In Malta, a mortgage is a form of security over a vessel afforded to a creditor (mortgagee) by a debtor (mortgagor) in respect of a certain liquidated debt or other obligation. Maltese law provides a high degree of protection to mortgagees. CSB Group assists clients throughout the entire ship mortgage registration process.
Registration of Mortgages
A mortgage over a Maltese registered vessel may be registered in the Registry of Shipping at the Authority for Transport in Malta by the filing of a Mortgage Deed. Mortgages are recorded in the order in time in which they are filed with the Registrar. Further mortgages or transfer of the vessel without the mortgagee’s prior written consent may be prohibited by a specific clause in the mortgage deed. A mortgage may also be registered in favour of a security trustee acting on behalf of a person or a syndicate to whom a debt or other obligation is due.
Common practice, when it comes to register a mortgage is for any accompanying loan agreement and deed of covenants to be signed by the owners of the vessel, and for the mortgage deed itself to be signed by the company’s local authorised attorney simultaneously in Malta, CSB Group may assist you in this respect. The original mortgage is then endorsed by the Registrar, the date and time recorded thereon, and returned to the mortgagee. The accompanying loan agreement and deed of covenants need not be filed in the Registry.
Some Protection afforded to the Mortgagee
A mortgaged vessel may not be deleted from the Maltese Register without the mortgagee’s prior written consent. In addition, a vessel may not be struck off the Register by the competent authorities without at least one month’s notice being given by the Registrar of Shipping to the mortgagee, and furthermore if the vessel is deleted in such circumstances, the Authority for Transport in Malta will issue the deletion certificate save for any registered encumberances and consequently the mortgage continues to attach to the vessel.
Enforcement of Mortgages
In the event of default of any term or condition of a registered mortgage, the mortgagee may upon giving notice to the mortgagor take possession of the ship and have the power absolutely to sell the ship or share therein, in respect of which he has a vested interest.
All mortgages, whether principal and interest or account current, are executive titles and enforceable upon default of the debtor without the need of a prior court judgement to enforce such mortgage. The Merchant Shipping Act also provides that foreign mortgages will be recognised as a mortgage and thereby benefit from mortgage status under the Merchant Shipping Act if all the requirements are met.
Apart from the mortgagee’s rights to take possession and sell the vessel secured by mortgage, upon default, the mortgagee is also empowered to take over and complete vessel registration formalities. Claims secured by a mortgage enjoy a ranking.
Recognition of Foreign Mortgages
The Merchant Shipping Act provides that a foreign mortgage is recognised as a mortgage for the purpose of Maltese law and thereby benefits from the status, rights and powers granted by law notwithstanding the fact that it is not entered over a Maltese registered ship. The recognition of a foreign mortgage is subject to the following conditions:
- it has been validly recorded in the registry of ships of the country under whose laws the ship is documented;
- the registry of ships wherein the foreign mortgage is recorded is a public registry;
- it appears upon a search of the registry; and
- under the laws wherein it is registered, it is granted a preferential and generally equivalent status as a mortgage under Maltese law.
Pursuant to the above, a foreign mortgage registered over a vessel that is in Maltese territorial waters may, if the above-mentioned conditions are satisfied be deemed to be an executive title and consequently the mortgagee may enforce its security against the mortgagor without the requirement of obtaining a court judgment against the mortgagor, arrest the vessel in Malta and have the vessel sold either by (i) private sale (ii) court order or (iii) a court approved sale, irrespective of the flag under which the vessel is registered.