International Law News Archives - Page 3 of 8 - Malta Maritime Law Association

Update on yachting procedures

September 2, 2020 Leave a Comment

Malta has always been at the forefront of offering solid, reliable solutions to yacht owners depending on their individual requirements and the intended use of their yacht. The first half of 2020 has seen the introduction of updated rules affecting operating leases and streamlined importation procedures, offering owners the possibility of availing themselves of a number of solutions and procedures catering to their individual requirements. Given the delay in the season due to the COVID-19 pandemic, this article highlights these developments for owners that are taking delivery of or importing their yachts over the coming months.

Improved importation procedures

For many years Malta has offered an efficient and attractive procedure for the importation of commercial yachts that are intended to be brought into free circulation within the European Union so as to enable them to carry out their chartering season in the Mediterranean. The introduction of the following measures earlier in 2020 was intended to further strengthen the procedure governing the importation of commercial yachts in Malta:

Deferment of value added tax (VAT) on the importation of commercial yachts by Maltese owning entities with a Maltese VAT registration without the requirement of the importing entity setting up a bank guarantee as required in the past.
Deferment of VAT on the importation of commercial yachts by EU owning entities with a Maltese VAT registration provided that the company appoints a VAT representative in Malta in terms of Article 66(2)(b) of the VAT Act without the requirement of the importing entity setting up a bank guarantee as required in the past.
Deferent of VAT on the importation of commercial yachts by non-EU owning entities on provision by the importing entity of a bank guarantee in an amount equivalent to VAT on 0.75% of the value of the yacht which would in all cases be subject to a cap of €1 million.

Updated guidelines relating to use and enjoyment by yacht lessees

On 12 March 2020, the commissioner for inland revenue published revised guidelines regarding the place of supply of the hiring of pleasure yachts. The guidelines establish the manner in which the use and enjoyment of such pleasure yachts is to be treated for VAT purposes.

While the general principle is that full taxation in Malta applies where the place of supply of the service is determined to be Malta, the guidelines provide for a method of adjustment based on the actual effective use and enjoyment of a pleasure yacht in and outside EU waters. The revised guidelines establish that this is to be calculated by reference to the period of time when the pleasure yacht is used and enjoyed outside EU territorial waters.

For the purpose of applying the guidelines, the lessee must provide the lessor with documentary or technological data to determine the actual effective use and enjoyment by the lessee of the pleasure yacht in and outside EU territorial waters during the lease period.

The guidelines may be used within the context of operating leases that are set up under Maltese law.

Updated practices in application of operating leases

Malta has built a formidable reputation in catering to owners’ needs while constantly taking into account industry practice and legal developments. This has led to Malta being a go-to jurisdiction for the setting up of operating leases. Such operating leases are formulated in accordance with best practices to ensure compliance with EU interpretations and European Court of Justice judgments and would generally comprise the following principles:

A Maltese shipping organisation would be set up as the owner of the yacht (the lessor), which would lease the yacht to another entity (the lessee).
The place of supply of the yacht would be Malta.
The yacht would be available to a lessee for consideration for a specified period.
General principles relating to intra-community supplies and importations at the time of acquisition of the yacht by the lessor and place of supply rules at the time of the supply of the yacht to the lessee will apply.
The lease period and the consideration paid to the lessor by the lessee for the use of the yacht are commercial decisions that are established contractually between the parties.
Such decisions would be based on an assessment of the type of yacht involved, its specifications and value, together with the prevailing market conditions.
The lessee would pay VAT on a quarterly basis on the monthly lease instalments to the lessor.
Subject to a number of conditions being satisfied, the VAT department would, on a request to that effect, issue a letter confirming that the lessor has declared and is accounting for VAT on the lease of such yacht in Malta.

By Alison Vassallo at Fenech & Fenech Advocates www.fenechlaw.com.

Source: ILO

Dispute resolution regulations for bunkering operations

July 1, 2020 Leave a Comment

Introduction

Transport Malta’s Ports and Yachting Directorate recently issued Port Notice Number 07/20 entitled “Dispute Resolution and Procedures in Connection with Bunkering Operations” to remind recipients about the Dispute Resolution (Procedures) Regulation under Subsidiary Legislation 545.30 of the Laws of Malta.

The port notice highlighted that authorised providers and customers can make complaints to the regulator to settle any disputes between them.

In accordance with the port notice, the regulation applies to bunkering operations where a dispute has arisen between the bunkering fuel operator and provider and the receiving vessel. The procedure provides for an alternative dispute resolution (ADR) mechanism that aims to be swift, economical, transparent and simple.

Much of the port notice’s attraction lies in the fact that disputes between authorised providers must be settled within four months, while disputes between an authorised provider and a consumer must be settled within 90 days, with extensions allowed only in exceptional circumstances.

Complaints and supporting documentation may be filed with the regulator online and, subject to certain conditions, the regulator’s decisions are binding on the parties to the dispute with administrative fines imposed for non-compliance. However, this procedure is entirely voluntary and does not affect the parties’ rights to proceed to arbitration or court should they prefer.

Dispute Resolution (Procedures) Regulation

The relevant parties under the Dispute Resolution (Procedures) Regulation are as follows.

Authorised providers
The regulation is not limited to bunkering operations and defines an ‘authorised provider’ as any natural or legal person, whether privately or publicly owned, which is authorised to operate, provide or carry out any activity or operation or provide any service relating to energy and water services.

Consumer
A ‘consumer’ means any person who uses or requests a service or product, the provision of which is regulated by the act, for purposes outside of their trade, business, craft or profession. This definition raises the question as to who can qualify as a consumer; however, the port notice explains that it applies to “bunker operations where a dispute arises between the bunkering fuel operator and provider and the receiving vessel”.

Regulator
The regulator, established under the Regulator for Energy and Water Services Act, is composed of a chair and no fewer than four and no more than six members. Members are appointed by the minister for five or seven-year terms and may be reappointed only once.

Proceedings before regulator
The Dispute Resolution (Procedures) Regulation provides for two scenarios: dispute resolution where the parties are both authorised providers and dispute resolution where the parties are an authorised provider and a customer. The regulation seeks to provide authorised providers and consumers with an ADR mechanism that aims to be simple and transparent, offering binding decisions in a swift and economical manner.

Where a dispute arises between authorised providers, the regulator must initiate an investigation into the dispute as soon as possible and seek to resolve the dispute within four months from the date on which it was notified. This timeframe may be extended by a further two months where additional information is sought and the parties agree to such an extension.

Under the regulation, the regulator has the power to initiate an investigation on its own initiative. However, the regulator’s jurisdiction is not automatic and they may refuse to initiate an investigation where they are satisfied that other means of resolving the dispute in a timely manner are available to the parties.

The regulator may also refuse to initiate an investigation where the dispute is already subject to legal proceedings. Where a decision has been taken to refuse to initiate an investigation, the regulator must inform the parties as soon as possible. However, where the dispute has not been resolved or the party seeking redress has not initiated legal proceedings within four months from such a decision, the regulator may, at the request of a party, initiate an investigation.

Subject to possible appeal, the regulator’s decision will be binding on the parties and failure to abide by the decision will be considered an infringement of the regulation, subject to an administrative fine.

Under the regulation, the regulator will also have jurisdiction in cases where a consumer alleges that an authorised provider has infringed the Regulator for Energy and Water Services Act or subsidiary legislation made thereunder. When referring a dispute, a consumer must show on a prima facie basis that it has been affected by an act or omission of the authorised provider. In resolving the dispute, the regulator may, among other directives, order the authorised provider to effect reimbursement of payments received or to make compensation payments. Such payments may include the whole or part of the costs relating to the engagement of a lawyer or technical adviser engaged in submitting the dispute. Should a party fail to abide by an order given, the regulator may impose an administrative fine of not more than €600 for each day of non-compliance.

Notably, the regulator is not a compulsory dispute settlement mechanism for disputes arising between authorised providers and consumers. In fact, the regulation makes clear that “the provisions of this Regulation shall be without prejudice to the right of a consumer to have recourse to any other body in resolving any such dispute”.

As many other ADR mechanisms, the regulator aims to be expeditious in its investigations, with the regulation setting out a 90-day period within which disputes must be resolved. This timeframe may be extended only in exceptional circumstances. The regulator aims to increase efficiency by allowing complaints and supporting documentation to be submitted online. Official communication may also be made electronically or if applicable, by post.

When faced with a consumer complaint against an authorised provider, the regulator may refuse to deal with complaint in the following circumstances:

Where the consumer did not first attempt to contact the authorised provider in order to discuss their complaint and seek to resolve the matter with the authorised provider directly.
Where the dispute is frivolous or vexatious.
Where the dispute is or has been considered by another dispute resolution entity or a court.
Where the consumer did not submit the complaint to the regulator within one year from the date on which the consumer submitted the complaint to the authorised provider.
Where dealing with the dispute would seriously impair the regulator’s effective operation.
Where the consumer did not submit the complaint to the regulator within two years from the date on which the facts constituting the substance of the complaint first arose.

According to the regulation, decisions are binding on the parties to the dispute. However, where the dispute is between an authorised provider and a consumer, it is only binding on the consumer if they have been informed of the binding nature in advance and have specifically accepted this.

Although decisions are binding, they are not final and decisions taken by the regulator are subject to appeal before the Administrative Review Tribunal within 20 days of the decision. Appeals may be filed on the following grounds:

a material error as to the facts has been made;
there was a material procedural error;
an error of law has been made; or
there was some material illegality, including unreasonableness or lack of proportionality.

Comment

The Dispute Resolution (Procedures) Regulation aims to provide for an ADR mechanism that seeks to increase consumer protection in a timely and cost-effective manner. In times where courts have been forced to close due to COVID-19 containment measures and where there may be significant backlogs as they slowly open up again, authorised providers or consumers looking to settle disputes quickly may consider this mechanism as a valid alternative. Nonetheless, it is advised that disputes involving complex legal issues, including bunkering operations, should continue to be referred before a court so that the parties can make full use of all of the legal mechanisms available therein.

by Dr Martina Farrugia, Fenech & Fenech Advocates

Source: ILO

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

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

Flag injunctions: practical alternative to ship arrests

September 23, 2019 Leave a Comment

Introduction

Located in the heart of the Mediterranean and on the rhumb line between Gibraltar and the Suez Canal, Malta has long been regarded as a hot spot for ship arrests. Maltese law is straightforward in terms of who has a right to arrest and which claims may be secured by means of an arrest. Consequently, creditors can pre-assess and pre-determine whether they can proceed with a ship arrest in Malta. Further, local arrest procedures are quick, efficient and inexpensive meaning that a creditor monitoring or tracking a debtor’s vessel would normally be more than pleased to discover that said ship is scheduled to call at a Maltese port.

However, while ship arrests are a powerful legal remedy for creditors, they have one major limitation: they are possible only where the targeted vessel actually enters Maltese waters. Thus, a vessel can be arrested only when it is physically present within Malta.

Section 37 injunction

Apart from arrests, Maltese law offers creditors another practical and useful mechanism to ensure that they can adequately secure maritime-related claims, which may arise in connection to vessels. Section 37 of the Merchant Shipping Act affords a creditor the right to request the courts to issue an injunction over any vessel flying the Maltese flag, to ensure that it cannot be sold, transferred or deregistered from the Maltese ship registry. An injunction may be requested at any time, irrespective of where the ship is located or trading. The relevant court order is colloquially referred to as a ‘Section 37 injunction’.

From a procedural perspective, a creditor must file a sworn application requesting that the courts prohibit the sale or transfer of its debtor’s vessel. This must then be served on the debtor, which has 20 days to file a reply. Subsequently, the court will schedule a hearing to determine whether to issue the final injunction. However, given that speed is of the essence when dealing with injunctions of this nature, the creditor will also simultaneously with its application, file an ex parte application (ie, the debtor is not served with a copy of the same) requesting that the same court immediately issue a provisional injunction prohibiting any transfer or sale of the vessel pending the outcome of the final order. This ensures that the element of surprise is maintained and that a provisional injunction is issued expeditiously. Indeed, a provisional injunction is normally issued within the same day that the request is filed. When the court issues an injunction order, be it provisional or final, it is immediately served on the national ship registry administration and is then duly recorded in the ship’s register. Once the injunction is duly registered, the Maltese registry will not recognise or record any sale or transfer of that particular vessel, unless the ship is sold by judicial sale. Likewise, the owner will be prohibited from deregistering the vessel from the Maltese register while the injunction remains in force.

The Section 37 injunction is regarded by many as a practical and useful tool for creditors for a number of reasons. Malta is currently the sixth largest flag in the world and the largest in the European Union, boasting a gross tonnage of more than 82 million. The fact that a Section 37 injunction is issued on the basis of the flag rather than the location of a ship means that this remedy is available for roughly 6% of the world fleet. In addition, more than 780 superyachts are registered under the Maltese flag. This particular remedy offers creditors a more discreet way of securing their claims than having to arrest. Further, this procedure is available irrespective of whether the ship owner is a Maltese entity. The Maltese courts have jurisdiction to issue Section 37 injunctions against any owner of a Maltese-flagged ship, even if they are foreign domiciled.

Further, unlike a ship arrest, a Section 37 injunction does not impede a vessel from trading and operating commercially. As such, this remedy is advantageous to creditors faced with a debtor that is facing liquidity or cash-flow issues despite having assets (ie, ships). By allowing a vessel to continue to trade, a ship can continue to generate profits and liquidity for its owner. The cash earned could eventually translate to the creditor’s debt being paid off. In addition, throughout the whole process, the creditor can be confident that the ship cannot be transferred and thus that it has security for its claims. Because the ship is not impeded from its commercial operations, there are also restrictive circumstances where a debtor may request the court to order a creditor to provide for counter security. This is naturally an advantage for creditors. Further, provided that the grounds to issue the flag injunction subsist, there are limited defences or challenges which can be brought to frustrate a Section 37 injunction.

If creditors maintain their flag injunction over a vessel, it will remain registered in the ship’s registry. This means that if the debtor ship owner wishes to sell its ship in future, it would be prohibited from doing so until it either settles the debt or challenges the injunction. Thus, in some cases, the mere fact that the ship cannot be transferred creates enough pressure for a debtor to settle its dues.

Comment

For all of the above reasons, the Section 37 injunction provides creditors with an interesting, cost-efficient remedy where a ship arrest is not possible.

by Adrian Attard, Fenech & Fenech Advocates

Source: ILO

Member of the Comité Maritime International

Update on yachting procedures

Dispute resolution regulations for bunkering operations

Effect of COVID-19 on Maltese shipping industry

2020 Global Sulphur Cap: The countdown begins

Flag injunctions: practical alternative to ship arrests

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