MALTA Law and Practice Contributed by: Ann Fenech, Adrian Attard, Lara Saguna Axiaq and Martina Farrugia, Fenech & Fenech Advocates
stances, a garnishee order is used in the context of seizing any funds belonging to a debtor in bank accounts held with local banks. The credi - tor names the banks as garnishees in their appli - cation, and consequently the banks would be obliged to seize any of the debtor’s funds in their possession. That said, the law allows a creditor to name any third party as a garnishee. There is, therefore, nothing precluding a con - signee from issuing a garnishee order against the ship-owner and listing the charterer as a garnishee. Once the charterer is served with the garnishee order, it would be legally obliged to deposit into court any moneys 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. 4.7 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 Arti - cle 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. 4.8 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 mari - time claims. Section 37 of the MSA affords a creditor the right to request that the Maltese courts issue an injunction over any vessel fly - ing the Maltese flag, prohibiting it from being sold, transferred or deregistered from the Mal -
tese Ship Registry. In addition, such an injunc - tion 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 precaution - ary 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 Mal - tese 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 Maltese territorial waters, a Section 37 injunction may be requested wherever the vessel is situ - ated. A vessel may continue trading while under a Section 37 injunction, which is advantageous to creditors dealing with a debtor who may have liquidity issues. By allowing the vessel to oper - ate commercially, the ship can continue to gen - erate revenue and, hopefully, the debtor could eventually be able to pay its dues. Nonetheless, the creditor issuing the Section 37 injunction will
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