriously detrimental to a party. In such cases, the claimant must file an application to open the court registry and justify the urgency at hand. Within the context of shipping, this effectively means that the filing of warrants of arrest of ships, urgent injunctions prohibiting the transfer of ownership of vessels or the entry of any further mortgages, or any such similar measures, can continue to be filed. Moreover, the processes involved remain expeditious and provided that all documents are in hand, an arrest or a flag injunction can still be carried out in a matter of hours.

Further, to ensure that the closure of courts does not prejudice the rights of any persons, the superintendent of public health has also issued Legal Notices 61 and 84 of 2020 to suspend all prescriptive periods and other time bars. During the period that the courts remain closed, the running of any legal and judicial times and any other time limits have been suspended, including peremptory periods applicable to proceedings or other procedures before said courts. This suspension also applies to prescription in criminal and civil matters.

With regard to the legal and judicial time frames, which are not peremptory in nature, Maltese law already caters for the possibility of extending said limits. Article 106 of the Code of Organisation and Civil Procedure, Chapter 12 of the Laws of Malta, allows for such a request on good cause to be made, provided that it is filed within the time period sought to be extended. However, it is not permissible to request such an extension once the original time period has expired. Therefore, in the given circumstances, said article alone would not have provided the necessary safeguards, particularly since it is still unclear when the courts will be reopened. Accordingly, the new legal notices ensure that further protection is offered by legislating the immediate suspension of all such time limits. By doing so, the legislature has also ensured that the judiciary will hopefully not be flooded with extension requests the moment that the courts are reopened.

On the other hand, most peremptory periods cannot be suspended or extended on the request of interested parties. This includes those time bars which cannot normally be derogated from. By way of example, this would include the one-year period to bring a claim in respect of damaged or loss of goods under the Carriage of Goods by Sea Act and those maritime-related time bars found under the Commercial Code. These periods have therefore also all been suspended by means of the superintendent of public health’s legislative interventions.

The abovementioned suspension will last until seven days from when the superintendent repeals the court closure order. Thus, where a legal and judicial time frame or prescriptive period would have ordinarily expired in the period when the court is closed, the interested party now has seven days from the reopening of the courts to file the necessary acts or court papers.

Thus, any party involved in disputes or contentious matters which could result in a claim before the Maltese courts should bear the above in mind and also watch this space to see when the Maltese courts will reopen. In the meantime, with respect to urgent filings such as ship arrests and flag injunctions, it is very much business as usual in Malta.

By Adrian Attard at Fenech & Fenech Advocates

Source: ILO

Measures taken by the Malta Transport Authority in the context of COVID-19

March 31, 2020 Leave a Comment

The Malta Transport Authority has taken measures in the context of COVID-19 which have been made public with the following notices:

MS Notice 160 on SUPPORTING MEASURES TO THE MALTESE SHIPPING INDUSTRY DURING THE COVID-19 PANDEMIC offering shipowners the possibility of deferring due payment of registration fees and annual tonnage tax, the anniversary date of which falls due on or after the first day of April 2020. The deferment may be made for a period of three months, during which period the Registry will continue to issue renewed certificates of registry upon receipt of a request to proceed.

MS Notice 158 on EXTRAORDINARY MEASURES RESULTING FROM THE COVID-19 PANDEMIC

Port Notice 6/2020 ADDITIONAL PRECAUTIONARY MEASURES AND INSTRUCTIONS TO MARINE TERMINALS AND PORT SERVICE PROVIDERS

Port Notice 5/2020 PRECAUTIONARY MEASURES TO CRUISE LINERS AND PASSENGER SHIPS

Recent changes to procedures in relation to vessel arrests

January 22, 2020 Leave a Comment

Procedures for an arrest of vessel in Malta have been recently upgraded to enable, for the first time in Maltese legislative history, privately-engaged bailiffs to formally serve a warrant of arrest on ships that are in Maltese territorial seas. Act XXXI is the law that brought these changes into force effective as on the 18th of December 2019.

The new law changes the traditional rule that required that service of warrants of arrest must necessarily be done by a Court Official, typically the Court Marshall. The new law introduces flexibility into the procedure for service of an arrest in that it enables the creditor to engage a private bailiff (identified ‘a priori’ to the Court) to physically serve upon and notify the warrant of arrest to the ship’s Master and proceed to ‘seize’ the ship’s papers for them to be lodged in Court. Under the newly promulgated procedure, the privately engaged bailiff will work hand-inhand with Court officials thus ensuring that all steps remain subject to Court scrutiny.

The new procedure is specifically intended to facilitate the arrest of ships in difficult weather conditions, particularly where ships are miles away from Maltese shores, on anchorage, and sea conditions are bad. Now, more appropriately, rather than having Court personnel shipped out to vessels to enable notification of an arrest warrant, lawyers acting for creditors can tap the private sector to engage individuals that are apt to go out at sea in such weather conditions in place of the Court Marshall.

Contributed by Ganado Advocates, Source: Lexology

Click here to view Act XXXI

2020 Global Sulphur Cap: The countdown begins

October 14, 2019 Leave a Comment

In just a few months’ time, one of the International Maritime Organization’s most ambitious and far-reaching regulatory amendments shall enter into force. Back in October 2016, the IMO’s Marine Environment Protection Committee (MEPC) confirmed 2020 as the deadline to introduce a new global limit for sulphur emissions in shipping.

While restrictions on sulphur emissions from ships have existed for quite some time in specifically designated regions (known as emission control areas), the envisaged transition on a global scale is proving to be quite daunting. As at January 1, 2020, the permissible sulphur content in marine fuels consumed by all ocean-going vessels will drop overnight from the present 3.5 per cent m/m (mass by mass) to just 0.5 per cent m/m in accordance to Annex VI to the International Convention for the Prevention of Pollution from Ships.

From an environmental point of view, the 2020 Global Sulphur Cap is literally a breath of fresh air. The decision to steam ahead with the 2020 deadline highlights IMO’s willingness to implement more environmentally friendly policies. Sulphur emissions from ships are considered as a major component of air pollution. They are harmful both to the environment as well as to human health – for instance they can lead to respiratory diseases and contribute to acid rain.

Ships generally need to burn fuel products (bunkers) to navigate from one port to another. Consequently, the combustion of these fuels releases sulphur emissions into the air. Heavy fuel oils used by ships are presently permitted to have a sulphur content of 3.5 per cent, making them amongst the dirtiest transport fuels in the world. This is extremely alarming given that 90 per cent of world trade is transported by sea. In 2018 alone, the demand for the bunker fuels was circa 3.5 million barrels per day, which translates into around 5 per cent of the total global fuel demand of that year.

The need to radically lower ships’ sulphur emissions was highlighted in a study submitted by Finland in 2016 to the IMO, which estimated that if the 2020 deadline had been postponed by just five years, the air pollution from ships would have contributed to more than 570,000 additional premature deaths between 2020 and 2025.

As of next year, therefore ship owners and operators must ensure that the fuel being burned in both their main and auxiliary engines has a maximum Sulphur content of 0.5 per cent. This will help to significantly reduce the impact of ship emissions and should contribute to improving air quality.

However, as stakeholders prepare for this imminent stricter regime, they have to also come to terms with the escalating operational costs and new challenges which they must overcome in order to ensure compliance. The impact of IMO 2020 has had a rippling effect throughout the shipping and energy sectors effecting not just ship owners and charterers but also fuel refineries, bunker suppliers, storage facilities, flag administrations and port state control. S&P Global Platts Analytics have estimated that the global impact of this new sulphur cap will cost in excess of one trillion American dollars over the span of five years. Whilst this is indeed a staggering figure, environmentalists argue that the impact of shipping pollution is far costlier.

Ship owners have identified three principal avenues to pursue compliance with the new 0.5 per cent limit. First, a ship owner may opt to switch from heavy fuel oils to low-sulphur distillates (MGO, VLSFO or other low sulphur fuel blends). Second, a ship owner may resort to using alternative fuels such as LNG. This second option is perhaps more suitable for new builds. The third option available to ship owners is to continue to use heavy fuel oil (HFO) and to install emission abatement technology (‘scrubbers’) on board the vessel.

Each option has its own advantages and setbacks

Each option has its own advantages and setbacks. There does not yet appear to be all encompassing solution and thus each ship owner must pursue the route which is most feasible and cost-effective for it to achieve compliance. Ship owners must weigh a number of different considerations such as the age of their vessels and the number of receiving tanks on board, their trading patterns and the locational availability of different fuel products. Some prudent ship owners have already started re-organizing their bunker supply chains and networks to ensure that come January, they will be able to source compliant fuel. Cautious of the anticipated hikes in fuel prices and possible shortage of higher specification marine fuels, numerous ship owners are holding out for as long as possible before deciding how to proceed. As stated earlier, ship owners are however, not the only maritime stakeholder with a vested interest in IMO 2020.

On the other side of the supply chain, fuel refiners and bunker suppliers are also having to adapt to ensure that they can keep up with the market demand. Bunker suppliers and refiners have already started developing and experimenting with new fuel blends. For example, oil majors such as BP and ExxonMobil have both already also started producing very low sulphur fuels that comply with the 0.5 per cent requirement.

Apart from compliance, the effectiveness of IMO 2020 will be dependent on proper monitoring and enforcement. The expected price differential between compliant 0.5 per cent fuels and high sulphur fuels may tempt unscrupulous ship owners to risk non-compliance. This temptation could become a more realistic threat should the new regime fail to be adequately enforced. As a specialized agency of the United Nations, the IMO has no authority to enforce the new limits. Thus, enforcement will depend predominantly on flag States and Port State Control.

Port States are expected to conduct initial inspections based on documents and other possible materials, including remote sensing and portable devices. For instance, port State control officials will need to examine the vessel’s certification such as the International Air Pollution Prevention (IAPP) Certificate as well as the copies of the bunker delivery notes for the last supplies furnished to the ship. As from January 1, 2019, these bunker delivery notes must include a declaration by the bunker supplier confirming the sulphur content in the fuel it is supplying. It is also anticipated that a number of port States shall be deploying “sniffer drones” in major ports in order to identify any violations. Furthermore, if clear grounds to conduct a more detailed inspection exist, Port State Control will be permitted to conduct sample analysis and other detailed inspections to verify compliance to the regulation, as appropriate. Flag State administrations will also need to ensure that adequate fines and sanctions will be introduced in order to serve as a real detriment against violations or breaches.

Earlier this year, the IMO MEPC issued its Guidelines for Consistent implementation of the 0.5 per cent Sulphur Limit under MARPOL Annex VI as well as its Guidelines for port State control under MARPOL Annex VI in order to offer some assistance in relation to the implementation and enforcement of the new sulphur cap.

Nonetheless, a plethora of questions are still being put forward. For instance, will flag States with limited resources – including human resources – be in a position to effectively ensure compliance when their ships are navigating on the high seas? The International Bunker Industry Association has also raised concerns of the possibility of a compliance breach as a result of sulphur still being present in the tanks before switching. Are all ships expected to have cleaned their fuel tanks just prior to January 1, 2020?

Moreover, the effectiveness of IMO 2020 as a global threshold will only be possible if the same enforcement levels are applied across the board. Uniformity could help avoid market distortions. Due to public outcry, Indonesia had to recently backtrack on its original plans for a partial implementation of the new limit (by not applying it to cabotage vessels).

That said, there are still a number of countries, such as Egypt or Argentina, which have not yet even ratified Annex VI of MARPOL 73/78 and therefore ships in those jurisdictions may face no enforcement checks. Apart from external enforcers, ship owners may have contractual reasons to wish to comply. If a ship has an incident and it transpires that the bunker fuel are off-spec, P&I Clubs may consider the ship ‘unseaworthy’ or in breach of applicable laws, and thus could decide to invalidate that owner’s policy.

With just three months to go before the January 2020 deadline sets in, there still remain a number of variables at play and several lingering questions remain unanswered. It appears that only time will tell as to whether or not the shipping industry and the fuel supply chain in general are adequately prepared for this imminent momentous change.

by Adrian Attard, Fenech & Fenech Advocates

Source: Times of Malta

Member of the Comité Maritime International

Malta – Recent Changes to Laws Regulating Shipping Companies

Effect of COVID-19 on Maltese shipping industry

Measures taken by the Malta Transport Authority in the context of COVID-19

Recent changes to procedures in relation to vessel arrests

2020 Global Sulphur Cap: The countdown begins

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