Globally, ship sale and purchase transactions usually follow common practices and involve the consolidated contractual instruments which form the lex mercatoria (ie, the sum of internationally recognised principles of merchant law and trade customs, commonly known as the 'law merchant') based on the contracting parties' intention to be bound by such contractual procedures and rules. Market operators and their legal advisers prefer certain forms of contract (typically the Norwegian Sale Form and the NIPPONSALE forms of memorandum of agreement) and transactions usually follow an agreed process which leads to the ship's delivery.
Ship sale and purchase transactions are generally governed by English law. However, where the parties have elected for Italian law to apply, the consolidated international practice may still be adopted.
Italian law includes no specific rules concerning the sale of ships. As such, the general rules on the sale of movable assets apply. These rules afford contracting parties great freedom to establish the terms of their deal and require only certain adjustments to comply with the national rules.
However, should the purchase of a ship qualify as an acquisition of business assets, certain mandatory rules of law apply. These include the rules regarding the joint liability of the purchaser and the seller to pay:
- all debts and liabilities registered in the seller's corporate books (Article 2560 of the Civil Code); and
- all wages and earnings of the seller's employees (Article 2112 of the Civil Code).
Qualification of ship purchase as acquisition of business assets
The theoretical principle behind the extension of the above rules to the sale of ships is the assumption that:
- ship sale and purchase transactions may be regarded as equivalent to a transfer of business assets; and
- a ship may be considered the "aggregate of goods organized for the exercise of a business activity", as foreseen in Article 2555 of the Civil Code.
Italian case law has expanded the above legal definition by considering business assets to constitute not only the aggregate of goods, but also the aggregate of goods and contracts. Therefore, according to the majority of literature and case law on this topic, the mandatory rules on the transfer of business assets generally apply when:
- the object of the sale comprises multiple goods and/or contracts; and
- such goods and/or contracts are linked insofar as they are allocated and intended for the exercise of business activity.
Consequently, with particular reference to the sale of ships, case law trends affirm that the regime governing the transfer of business assets should apply where a purchase agreement involves the acquisition of a vessel 'in exercise' (ie, a vessel which is all set for navigation, with the crew and master on board) if all of the relevant contracts for its exercise are also acquired.
Notwithstanding the above interpretative guidelines, some lower court decisions have stated that even the sale of a single ship can be subject to the mandatory rules on the transfer of business assets.
In two recent judgments, the Rome Court of Appeal held that the mandatory rules regarding the transfer of business assets do not apply to sale and purchase agreements concerning a single ship.
Both decisions focused on the requirements which must be met for the business acquisition rules to apply. Further, the grounds on which both decisions were based related to the consideration that a vessel cannot in itself be considered an "aggregate of goods organized for the exercise of a business activity", but may form part of such an aggregate. In other words, the courts found that the plurality of goods requirement prevented the application of the business acquisition rules.
Similarly, a recent statute has introduced to the Code of Navigation Article 347bis, which explicitly provides that the rules concerning the joint liability of a seller and purchaser to pay employees' wages apply only where the ship is transferred with other goods which collectively form an "aggregate of goods organized for the exercise of a business activity" and not in cases where the object of the sale is merely the single ship.
The above legal novelties – particularly the new Article 347bis – are a welcome development as they bring clarity to and provide precise guidelines on a situation of legal uncertainty which has previously been characterised by conflicting decisions. Further, they embody the general principles outlined in the majority of literature and case law regarding the acquisition of business assets.
