JAPAN Law and Practice Contributed by: Jumpei Osada, Masaaki Sasaki, Takuto Kobayashi and Hiroshi Ideyama, TMI Associates
bareboat-charterer leases back the vessel to the original Japanese owner in the form of a time charter, foreign seafarers are allowed to be on board. 1.6 Registration of Mortgages Competent Authority for Registration of Mortgages Mortgages on Japanese vessels are recorded in a commercial registry and maintained by the branch office of the Legal Affairs Bureau, which has power over the location of the registered port (in the case of the vessels under construction, and the location of the manufacturer). Documentary Requirements for Registration of Mortgages The registration of a mortgage shall be applied to be recorded in the commercial registry with the original or certified copy of the ship mortgage agreement. In Japan, there is no designated form of the agreement. The registration of a mortgage on a ship under con - struction shall also be recorded in the registration after the delivery of the vessel without any additional appli - cation. The maturity date is not required to be stated, but the amount or the maximum amount of the prin - cipal must be specified. The secured claim must be owed by the registered mortgagee itself, and an agent or trustee for the benefit of lenders may not be regis - tered as the mortgagee. Mortgages on several vessels securing the same single claim are also permitted. A registration and licence tax of four thousandths of the amount of the secured claim will be imposed in order to register the mortgage. 1.7 Ship Ownership and Mortgages Registry Certificate of Administratively Registered Matters and Registered Book The certificate of administratively registered matters of a vessel can be obtained by anyone. Regardless of the location of the registered port, any District Transport Bureau or Shipping Bureau is available for inquiries. The certificate describes the status of ownership, but not the status of the mortgage. Certificate of Commercially Registered Matters The certificate of commercially registered matters can also be obtained by anyone. Not only the sta - tus of ownership but also the status of mortgages is described thereon. Such a request for issuance may
be made only to the competent branch office of the Legal Affairs Bureau. However, only interested parties are allowed to inspect collateral documents such as mortgage agreements.
2. Ship Finance and Leasing 2.1 Ship Loan Finance
In Japan, ship financing is predominantly debt-based, with equity financing used mainly in structured invest - ments (eg, shipping funds, leasing structures (includ - ing JOLCO), or joint ventures). The most common transactions involve bilateral or syndicated bank loans secured by a statutory ship mortgage ( Sempaku Tei- token ) under the Ship Act ( Sempaku-ho ), often com - bined with additional security and contractual protec - tions. Although it depends on the creditworthiness of the sponsor, the financial covenants (including the Loan- to-Value clause, minimum liquidity and net worth requirements) and the operative covenants (which, inter alia, restrict disposal of the vessel, change of flag or change in classification society, limit the arrange - ment of chartering and ensure compliance with appli - cable laws, sanctions and class requirements) are often stipulated under the debt and equity finance documents in general. As with ship mortgages in other common flag juris - dictions, a ship mortgage deed under Japanese law typically contains provisions governing, inter alia, registration and perfection formalities, covenants for preserving the value of the mortgaged vessel and pro - cedures relating to enforcement and private sale. It should be noted, however, that under Japanese law a ship mortgage does not confer any right of pos - session on the mortgagee; accordingly, enforcement must be carried out through formal attachment and judicial procedures rather than by taking possession of the vessel. In addition to the ship mortgage, the assignment of insurances and requisition compensa - tion, and the assignment of charter hire, are typical security packages. In case of construction financing, the assignment of shipbuilding contract and refund guarantee is also included. Furthermore, account
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