When it comes to maritime claims, Maltese law offers different types of protection for creditors, such as the arrest of a vessel subject to the claim. In some instances, such as when a Maltese registered vessel may not be arrested in any one jurisdiction immediately, or when there is the risk that the vessel shall be transferred to another owner or have its registered flag changed, another instrument is available to the creditor. Article 37[1] gives the power to the Court to prohibit any dealing with a vessel or any share therein. In this way transfers, leases or any other dealings regarding the vessel or any of its shares are prohibited, any further mortgages on the vessel are not allowed to be registered and no deletion certificate from the Maltese registry is allowed to be issued, unless such is the prerogative of the Registrar according to any law or policy.
The rights over the vessel which may give rise to an application for this order to be issued are a right to ownership, a right secured by a mortgage, or secured by a registered encumbrance or privilege or lien, or any other claim which gives right to a claim in rem against a vessel under Maltese law. Generally, maritime claims such as collisions, bunker claims, services or debt claims, and damages claims may all give rise to such an action. The order ensures that the assets of the ship-owner, usually being the sole vessel subject to the debt incurred and therefore to the action in rem of the creditor, remain those of the ship-owner/debtor so that upon a decision of the Court, the vessel may be sold with the proceeds recovered being used, in whole or in part, to settle the amounts due to the creditor.
The action is triggered by a sworn application submitted to the Maltese Civil Court, First Hall. Such sworn application should indicate the specific amount of the claim. The Court may award an interim order pending a final judgment. It is important to note that the Court must appoint the writ for hearing within twenty days which is a clear indication of the legislators’ intent to have the Court regard such application as an urgent matter. The Court may refuse to hand down the order, or may discharge the order already made, or in general “act in the case as the justice of the case requires”.[2]
The order may be made on any terms and conditions the Court deems fit, and this includes an imposition to provide appropriate security for damages, interests and costs that the applicant may suffer as a result of the issuance of the order. In a recent case,[3] the Court decided that the plaintiffs had established prima facie that they had a right to be protected, however, the Court found that the plaintiffs had not proven the right as clearly in contrast to the burden to be put on the defendants if the order was to be issued unqualified. The Court took cognisance of the fact that this order could result in serious repercussions, both financially and otherwise, on the ship-owner and must therefore proceed cautiously. Therefore, since a prima facie contractual relationship had been established, the presiding Judge decided that the order of no dealings was to be issued. However, the Court also stated that the order was being issued on the condition that a counter security of Euro 10,000 is deposited by the plaintiffs in order to ensure that the interests of the defendants are safeguarded. This case related to wages of employees working as seamen on board the vessel. The Court found that the evidence, prima facie, provided for the existence of a contractual relationship between the parties. The Court then reiterated that the plaintiffs provided evidence for a prima facie right. However, in order to decide whether such right was justified, a separate ad hoc action would be initiated and the matter determined.[4]
In the event that the order is issued by the Court, and the claim on which it is based must yet be judicially verified, then the plaintiff must prosecute such case in the courts of Malta or any other relevant jurisdiction within eight working days of the issue of the definite order. If not, on the application of the owner or any other interested party, the order is revoked by the Court. When the Court has issued a provisional order, the plaintiff is obliged to prosecute the claim within thirty days of the issue of the provisional order or else eight days from the issue of the definite order, whichever is the earlier. Therefore, the order may not be an end in itself but a tool for the creditor to safeguard his rights while seeking to settle the claim.
This order is issued for a period of no longer than one year, that may, however, be extended by the Court, on the application of the plaintiff, for further periods of not more than one year each. The applicant needs to confirm that the order is still required and the application must be filed at least thirty days prior to the extinction of the then present current term of the order. In fact, on the argument that the issuance of the order would be tantamount to a perpetual injunction, the Court was very clear in refuting this idea and stating that the issuance of the order would only be made to stand pendente lite.[5]
The Court does not issue the order if it is satisfied that the rights of the plaintiff are already otherwise secured. Similarly, once the respondent deposits in Court the amount of the claim or gives sufficient security to cover such claim, this order is not issued by the Court or it is discharged accordingly. If this is not the case, the order could provide an undue burden on the ship-owner and the vessel.
The Registrar is notified of such order and a note showing the issuance of the order is included in the registry of vessels. The Registrar may issue any deletion certificate according to merchant shipping law, excluding on request of the ship-owner. The rights of the holders of already present mortgages registered over the vessel, as well as bareboat charter registrations and the sale of the vessel pursuant to a competent court’s authorisation, are not affected.
The order is a helpful instrument that further safeguards the creditors. Together with the warrant for arrest of vessel, it helps the creditor have a further possibility in recovering the credit he is owed since the vessel subject to the claim remains the property of the debtor and therefore may be sold, by judicial sale by auction or private sale, in order to recover profit therefrom. The transfer of a vessel by the owner to a different flag, the legislation of which will place a creditor at a disadvantage, or the transfer of the same vessel to a different owner, may likely create difficulties for the creditor. Article 37 of the Merchant Shipping Act seeks to minimise these risks for a creditor and it is precisely with this in mind that Article 37 was included in the Act.
The content of this article is intended to provide a general guide to the subject matter and should in no way be construed as advice. Specialist advice should be sought about your specific circumstances.
[1] Chapter 234 of the Laws of Malta
[2] Article 37 (1), Chapter 234 of the Laws of Malta
[3] Application No: 144/2014, Av. Dr Malcolm Mifsud on behalf of the absent Captain Wayne Foulis, Alex Dodson, Andrew Flanagan, Thibaut de Larquier, Sarah Foulis, Bryony Parr, Holly Whitaker, Guy Mannering vs Icon Boat Limited owner of vessel M/Y Pure One, First Hall, Civil Court, Judge Mark Chetcuti, 20TH November 2014.
[4] “L-atturi pprezentaw dokumenti ta’ hlasijiet dovuti li juru prima facie pretensjoni. Jekk tali pretensjoni hi gustifikata hi kwistjoni li trid tigi deciza fl-azzjoni ad hoc li trid issir” – Ibid. P. 6.
[5] Application No. 526/2016, Yacht Projects Limited vs Phelan Good Chartering Limited as owner of the vessel M/Y Phelan Good (official number 16463), First Hall, Civil Court, Judge Mark Chetcuti, 2nd August 2016.
The above article was originally published in issue 15 of ShipArrested.com’s The Arrest News.
