Ship Financing & Mortgages

Gonzi & Associates, Advocates assists shipping organisations in the purchase, sale or administration of vessels and yachts registered under the Malta flag or in any other jurisdiction around the world by cooperating and interacting with financial institutions and banks in various transactions where solutions for financing are established.

The Firm takes great pride in getting involved in all the aspects of ship and yacht finance, including advice and negotiating on behalf of the client to ensure that every legal aspect is covered. The services provided in this area range from the drafting of loan and various financing agreements, refinancing, the vetting and review of already established agreements, advising as regards the relevant issues pertaining to the registration, enforcement or realisation and discharge of mortgages and other securities over Maltese registered vessels to other related advisory services.

Another feature of the registration of a vessel under the Maltese Flag is the relatively simple procedure that on registration, whether provisional or permanent, such vessel may be used as a security for a debt by means of a mortgage. Maltese law provides for a well-developed security regime of maritime mortgages, rights and privileges. The law on ship mortgages in Malta, the Merchant Shipping Act, Chapter 234 of the Laws of Malta, has been modelled closely on the U.K. Merchant Shipping Act. Thus, similarly to the UK position, a ship registered in Malta, including all its equipment, machinery and other related accessories may be put up as security for financial transactions.

The registration of a ship mortgage is completed with the filing of an original mortgage duly executed and delivered with the Registrar of Ships, together with:

• the mortgage instrument;
• a legal opinion or notarial declaration verifying the binding authority of the person/s executing the mortgage on behalf of the mortgagor;
• and corporate authorities of the mortgagor, resolving in favour of the granting of a mortgage over all the shares in the vessel. The Registrar will retain a copy of the original mortgage form and return the original to the mortgagee.

The original mortgage form will be returned to the Registrar of Ships once the mortgagor repays the loan, in order that the Registrar may discharge the mortgage. The deed of discharge is to be signed by the mortgagee or an authorised attorney thereof and witnessed by a lawyer or notary public.

As is custom in Maltese law, mortgages are recorded in chronological order according to the time and date in which they are registered. A clause may be inserted into a mortgage ensuring any further mortgages or transfer of the vessel without the mortgagee’s prior consent are prohibited. A mortgage may also be registered in favour of a security trustee acting on behalf of a person or an entity to whom a debt or other obligation is due.

Other benefits of mortgage registration in the Malta Registry include, amongst others, the fact that:

• registered mortgages enjoy a high ranking;
• the bankruptcy of the mortgagor following registration doesn’t affect the registered mortgage; and
• the deletion of a mortgaged vessel by the Maltese Ship Registrar doesn’t prejudice registered encumbrances.

The importance of the registration of ship securities is highlighted when one examines that a mortgage, unlike in other jurisdictions, is an executive title under Maltese law and thus can be enforced upon default without the need for a prior judgement to do so. In such cases, the mortgagee, upon giving notice to the mortgagor, is entitled to:

• take possession of the vessel without being considered as the owner thereof;
• sell the vessel or share in respect of which it is registered;
• do all such things in the name of the owner which are necessary in order to maintain a valid registration status, such as for instance, paying fees and receiving certificates.

In addition to the abovementioned rights, a vessel cannot be deleted from the registry without the prior written consent of the mortgagee.

Gonzi & Associates, Advocates legal services in this sphere spanning from:

• the drafting and vetting of financial agreements, including loan agreements, that would bring the mortgage (or other security) into existence;
• assistance with the registration, transfer, amendment and discharge of Maltese statutory mortgages; and
• the arrest of vessels within Maltese territorial waters including the enforcement of Maltese and foreign registered mortgages and other security.