1. SHIP AS PROPERTY – mortgages and liens
Dr.Iva Savić
Maritime and Transport Law | March 29th 2018
SHIP AS PROPERTY – mortgages and liens

2. Proprietary rights - the right of ownership, mortgage on a ship and maritime liens - may be established:
On a ship,
On a ship under construction,
On a yacht, and
On a yacht under construction.

3. ownership ORIGINARY building a ship booty (ship as maritime gain)
confiscation
abandonment
Derived – from the ownership of a previous shipowner
purchase
endowment
ex lege
by the effect of a judicial decision

4. Owner …has the right to: posses (possidere) Use (uti) utilize(frui)
dispose(abuti)
the ship
> Only registered owner can sell the ship or constitue mortgage on it (!)

5. Int. Convention on Maritime Liens and Mortgages, 1993
International Convention for the unification of certain rules relating to maritime liens and mortgages
not accepted widely
1967 – never entered into force
Int. Convention on Maritime Liens and Mortgages, 1993
CMI, UNCTAD and IMO
Better accepted
rules taken into Croatian maritime code

6. Mortgages

7. why a mortgage?
19th & 20t century - introducing the institute in different national maritime legislation worldwide
instrument enabling the financing of the shipping industry
SHIP OPERATORS – in need to posses the vessel > annuity payoff from vessel utilization
CREDITORS – in need to have rights in rem
possibility to secure any claim
Ship registry entry

8. Mortgage on a ship is a right entitling the creditor to compensate his claim from the sale price of the ship obtained through an auction based on a court order or an extrajudicial sale or by taking the ship into possession and using it. (art. 219 Croatian Maritime Code)

9. mortgage mortgagor (borrower) mortgagee (lender, CREDITOR)
creates a charge in favor of a mortgagee
the ship remains in his posession and use
obtains a hold on the property mortgaged
“controls” the property – mortgage enables him to take posession and enforce the security

10. Main rights MORTGAGEE (CREDITOR) Judicial sale of the ship
Extrajudicial sale of the ship
Dispossession and utilization of a ship*
> Up to the parties to exclude some of the options available

11. creation of a mortgage Titulus: Modus: registration in ship registry
contract > contractual mortgage
court decision > court-ordered mortgage
Modus:
registration in ship registry
protects the mortgagee against all latter creditors
inspect the register (!)

12. TYPES: Contractual mortgage Court-ordered (coercive) mortgage
Public notary mortgage
more efficient
enforcement document
Court-ordered (coercive) mortgage
* JOINT HIPOTEQUE
–registering 1 claim over two or more ships
–borrower is liable with each ship burdened to the full amount

13. Scope Vessel Appurtenances* Incidents
Insurance indemnity (only continental law tradition)
Loss Payable Clause (insurance in favor of a creditor)

14. Not included Freight Fare Towage fees Rental fees (bareboat charter)
Salvage Award
> mortgagor uses them for the annuity payoffs

15. realisation
taking posession of a ship by mortagee (dispossessing the mortgagor) and:
a) utilizing the ship – considering the interests of a mortgagor (prudently)
b) selling a mortgaged ship
Juidicial sale (public auction sale, direct settlement)
Extrajudicial sale (private sale)
Main creditor’s duties for out of court sale and dispossession:
achieving reasonable price
Good businessman (prudent) conduct
> Liable for damage if not adhering to the above principles

16. Termination 1) mortgage deletion,
2) sale of a vessel in distrainment of bankruptcy proceedings,
3) extrajudicial sale of the ship,
4) declaration of a ship as a maritime gain or a war gain at sea* (booty)

17. Liens on a vessel

18. Maritime lien exists independently but is “attached” to a ship
titulus of its creation: law – no need to register it
privilege arises as soon as the right of payment occurs; is effective erga omnes
numerus clausus
limited in duration - 1 year duration > legal certainty, protection of other creditors and new shipowner

19. surety instrument ON A VESSEL – accessory to the vessel
common law tradition
a claim against a ship which can be made effective by the seizure of it > arrest against the vessel, suit against the vessel
exists independently but is “attached” to a ship (unaffected by a change of ownership)
ON AN OWNER – civil law tradition > arrest against the vessel as a means to put pressure on its owner

20. Lien classes – convention 1993 (i)
(a) Claims for wages and other sums due to the master, officers and other members of the vessel's complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
(b) Claims in respect of loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel;
(c) Claims for reward for the salvage of the vessel;
(d) Claims for port, canal, and other waterway dues and pilotage dues;
e) Claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers' effects carried on the vessel.

21. scope Includes default interest Insurance not included
Apertenances included
Rank relevant – not the moment and place where the maritime lien on vessel has started

22. Order of settlement – rank rules
Ex lege class order
more claims within the same class - proportional
Exception: 3rd class maritime lien- salvage award
Advantage to all other classes that have arisen prior to salvage (!)
Advantage to all previous salvage operations
Right of Retention – Shipbuilder and Shiprepairer
Mortgage
Other (regular) creditors

23. Termination Cessation of a secured claim cessation of one year
Sale of vessel (execution/ insolvency procedure)
establishment of a limited liability fund (for relevant class claims)
declaring a ship as a maritime gain (booty)