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19 June 2019
Ship mortgages are the traditional form of registered security over Malta-flagged vessels. These mortgages rank ahead of subsequently registered mortgages according to the order of time and date on which they are produced to the registrar of ships. Considering that they grant an executive title to a mortgagee, if an event of default occurs, the ship mortgage is rendered immediately enforceable without the need for any judicial proceedings.
The mortgagee must simply file a judicial letter in the court registry requesting payment and calling on the debtor to settle all outstanding indebtedness. The letter must also be served on the vessel. Following such notice, the mortgagee may immediately proceed to:
A collateral deed of covenants to the Maltese mortgage is usually executed simultaneously with the ship mortgage and regulates in further detail the conditions and obligations arising from the ship mortgage and other documents referred to therein.
The deed of covenants, whether governed by Maltese or foreign law, will generally contain as an annexe thereto an irrevocable power of attorney granting the mortgagee the authority to (among other things) apply for the closure of the ship's Maltese register as additional security. This power of attorney may be submitted for registration with the registrar in accordance with Article 17 of the Merchant Shipping Act (Chapter 234 of the Laws of Malta).
If an event of default occurs, the power of attorney executed by the mortgagor allows the mortgagee to apply for the immediate closure of the vessel's Maltese register on the mortgagor's behalf and to pay all such fees, make all such declarations and receive all such certificates, including the deletion certificate, as necessary to fulfil the mandate.
While such power of attorney is generally included as a matter of custom, the registration of this additional security in favour of the mortgagee is not essential for enforcement. Registration of the irrevocable power of attorney is nevertheless an option for mortgagees and provides the added benefit of allowing for swifter enforcement in cases of default.
Once the irrevocable power of attorney is registered, the registrar need not seek additional verification of the due execution and validity of the said power of attorney and, as a result, the registrar will be in a position to expedite the closure of registry in the interest of the mortgagee in the case of an event of default.
This mechanism is one of the additional modes of security available to the mortgagee. It illustrates:
For further information on this topic please contact Peter Grima at Fenech & Fenech Advocates by telephone (+356 2124 1232) or email (email@example.com). The Fenech & Fenech website can be accessed at www.fenechlaw.com.
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