An additional benefit deriving from the registration of a vessel under the Maltese flag relates to the efficient procedures for the registration of mortgages over vessels and for enforcing mortgage security rights.
Mortgages on Maltese Ships
Under Maltese law, a mortgage may be drawn in favour of any creditor to secure the payment of a principal sum and interest, an account current, as well as the performance of any other obligation. Such obligations may include those arising from a suretyship or a guarantee of obligations of third parties.
Only ships that have been registered in the Maltese registry can be subject to a mortgage under Maltese law, and the mortgage has to be constituted on the appropriate statutory form. Mortgages of registered ships shall not have any effect in regard to the ship to which they refer or against any person unless they have been registered under and in accordance with the Merchant Shipping Act. The same applies to transfers of mortgages.
Registration of Mortgages
The registration of a mortgage is a relatively simply procedure and is completed by filing the appropriate statutory form with the Malta Maritime Authority. Mortgages are recorded in the order in time in which they are produced for registration. If there are more mortgages than one registered in respect of the same ship or share, the mortgagees shall be entitled in priority according to the date and the time at which each mortgage is recorded in the register.
The Registrar shall also register any condition contained in any Mortgage prohibiting the registration of any further mortgages over the ship or the transfer of the ship without the written consent of the mortgagee. In such cases the creation of further mortgages or the transfer of the ship, if effected without the consent of the mortgagee, will not be effective. This of course does not apply to any transfer of the ship effected pursuant to a court order.
Mortgages attach to the ship in respect of which they are registered until they are discharged. When a ship has been sold pursuant to an order or with the approval of a competent court within whose jurisdiction the vessel was at the time of the sale, the interest of the mortgagees as well as of any other creditor in the ship shall pass on to the proceeds of the sale of the ship. Mortgages also attach to any proceeds from any indemnity arising from collisions and other mishaps as well as any insurance proceeds.
Enforcement of Mortgages
With respect to the enforcement of mortgage rights, Maltese law provides a high degree of protection to mortgagees. In the event of default of any terms or condition of the mortgage or of any document or agreement referred to therein, provided notice has been given to the mortgagor, the mortgagee shall have:
- The right to take possession of the ship;
- The power to sell the ship by private sale; and
- The power to do such things in the name of the owner as may be required to maintain the status and validity of the registration of the ship under the Malta flag.
Moreover, under Maltese law a registered mortgage securing certain and liquid debts or resulting from any account current, overdraft or other credit facility is considered to be an executive title and enforceable as such. This means that in Malta one need not make recourse to a lawsuit and eventual court judgment in order to enforce a mortgage. It suffices to serve a judicial letter on the master f the vessel, the local agent or a curator appointed by the court to render the mortgage an executive title.
In the case of bankruptcy of the mortgagor or shipowner, all registered mortgages, any special privileges and all actions and claims to which a vessel may be subject shall not be affected. |
