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Domestic shipping licence and foreign ship managers - International Law Office

International Law Office

Shipping & Transport - Malaysia

Domestic shipping licence and foreign ship managers

September 22 2010


The National Cabotage Policy was implemented on January 1 1980 and, for this purpose, the Merchant Shipping Ordinance 1952 was amended and the Domestic Shipping Licence Board established. The board is responsible for regulating and controlling the licensing of ships engaged in domestic shipping in Malaysia.

Section 65A of the ordinance defines 'domestic shipping' to mean the use of a ship to:

"provide services, other than fishing, in the Federation waters or the exclusive economic zone; or for the shipment of goods or the carriage of passengers from any port or place in Malaysia to another port or place in Malaysia; or from any port or place in Malaysia to any place in the exclusive economic zone or vice versa".

However, before engaging in domestic shipping a ship must possess a valid domestic shipping licence (Section 65L of the ordinance). To qualify for a licence, first, the ship must qualify as a Malaysian ship under Section 11 of the ordinance (Section 65KA(1) of the ordinance further stipulates that no ships other than Malaysians ship may engage in domestic shipping).(1)

Under Section 11 of the ordinance, a ship qualifies as a 'Malaysian ship' if: (i) it is wholly owned by Malaysian citizens; or (ii) where it is owned by a corporation:

  • the corporation is incorporated in Malaysia;
  • the principal office of the corporation is in Malaysia;
  • the management of the corporation is carried out mainly in Malaysia;
  • the majority, or a percentage as determined by the minister under Section 11(1A) including the voting share, of the corporation is held by Malaysian citizens free from any trust or obligation in favour of non-Malaysians; and
  • the majority, or a percentage as determined by the minister under Section 11(1A), of the corporation directors are Malaysian citizens.

Second, the board has stipulated that a licence applicant must fulfil the following requirements:(2) (i) for an individual or a sole proprietor applicant, he or she must be a Malaysian citizen; or (ii) for an organisation or corporation applicant:

  • the corporation must be incorporated in Malaysia;
  • the majority directors of the corporation must be Malaysian citizens; and
  • the majority of the shareholding, including the corporation's voting shares, must be held by Malaysian citizens free from any trust or obligations in favour of non-Malaysians.

The ordinance and the Domestic Shipping Licensing Board Regulations 1981 are both silent on the aspect of the management of a Malaysian ship with regards to an application for a licence. The conditions imposed by the board for a licence applicant include no stipulation or dictation with regard to the management of a ship.

As such, a Malaysian ship managed by a foreign ship management company would still be eligible for a licence. However, in respect of a ship that is registered as a Malaysian ship with the Malaysia International Ship Registry,(3) there is a requirement that such a ship must first appoint a ship manager who is either: (i) a Malaysian citizen having his or her permanent residence in Malaysia; or (ii) a company incorporated in Malaysia and having its principle place of business in Malaysia.(4) Further, in accordance with Section 66C(3) of the ordinance, such an appointment must be for the entire period that the ship remains registered with the registry.

Therefore, if the licence is intended for a Malaysian ship that is registered with the registry, the appointment of a foreign ship management company would be in breach of the aforesaid provisions and the ship could lose its status as a Malaysian ship,(5) and would thus not be eligible to engage in domestic shipping.

For further information on this topic please contact Rajasingam Gothandapani at Shearn Delamore & Co by telephone (+60 3 2070 0644), fax (+60 3 2078 5625) or email (rajasingam@shearndelamore.com).

Endnotes

(1) Subject to the exemptions set out under the Exemption from Section 65KA(1) (PU (B) 316/2003) and the Exemption from Section 65KA(1) (PU (B) 116/2003).

(2) The list of requirements can be obtained from the Ministry of Transport's website at www.mot.gov.my.

(3) Section 66B of the ordinance.

(4) Section 66C(1) and (2) of the ordinance.

(5) And also be liable to an offence under Section 66G of the ordinance.


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