MALTA Law and Practice Contributed by: Ann Fenech, Adrian Attard, Lara Saguna Axiaq and Martina Farrugia, Fenech & Fenech Advocates
5.10 Procedure for the Judicial Sale of Arrested Ships Judicial Sales of Ships A creditor with a final and non-appealable enforce - able title may apply to the Maltese courts to have an arrested ship sold judicially, either by means of a court auction or by means of a court-approved private sale. In both cases, the vessel is always sold free and unen - cumbered. In the case of a judicial sale by auction, the credi - tor presents an application requesting the courts to schedule an auction date and appoint an auctioneer to preside over the auction. The registration of bid - ders is normally carried out on the day of the auction itself. Bidders fill a registration form and are required to present all the necessary bidding documentation shortly before the auction commences. The auction is public, and the vessel is sold to the highest bidder, who must deposit the purchase price in court within seven days, running from the auction date. There is no minimum reserve price and thus the market value of the vessel is not guaranteed. Alternatively, a court-approved private sale allows the creditor to take a more proactive approach, as it may actively source the market for potential buyers (usually through ship-brokers). Once the best offer is identified, the creditor would normally conclude a memorandum of agreement with that prospective buyer, to be approved by court. The creditor would then file a court application to request that the pre - siding judge approve the private sale. The creditor is required to submit two independent appraisals of the vessel. These need to be survey valuations, rather than “desktop” estimates. The creditor must prove to the court that the proposed private sale is in the interest of all known creditors and that the price offered is reasonable in the giv - en circumstances. The application is served on all interested parties, and a hearing date is appointed for the judge to decide whether to accept the sale. Once approved, the purchaser has seven days, run - ning from the date of the completion of the sale, to deposit the purchase price in court.
Maintenance Expenses Generally, it is the ship-owner who remains respon - sible for the maintenance of its vessel while under arrest. Nonetheless, Article 857 (4) of the COCP states that any expenses necessary for the preservation of an arrested ship should be borne by the party issuing the arrest warrant. In such cases, the law provides the arresting party with the right to recover any such expenses and costs, together with its claim against the owner. These expenses would enjoy a relatively high ranking. This provision in the law was originally enacted to ensure that the Maltese port authorities are not left exposed when a ship-owner has aban - doned the vessel. However, a recent judgment has allowed the owners of an arrested vessel allegedly in dire financial difficulty to rely on this article. Ranking Following a judicial sale of a vessel, and the deposit of the purchase price, competing creditors must par - ticipate in distribution proceedings in order to be paid according to the established rankings of their respec - tive claims. Article 54A of the MSA sets out the ranking of all maritime claims in a clear and hierarchal order. Under Maltese law, a mortgagee would enjoy a rela - tively high ranking. Only possessory liens and a limited number of special maritime privileges would pre-rank a mortgage claim. All ordinary maritime claims under Article 742B would rank after a mortgagee’s claim. 5.11 Insolvency Laws Applied by Maritime Courts Under Maltese general corporate law, a company in financial distress may file for a company recov - ery procedure under Article 329B of the Companies Act, seeking judicial protection, for a specific period of time, in order to be able to attempt to revive the company’s business. Under this protection, a creditor would not be permitted to seize any assets or enforce any judgment against the debtor company in Malta without first obtaining leave of the courts. That said, shipping companies are not regulated by the Companies Act and are governed by the provi - sions of the Merchant Shipping (Shipping Organisa - tions – Private Companies) Regulations, Subsidiary Legislation 234.42, which do not have an equivalent company recovery procedure. It is therefore ques -
355 CHAMBERS.COM
Powered by FlippingBook