The Malta Maritime Law Association, Malta Maritime Forum, The Yachting Trade Section within the Malta Chamber of Commerce and Super Yacht Industry Network Malta have issued a communiqué in reaction to the articles reported in the press on a communication sent by the French Commissioner Pierre Mascovici to Minister Scicluna regarding the application of rules on VAT relative to yachts.
Ann Fenech re-elected to the Comité Maritime International (CMI) Executive Council
Ann Fenech, who has for the last two years served as a member of the CMI Executive Council, was unanimously re-elected to a second term on the said Council. Ann Fenech’s reappointment took place during the CMI General Assembly held in Genoa at the beginning of September, which entrusted her to serve for another two year term as one of the 13 members of the CMI’s Executive Council.
Ann Fenech is the President of the Malta Maritime Law Association and the first Maltese person who has ever been elected to the CMI Executive Council.
The Comité Maritime International is the oldest organization in the world that is exclusively concerned with the unification of maritime law and related commercial practices. Founded in 1897, CMI has been responsible for the developing and drafting of most international maritime law instruments over the last century. To this effect, CMI also enjoys observer status at the International Maritime Organization (IMO).
Since her appointment two years ago, Ann Fenech has also been appointed as chair of the CMI International Working Group (IWG) on Ship Financing Security Practices. She delivered a presentation at the CMI/AIDIM Seminar, wherein she gave a detailed overview of the work carried out by the said IWG over the last year.
The Conference was very well attended with more than 200 maritime lawyers from all over the globe.
New Guidelines on Private yacht carriage capacity
At the start of 2017 Transport Malta, the authority responsible for the administration of the Malta flag, introduced new guidelines that allow more than 12 persons on board privately registered yachts.
Since their launch, these guidelines have been welcomed by the industry, not least since they represent the consolidation of a flexible approach towards authorisation for the carriage of additional guests on board and a departure from the previously strict requirement for yachts to be built in accordance with the International Convention for the Safety of Life at Sea or the Passenger Yacht Code and registered with a red ensign flag.
These guidelines apply to yachts both above and below 500 gross tonnes and will be applied on a case-by-case basis at the discretion of the authority. Further, pleasure yachts falling within the ambit of the guidelines will be prohibited from navigating more than 150 miles from a safe haven while carrying more than 12 persons.
Requirements
Yachts falling under the guidelines must:
- hold a valid class certificate (a requirement applicable for yachts over 500 gross tonnes);
- comply with the requirements of the Commercial Yacht Code;
- possess an approved stability booklet, which covers the loading conditions relative to the total number of persons being requested on board;
- install and carry the appropriate safety equipment, depending on the expected number of persons on board;
- have a 100% life raft capacity;
- carry a compliment crew in line with the Commercial Yacht Code;
- have been issued a safety radio statement of compliance (applicable to yachts over 300 gross tonnes) or a safety radio certificate (for yachts over 500 gross tonnes); and
- comply with the International Convention for the Prevention of Pollution from Ships requirements, as detailed in the Commercial Yacht Code.
The guidelines also require an intermediate survey to be effected every two-and-a-half-years, starting from the date on which the vessel is allowed to carry more than 12 persons. The aim of this survey is to verify the continued compliance with the minimum requirements.
Comment
The Malta flag has increasingly garnered a solid reputation as being one of the leading European flags and is favoured by owners, financiers and operators of private and commercial yachts. Speaking at the Fifth Opportunities in Superyachts Conference organised in Malta on the February 23 2017, Minister for Transport and Infrastructure Joe Mizzi noted a record increase of over 14% in the registration of superyachts over 24 metres under the Malta flag over the past year. He attributed this success to the high level of service offered by both the public and private sectors and the “various initiatives and strategies in favour of the industry offering a holistic package”.
The new guidelines stem both from a recognition by the Maltese administration that there is a gap in the superyacht market and the administration’s continued effort to remain at the forefront as a leading yachting flag, which is conscious of the need to meet the industry’s frequently changing requirements while maintaining the highest possible technical standards.
Contributed by Alison Vassallo, Fenech & Fenech Advocates
Source: ILO 12 April 2017
Court lifts physical bunker supplier’s arrest of vessel
Following the issuance of a provisional arrest warrant for a yacht at the request of a physical bunker supplier, the Maltese court determined that it was not vested with jurisdiction in rem and accordingly lifted the arrest.
Facts
The motor yacht Vicky was arrested in Malta on January 4 2017 by Thevenin & Ducrot for a claim relating to unpaid bunkers supplied to the yacht. The owners of the yacht subsequently filed an application before the Maltese courts challenging the arrest and arguing, among other things, that the Maltese courts lacked jurisdiction in rem.
The court had to examine whether the requirements set out under Articles 742B and 742D of the Code of Organisation and Civil Procedure and Article 50 of the Merchant Shipping Act were satisfied when the arrest warrant was issued.
Maltese law and jurisprudence dictate that three essential requirements must be satisfied in order for an arrest in rem to be validly issued:
- The vessel must be physically situated within Maltese territorial waters.
- The claim must fall under Articles 742B of the Code of Organisation and Civil Procedure, which lists all maritime-related claims for which a claim in rem may be brought and includes dues “in respect of goods, materials, provisions, bunkers, supplies and necessaries supplied or services rendered to a ship for her operation, management, preservation or maintenance”.
- The requirements set out under Article 742D of the Code of Organisation and Civil Procedure must be satisfied.
Article 742D provides that unless the claim is privileged in accordance with Article 50 of the Merchant Shipping Act, an arrest in rem may be brought against a ship only when the person liable for the claim:
- was the owner or charterer, or in possession or in control, of the ship or vessel when the cause of action arose; and
- is the owner, beneficial owner or the bareboat charterer of the ship when the action is brought.
The yacht owners argued that this requirement had not been satisfied.
The owners alleged that they were not liable for Thevenin & Ducrot’s outstanding dues. They further maintained that they had no juridical or legal relationship with the physical supplier that arrested the yacht. It transpired that the owners had not directly ordered the bunker supply in question. Instead, they had ordered bunkers from an intermediary fuel trader, Mastco Group AG. The latter entity subsequently used a third-party broker to purchase the fuel product from the physical supplier. However, when the bunkers were furnished to the Vicky, Mastco Group failed to pay the physical supplier. That said, the yacht owners had paid Mastco Group AG for the bunkers.
The physical supplier defended the arrest by arguing that although its invoices were issued to Mastco Group, the owners were aware of the order and accepted the fuel product. To this effect, the arresting party presented its bunker delivery note and argued that since this document bore the vessel’s stamp and was signed by the chief engineer, the owners were also liable for payment of the fuel product.
Decision
The court disagreed with the supplier’s argument, holding that the bunker delivery note was nothing more that proof of receipt of the fuel consignment. Moreover, the fact that it was signed by a representative of the vessel in no way meant that the vessel or the owners had participated in the contract of sale or were party to the agreement.
The supplier also alleged that its claim was in fact a privileged one in terms of Article 50(m) of the Merchant Shipping Act and that in any event, Article 742D of the Code of Organisation and Civil Procedure should not apply. However, in order for a claim to be deemed privileged, the debt in question must have been contracted directly by the owner of the ship, the master or an authorised agent of the owner. To this effect, the supplier argued that when Mastco Group AG ordered the bunkers it did so as an authorised agent for and on the behalf of the vessel. The court disagreed with this contestation as no substantial evidence was produced to prove, even on a prima facie basis, that Mastco Group AG had acted as the agent of the owners or vessel when purchasing the fuel product.
The court thus concluded that the Maltese courts were not vested with jurisdiction in rem and ordered that the arrest warrant be lifted.
Comment
In light of the growing spate of claims brought by physical suppliers against shipowners, this judgment sheds important light on the onus of proof with which an arresting creditor is burdened. The court held that it was insufficient merely to procure evidence of knowledge of the supply or proof of acceptance of the product from the supplier; there must be a more genuine juridical link between the physical supplier and the owner of the vessel. In this regard, the court may have reached a different conclusion had the bunker delivery note included a statement or declaration incorporating the physical supplier’s terms and conditions (which, in turn, may hold a shipowner jointly and severally liable for the payment). In this scenario, there are arguments both in support and against any arrest in rem made on this basis. That said, this remains a moot point, as it is still untested by the Maltese courts. Further, it would appear that a claim for unpaid fuel product ordered by a third party may in certain circumstances be considered privileged, provided that there is unequivocal evidence that the third party made the order in its capacity as an authorised agent of the owners.
Contributed by Dr Adrian Attard, Fenech & Fenech Advocates
Source: ILO, 22 March 2017
Maritime Malta – Legal Perspective
The term ‘Maritime Malta’ perfectly describes Malta – a country which has always had close connections with the sea and maritime sector. Malta’s position in the centre of the Mediterranean, equidistant from the straits of Gibraltar and Suez and the shores of North Africa and Italy, means that it has always been considered a highly strategic trading post.
Malta’s existing maritime diversity is evidenced by the fact that it:
- has the largest shipping register in Europe;
- has one of the deepest natural harbours in the world;
- is home to numerous marinas which now welcome some of the world’s most glamorous superyachts;
- has a tradition in ship repair, with numerous yards and docks – one of which is 230 metres long;
- has two fascinating ports of call, Valletta and Gozo, for the hundreds of cruise liners either visiting Malta or using it has a home port;
- is equidistant from the straits of Gibraltar and Suez and thus an ideal bunkering location;
- boasts an international port (Malta Freeport) which serves as a highly successful transhipment centre; and
- is home to the International Maritime Law Institute, a postgraduate academic institution under the auspices of the International Maritime Organisation.
These achievements are a direct result of careful planning, a strong workforce that is prepared to deliver value for money and a ‘can do’ attitude. In addition, Malta has a stable and reliable legal regime and laws which give investors and their financiers a high degree of confidence.
Overview of legal system
Before Malta became a British colony in 1801, it had a fully developed judicial system based initially on Roman law and later on the Napoleonic Code. When the British came to Malta, they found a highly developed legal system. That said, the years under British rule (from 1801 to 1964) were extremely important in terms of shipping legislation, as a number of shipping laws passed in England during this period came into force in Malta.
Following independence in 1964, a number of important commercial laws passed by Parliament were based on the British model. These include several laws in relation to financial services, shipping and companies. This, coupled with the fact that English is the second official language in Malta (which means that all legislation is available in English), ensures that investors and their financiers are guaranteed a high level of confidence. As English is an official language, there is often less bureaucracy compared to other jurisdictions, where everything from a simple power of attorney to the most complex corporate documents must be translated into the working language of the respective country, notarised and apostilled.
Malta has a diverse body of maritime laws to sustain its maritime activities. It is universally recognised that having a solid legal base which provides potential investors and their financiers with confidence that their investments are secure is paramount. Without it, no country can aspire to have good-quality, high-end investments.
In addition to the laws passed by Parliament, Malta is a signatory to an increasing number of international conventions regarding the maritime sector. Further, as Malta is a member of the European Union, it is subject to the entire body of European law.
International conventions
Malta is party to a number of both well-known and less-established international conventions, and these conventions are a major part of its body of law. The more well-known conventions include:
- the Safety of Life at Sea Convention;
- the Prevention of Pollution from Ships Convention; and
- the United Nations Convention on the Law of the Sea (UNCLOS).
Malta helped to launch the discussion on the establishment of UNCLOS on November 1 1967 when Dr Arvid Pardo, Malta’s permanent representative to the United Nations, made a heartfelt appeal before the General Assembly highlighting the need to protect the oceans and take all measures against pollution. It was Pardo who, based on Malta’s historic position, argued that the seabed and ocean floor should constitute part of the “common heritage of mankind” – a phrase now contained in Article 136 of UNCLOS.
Local legislation
In terms of local legislation, there are several laws which regulate every aspect of the maritime sector. Perfect examples of Maltese maritime law are the Merchant Shipping Act (first promulgated in 1973) and the several pieces of subsidiary legislation promulgated under the act. The Merchant Shipping Act is the undisputed authority for the maritime sector. It regulates numerous pillars of maritime law, including:
- the registration of vessels;
- the registration of mortgages;
- masters and seafarers;
- safety at sea;
- pollution;
- special shipping inquiries;
- wreck and salvage; and
- shipowner liability.
Many other legal notices and subsidiary legislation have been promulgated under the auspices of the act. Combined, these laws establish the entire body of law regulating, among other things:
- collisions at sea;
- training and certifications;
- load line rules;
- the limitation of liability on maritime claims;
- safe manning and watch keeping;
- shipping organisations; and
- the certification of commercial yachts.
The Merchant Shipping Act has been fine-tuned and constantly updated to the extent that the Malta flag is now the European white-listed flag of choice for hundreds of shipowners. The reasons behind the flag’s success are mostly operational in nature and include:
- English being an official language;
- the tonnage tax regime; and
- the regulator’s ability to offer a continuous service, where necessary.
Further, as Maltese law offers a great deal of protection to financiers, it is attractive to investors. Ships are often financed by third parties. The mortgagee must believe that the law of the flag state properly protects its interests; otherwise, the financier will refuse the owner’s chosen flag. As such, the choice of flag is an important consideration.
Maltese law also protects mortgagees against defaulting owners – one of the reasons why the Maltese flag is so successful. Further, under Maltese law, mortgagees are in a privileged position because the mortgage itself constitutes an executive title. This means that the mortgage is equivalent to a judgment. Thus, in the case of a defaulting owner, the mortgagee need not commence an action on the merits against the mortgagor for defaulting on its payments. Any other normal creditor would have to commence an action, make a case in court, obtain a judgment and then enforce the judgment.
Under Maltese law, mortgagees have a number of available options to enforce their rights:
- Take possession of the vessel – under this method, the mortgagee can trade the vessel as though it has ownership while the vessel remains under the ownership of the defaulting owner.
- Private sale – under a private sale, the vessel is sold with all its privileged debts and thus will be an unattractive proposition to potential purchasers.
- Judicial sale – a judicial sale is one ordered by the courts. Once a date is set for the auction, the vessel will be sold to the highest bidder. In a judicial sale, the vessel is sold free and unencumbered (thus shedding all of its previous debts); however, as there is no reserve price, vessels are commonly sold for a fraction of their actual price.
- Court-approved private sale – a court-approved sale allows a mortgagee to find a private buyer and negotiate a price, thus eliminating the uncertainty of the sale price. To do so, the mortgagee must file an application in court requesting approval of the sale and present two independent valuations of the ship to show that the sale price is equal to or in excess of the valuation. Once the sale is approved, the vessel will be sold free and unencumbered. This method ensures that the vessel will be sold for an agreed price, rather than leaving it to chance in a judicial sale – something which is particularly useful in the depressed, second-hand tonnage market. This way, all the parties involved – including the shipowner – get the benefits of both a private sale and judicial sale without the disadvantages.
Comment
One of the secrets behind Malta’s success in the international maritime industry is the country’s willingness to think outside the box, improve its products, develop new solutions and update its laws to ensure that they meet the needs and requirements of the international maritime community. For example, Maltese law has continued to develop robust structures to assist superyacht owners, distinguishing them from cargo vessels and passenger liners (for further details please see “Malta – logical choice for superyacht owners“).
To be successful, a country’s maritime law must reflect the needs of the community: it must be sensitive to the needs of users and regulators and should thus be continuously updated. Malta’s regulator and legislature work with industry service providers to ensure that Maltese law reflects the exigencies of the maritime industry. In this context, the Malta Maritime Law Association (MMLA) has become important in developing the concept of ‘Maritime Malta’. The MMLA comprises maritime lawyers and other service providers and has an excellent working relationship with Transport Malta. The MMLA is a member of the Committee Maritime International (CMI), the body tasked with drafting maritime conventions. In 2015 Malta had its first representative elected to the CMI executive committee.
Contributed by Dr. Ann Fenech, Fenech & Fenech Advocates
Source: International Law Office, 30 November 2016
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