News - Malta Maritime Law Association

Collision of Ships in a Foreign Port

December 23, 2013 Leave a Comment

Times of Malta, Monday, December 23, 2013, by Karl Grech Orr

The First Hall of the Civil Court, presided over by Mr Justice Mark Chetcuti, in the case “Godwin Xerri on behalf of Pol-Euro Shipping Lines Plc SA and Sea Voyager Shipping Ltd v Zejt Marine Services Ltd” on December 12, 2013, held, among other things, that the flag of the vessel although relevant, was not enough in this case to invoke the application of Maltese law.

The facts in this case were as follows. The Polish company Pol-Euro Shipping Lines plc SA was the owner of the Malta flag vessel Sider Lipari IMO no. 9119907, which bareboat chartered the vessel to the Malta Company Sea Voyager Shipping Ltd for 24 months, and extended it up to June 30, 2014.

On July 18, 2012, the Malta flag vessel Asso Zejt I which was the property of the Maltese company, Zejt Marine Services Ltd, collided into the vessel Sider Lipari, while it was berthed along the quay at the port of Sousse, in Tunisia.

As a consequence of the collision, the vessel Asso Zejt I caused extensive damage to the vessel Sider Liapri as well as other damages, amounting to over €300,000. The vessel Asso Zejt I was the only asset of Zejt Marine Services Ltd, and in view of the circumstances, it was likely that Zejt Marine Services would try to transfer the vessel before a decision was given on the merits.

It was feared that if the vessel was transferred before the case was decided, Pol-Euro Shipping and Sea Voyager Ltd would be unable to enforce their claims. Pol-Euro Shipping and Sea Voyagers Shipping said that there existed all requisites stipulated in article 37 of the Merchant Shipping Act. Article 742 B (F) of chapter 12 of the Laws of Malta provided specifically that the Maltese courts had jurisdiction in rem in respect of any claim for damages against a vessel arising as a result of a collision.

Faced with this situation, Pol-Euro Shipping and Sea Voyager Shipping filed legal proceedings against Zejt Marine Services Ltd, requesting the courts:

to order that there would be no sale/ transfer or any dealing in the vessel Asso Zejt I;
to order that there would be no sale/ transfer or dealings in the shares in Zejt Marine Services Ltd;
to order that no deletion certificate would be issued by the Registrar of Shipping; and
that there would be no mortgage registration over the vessel Asso Zejt I.

In reply, Zejt Marine Services Ltd disputed the legal action, which it said was unfounded. It was stated that the vessel was not its sole asset. Apparently, Zejt Marine Services had deposited a sum in Tunisia to cover its exposure to liability. It further appeared that claimants tried to arrest the vessel in Tunisia but the arrest was revoked owing to this fund. Zejt Marine Services pleaded that there did not exist the requisites to issue the order under article 37, and that the incident happened in Tunisia and that therefore the law of Tunisia was the applicable law.

The law in Tunisia gave the owner of the vessel the right to exonerate itself from responsibility by depositing the amount under the authority of the courts in Tunis and this to satisfy any liability of the owner of the ship. Zejt Marine Services said that it deposited a sum in settlement of any liability.

It was argued in its defence that this legal action was not permissible under article 37 of the Merchant Shipping Act, nor would any transfer of shares cause any prejudice to claimants. In addition, it claimed that it could not be ordered not to issue the deletion certificate.

This order could only be made against the Registrar of Shipping. The court noted that according to claimants the collision occurred due to the fault of the vessel Asso Zejt I which hit the vessel Sider Lipari. At the time, Sider Lipari was tied to the quay.

The Maltese court had jurisdiction under article 742 1 (b) of chapter 12 of the Laws of Malta as Zejt Marine Services was a Maltese company. The court made reference to EU Regulation 864/07 known as the Rome II, which applied to all member states under the treaty.

In the context of the Irish courts, Liz Heffernan wrote regarding the application of this regulation: “Turning first to geographical reach, the regulation is of ‘universal application’ which means that it is not limited to tort litigation within the EU but extends to any proceedings in tort that contain an international element whether EU or not.

In this sense, the regulation will provide a ‘one-stop shop’ for choice of law in tort which will obviate the need for the Irish courts to operate wholly different regimes for European as opposed to nonEuropean cases.”

According to Zejt Marine Services, the applicable law under Regulation 864/2007 (Rome II) was per article 4 (1) of the regulation which provides, unless otherwise provided, that the applicable law for obligations (not contractual) which result from delict or quasi-delict, was the law where the damages occurred.

Claimants, on the other hand, argued that the vessels had to be considered an extension of Malta and that therefore Maltese law should apply as the lex loci delicti.

The court, however, did not accept this interpretation. In this case it noted that the collision occurred in Tunis and the damages were also suffered in the same place. The facts came within the parameters of Regulations 4 (1 the applicable law was the law of the country where the damages were caused.

The court did not consider the flag of the vessel as the factor which justified an exception to the general application of Regulation 4 (1). Reference was made to Cheshire on private international law. Under article 4 (1) of the regulation, the applicable law was the law of Tunis. Claimants referred to Regulation 4 (2), according to which Maltese law should apply. Regulation 4 (2) provides: “However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.”

The fact that Maltese courts had jurisdiction did not mean that Maltese law should apply The court did not accept this argument.

The claimants under this article had to establish the seat of the central administration. No proof was brought, save for the fact that two of the parties in these proceedings were companies registered in Malta. The place of the registration was not necessarily the place of central administration.

This had to be proven by the person claiming the exception to the general rule under article 4 (1). Any interpretation had to be construed restrictively. On this point the court noted that not all the companies involved in the dispute were allegedly habitually resident in Malta. The owner of the vessel suffering the damages was a Polish company, which was not habitually resident in Malta.

In this respect, the court said that article 4 (2) did not apply. The fact that legal action was taken in Malta did not make Maltese law the applicable law, pointed out the court. Claimants also referred to the exception in article 4 (3) which provides: “Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question”.

It was stated that there was a manifest connection with Maltese law, and that therefore, Maltese law should apply. Claimants maintained that the nationality of the parties, the flag of the vessels and the damages, were all connected with Malta favouring the application of Maltese law.

The court felt that article 4 (3) gave the courts a margin of discretion. Reference was made to Cheshire: “It is not enough to show that the tort/delict is more closely connected with a country other than that indicated in paragraphs 1 or 2, it has to be ‘manifestly’ designed to underscore the exceptional nature of this escape clause.

The use of rules in article 4 (1) and (2), rather than presumptions, is also designed to make clear that the exception really is exceptional. “The escape clauses use the criterion of connections. The connection must be with a country, rather than the law of a country.

The scenario of both parties having a common habitual residence that is dealt with in article 4 (2) will be very much the exception and so article 4 (3) is likely to operate more commonly as an exception to article 4 (1), rather than article 4 (2). Apart from cases where there is a pre-existing relationship between the parties, situations where article 4 (3) would operate as an exception to article 4 (1) are likely to be relatively rare.”

In this case, however, the court was of the opinion that there were no grounds to apply this exception under article 4 (3). The flag of the vessel, although relevant, was not enough in this case to invoke the exception under article 4 (1). This was a case of a collision between two vessels, not an incident on a vessel.

The nationality of the parties was not conclusive. There was no proof of any intrinsic connection with Malta. The damage was suffered as a result of a collision and this was not enough not to apply article 4 (1) of the regulation. The fact that Maltese courts had jurisdiction did not mean that Maltese law should apply.

The court did not feel, in view of the relations between the parties, that it was fair to apply Maltese law, to determine the dispute.

For these reasons, on December 12, 2013, the First Hall of the Civil Court concluded that there was not a strong enough connection with Maltese law in order to disturb the application of article 4 (1). The court found Zejt Marine Services’ pleas to be justified.

It accordingly accepted Zejt Marine Services’ plea, declaring the law of Tunisia to be the applicable law to determine this dispute. The case had to be continued.

Dr Karl Grech Orr is a partner at Ganado Advocates.

Authorities launch guidelines on tax treatment of charters

August 21, 2013 Leave a Comment

Contributed by Fenech & Fenech Advocates
ILO – August 21 2013

Following similar announcements recently made by France and Italy, on July 29 2013 the Maltese authorities published the Guidelines for the Value Added Tax (VAT) Treatment of Short-Term Yacht Chartering. The guidelines address situations in which a short-term charter of a yacht with a crew (or on a bareboat charter basis) is entered into between the owner or operator and the charterer for a consideration.

In terms of Article 56(1) of EC Directive 2006/112 on the common system of VAT, the place of short-term hiring of a means of transport is deemed to be the place where the means of transport is actually put at the disposal of the customer. Article 56(2) provides that in the case of vessels, ‘short-term’ shall mean the continuous possession or use of the means of transport throughout a period of not more than 90 days.

The short-term charter of a yacht to be used for leisure purposes is a supply of a service that is taxable at the standard rate of VAT at the place where the yacht is placed at the disposal of the customer. Therefore, where the yacht is placed at the disposal of the customer in Malta, the charter would be subject to VAT at the standard rate of 18% on the hire that is paid by the charterer to the owner by way of consideration.

Under these guidelines, subject to a number of conditions stipulated by the guidelines themselves and any further conditions that may be imposed, this supply may be taxed according to the portion of the yacht’s use within the territorial waters of the European Union. This is based on Article 59a of EC Directive 2006/112, which provides that member states may consider the place of supply of yachts capable of international travel as being situated
outside the Community if the effective use and enjoyment of the services or part thereof takes place outside the Community.

Since it is difficult to determine the physical movement of a yacht in order to establish the period that the yacht spends within the territorial waters of the European Union and that it spends outside territorial waters of the European Union, the guidelines provide that an acceptable measure would be the length of the yacht and its method of propulsion. The guidelines then establish the estimated percentage proportion of the charter, based on the time
that the yacht is used within the territorial waters of the European Union. The standard rate of VAT at 18% is applied to the established percentage of the charter deemed to relate to its use within EU territorial waters. By way of example, sailing or motor yachts over 24 metres in length would be susceptible to taxation on 30% of the hire that is paid on the charter.

Following the submission of a number of documents to the VAT department – which include, but are not limited to, evidence that the owner or operator of the yacht is registered to VAT in Malta, details of the yacht and a copy of the charterparty – and provided that the conditions established in the guidelines and any other further requirements stipulated by the director general of VAT are met to the latter’s satisfaction, the applicant would be informed in writing of the applicable proportion of the charter fee that would be subject to VAT. Prior approval must be sought in writing from the VAT department and each application will be considered on a case-by-case basis.

The subject of yacht charters sees a coupling of Malta’s steadily increasing reputation as a yachting hub on a legislative front with the attractiveness that it may offer those seeking an alternative cruising ground in the Mediterranean. While the concentration of yacht charters has traditionally and will remain scattered along the French Riviera, as a result of its unique location and proximity to Sicily and Tunisia, Malta undeniably offers a fascinating option as the starting point to a charter holiday in the Mediterranean.

For further information on this topic please contact Alison Vassallo at Fenech & Fenech
Advocates by telephone (+356 2124 1232), fax (+356 2599 0645) or email alison.vassallo@fenlex.com.

Failure to file sea protest correctly can scupper your case

July 10, 2013 Leave a Comment

Contributed by Fenech & Fenech Advocates
ILO – July 10 2013

Introduction

The Maltese flag has established itself as a flag of confidence and a popular choice for many well-reputed shipowners. This is clearly evidenced by the fact that the Maltese registry boasts tonnage of more than 45.6 million gross tons, making it the eighth largest flag in the world and the second largest in Europe. The Maltese flag is flown aboard vessels worldwide. In light of these figures, and bearing in mind that ships at sea will always remain vulnerable to a number of risks, it is probable that Maltese-flagged vessels may become a casualty of some sort from time to time.

Where such an incident results in damage being sustained – whether to the vessel itself, its cargo, another vessel or any other property – the ship, its master, owner or charterer may potentially become exposed to a number of claims. In such cases, it is essential to establish the events that gave rise to the incident in question. Most jurisdictions therefore either oblige or enable the master of a ship to make a so-called ‘sea protest’ shortly after the incident in question, in which he or she can declare the facts of the incident as known to him or her. In this regard, Malta is no exception.

Under Article 104 of the Merchant Shipping Act, a master is obliged to make a sea protest
wherever a vessel flying the Maltese flag:

sustains damage;
is stranded, abandoned or lost; or
owing to the stress of weather or any other cause, is forced to enter port.

Under Maltese law, a sea protest tends to hold significant probative weight in any subsequent settlement negotiations or litigation, since it is often taken as being a correct statement of facts (unless there is evidence to the contrary). However, there is a tendency to assume that the form and method by which such a sea protest is made are not important, so long as the statement produced is truthful and duly sworn before a notary public. This impression is wrong – Maltese law provides clear rules on how a sea protest should be made, together with a detailed procedure.

Applicable procedure

Making a sea protest
Article 104 of the act clearly indicates that when the vessel is at a Maltese port, any sea protest must be made before a judge of the civil courts of Malta. When the ship is at a port outside of Malta, it should be made before a Maltese consular officer. In the absence of such a consular officer in any particular jurisdiction, the law requires that the sea protest be made before a local authority in that particular country.

Timeframe
Article 104 also stipulates the timeframe within which a sea protest must be made. If the event giving rise to the need to make a sea protest occurs while the vessel is at a port, the sea protest must be made within 24 hours of the incident taking place. If the incident occurs while the vessel is at sea or outside any port, the master has 24 hours from the vessel’s next entry into port to make the sea protest.

Information to be included
Maltese law clearly indicates the information that should be included in a sea protest, in terms of both the content of the sworn statements and the documentary evidence required. The master making the sea protest is duty bound to produce his or her official logbook and the original ship’s log when making the sea protest, so that these documents can be physically endorsed by the authority before which the protest is made.

The Maltese courts have held that, in accordance with Article 104, where authenticated copies of the logbook are provided by the master when making the sea protest, these documents should subsequently be treated as being authentic evidence of their content, unless proof can be brought to the contrary.(1) Indeed, Article 104(7) allows interested parties to prove any facts that are contrary to those stated in the sea protest.

In relation to the sea protest, and more specifically the contents thereof, the master must state
on oath the facts known to him or her with regard to the incident in question. These should
include:

the place and time of sailing;
the nature of the cargo onboard the vessel;
the course pursued;
the incident encountered;
the damage sustained; and
all other relevant facts, particularly those relating to the casualty at hand.

Sworn statements
Furthermore, when making the sea protest, the master must be accompanied by at least another three crew members, who should also be examined on oath. The law also states that when a passenger vessel is involved, passengers should also ideally (where practicable) accompany the master to give a statement. However, for various reasons (eg, the language difficulties sometimes faced by seafarers), in practice the master and the crew members usually prepare their written statements beforehand. These are then produced at the sea protest and sworn on oath.

Risks of non-compliance
The effects of not complying with Article 104 can be substantial. For instance, a master who fails to comply with Article 104 will legally be answerable to any interested party for damages and interest that ensue as a result of such non-compliance. The law also provides that if cargo is on board the vessel, the master cannot discharge the cargo (except where there is imminent danger) before he or she has completed the sea protest in accordance with Article 104.

Case study
In a 2011 judgment,(2) the Maltese courts were asked to consider whether a duly notarised statement by the master that was drawn up after the vessel had entered port in Malta was sufficient to constitute a valid sea protest under the law.

The plaintiffs alleged that damage caused to a consignment of steel beams brought to Malta on board the MV Emzani had resulted from bad stowage on the part of the charterers. The defendants did not deny that the beams had sustained damage, but argued that this was due to bad weather encountered by the vessel en route to Malta, rather than any shortcoming in stowage. The defendants argued that the sea conditions and weather were so bad that the vessel had had to stop for shelter during its voyage towards Malta. When the vessel finally entered Maltese waters, the master proceeded to make a sea protest before a Maltese notary public. The defendants relied heavily on the content of this document as evidence to support their defence that the damages sustained to the cargo were the result of an act of God.

After reviewing Article 104 of the Merchant Shipping Act, the courts concluded that the statement made before the notary public was not and could not be considered a sea protest under Maltese law. Thus, the statement made by the master did not have the juridical effect of a sea protest as contemplated under Maltese law. Moreover, the court made reference to

Article 104(7) and commented that where a sea protest is not filed within the timeframe stipulated by law, the defendant may still prove its defence through any other means. In other words, the facts stipulated in the sea protest may still be relied on, but the defendant cannot rely on the invalid sea protest – the content thereof would need to be proven by other means.

In this particular case, the court disregarded the statement made by the master before the notary public and also felt that no alternative supporting evidence had been brought by the defendants to prove their position.

Comment
In light of the above, owners of Maltese flagged vessels and their masters should take careful note of Article 104 of the Merchant Shipping Act. Irrespective of having made any duly notarised statement, the effects and consequences of failing to making a sea protest in line with Article 104 could prove detrimental to shipowners.

For further information on this topic please contact Adrian Attard at Fenech & Fenech Advocates by telephone (+356 2124 1232), fax (+356 2599 0645) or email adrian.attard@fenlex.com.

Endnotes

(1) Advocate Doctor Griscti v Parnis England, Maltese Civil Courts, January 31 2003.
(2) Gasan Mamo Insurance Limited (C-3143) v MMS Limited (C-3984).

Maritime honours bestowed

June 23, 2013 Leave a Comment

Times of Malta, Sunday, June 23, 2013

The Malta Maritime Law Association (MMLA) recently joined the rest of the maritime community in Europe to celebrate European Maritime Day.

To celebrate the occasion the association organised an event during which its president, Ann Fenech, conferred, for the first time, an honorary membership on Joe Borg, former EU Commissioner, Lino Vassallo, Permanent Representative of Malta to the International Maritime Organisation and former Registrar General of Shipping and Seamen, and John Sullivan, chairman of Tug Malta, for their invaluable contribution to the maritime sector.

The association was set up in 1994 with the aim of promoting the study and advancement of maritime law. The MMLA is an affiliated member of the Comité Maritime International, the oldest international organisation in the maritime field, established in 1897.

Attending the event were 74 delegates, including Economy, Investment and Small Business Minister Chris Cardona.

Maritime Labour Convention and Maltese law at MMLA event

March 21, 2013 Leave a Comment

Times of Malta, Thursday, March 21, 2013

Guidelines are in place to help shipowners adapt to the new obligations so that all vessels would comply by August 20 when the MLC will enter into force. The Maritime Labour Convention 2006 and its incorporation into Maltese legislation was the focus of a recent Malta Maritime Law Association seminar at the Chamber of Commerce’s Exchange Buildings in Valletta. Around 90 participants representing a cross section of the local maritime industry were welcomed by MMLA president Ann Fenech.

Registrar General of Shipping and Seamen Ivan Sammut explained that the MLC had combined best practices and standards of previous conventions with new technology to achieve both favourable working conditions for seafarers and secure economic interests in fair competition for quality shipowners.

While the MLC sets the standards, it was up to the flag states to provide the national legislation. Malta was the 34th state to ratify the MLC at the beginning of this year. Mr Sammut explained that the legislative process transposing the Convention in the Laws of Malta was in its final stage.

The legal instrument, the Merchant Shipping (Maritime Labour Convention) Rules 2013, had been drafted and circulated to the public for consultation and Guidelines for the Implementation of the MLC 2006 can be downloaded from the website of the Merchant Shipping Directorate within Transport Malta.

Mr Sammut explained the regulations included in the MLC and while many were already provided for in the present legislation, some required changes from the industry. Mr Sammut referred to the guidelines which helped shipowners adapt to the new obligations so that all vessels would comply by August 20 when the MLC will enter into force

Member of the Comité Maritime International

Collision of Ships in a Foreign Port

Authorities launch guidelines on tax treatment of charters

Failure to file sea protest correctly can scupper your case

Introduction

Maritime honours bestowed

Maritime Labour Convention and Maltese law at MMLA event

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