The Malta Maritime Law Association in conjunction with the Comite’ Maritime International (“CMI”) and the Minister for Transport, Infrastructure and Capital Project organised a High Level Technical Colloquium on a Draft International Instrument on Foreign Judicial Sales of Ships and Their Recognition (the “Draft Instrument”).
The half-day technical event which welcomed members from the shipping industry representing over 50 nationalities, was held at the Malta Chambers of Commerce on 27th February and discussed the need for an international instrument on foreign judicial sales of ships and their recognition.
The organization of such event was a response to the wishes of UNCITRAL for an informative technical meeting to be held in order to enable stakeholders from different jurisdictions across the five continents, such as ship-owners and financiers, to join forces and discuss the importance of having an international instrument which would introduce a substantial degree of stability and uniformity in an important aspect of maritime trade.
Dr. Ann Fenech, in her capacity as Executive Committee Member of the CMI and President of the Malta Maritime Law Association, officially opened the workings of the technical meeting. Dr. Fenech highlighted the importance of such technical meeting and the relevance of such event for the worldwide maritime community. Dr. Fenech thereafter invited to the panel stage the Minister for Transport, Infrastructure and Capital Project Dr. Ian Borg.
Dr. Borg referred to the role of Malta within the international community and its ultimate goal of creating more stability within this sector. Dr. Borg confirmed the commitment of Maltese Authorities in order to ensure the adoption of the above mentioned draft instrument.
Dr. Borg was soon after followed by Mr. Stuart Hetherington, President of the CMI. Mr. Hetherington informed the audience about the history preceding the technical meeting and the adoption of the Draft Instrument. Mr. Hetherington referred to CMI’s initial submission to the IMO Legal Committee’s 102nd Session of a paper outlining a proposal for an interna-tional convention regulating the judicial sale of ships and the importance of such document in order to ensure that the buyer on a judicial sale obtains a good title which cannot be challenged in other jurisdictions. Despite an initial support, IMO’s Legal Committee decided that there was no “compelling need” for such an instrument.
Mr. Hetherington soon after referred to UNCITRAL’s suggestion in June of last year that the CMI organises an international colloquium to further explore the need for such an instrument. The CMI’s Executive Council has warmly accepted such suggestion and for this reason it explored the possibility of organising such a colloquium in conjunction with the Government of Malta in early 2018.
Hetherington further added that “when someone buys a ship from a court; the buyer wants to know that no one else has a claim against the previous ship owner – he doesn’t want to defend the claim, waste money, lose trade because his ship gets tied up when it’s under arrest”. Moreover, “it is indeed very exciting for us to play this role in what would hopefully be the creation of a convention on the international recognition of Judicial sales”.
Soon after Mr. Harrington, legal officer at UNCITRAL was invited to present himself and his role within the Colloquium. Mr. Harringtion informed the audience present about the role of UNCITRAL within the international community and its contribution to the modernization and harmonization of rules on international business over the last 50 years. During such colloquium Mr. Harrington acted as a listener, collected information and will present a report to UNCITRAL justifying whether the Draft Instrument should be adopted in the form of an international convention.
The Colloquium thereafter proceeded with two separate panel discussions. The first one focused on the “enforcement processes in various jurisdictions and the need for greater and more uniform international recognition of Judicial Sales” while the second one draw its attention towards the “challenges faced by financiers, creditors and owners”.
Both discussions were moderated by Dr. Ann Fenech and Prof. Alexander von Ziegler respectively and witnessed the participation of high profile practitioners within the industry.
The first panel discussed issues faced by practitioners and ship-owners when the court approval to the sale of a vessel following a judicial process is not recognized in a different jurisdiction, hence exposing the vessel to the action of the creditors under the previous ownership. Panelists referred to the provisions regulating judicial sale of vessels in their jurisdictions and how protection granted to creditors is pivotal in ensuring stability within maritime trade.
Mr. Teh confirmed that a similar convention would re-inforce national provisions ensuring that a vessel acquired following a judicial sale is free and unencumbered. Moreover, he added how such convention would encourage creditors to attack proceeds of the sale and not the sale itself.
Mr. Buss also referred to the negative perception that a ship acquired through a court auction may be subject to further arrests, hence discouraging bidding amongst buyers and therefore the possibility of obtaining a higher prices able to satisfy creditors to the largest extent possible.
The panelists were:
Camila Mendes Vianna Cardoso – Managing Partner at Kinkaid – Mendes Vianna Advogados, Rio de Janeiro, Brazil;
Jan-Erik Potschke – Partner, Ahlers & Vogel, Hamburg, Germany;
Ann Fenech (Moderator) – CMI Councillor and Managing Partner at Fenech & Fenech, Malta;
Lawrence Teh – CMI Administrator and Senior Partner at Dentons Rodyk & Davidson, Singapore;
Charles Buss – Partner at Watson Farley & Williams, London, U.K.; and
Brooke Shapiro – Associate at Winston & Strawn LLP, New York, USA.
The second panel discussed pragmatic issues both ship-owners, creditors of a ship and practitioners have to face when a vessel is sold following a judicial sale and is subsequently re-arrested in another jurisdiction.
The Panel analysed aspects of a practical nature involved with the registration of a change of ownership following a judicial sale and the need to protect in more holistic manner crew members abandoned while at sea by their employer.
Panelists highlighted also the fragility of the market and reluctance of persons to acquire a vessel following a judicial sale.
In particular Mr. Laurijssen highlighted the importance for ship-owners acquiring a vessel to obtain financing from third parties. A possibility which might be hindered if the vessel acquired as free and unencumbered is not so recognised in other jurisdictions.
Another practical issue which Mr. Laurijssen referred to concerns the de-registration from a register and registration under the new ownership in another register. Very often a lack of recognition by other jurisdictions delays such procedure with unavoidable costs for the buyer.
Dr. Cornelia Zammit German referred to those creditors like bunker suppliers who rank after protected categories such as seafarers or mortgagees. In her opinion such convention will benefit low ranking creditors as long as these are adequately notified and therefore made able to accede the profits available for distribution following a judicial sale. Certainty with respect to the vessel status as “free and unencumbered” following a judicial sale would in her opinion increase the number of persons willing to acquire a vessel subject to a judicial sale process. Mr. Tilman Stein in fact referred to another negative effect of such uncertainty, that is lower prices offered for vessels involved in judicial sales procedures.
The panelists were:
Tilman Stein – Director and Senior Counsel at Deutsche Bank, Hamburg, Germany;
Peter Laurijssen – Manager Legal Department at CMB Group, Antwerp, Belgium;
Alexander von Ziegler (Moderator) – CMI Executive Councillor, Partner, Schellenberg Wittmer Ltd. Zurich, Switzerland;
Cornelia Zammit German, CEO at Falzon Group of Companies, Malta;
Simon Ward – Fellow / Chartered Shipbroker at the Institute of Chartered Shipbrokers, London, UK;
Ivan Sammut – Registrar General of Shipping & Seaman, Malta;
Norman Martinez – Associate Professor at the IMO International Maritime Law Institute
As can be seen the practitioners represented several jurisdictions across the world; both common and civil law jurisdictions were represented. During their intervention they shared their experience when involved in the recognition of a court sanctioned judicial sale and explained the negative implications affecting the acquirer of the vessel when such is not recognized in a foreign jurisdiction.
The panel discussion was followed by a question and answer session. This witnessed an active participation of the audience present which put forward comments and suggestions with respect to the Draft Instrument. Among various interventions, there were those of Soren Larsen of BIMCO, Capt. Bugeja, Malta’s Harbour Master, Capt. Pilot Colin Formosa from the Malta Maritime Pilots, Ms. Petra De Bruin, Senior-Judge within the District of Rotterdam and highly involved in the adjudication of ship litigation matters who stressed the importance of involving members of the judiciary during discussion stages of such Draft Instrument.
The question and answer session was thereafter followed by concluding remarks of Mr. Ryan Harrington, Mr. Stuart Hetherington and the closing speech of Dr. Fenech.
The outcome of the Colloquium will be presented to UNCITRAL to assist same in its deliberations at its meeting in New York in June.
Materials for Malta Colloquium Valletta , Malta, 27 February 2018
Papers relevant to UNCITRAL General Assembly Meeting 3-21 July 2017
Earlier Papers Relevant to the Colloquium
7. Proposal to IMO Legal Committee 103rd session LEG 103/13 dated 5 April 2016: Proposal to add a new output to develop a new instrument on Foreign Judicial Sales of Ships and their Recognition, and attachments.