News - Malta Maritime Law Association

Notice on Maritime Emissions issued

April 11, 2017 Leave a Comment

EU Regulation 2015/757 on the Monitoring, Reporting and Verification of Carbon Dioxide Emission from Maritime Transport (the “Regulation”) has entered into force on 1st July 2015. The Authority for Transport in Malta (“Transport Malta”) has recently issued Notice 133 concerning such regulation.

In brief

The Regulation requires ship-owners and operators of 5000+ GT vessels to monitor, report, and verify CO2 emissions of such ships calling at any European port.

What are ship-owners and operators required to do?

Ship-owners and operators of 5000+ GT vessels flying the Maltese Flag are required to set up all those procedures required to implement the Regulation as soon as possible by developing Monitoring Plans and procedures for the collection and reporting of data concerning fuel consumption and transport work.

Any Deadline?

Companies are requested to submit to an Accredited Verifier Ship-Specific Monitoring Plans for fuel consumption showing the method adopted for monitoring and reporting measures together with any other information for each of their vessel. Ships falling under the application of the Regulation after 31st August, 2017 would have to abide by such provisions not later than two months after the ship’s first call in a European port.

As from the 1st January, 2018 Per-Voyage and Annual Monitoring procedures shall be in place. These should be prepared in accordance with the monitoring plan as approved by the accredited verifier for each ship arriving (or departing from) a European port and for each voyage.

As from 2019, ship-owners and operators of 5000+ GT vessels will be obliged to submit to Transport Malta and the European Commission every year by the 30th April, Verified Annual Emissions Reports concerning CO2 emissions.

What does the Monitoring Plan consist of?

The monitoring plan shall tackle all the elements required by the Regulation including a reference to all those documents proving the monitoring methods adopted for the specific ship. This should be based on the template model accessible under Annex I of the Implementing Regulations 2017/1927.

Conformity of the Monitoring plan shall be assessed by the accredited verifier prior to the beginning of the reporting period.

Contributed by Dingli & Dingli Lawfirm

Source: Shipping Law News 12 April 2017

Court lifts physical bunker supplier’s arrest of vessel

March 23, 2017 Leave a Comment

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

December 15, 2016 Leave a Comment

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

MMLA President at IMLI

December 1, 2016 Leave a Comment

Dr. Ann Fenech (President of the Malta Maritime Law Association and Managing Partner and Head of the Marine Litigation Department of Fenech & Fenech Advocates in Malta) visited the IMO International Maritime Law Institute (IMLI) on 22 November 2016 and delivered a set of lectures on ‘the Role of the Maritime Law Practitioner: Local and International’ to the IMLI Class of 2016 – 2017.

Dr. Fenech began her lecture with a brief introduction of Malta’s historic location as a maritime nation which attracted many maritime activities, including the construction of a naval dockyard now developed into a commercial dockyard.

On the role of a maritime law practitioner, Dr. Fenech described that such a role may come in various ways and situations across the entire spectrum of maritime activities. Maritime lawyers may be involved in contractual as well as transactional litigious cases such as ship repair contracts or post repair disputes between ship repairers and ship owners. Other areas which maritime lawyers may grapple with in their practice include the privatization of shipyards, industrial relations, and incidents during marine operations. She admitted that works concerning marine accidents could be heartbreaking in situations claiming lives.

Further, Dr. Fenech discussed with the students, the crucial role maritime lawyers play in the registration of vessels. She vividly explained how Malta’s Ship Registry successfully developed from one million tons in 1986 to sixty-five million tons today; from a flag of convenience to a flag of confidence; from a black-list to a white-list, and from a flag used by few to a flag used by many. The students learned that Malta is the 7^th largest Registry in the world.

While assuring the students that IMLI is one of the very few Institutions worldwide where students are introduced to the entire spectrum of maritime practice, Dr. Fenech advised them to have confidence in themselves as maritime lawyers when dealing with clients. She also advised them to be firm with an open mind and flexibility for various options for settlement in the best interest of clients.

Dr. Ann Fenech obtained an LL.D. from the University of Malta in 1986 and joined the international shipping law firm of Holman Fenwick and Willan in London. She obtained her LL.M. Degree in Maritime Law from the University of London in 1989 and worked with the law firm, Chaffe, McCall, Phillips Toler and Sarpy, in New Orleans, the United States of America two years later. In 1992, she joined Fenech and Fenech Advocates (Malta) where she set up the Marine Litigation Department and was appointed Managing Partner in 2008.

She has been involved in the drafting of numerous shipping laws in Malta such as the Pilotage Act and amendments to existing laws including the Merchant Shipping Act and the Code of Organisation and Civil Procedure, where she introduced the rules governing the jurisdiction in rem for the Maltese Courts. She has held several portfolios in her career including Council Member of the European Maritime Law Association; President of the Malta Maritime Law Association, and Maritime Arbitrator, Malta Maritime Arbitration Center, among others. She was awarded Best in Shipping Law at the European Women in Business Awards in 2012 and 2014 respectively. In June 2016, Dr. Fenech was elected to the Executive Council of the Comité Maritime International.

Dr. Ann Fenech lectures extensively on Maritime Law at the University of Malta and abroad.

Source: IMLI Newsletter, December 2016

Unnecessary risks constitute breach of marine insurance policy

May 2, 2016 Leave a Comment

On October 7 2015 in AJD Tuna Ltd v Citadel Insurance plc the Maltese Civil Court held that underwriters need not make payments under an insurance policy when the loss or damages occurred due to a fault or negligence on the part of the assured and where the assured’s behaviour constitutes a breach of policy.

Facts

The proceedings revolved around a claim brought by AJD Tuna Ltd against its underwriter in respect of the loss of the assured’s vessel, the Pippo II. The fishing vessel was berthed in Xemxija (a harbour in the north of Malta) when, during a storm, it broke off its mooring and ended up grounding on some nearby rocks.

As a result, the vessel started taking on water and risked sinking. The dangers were further compounded by the fact that there were a number of bluefin tuna farms in the vicinity and the owner of the vessel was concerned that the bunker fuel onboard could leak and cause environmental damage. The owner immediately informed the insurer of the incident, and the latter sent a representative to assess the situation.

The owner carried out some temporary repairs onboard the vessel in order to attempt to navigate it to a nearby port. However, rather than opting for one of the nearer ports recommended by the underwriter’s representative, the owner sailed the ship north towards the Mgarr Port in Gozo, an island just north of Malta. Along the way, the vessel encountered further difficulties and eventually sank in the channel between the islands.

The owner subsequently demanded reimbursement for its losses from the underwriter. The underwriter argued that the owner had breached its obligations under the respective policy and that no payment was owed as compensation.

The insurer argued that the owner took unreasonable and unnecessary risks when it decided to sail the boat across the channel to Gozo. Furthermore, the underwriter contended that it had instructed the owner that the vessel should either be left in Xemxija or alternatively taken to one of the nearby harbours. The insurer referred to the insurance policy, under which the underwriter was entitled “…to decide the port to which vessel shall proceed for docking or repairs.” Thus, the insurer contended that by deviating from its instructions and taking the vessel to Gozo rather than to the suggested ports, the owner had violated its obligations under the insurance policy.

In addition, the insurer argued that the owner’s actions resulted in the vessel sinking in deep waters, preventing the possibility of any investigation. Moreover, had the vessel sunk in shallower waters, it could have been salvaged, thereby reducing the loss suffered.

Decision

The court appointed an expert to assess the extent of the damages initially suffered by the vessel during the storm based on given testimony and available evidence. In addition to the fact that water had entered through cracks in the hull, a part of the keel was missing which further aggravated the risk of sinking during the storm. The court-appointed expert also advised that the vessel should not have undertaken such a voyage in this state unless it was in calm waters and under tow. The court shared the same sentiment as the expert and concluded that the decision to take the vessel to Gozo was imprudent, bearing in mind the state of the vessel and the weather.

Interestingly, the court also noted that the underwriter, on its part, had failed to provide the owner with a surveyor when the incident occurred in order to help it assess the extent of the damage and the repairs which needed to be carried out. The court also observed that the owner had every reason to request the assistance of a surveyor, as this was in its interest. The court considered this shortcoming when deliberating which party should pay the court’s costs and expenses.

The court nonetheless concluded that the owner had acted unilaterally and imprudently when it took the vessel to Gozo and consequently dismissed its claim for any damages.

Naturally, the court placed considerable weight on the insurance policy and found that by making certain decisions, the owner had failed to adhere to its obligations under the relevant policy.

Comment

While the owner’s situation is sympathetic given the distressing circumstances under which it had to act, this judgment highlights the importance of ensuring that owners are familiar with the content of their insurance policies – in particular, with the responsibilities arising thereunder. Moreover, the court’s decision illustrates the importance of having an emergency procedure in place that complies with any contractual duties arising under an insurance policy. As this case has shown, failure to do so could result in the assured receiving no compensation.

Contributed by Adrian Attard, Fenech & Fenech Advocates

Source: International Law Office, April 27, 2016

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