Formally known as the United Nations Convention on the International Effects on the Judicial Sales of Ships, Malta will sign the Convention during a celebratory event held at Verdala Castle on 19th June 2024. The event, held in collaboration between the Ministry of Foreign and European Affairs and Trade, the Comite’ Maritime International (CMI) and the United Nations Commission on International Trade (UNCITRAL), will exceptionally feature the availability of the UN Treaty Book, giving the opportunity to visiting high-level State representatives to sign the Convention.
Maritime practitioners worldwide hailed this Convention as one of the most important maritime conventions in recent years as it will provide certainty and stability in a vital area of international trade which is responsible for the carriage of 90% the world trade.
Background
Ship arrests are a common occurrence in the maritime trade as it provides a ready means for the creditor to seize the vessel, apply for a judicial sale and use the proceeds to satisfy a claim. While most judicial sales offer a ‘clean’ title to the prospective buyer, that is, a transfer of ownership without any encumbrances, this clean title is not always honoured.
This produces adverse effects such as ‘re-arrests’ of vessels even though the ship was acquired by new owners via a judicial sale which in turn, suppresses bids and makes sourcing of finance for such purchases more difficult. The judicial sale would not attract a sufficiently high price to satisfy creditors and extinguish the obligation.
Owners of vessels purchased via judicial sale were also faced with the impossibility of deleting the ship from the previous register or could not obtain the deletion of old mortgages, ultimately leading to severe interruptions in international trade.
The CMI began working on a draft Convention on the International Recognition of Judicial Sales of Ships over 12 years ago, with the General Assembly of the CMI adopting the Draft in Beijing in 2012 and finally approved by the same General Assembly in Hamburg in 2014.
Eventually, the Beijing Draft as it was known, was presented at the 51st session of UNCITRAL in 2018. Following internal working groups and consultations, the draft Convention was presented to and adopted by the United Nations General Assembly on 7th December 2022.
The UN General Assembly authorised a signing ceremony for the Convention which was held on 5th September 2023. Fifteen States signed the Convention.
The European Union signed the Convention on the 14th of March 2024, paving the way for the signatures of the individual EU Member States.
Malta Connection
Malta was involved at two important stages leading up to the final Convention. In February 2018, the Ministry for Transport Infrastructure and Capital Projects of the Government of Malta, in collaboration with the CMI and the Malta Maritime Law Association, co-hosted a high-level colloquium with a number of international experts to examine the challenges associated with the failure of giving full effect to the free and unencumbered title in vessels sold in judicial sales and suggested possible solutions.
The results of this colloquium were presented to UNCITRAL which adopted the convention by consensus in 2022.
As a follow-up to the 2018 colloquium and to keep up the momentum in favour of the formalisation and eventual adoption and coming into force of the Convention, the Malta Symposium was held in April 2023 with presentations by UNCITRAL, the CMI, the European Commission and other major stakeholders in the field.
