MALTA Law and Practice Contributed by: Ann Fenech, Adrian Attard, Lara Saguna Axiaq and Martina Farrugia, Fenech & Fenech Advocates
belonging to the carrier which may be, or may come to be, in its possession. Thus, whenever freight is due from the charterer to the owner, the former would be prohibited from paying it directly to the owner but instead would need to deposit the amount in court as security for the consignee’s claim. 5.7 Sister-Ship Arrest Maltese law permits sister-ship arrests under certain circumstances. Article 742D of the COCP provides that, where a creditor has a claim in rem (which is one of the maritime claims listed in Article 742B) in relation to a particular ship, it may arrest any other ship that is owned or beneficially owned by the party who is liable in personam for the claim. 5.8 Other Ways of Obtaining Attachment Orders Maltese law offers creditors the possibility of applying for a flag injunction, which is another pragmatic tool used to obtain security for maritime claims. Section 37 of the MSA affords a creditor the right to request that the Maltese courts issue an injunction over any vessel flying the Maltese flag, prohibiting it from being sold, transferred or deregistered from the Maltese Ship Registry. In addition, such an injunction would also prohibit the affected ship-owner from registering any further mortgages over the ship in question. A Section 37 injunction may, however, only be issued where the creditor has a “right in or over a ship or a part”, which is defined under Section 37 (10) of the MSA as being a claim based on one of the following: • a right of ownership; • secured by a mortgage; • secured by a registered encumbrance; • secured by a privilege or a lien over the ship arising by operation of Maltese law or the law applicable to the claim; or • any other maritime claim which gives rise to a claim in rem under Maltese law. Furthermore, the flag injunction is a precautionary measure and, accordingly, the creditor will also need to open an action on the merits before a competent court or tribunal.
Once the injunction is issued by the courts, it will be recorded in the ship’s register at the Maltese Ship Registry, where it will remain until it is removed by court order, preventing the sale, transfer or deletion of the vessel until that time. Unlike a ship arrest, which must occur within Mal - tese territorial waters, a Section 37 injunction may be requested wherever the vessel is situated. A vessel may continue trading while under a Section 37 injunc - tion, which is advantageous to creditors dealing with a debtor who may have liquidity issues. By allowing the vessel to operate commercially, the ship can continue to generate revenue and, hopefully, the debtor could eventually be able to pay its dues. Nonetheless, the creditor issuing the Section 37 injunction will continue to maintain its security, as the ship cannot be sold or transferred. A creditor may also resort to using other attachment mechanisms available under Maltese law, which are not exclusive to maritime claims. For instance, a credi - tor may file for a garnishee order (which is similar in nature to a freezing order) to seize any funds which the debtor may have in accounts held with Maltese banks. It is also possible to apply for a warrant of seizure of any other movables or immovables which a debtor may have in Malta. 5.9 Releasing an Arrested Vessel For a ship-owner or any interested party to secure the immediate release of an arrested ship, they would need to put up adequate security in court to cover the alleged claim amount. Strictly speaking, Maltese procedural law only allows two forms of security: • the deposit of the money in court; or • the presentation of an original bank guarantee (which must be drawn by a Maltese bank) in court. That said, a Maltese court would generally allow a Club Letter of Undertaking (LOU) to be granted as alternative security for a claim, provided that the arresting creditor does not object.
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