SOUTH KOREA Law and Practice Contributed by: Woorin Sung and Hee Kyung Jeong, D&A LLC
2. Ship Finance and Leasing 2.1 Ship Loan Finance
case of joint representatives, all such representa - tives) is a citizen of South Korea. With respect to a vessel under construction, a mort - gage may be registered with the registry office hav - ing jurisdiction over the shipbuilding site. However, separate registration of a transfer of ownership is not permitted in respect of such a vessel. 1.5 Temporary Registration of Vessels The South Korean legal system does not provide for a temporary vessel registration system. That said, a lim - ited mechanism for the grant of temporary nationality does exist. As a matter of principle, dual registration is prohibited in South Korea. Accordingly, the owner of a vessel that has lost its Korean nationality under the Ship Act is required to apply for deregistration. 1.6 Registration of Mortgages The creation and registration of vessel mortgages fall within the jurisdiction of the courts. Specifically, such matters are handled by the district courts and their registry offices having jurisdiction over the vessel’s port of registry or the shipbuilding site. To create a mortgage over a vessel, the applicant is required to submit: • documents evidencing the cause of registration, such as a vessel mortgage agreement; and • documents relating to the mortgage creator, includ - ing the applicant’s certificate of seal impression. 1.7 Ship Ownership and Mortgages Registry Information regarding ownership and mortgages over a vessel is publicly available. Where a third party that is neither the vessel owner nor a mortgagee seeks to obtain a copy of a vessel’s registry record, that party must attend the relevant registry office in person and submit an application including the vessel’s identifica - tion number and the applicant’s personal information. Unlike real estate registries, online issuance of such copies is generally not available.
Ship finance in South Korea is primarily conducted through loan financing led by financial institutions, with equity investment typically included as a supplemen - tary component. Most transactions are undertaken to finance the acquisition, construction or operation of vessels, and the vessels themselves are commonly used as the principal collateral. The key terms and conditions of such financing agree - ments include: • loan amount and drawdown conditions; • interest rate; • repayment structure; • events of default and acceleration; and • collateral. In addition to a ship mortgage, multiple forms of addi - tional collateral are typically required. Such additional collateral commonly includes: • security assignment over receivables (known as yangdo-dambo under Korean law) arising from charterparty agreements, insurance proceeds, freight, etc; • the creation of a pledge over the shares of the vessel-owning company; • the creation of a pledge over deposit accounts; and • the transfer of rights under repayment guarantees. 2.2 Ship Leasing In South Korea, ship leasing transactions have gradu - ally increased in recent years. This trend is driven by stricter risk management by traditional commercial banks in ship finance, volatility in shipbuilding and shipping cycles, and increased funding needs arising from rising vessel prices and expanded investment in environmentally friendly vessels. Chinese leasing houses have been expanding their share in the international ship finance market. In Korea, however, there are also calls for the adoption of restrictive measures against Chinese leasing com - panies.
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