Ships as security for debts, Mortgages, and Maritime ... - Ghsl.org

Dr. Tonio Fenech LL.M. (Lond), LL.D.

Dr. Tonio Fenech LL.M. (Lond), LL.D.

A Credit economy implies the need for
confidence that payment obligations will be
fulfilled
Most systems have long developed specific
methodologies and concepts, intended to give
a creditor some “security interest” in property
A method which provides for differentiation
and prioritization in ranking between
competing rights
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3

...is an interest in or some right against
property of a debtor that is granted to a
creditor to secure payment, or the
performance of some obligation owed to that
creditor.
May be created:
By agreement, or
Operation of law
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4

Lord Justice Roskill in The “Panglobal
Friendship” [1978] 1 Lloyd’s Rep. 369 (CA):
For advancing funds to one or more ship owning
companies, a bank will typically take:
a mortgage on the ship, and possibly also mortgages
on other sister ships, by way of security for the loan
an assignment of any time charter
an assignment of insurance policies and P&I Club
cover
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5

There are other permutations , refinements and
variations of the above theme
Off-balance sheet financing ( leasing)
High yield bond issues (junk bonds, etc)
Flotations and other capital markets transactions
Others
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6

The general principle:
“Ships and other vessels constitute a particular
class of movables whereby they form separate
and distinct assets within the estate of their
owners for the security of actions and claims to
which the vessel is subject. In case of
bankruptcy of the owner of the ship, all actions
and claims, to which the ship may be subject,
shall have preference, on the said ship, over all
other debts of the estate”. (Art 37A MSA)
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7

separation of estates
for the security of actions and claims
to which the ship may be subject
Therefore bankruptcy of the owner will not
affect claimants who have relied on the security
of the vessel, since the latter claims will have
priority.
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8

A ship may constitute security for a debt or
other obligation either:
by agreement or
by operation of the law
A debt or other obligation may be secured –
by means of a mortgage which is a special charge over
a vessel, or
by a general hypothec which attaches to all the assets
of a debtor, including any vessel such debtor may
own, or
by a special privilege upon a vessel
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9

Language used seems to imply this, but if this
is the case, then it should be amended
MSA already provides for a possessory lien in
appropriate cases
What about security by title transfer,
introduced into the Civil Code in 2010 as part
of the comprehensive changes brought about
by the Aircraft Registration Act?
Clearly there is no reason for the strictures
caused by such closed language
tfenech@fff-legal.com www.fff-legal.com 10

S. 37A(2):
a ship shall include together with the hull, all
equipment, machinery and other
appurtenances or accessories belonging to
the ship, which are on board or which have
been temporarily removed therefrom;
S.37B(3):
separate items upon a vessel may themselves
be subject to special privileges in accordance
with the Civil Code
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11

Section 37C:
all mortgages, special privileges, claims and actions to which a
vessel may be subject, are not affected by the bankruptcy of the
owner happening after the date of the mortgage or special
privilege, or when the action or claim arose. These will have
priority on the ship over all other debts claims or interests of any
other creditors.
Nor can judicial sales instituted by a mortgagee or privileged
creditor be interrupted for any cause other than a cause which
could be set up by the owner.
2010 amendments make it clear that Companies Act insolvency
rules in the do not apply where inconsistent with the MSA
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12

Mortgages attach to the ship until discharge.
Exceptions to this rule:
where the ship is forfeited the interest of the mortgagee in
the ship will terminate where the mortgagee has
authorised, consented to, or conspired in the act or
circumstances leading to forfeiture;
where a ship is 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
mortgagee as well as of any other creditor in the ship shall
pass on to the proceeds of the sale of the ship;
sales which are either judicial sales by auction or sales
which will have otherwise been approved by the Court.
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13

What about a sale by a mortgagee in
possession?
Where bill of sale states that ship is sold free from
encumbrances, the rights arising from the mortgage
no longer exercisable in relation to that ship
Other charges:
No droit de suite in relation to any hypothec or
privilege,
special privileges specified in s. 50, provide droit de
suite for 12 months after voluntary sale, except where
there is a judicial sale.
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14

The traditional security structure for a loan in
the shipping field comprises a number of
elements:
a mortgage of the vessel;
an assignment of earnings, such as hire from a
charger-party, out of which the loan is to be repaid;
an assignment of insurances;
sometimes, particularly in the case of a one-ship
company, a pledge on the shares of the company,
typically to give the lender the option of selling the
company rather than the ship in the event of default.
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16

Mortgages did not form part of our law prior to the
incorporation of the Merchant Shipping Act;
Now part of Maltese law only for the purpose of
putting up a ship or an aircraft as security for a loan or
debt.
Major amendments were made in 1988 and in 2000
with the aim of strengthening the mortgagee’s
position
Some further amendments in 2010 are also
interesting in this regard
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17

The term mortgage is not defined in our law
One must thus refer to foreign sources, in addition to the
MSA, to understand the mortgage in terms of its effects,
and the chain of rights and duties it establishes
Bowtle & McGuiness (The Law of Ship Mortgages):
a ship mortgage is merely one species of various forms of a
consensual “real” security
The modern UK ship mortgage is essentially statutory in nature,
but it is a creation built upon the foundation both of the
common law of mortgages as well as early statute law
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18

Bowtle & McGuiness:
“At the elementary level, it may be stated that in essence a mortgage
is a transaction under which a debtor confers upon a creditor a
proprietary interest in property of the debtor....it being intended that,
by realisation or appropriation of that property interest the creditors
will obtain the discharge of the debtor’s liability to the creditors. The
property interest so conferred is redeemable or the obligations to
create it is defeasible in the event that the debtor discharges the
liability in question”
At common law, the mortgage was seen to be a transfer of
property made by a debtor to a creditor as security for
performance. The mortgagor would normally remain in possession
of the ship for his own benefit, and subject to any contractual
limitations (normally in a “deed of covenants”) the ship can be
employed freely. Where default occurs in terms of the mortgage,
the mortgagee may seize the ship and sell it.
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19

Ever since the 17 th Century, a statutory registration
system for ships was introduced in the UK.
The English regime governing the creation of ship
mortgages is essentially built upon this registration
regime.
The instrument creating a mortgage must be in the
prescribed form, as must a transfer or discharge of such a
registered mortgage.
not necessary for the mortgagee to acquire possession of
the ship for the mortgage to come into effect.
non-compliance with statutory requirements may
prejudice enforcement, eg with respect to third parties.
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20

The mortgage was created by a transfer of title
to the mortgagee under a bill of sale, which was
registered with an annotation that the transfer
was not absolute but by way of mortgage.
The mortgage was also noted by endorsement
on the certificate of registry of ship.
A statutory form of mortgage was only
introduced in the Merchant Shipping Act of
1854.
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21

This modified and departed from the common law
conception of mortgage as a security interest arising in the
form of conditional conveyance of title, without specifying
its precise legal nature
The form of mortgage set out in the schedule however
stated clearly that the security which was conveyed
created a right in rem by way of security
There was no longer a notional transfer of legal title to the
ship, but the mortgage became a statutory from of charge
MSA 1894 did not change things, and the Malta MSA of
1973 was clearly modeled on this, and followed it very
closely
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22

Bowtle & McGuinness define the modern mortgage as:
a form of security by or under a contract that confers an interest in
the property subject to it…..that is annulled upon the performance
of some agreed obligation – usually the payment of a debt with or
without interest.
The terms “mortgage” and “charge” are used almost
interchangeably. This practice is most clearly evident in the case
of present-day ship mortgages, in which these two types of
security have been fused into a single type of security interest.
For all practical purposes, there is little difference between the
two classes of security, and while they are conceptually different in
their origins, they have now become subsumed into a hybrid form
of security.
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23

The position of a mortgagee and mortgagor under the modern
legislative framework was discussed in ex parte North Brisbane
Finance & Insurance Pty Ltd [1983] 2Qd.R.684 at p.688 (re
corresponding provisions of Australian Shipping Registration Act
1981):
“Section 40 confers on the mortgagee of a ship the status of holder of
a statutory charge by way of security, not that of a legal owner of the
ship as in the case of a mortgagee under the general law.”
“It is in that context that Section 41 confers on the ship’s mortgagee a
power absolutely to dispose of the ship and to give effectual receipts
in respect of the disposal. Without that power, a mortgagee of a ship
would have to look elsewhere, and probably to the Court, for
assistance in selling a ship of which he was not the owner”
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24

In “Maritime Law” 4th Ed. 1995:
A mortgage could be said to be ‘any charge by
way of lien on any property for securing money
or money’s worth.
It is the creation of a charge or encumbrance in
favour of the lender of money by the person
wishing to borrow.
It is the essence of a mortgage that it is
something more than a mere personal covenant.
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25

Chorley & Giles, “Shipping Law” (8th ed. 1987):
A mortgage is a charge or encumbrance which the
borrower of money, the mortgagor, creates in favour
of the lender, the mortgagee.
The latter thereby obtains a hold on the property
mortgaged, which prevents the general creditors of
the owner from selling the ship in satisfaction of their
claims.
It also enables the mortgagee to recoup himself for
the mortgagor’s failure to repay the loan, or the
interest on it, by selling the ship or taking possession
of her
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26

Iain Goldrein, “Ship Sale & Purchase” 1993:
A mortgage is:
a transfer of property, or
an interest in property,
as security for a debt, usually a loan.
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27

A mortgage is a security transaction and is a form of “real”
security. It is a transfer of property or an interest in property as
security for a debt.
The essential feature of a mortgage is that it is only a security
transaction; the property is redeemable by the mortgagor upon
satisfaction of the debt which it secures, but on the other hand the
property is realisable by the mortgagee if it is not.
The mortgagee acquires a right by a mortgage to the ownership of
property in a certain event, namely on default of payment of
principal and interest. From the standpoint of the mortgagor,
whereas every mortgage implies a right of redemption so too does
it imply a debt, and a personal obligation to repay it.
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28

The difference betweeen mortgage and
Outright sale: mortgage takes place by way of security only
Pledge: pledgee’s security is dependant upon possession
and an ancillary power of sale, while the mortgagee actually
has title to the goods, subject to mortgagor’s right to
redemption
Charge: property subject to a charge, it is appropriated to
meet a debt or obligation, but its efficacy does not lie in
possession, nor does property therein pass to the chargee.
Enforcement of the security is by waqy of judicial process.
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29

The MSA follows the British legislative model
since 1854
Thus, no definition. Some hints from the general
provisions in art. 37A, B and C, besides a general
reference to Art 38
General rules provide that a ship is separated
from the rest of the estate of the owner for the
security of actions and claims to which the vessel
is subject .
Therefore separation of estates as well as the
description of a mortgage as being a “special
charge” over a vessel.
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31

We have a rather odd but interesting mixture of
Continental and Anglo-Saxon notions
Self-help and other remedies tend towards describing
the mortgage as a from of transfer of property by way
of security
But mortgagee is considered owner only to the extent
necessary for making security available for
satisfaction of amounts owing to him
Alternatively, it can be seen as a charge on, not
transfer of, property, with exceptional remedies
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32

There do not seem to be court decisions which
considered the nature of Maltese mortgages.
We have only imported the statutory form of
ship mortgage directly from British statute,
which as we have seen, had somewhat moved
away from the classic common law conception
of mortgage
Do the new provisions re security by title
transfer impinge on this discussion in any way?
tfenech@fff-legal.com www.fff-legal.com 33

2095F(1):
“Security by title transfer is a contract whereby the
debtor, or a third party for the debtor, transfers or
assigns movable things.....so as to secure a present or
future obligation” to:
▪ the creditor(s) present or future; or
▪ A security trustee in accordance with Art. 2095E
2095F(10):
“For all intents and purposes, the creditor to whom
the property has been transferred shall be considered
to be the absolute owner of the property......and such
property shall not form part of the patrimony of the
debtor”
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2095F(11): A transfer by way of security:
Shall not be subject to re-characterisation as any
other contract and shall take effect in accordance
with its terms; and
Shall be enforceable notwithstanding the
bankruptcy or insolvency of the debtor or
transferor
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Art. 38:
A registered ship or a share therein may be made a
security for any debt or other obligation by means of:
an instrument creating the security (in this Act called a
“mortgage”) executed by the mortgagor in favour of the
mortgagee and
in the presence of, and attested by, a witness or witnesses
“In this Act called a “Mortgage” evidences the alien
nature of the mortgage to our law, but also the fact
that one should be careful before making reference to
traditional attributes of the term!
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36

Legislator seems to have ignored the opportunity of
taking the bull by the horns, possibly for continuity
reasons
Language of MSA does not seem to be strong enough
to characterize mortgage as a transfer by way of
security
But many elements are similar
Many elements of security by title transfer should be
applied to mortgages where the law on mortgages is
silent
A more comprehensive restatement of mortgage law
will probably help for academic purposes, but the
problem does not appear to be substantial
tfenech@fff-legal.com www.fff-legal.com 37

The Mortgage instrument must be in the
statutory form prescribed by the Minister from
time to time.
Normally, the detailed terms and stipulations
concerning the mortgage will be set out in a
separate collateral deed of covenants.
In order to avoid complications of due notice, it
is usually preferable to make express reference
to the collateral deed in the actual instrument of
mortgage.
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38

A mortgage is indivisible notwithstanding the
divisibility of the underlying debt or other
obligation it may secure;
mortgages attach also to any proceeds from
any indemnity arising from collisions and
other mishaps as well as any insurance
proceeds.
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40

Art. 38(4) recognizes role of security trustees as
mortgagee, being entitled to exercise all of the
mortgagee’s rights.
Art. 2095E of the Civil Code applies to all situations
involving security trustees, where Maltese law applies
Until the Recognition of Trusts Act 1994, whenever there
were multiple financiers, practitioners often had to resort
to naming each and every one of them on the mortgage.
Nowadays, one of the financiers can act as Trustee for the
others for security purposes, which makes things much
simpler in the context of a “work-out” or enforcement of
mortgage rights.
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41

A mortgage may be created to secure the payment of principal
and interest, an account current, as well as the performance of any
other obligation.
The monetary value of the indebtedness need not be actually put
down in the mortgage.
The term “account current” here means “any indebtedness of a
mortgagor in favour of a mortgagee arising and determinable in
accordance with an underlying obligation”.
The normal meaning attributed to “account current”, and the
provisions of law governing such contracts in in the Commercial
Code do not apply to mortgages, except where specifically so
agreed
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42

The 2010 amendments also make it clear that a
mortgage can cover future obligations bue by the
debtor to the creditor;
In such cases, however, a maximum sum by way of
principal for which the mortgage is granted must be
expressly stated in the mortgage and such sum shall
be “recorded in the register by the registrar”
Such security can only be granted to credit
institutions in an approved jurisdiction, or as indicated
by Ministerial Notice;
“the Minister may make regulations to regulate the
operation of security granted to secure future debts”
tfenech@fff-legal.com www.fff-legal.com 43

Article 47: a transfer or mortgage of a
registered ship “shall have no effect” against any
person other than the transferor or mortgagor, or
their heirs, unless the transfer or mortgage has been
registered in accordance with the MSA
The effect of registration is therefore that it gives
efficacy to the mortgage (or transfer of the vessel)
as against third parties.
The priority rights of the mortgagor are established
and secured from the date and time of registration.
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44

Mortgages are recorded in the order in time that they
are presented for registration.
You can have several mortgages on the same ship,
with the first one recorded in time having first priority.
Where it is stated in the mortgage instrument that the
prior written consent of the mortgagee is required
before any further mortgages can be registered (or
transfer of ownership), the registrar shall make a note
of this, and will not permit any further registrations.
(See 39(4)). Any registration in such circumstance will
be null and void
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45

The mortgage deed is often accompanied by a collateral
document, usually called a “Deed of Covenants”.
It is like an addendum to the mortgage instrument, or a
“rider” to any other agreement containing:
the time for repayment of the principal sums;
the interest payable on the capital sum loaned;
the method of payment of such sum;
the insurance requirements and responsibility for the same;
any restrictions imposed by the mortgagee on the manner in
which the ship is operated;
events of default, and resultant action that can be taken by the
mortgagee.
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46

Mortgages are recorded in the order of time that they
are presented for registration (Art. 39, 41).
Art. 40: The rights of the registered mortgagee remain
unaffected upon registration of the mortgage by:
the creation of any separate privilege or charge on any
part, appurtenance or accessory of a ship which may
attach in virtue of any law; or
the reservation of ownership rights by a seller of any part,
appurtenance or accessory sold to the ship owner,
provided that provisions, fuel and other consumable
goods are not here considered to be appurtenances.
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47

any creditors reserving ownership rights or
enjoying a special privilege or charge over
parts, appurtenances or accessories, register
such privilege or charge prior to the
registration of a mortgage, such creditors
would be preserving their position as against
any subsequent mortgagees.
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48

Art. 42: In the event of default of any term or condition of
a registered mortgage or of any document or agreement
referred to therein, the mortgagee shall, upon giving
notice in writing to the mortgagor:
be entitled to take possession of the ship or relevant share
therein;
have power absolutely to sell the ship or relevant share therein;
have power to apply for any extensions, pay fees, receive
certificates, and generally do all such things in the name of the
owner as may be required in order to maintain the status and
validity of the registration of the ship.
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49

The requirement for written notice came in 2010. Prior to that, the
law merely stated that “simple” notice was required. Some other
qualifications:
POSSESSION: “except so far as may be necessary for
making a mortgaged ship.... available as a security for a mortgage
debt, the mortgagee shall not by reason of the mortgage be
deemed to be the owner of the ship or share, nor shall the
mortgagor be deemed to have ceased to be the owner thereof’
POWER TO SELL: but where there are several mortgagees, a
subsequent mortgagee can only do so with the concurrence of
prior mortgagees, unless under the order of a court of competent
jurisdiction;
Are these limitations solely for the protection of the mortgagor?
50

S.2095H(6): creditor can sell property:
In the manner agreed, or in the absence of
agreement, in the manner the creditor considers most
appropriate and commercially reasonable;
▪ For a price established in agreement (with transferor), or in
the absence thereof,
▪ at the market value, or if there is no such value
▪ At a price established by an independent competent person;
AND
▪ When by judicial sale by auction, at a price and in accordance
with applicable law
The creditor shall be the sole person entitled to
receive the proceeds of sale
tfenech@fff-legal.com www.fff-legal.com 51

One would tend to think that mortgagee operation could
only be done with limitations
See generally intervention of Merita Bank in Newcastle
P&I Association vs Dr Dingli noe (26.3.1999 per Arrigo J.)
refers with approval to a number of English cases
the Mortgagee owes a number of duties to the mortgagor as
well as to other creditors when exercising its right of sale of the
vessel
See also, a contrario sensu:
Aircraft Registration Act ;
Provisions re security by title transfer
tfenech@fff-legal.com www.fff-legal.com 52

S.2095F(11): the “fruits” of property transferred by way of
security are deemed part of the property and are subject
to the rights of the creditor as stated in the provisions re
security by title transfer
S.2095H(1): creditor not permitted to make use of
property unless expressly permitted by the agreement,
and shall be liable for loss or deterioration of property
from his negligence
S.2095H(3): fiduciary obligations owed (see
articulation of provision)
S.2095H(4): absolute ownership, but with limitations.
Unauthorized use of property is a breach of fiduciary
obligations
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53

Art. 33 of the Aircraft registration Act
explicitly provides for two further powers of
the mortgagee in possession of the relevant
aircraft:
Power to lease the aircraft so as to generate
income therefrom; and
Power to receive any income from the
management of the aircraft;
tfenech@fff-legal.com www.fff-legal.com 54

Art 42(2): a registered mortgage shall be deemed to be an
executive title for the purposes of section 253 of the COCP:
where the obligation it secures is a debt certain liquidated and due,
and not consisting in the performance of an act;
where a maximum sum secured thereby is expressly stated in the
mortgage and such figure is recorded in the register for public notice
All registered mortgages which secure debts resulting from any
account current or overdraft or other credit facility, are covered by
the provisions of Art. 42.
For related proceedings, service is achieved by serving the master
of the vessel or (if absent from Malta), on the local agent or (if
absent) on a curator appointed by the court to represent the
debtor and the ship
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55

Where a mortgage is not as contemplated in Art. 42(2):
the amount certain, liquidated and due; or
The actual sum due when the mortgage secures as future debt
within an expressly stated maximum
can be determined in connection with any judicial sale of a
ship, by an affidavit served on the mortgagor by the
mortgagee, wherein he specifies the amount due at the
time of enforcement
Any such declaration may be contested by any interested
party according to law.
tfenech@fff-legal.com www.fff-legal.com 56

Section 44 of MSA allows transfers of mortgages by means of an
instrument of transfer.
This is a form of assignment of rights.
the registration of the instrument of transfer serves as notice for
the purposes of Section 1471 of the Civil Code.
Section 44A now makes it clear that the assignee of part of an
obligation secured by a mortgage to be registered as a comortgagee
Section 45 provides for transmission of interest by death of the
mortgagee.
Section 47: registration required for efficacy of transfer against
third parties. Presumably this is also the case for transmission
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57

Form an integral part of the mortgage, and
amended mortgage will have same order of
priority as original mortgage.
Provisions of art. 38 must be followed, but
consent of mortgagee must also be presented;
Mortgage amendments can be made for any
purpose.
Art. 45A specifies two indicative examples
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58

Increasing the amount secured by a mortgage; but
amendment and variation of:
rates of interest payable; or
Modalities for calculation of interest, including any indices,
margin, or market mechanism, the repayment schedule or the
currency
is not an increase for the purposes of this article;
Extending a mortgage to secure any other obligation of
the mortgagor, whether as principal or as surety for any
other person, in favour of the mortgagee;
In this case, however, a clear exception is made in respect of
new obligations qualifying as future obligations
tfenech@fff-legal.com www.fff-legal.com 59

Section 45A(5):
“Where any mortgages other than the mortgage that it is
intended to amend are entered in the register of the ship
an amendment shall not be noted unless the consent in
writing of all the other mortgagees whose interests may
be prejudiced by the amendment, is produced to the
registrar.”
a mortgage amendment may not be affected after the
obligation secured by the mortgage has been satisfied
Mortgagee consent is indicated through a declaration
executed in the presence of, and attested by, a witness
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60

Art. 46:
the mortgagee must return the mortgage
deed together with a receipt,
which must be endorsed on the flip-side of
the deed itself,
duly signed by the mortgagee and attested.
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61

Art. 49: recognition of foreign mortgages with
similar status given to Maltese mortgages,
notwithstanding the fact that they are not
entered over a registered ship.
Provided that:
the mortgage has been validly recorded in the foreign
registry of ships concerned;
such registry is a public registry;
such mortgage appears upon a search of the registry;
and
under the foreign laws concerned, the mortgage is
granted a preferential and generally equivalent status
as a mortgage under the MSA.
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62

Recognition becomes important in a number of
circumstances, two examples of which are as
follows:
on initial registration, one of the declarations made by
the owner refers to any unsatisfied mortgages or
encumbrances. Any such mortgages will be
recognised by virtue of s. 49.
a ship bareboat charterparty registered in Malta, flies
the Malta flag, but Maltese registration will not assert
any ownership rights over the vessel. Mortgages and
encumbrances cannot be registered against such
ships in Malta. Nor will the Registrar accept making a
simple note recording the fact that the underlying
register shows the existence of a mortgage.
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Art. 37B: special privileges arise in virtue of law and no
debt or other obligation other than those specified at
law shall be secured by a special privilege.
Art. 1999 (Civil code): Privilege is a right of preference
which the nature of a debt confers upon a creditor
over other creditors, including hypothecary creditors.
Art. 1997(2) (Civil Code): the provisions of the Title
dealing with Privileges and Hypothecs “shall not apply
to ships or to debts to which ships may be subject
except so far as they are consistent with the
provisions of the Merchant Shipping Act, 1973.”
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Art. 37B MSA: special privilege on a ship can only be
created ex lege, but that separate items on a vessel can
themselves be subject to special privileges in accordance
with the Civil Code.
Art.37D: any hypothecs and privileges to which a ship may
be subject under the provisions of the Civil Code, do not
continue to attach to the ship when the ship is transferred
to third parties, whether or not these are of a general or
special nature.
However, the special privileges listed in Art. 50 are
afforded the “droit de suite” (except judicial sales or after
12 months)
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The debts which are held by section 50 to be secured
by a special privilege on the vessel concerned are the
following:
judicial costs incurred in respect of the sale of the ship and
the distribution of the proceeds thereof;
fees and other charges due to the registrar of Maltese
ships arising under the Act;
tonnage dues;
wages and expenses for assistance, recovery or salvage,
and for pilotage;
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the wages of watchmen, and the expenses of watching the ship from
the time of her entry into port up to the time of sale;
rent of the warehouses in which the ship’s tackle and apparel are
stored;
the expenses incurred for the preservation of the ship and her tackle
including supplies and provisions to her crew incurred after her last
entry into port;
wages and other sums due to the master, officers, the crew including
repatriation costs and social insurance contributions payable on their
behalf;
damages and interest due to any seaman for death or personal injury
and expenses attendant on the illness, hurt or injury of any seaman;
moneys due to creditors for labour, work and repairs previously to the
departure of the tfenech@fff-legal.com ship on her last voyage: www.fff-legal.com
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ship agency fees due for the ship after her last entry into port, in accordance
with port tariffs, and any disbursements incurred during such period not
enjoying a privilege in paragraphs (a) to (I) of this section, though in any case
for a sum in the aggregate not in excess of four thousand liri;
moneys lent to the master for the necessary expenses of the vessel during her
last voyage, and the reimbursement of the price of goods sold by him for the
same purpose;
moneys due to creditors for provisions, victuals, outfit and apparel, previously
to the departure of the ship on her last voyage;
damages and interest due to freighters for non-delivery of the goods shipped,
and for injuries sustained by such goods through the fault of the master or the
crew;
damages and interest due to another vessel or to her cargo in cases of
collisions of vessels;
the debt specified in paragraph (d) of section 2009 of the Civil Code for the
balance of the price tfenech@fff-legal.com from the sale of a ship. www.fff-legal.com
69

Where debts of a nature similar to the ones
mentioned are contracted in different ports,
or in several forced returns to the same port,
the priority established by art.50 shall be
established on each arrival or return.
Privileged debts established on subsequent
arrivals or returns have preference over those
contracted on the occasion of a former arrival
or return.
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The privilege granted to the seller for the price
of the thing sold under the provisions of article
2009 (d) of the Civil Code is only effective
regarding vessels, if the claim for such price is
registered in the register of the said ship, within
two days from the date of the sale.
Such privilege is registered by delivery to the
registrar on the prescribed form duly completed
and signed by the seller.
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Art. 54:
Any ship repairer, shipbuilder, or other creditor
into whose care and authority a ship has been
placed for the execution of works or other
purposes shall have a possessory lien over the
ship.
A ship repairer is afforded a special privilege on
the vessel as discussed above, but only if the
debt was contracted directly by the ship owner
or his agent.
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A possessory lien shall entitle the creditor to retain
possession over the ship on which he has worked or
carried out activity until such creditor is paid the debts
due to him.
It shall be extinguished by the voluntary release of the
ship from the custody of the creditor.
It shall not be extinguished if the vessel is released
pursuant to a court order or following a judicial sale of
the vessel.
The creditor shall be obliged to release the ship if he is
paid the sum claimed, or adequate security is
deposited in Court. tfenech@fff-legal.com www.fff-legal.com
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The creditor upon a demand by judicial letter
served upon him by any person interested in
the ship, shall be obliged to declare the
amount of his claim by judicial act to be filed
within a period of two days from the date of
notification to him of the aforesaid demand
failing which he shall be obliged to release
the ship forthwith.
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The debts specified in article 50 shall rank in
the order therein set out and in preference to
other hypothecary and privileged claims,
notwithstanding that the ship is still in the
possession of the debtor, and the debts
specified in article 50(a) and (b) shall under all
circumstances rank in preference to any
claim.
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Debts secured by possessory liens, rank after some of the
privileged debts, but not all.
Examples:
such a lien holder ranks after the ship repairers who did
work on the direct order of the ship owner, but ranks prior
to ship agency fees as well as the rest of the privileged
debts listed thereafter, as well as any other hypothecary
and privileged claims.
Debts secured by a mortgage rank after the debts of
possessory lien holders, as well as ship agency fees;
however they rank prior to debts for necessary expenses,
etc...
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Where the fund constituted by the ship is
insufficient, competing creditors under the
same heading shall share rateably.
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