News - Malta Maritime Law Association

Malta Flag now Europe’s top shipping register and endorsed as a Low Risk Flag

January 28, 2012 Leave a Comment

Source: Hellenic shipping worldwide news article, Saturday, 28 January 2012

The Maltese Shipping Register was confirmed as the largest merchant flag in Europe and seventh worldwide by Clarkson Research Services, one of the leading providers of statistical services in the maritime sector. Minister for Infrastructure, Transport and Communications, Dr Austin Gatt announced this during a press conference held at Transport Malta offices on Friday.

As at end of 2011, the Maltese Register of Shipping had achieved an increase of over 6 million gross tonnage representing a growth rate of 16.1% over the previous year. The registered gross tonnage under the Merchant Shipping Act is 45.6 million. These figures include a whole diversity of vessels including yachts and superyachts. Minister Gatt said “we are very proud of the strong performance of the Maltese Shipping register.

The latest published statistics represent record figures for the Malta Flag and a significant achievement for the Malta Flag Administration over the past decade. This increase is mainly attributed to the continued effort of Transport Malta and the Maltese shipping community, including local intermediaries, to attract reputable companies to the Maltese Register. We must continue working to consolidate this position in the years to come.”

Particular positive results were registered in the registration of superyachts. The three consecutive year trend was reconfirmed with an increase of 18.6% in the registration of superyachts over 2011. As of the end of December the superyachts, larger than 24 metres in length, flying the recognizable Maltese cross worldwide was almost 300. Minister Gatt also announced that Malta was recently confirmed by the Paris Memorandum of Understanding on Port State Control (Paris MoU) on the list of “low risk ships” under the New Inspection Regime, after the successful completion of an IMO (International Maritime Organisation) Audit last year.

This new low risk status will translate into real benefits to Maltese registered ships and superyachts particularly when calling at ports within the Paris MOU region. It will denote significantly less targeting for port State control inspections, thus less impact on operations. Minister Gatt continued “this status was achieved thanks to the efforts of all stakeholders and the efforts of the personnel of the Merchant Shipping Directorate within Transport Malta. Such achievement is testimony to their level of commitment since the Administration has managed to concurrently increase the growth rate while meeting the stringent low risk criteria”.

In his concluding remarks, Minister Gatt also made reference to last week’s announcement that the Malta Aviation register had another successful year. Dr Gatt concluded: ““these results encourage us to work harder to ensure Malta continues to benefit from the associated positioning within these international sectors, from the direct revenue and the indirect added value they bring to our economy.’’

Source: Superyacht Times

Focus on Malta: Fairplay

January 26, 2012 Leave a Comment

Despite the EU debt crisis, the Euro currency has been Malta’s salvation, says Islands’ businesses, writes Paul Gunton of Fairplay [published in Fairplay, 26 January, 2012].

Read the full article in pdf.

Malta becomes biggest ship registry in Europe

January 23, 2012 Leave a Comment

For the first time in its maritime history, Malta has been confirmed as the country with the largest ship register in Europe. Following a 16 per cent increase in tonnage, the island surpassed Greece By the end of the year, 5,830 vessels – a total of 45.6 million tonnes – were registered under the Maltese flag, Transport Minister Austin Gatt has said: “Following a 16 per cent increase in tonnage, the island surpassed Greece for the first time. Although it’s the smallest European country, Malta has the seventh largest ship register in the world,” he said.

Dr Gatt said that during 2011, the Maltese shipping register generated over €12 million in revenue for Transport Malta alone. This significant achievement was mainly attributed to the register’s high-service quality which attracted reputable companies, Dr Gatt added. Applicants had to pass through a rigorous selection process and not every owner who expressed interest in joining the register was accepted. The condition and the age of prospective members are a major factor in the determination of whether they would make it to the register.

Malta’s register listed various types of vessels, including cruise liners like the Royal Caribbean, and super yachts, which registered an increase of 18.6 per cent over the previous year.

[Source: Times of Malta]

A focus on the Bacino

January 9, 2012 Leave a Comment

Appeared in Times of Malta, 9 January 19, 2012. By Alison Vassallo

Every once in a while a judgment is handed down by the European Court of Justice which, by reason of the ripples it causes in a particular sector of the industry it touches upon, comes to be referred to simply by one word – one such case is that which has come to be referred to as the “Bacino”.

The Bacino has attracted significant criticism directed from all angles of the yachting community. The full name of the case is “Etat du Grand-Duche de Luxembourg, Administration de l’enregistrement et des demains v. Pierre Feltgen, Bacino Charter Company SA (C- 116/10)”, December 22, 2010 and consisted of a reference for a preliminary ruling made by the Luxembourg Cour de Cassation to the ECJ concerning the interpretation of Article 15(5) of the Sixth Council Directive 77/338.

The article of law which formed the object of this referral provided that: “Member States shall exempt.. 4. The supply of goods for the fuelling and provisioning of vessels: a) used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities; b) used for rescue or assistance at sea, or for inshore fishing, with the exception, for the latter, of ship’s provisions; 5. The supply, modification, repair, maintenance, chartering and hiring of the seagoing vessels referred to in paragraph 4(a) and (b) and the supply, hiring, repair and maintenance of equipment – including fishing equipment – incorporated or used therein”.

Bacino Chartering Company SA (“Bacino”) made available on a regular basis a vessel which it owned, together with a crew, to natural persons for the purpose of leisure activities on the high seas. Bacino did not charge the charterers VAT on the hire and therefore did not pass any VAT payments calculated on such hire to the Luxembourg tax authorities.

The Luxembourg tax authorities were however of a different view and they notified Bacino of the tax assessments for the financial years 1998 and 1999 which set out the amounts of VAT owed by the company for charters carried out during such period.

Bacino challenged that assessment before the District Court of Luxembourg which dismissed its action, subsequent to which Bacino was successful in arguing before the Court of Appeal that since the vessel was engaged in navigation on the high seas and carrying passengers for reward, the said activity did in fact fall within the parameters of the exemption outlined above.

In assessing whether VAT is due on a particular service, the ECJ adjusted the collective focus of the industry to the use being made of the yacht by the person availing himself of the particular service. Therefore in case where service consists of making a yacht available for charter and the lessee is a private person using the yacht for leisure purposes the Court held that VAT is due by him to the owner on the hire.

By analogy, in case where the person ordering the supply of fuel, provisions or commissioning the refit of a yacht is the owner of the yacht who is using the yacht for commercial activities on the high seas, then no VAT is due on the said services by the owner to the particular supplier or service provider.

While the question put to the ECJ related solely to whether VAT is due on the hire paid by a private person to the owner of a yacht where the owner is in the business of operating the yacht for commercial purposes on the high seas, the findings of this judgment may be said cover other services besides hire, namely those of supply, modification, repairs and maintenance.

Perhaps much of the alarm that has trickled down throughout the industry arises as a result of reading more into the judgment than there is. The ECJ in this case has not come up with new law. The court, when faced with the facts of the Bacino Case, was merely provided with a perfect opportunity of stating in black and white what the real spirit and meaning of the cited exemption is – placed simply being that where the lessee of a yacht uses the yacht for private (leisure) purposes, then the lessee is required to pay VAT on the service to the owner who in turn uses the yacht for commercial activities on the high seas.

The Bacino has attracted significant criticism directed from all angles of the international yachting community. The main concern for owners is whether they can retain competitive charter rates and whether the prevailing economic climate can support a proportionate hike in rates. It very much remains to be seen whether all of this will in fact translate into a tangible threat to the attractiveness of chartering a yacht, or whether this is effectively a storm in a teacup.

Dr Vassallo is a senior associate within the Yachting Department and the Marine Litigation Department at Fenech and Fenech Advocates.

Rights of the mortgagees under Maltese law – Part 2

January 5, 2012 Leave a Comment

Times of Malta, Thursday, January 5, 2012 , by Ann Fenech

In part one, I discussed a procedure which was inserted in our Code of Organisation and Civil Procedure in 2006 which gives the mortgagees of vessels further enhanced rights – a procedure whereby a mortgagee can enforce his rights through a court approved private sale which remedy attempts to bridge the distance between what was previously a choice between two remedies which were not in themselves 100 per cent satisfactory.

The judge made some very interesting remarks and observations, a number of which may very well open up a Pandora’s Box.

Through the court approved private sale the law seeks to support the mortgagee and other creditors of a defaulting owner by ensuring the best price for the vessel (something associated with a private sale as opposed to a judicial sale by auction), whilst ensuring that the vessel is indeed sold free and unencumbered (something which only a judicial sale by auction can guarantee and which a private sale cannot.)

We saw this remedy put to the test successfully on December 1, 2011 in the case Dr Ann Fenech for and on behalf of Danske Bank v. the M. V. Thor Spirit per Mr Justice Mark Chetcuti. The substantial and useful rights of the mortgagee granted by our law were however again confirmed by the same Mr Justice Mark Chetcuti on November 24, 2011, in the case Dr Louis Cassar Pullicino for and on behalf of Norddeutsche Landesbank Girozentrale v. Chemstar Shipping Ltd.

Section 42 of the Merchant Shipping Act lays down the rights of the mortgagee in the eventuality that the owner is in default of his obligations. One of the rights listed is the right of the mortgagee to take possession of the vessel. Whilst this may be all very well and good on paper, from a practical perspective this can present a number of challenges.

One would typically have a situation where the owner of the vessel is in default of a term in his mortgage; the mortgagee gives notice to the mortgagor to no avail because the owner remains in default, and the vessel is in some far flung jurisdiction. The mortgagee would like to take possession.

This would in real terms mean that the mortgagee would inform the owner that it intends to take possession; it may mean that the mortgagee would instruct the owner to take the vessel and to deliver the vessel into the possession of the mortgagee in a more efficient or reliable jurisdiction where the mortgagee can then take the necessary steps to enforce his mortgage through any remedy which Maltese law provides.

From experience, owners would generally comply with such requests. However there will be occasion when the owner, irrespective of the fact that the mortgagee would be fully within his rights to take possession of the vessel and order the owner to deliver the vessel to, say, Malta, the owner very consciously refuses. What can the mortgagee do about this situation?

This was the position which Norddeutsche Landesbank Girozentrale found itself in when following the default of Chemstar Shipping Ltd on its payments under a mortgage on the MV STAR 1, a vessel registered under the Malta flag, the bank sent the mortgagor a Notice of Default which was not actioned by the owner who remained in default of his obligations.

The mortgagee issued the owner with a Sailing Advice ordering the owners not to order the vessel to proceed to Turkey but to proceed to Malta instead. The owners ignored this advice and proceeded to Turkey. The bank then issued the owner with a further Sailing Advice as it was entitled to do in terms of its Loan Agreement to proceed immediately to Malta. The owners refused to do so. The bank representatives then attempted to board the vessel in Turkey to serve the Master with a notice of possession but were barred from boarding leading to the service of the notice of possession on the registered owners. The owners refused to hand over possession to the bank.

Given this, the bank was therefore forced to file an application before the Maltese courts requesting the court to confirm that the bank had the right to take possession of the vessel given the owner’s default, to fix a period of time within which the owner had to deliver the vessel to the bank failing which to authorise the bank to take possession of the vessel even by appointing new crew, order the owner to refrain from doing anything which would hinder either directly or indirectly the bank from taking possession of the vessel and finally to make all those orders necessary to enable the bank to take possession of the vessel.

The owners attempted to defend the application by stating that: The Maltese court had no jurisdiction over the matter because the vessel was not in Maltese territorial waters; that the law did not contemplate the mortgagee having a right to file such an application; that it was not the fault of the owners which led to them being in default; that the mortgagee had not taken any of the steps associated with obtaining an executive title; that the mortgagee had to first file an official letter which it did not.

Mr Justice Chetcuti threw out the defence of lack of jurisdiction on three counts – the basis that the defendant was a Maltese registered company and therefore the jurisdiction of the Maltese court was beyond question, on the basis of a jurisdiction clause in the deed of covenants indicating the Maltese courts as one of the courts to which disputes could be referred and on the basis of EU Regulation 2(1) of Regulation 44/2001.

Mr Justice Chetcuti also threw out the other defences by highlighting the fact that the right of the mortgagee to take possession was conditioned only by the need for the mortgagee to give notice to the owner in writing as stipulated in article 42 of the Merchant Shipping Act and the need to ensure that all the criteria established by the loan agreement and deed of covenants had been satisfied.

He therefore accepted all of the Bank’s requests and declared that the Bank had a right to take possession of the vessel and ordered the defendant to deliver the vessel to the bank within one week failing which was authorising the Bank to take possession of the Motor Vessel Star 1 ordering the owners to refrain from doing anything to obstruct the Bank from doing so.

In his decision dealing with every one of the defences separately, the judge made some very interesting remarks and observations a number of which may very well open up a Pandora’s Box, possibly each deserving a detailed analysis and article in themselves.

However, the general message which has been sent out loud and clear by this judgement is that in this particularly sensitive commercial area where the strength of the flag lies in the comfort it can give the financiers, international financiers of vessels registered under the Malta flag can rest assured that provided that their rights under the contracts they enter into are in line with the provisions of our Merchant Shipping Act they will be fully upheld and safeguarded.

Dr Fenech is head of the marine litigation department and managing partner at Fenech and Fenech Advocates.

Member of the Comité Maritime International

Malta Flag now Europe’s top shipping register and endorsed as a Low Risk Flag

Focus on Malta: Fairplay

Malta becomes biggest ship registry in Europe

A focus on the Bacino

Rights of the mortgagees under Maltese law – Part 2

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