1. Danish rules on securities and other protective rights in the charterparty trade – An appraisal
Ass. Prof. Dr. Kristina Siig
University of Southern Denmark

2. Agenda… 1) Discuss the issue for a while …
2) Discuss something competely different and much more important for as long time as I have left…
14 September 2016

3. Agenda… 1) Trying to put together the jig-saw puzzle…
2) Discussing methodology
14 September 2016

4. The situation Financiers Owners (‘ estate) Long term charterers
14 September 2016

5. Policy ideas behind the study …
Policy idea 1: Providing a comprehensive and clear regulation of securities will promote lending.
Policy idea 2: Enabling the Owner to offer different assets and securities/protections towards Financiers and Charterers will enhance their willingness to enter into an contract with the Owners.
Policy idea 3: A very restrictive regulation of ships’ mortgages/securities etc. may make a particular flag less interesting to Owners.
14 September 2016

6. Policy ideas behind the study …
Lending is necessary to finance new initiatives and acquisitions. New initiatives and acquisitions are necessary in order to promote innovation. Innovation is a good thing.
14 September 2016

7. The situation Financiers Owners (‘ estate) Long term charterers
Money Use of vessel
Service
14 September 2016

8. Financiers (what do we know)
Registered rights
Register a ship’s mortgage on the vessel in the Ship’s Register (incl. appurtenances & fishing rights)
Register a fleet mortgage on the vessel’s page in the Ships’ Register
Have the Owner register a letter of indemnity in the Financiers’ favour in the Ship’s Register
(Avail themselves of the Owners’ real property (pledge/letter of indemnity registered in the Land Register)
Register a floating charge in general on the Owners’ free assets or on (some of) the Owners’ receivables
Un-registered rights
Assignment of claims (outright or as a security)
14 September 2016

9. Financiers (what are we unsure of)
Is the prohibition of hardship-clauses (that the whole loan amount falls due in case of Owners’ bankruptcy) in the Land Register Act applicable?
Relevance of court practice under the lex generalis (Land Register Act – may one consider the mortgage to include receivables)?
May the charterers’ override the assignment of claim in case of Owners’ difficulties under the Code of Procedure sec. 511, sub-sec. 3?
14 September 2016

10. Charterers (what we do know)
Registered rights
May register the charterparty on the vessel in the Ships’ Register (quite singular feature of Danish law, I believe)
Have the Owner register a letter of indemnity in the Charterers’ favour in the Ship’s Register
Avail themselves of the Owners’ real property (pledge/letter of indemnity registered in the Land Register
Register a floating charge in general on the Owners’ free assets or on (some of) the Owners’ (other) receivables (not interesting in one-ship companies)
Un-registered rights: Assignment of claims… But… Charterers are not money-creditors, so…
14 September 2016

11. Charterers Regarding the registering of the charterparty on the vessel
Will have priority according to the time of entry
In voluntary sales: Must be respected (a registered quiet enjoyment clause)
In forced sales: Must be respected if the priority is covered by the bid (so the buyer must either continue with the charterparty or pay the charterers the ”value” of the charter, which is decided by the court) (Rule of the Code of Procedure which distinctly does not apply to chattels, but which we seem to use anyway)
Other issues:
Charterers may get out of a long-term interminable charterparty with ”usual” notice
14 September 2016

12. Owners’ estate in bankruptcy
May step into the charterparty – so change of control-provisions that are triggered by bankruptcy are invalid…
The contract as it stands: Charterers may end the charterparty with the notice given in the charterparty or – if interminable throughout the charterer – with ”usual notice”.
14 September 2016

13. Conclusion… Contents: Pretty good… Accessibility: ??????
14 September 2016

14. Challenges as regards methodology …
1) Trying to put together the jig-saw puzzle
Multiple incomplete sources)
Land Registration Act
Code of Procedure
Promissory Notes Act
Bankruptcy Act
General principles of laws of obligations
Maritime Code
Case law
Unpublished practice from the Bailiffs’ Court
14 September 2016

15. Challenges as regards methodology …
Two basic questions:
1) Lex generalis – lex specialis …
2) What is the background law – which regulations or principles do I gap-fill with – and when do I gap-fill with what?
14 September 2016

16. Challenges as regards methodology …
How should we consider the facts?
1) Should the vessel’s earnings be seen as an intrisctic part of the vessel, and thus automatically be a part of the Ships’ Mortgage?
2) Vessels are not immoveables, but they carry characteristics of immoveables – they are the Owners’ main production facility. When is which feature relevant?
2) A charterparty has features of a lease and features of a service contract. Which are more characteristic?
14 September 2016