Registration of mortgages under fire
INTERNATIONAL law governing the registration of ship mortgages under bareboat chartering arrangements is confusing and badly in need of clarification, according to Clay Maitland, executive vice-president of International Registries Inc (IRI).
Mr Maitland is a maritime lawyer specialising in vessel finance, and has attended the International Maritime Organisation's legal committee meetings since 1980.
IRI operates the Liberian and Marshall Islands registries. The Liberian registry is the world's largest in terms of deadweight tonnes (dwt), totalling 93 million dwt.
It records about 1,000 ship mortgages and related instruments each year in the two registries.
Mr Maitland suggests that UNCTAD sponsors amendments to the 1986 Convention on Conditions for Registration of Ships, which was the first convention governing the recoding of mortgages.
'It is in the interests of mortgagees, charterers and ship-owners to ensure that there is uniformity and certainty in this area of international law,' he said.
'It should be made clear that mortgages are subject only to the law of the underlying state of registry, which is the one to which the ship reverts at the end of its bareboat charter, and not to that of the bareboat charter registry. Unfortunately, the 1986 convention does not confront this question.' Mr Maitland called for bareboat charter registries to be required to furnish notice to third parties of any mortgages, charges or liens registered against a vessel in its underlying registry.
Both Liberia and the Marshall Islands require that their bareboat charter registries file ship mortgages recorded in underlying registries.
The Marshall Islands contains a specific statement in its 1990 Maritime Act that all such mortgages are exclusively subject to the underlying registry's law.
Review is even more important, according to Mr Maitland, because courts seeking to enforce mortgages are increasingly applying the law of the state of the underlying registry.
'Clarity between the responsibilities of the two registries is vital, because of the link between bareboat chartering and ship finance,' he said. 'Clarification of the law is particularly important for developing countries such as Chile, Argentina, Brazil and Peru.' He said that banks and lenders in Britain and the United States, and their legal advisers, would not record ship mortgages in those countries.
It was necessary for South American owners, wanting to expand their fleets, to place their ships in bareboat charter registries of which lenders approved.
'A major reason for the inclusion of the bareboat charter concept in the 1986 convention was to assist developing countries to secure financial support for merchant fleet development under an UNCTAD convention,' Mr Maitland said.
He said the work UNCTAD was doing in this field was of great service to governments, ship-owning and operating interests, and financial institutions.