Chapter 7 International Legal Framework for Recognition of Foreign Judicial Sales of Ships

Bleyen, Lief

doi:10.1007/978-3-319-24376-4_7

Lief Bleyen²⁴

Part of the book series: Hamburg Studies on Maritime Affairs ((HAMBURG,volume 36))

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Abstract

When a ship is sold by means of a judicial sale procedure, all claims are transferred so as to only lie against the proceeds of the sale, after which the purchaser obtains a ‘clean’ title, free of all encumbrances whatsoever. The unencumbered title which is obtained following the judicial sale will very likely lead to a higher sale price, to the benefit of claimants insofar as they have a favourable position according to the law applicable to the ranking and payout of claims. This fact means that a judicial sale is often a more beneficial method to enforce claims than, for example, a private sale where maritime liens and other claims survive the transfer of ownership.

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Notes

1.
See examples of cases regarding recognition problems in the following subchapter.
2.
Goldfish shipping, S.A. v. HSH Nordbank AG, Nos. 09-2314 and 09-2399, 21 April 2012, United States Courts Opinions, JU 4.15.
3.
Ibid., p 2–4.
4.
Goldfish shipping, S.A. v. HSH Nordbank AG, Nos. 09-2314 and 09-2399, 21 April 2012, United States Courts Opinions, JU 4.15.
5.
Ibid., p 2.
6.
Ibid., p 3.
7.
For more cases where recognition of a foreign judicial sale had been an issue both in Turkey and elsewhere see L. Henry, “brief discussion on judicial sale of ships”, International Sub Committee on the judicial sale of ships, Comité Maritime International, available at www.comitemaritime.org -> work in progress. (last accessed 9.02.2012). Moreover throughout the research cases have been mentioned where judicial sales were not recognised abroad or were challenged: see for example Rechtbank Amsterdam, 7 May 2004, KG 04/912 S&S 2007, 108, 528; The Acrux [1962] 1 Lloyd’s Rep. 405; The Cerro Colorado [1993] 1 Lloyd’s Rep. 58, 61.
8.
Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003).
9.
The holder of the so-called pledge right avoided labelling his claim as a maritime lien (even though the nomenclature was used in the Turkish Ship Registry).
10.
Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003).
11.
Section 11(5) of the Act states that “The claims mentioned in paragraphs (b) to (f) of subsection (4) shall rank after any claim referred to in paragraph (a) of that subsection, and in accordance with the following rules, namely — […] (d) claims mentioned in paragraph (d) of subsection (4) shall, among themselves, rank according to the law of the flag of the ship;”
Section 11(4) lists the claims contemplated against a fund which has been established by the sale of a vessel and 11(4)(d) reads: “a claim in respect of any mortgage, hypothecation or right of retention of, and any other charge on, the ship, effected or valid in accordance with the law of the flag of the ship, and in respect of any lien to which any person mentioned in paragraph (o) of the definition of ‘maritime claim’ is entitled;”
12.
Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003), para 9 referring to Oriental Commercial and Shipping Co Ltd v MV Fidias 1986 (1) SA 714 (D) at 718B.
13.
Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003), para 10, referring to the precedent of Transol Bunker BV v MV Andrico Unity and Others 1989 (4) SA 325 (A), stating that maritime liens recognised under South African law do not include the claim of a bunker supplier.
14.
The court even found that the so-called “pledge right” was not validly established under Turkish law. See Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003), para 13.
15.
Bridge Oil Limited v Fund Constituting the Proceeds of the Sale of the MV “Mega S” (formerly the MV “Aksu”) and Others (AC 58/2002) [2003] ZAWCHC 24 (12 June 2003), para 16 (1).
16.
The Acrux [1962] 1 Lloyd’s Rep. 405.
17.
Krochenski v. The ship Galaxias - Fed.Ct. (Trial Div.) (Rouleau J.) - 8 April 1988 summary available on LMLN 14 January 1989.
18.
Ibid.
19.
Ibid.
20.
This is exemplified by some cases discussed in each national report.
21.
The CMI is a non-profit international organisation established in Antwerp in 1897 which concerns itself with the “unification of maritime law in all its aspects” (CMI Constitution 1992, Art 1). Available at www.comitemaritime.org -> about us -> constitution. (last accessed on 25/08/2014.) The CMI works on the basis of member-associations which discuss the proposed topics with all relevant maritime actors, after which the representing lawyers of that particular association form a common position. Consultations on the international level are conducted regularly to exchange the ideas formed in each member-association. Additionally, the medium of electronic mailing provides an efficient forum for discussing and gathering valuable information among the member-associations. The CMI is one of the very first NGOs receiving consultative status at the International Maritime Organisation (hereinafter “IMO”). Having been bestowed this status, the CMI is in close cooperation with the IMO with regard to maritime law issues.
22.
See Chapter 2 for an overview of both Conventions.
23.
Both Conventions cover only the enforcement of maritime liens and mortgages, thus leaving out claims from a bunker supplier or a cargo owner.
24.
The CMI secretariat organises conferences every three to four years. Besides this, the CMI Assembly is usually held in conjunction with meetings organised by the member associations. For more information see www.comitemaritime.org -> about us -> constitution Part II. (last accessed on 25/08/2014).
25.
The topic was briefly presented on the basis of a preliminary study conducted by H. Hai L., A Brief discussion on judicial sales of ships. Available at www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
26.
The questionnaire is available at www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
27.
See answers to first set of Questions, available at www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
28.
See answers to second set of Questions, available at www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
29.
Ibid.
30.
Ibid.
31.
Ibid.
32.
Ibid.
33.
See commentary on the Beijing Draft on www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
34.
See Annex of this book or see www.comitemaritime.org -> work in progress -> judicial sales for the full version of the Beijing Draft.
35.
Some institutions which would have the competence to accept the current Draft Instrument are the International Maritime Organisation (IMO), the United Nations Commission on International Trade law (UNCITRAL), the United Nations Conference on Trade and Development (UNCTAD) and the International Institute for the Unification of Private Law (UNIDROIT).
36.
The resolution is available on www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
37.
See infra D. Assessment of the Final Draft.
38.
The actual content of this convention is not restricted to the conditions for recognition. See infra on assessment of the Final Draft.
39.
Draft International Convention on Foreign Judicial Sales of Ships and their Recognition (known as the Beijing Draft), amended in Hamburg 2014, art. 2.
40.
CMI Draft Convention of judicial sale of ships, art. 1.8.
41.
IWG Judicial Sales of Ships taking place in Oslo, 27 September 2011.
42.
CMI Draft Convention of judicial sale of ships, art 3.1 (a)-(d).
43.
From the context it is clear that the formalities and requirements with regard to the content of the notice are minimum standards which can always be expanded by the state conducting the sale.
44.
CMI Draft Convention of judicial sale of ships, art. 7.1.
45.
Ibid., art. 1.14.
46.
See CMI Questionnaire, 3rd group of questions, questions 1–4. Questionnaire is available on www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
47.
CMI Draft Convention of judicial sale of ships, art. 7.2.
48.
Ibid., art. 5.1(a).
49.
Ibid., art. 5.2.
50.
This was the idea of the German MLA, which took the example of the use of a specimen from other European Regulations such as the Brussels I Regulation, where reference is made to specimens – attached to the Regulation’s annexes – confirming the enforceability of judgments, court settlements, and authentic instruments. See opinion of GMLA on the Beijing Draft of 23 July 2013 available on www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
51.
CMI Draft Convention of judicial sale of ships, art. 5 (1).
52.
Ibid., art. 4.1 (b).
53.
Ibid., art. 6(1).
54.
Ibid., art. 6.2.
55.
Ibid., art. 1.7.
56.
Ibid., art. 7.4.
57.
Ibid., art. 7.3.
58.
Ibid., art. 8.1.
59.
Ibid., art. 8.2 (b).
60.
Ibid., art. 8.3.
61.
Ibid., art. 7.3.
62.
Ibid., art. 8.2 (a).
63.
In the CMI in particular, the drafting process often takes a long time as the drafting committee usually consists of practising lawyers who do not have the capability to work on the draft on a full-time basis.
64.
CMI Draft Convention of judicial sale of ships, preamble.
65.
Ibid., art. 3.
66.
Ibid., art. 4.
67.
Ibid., art 5.
68.
Ibid., arts. 6 and 7.
69.
Ibid., art. 8.
70.
Ibid., art. 2.
71.
Ibid., art. 3.3.
72.
Ibid., art. 4.1(b).
73.
Ibid., art. 5.
74.
Ibid., art. 6.
75.
See supra Chapter 6 III (3).
76.
See supra Chapter 5, III.
77.
CMI Draft Convention of judicial sale of ships, art. 3.4.
78.
See Chapter 2 on the 1965 Service Convention and the 2007 Service Regulation.
79.
ECJ, Opinion 1/03 (Lugano Convention) [2006] ECR I-1145.
80.
CMI Yearbook 2010, p. 379. Available at www.comitemaritime.org -> Publications (last visited at 06.05.2014).
81.
See comments of the U.S. Maritime Law Association on the Second Working Draft Instrument on Recognition of Foreign Judicial Sales of Ships and the commentary of the British Maritime Law Association on the revised text of the Convention on the recognition of the foreign judicial sale of ships. Comments available on www.comitemaritime.org -> work in progress -> judicial sales. (last accessed 25/08/2014).
82.
See supra national reports.
83.
The inspiration for the wording was found in the Brussels I Regulation, art. 34 para 1.
84.
CMI Draft Convention on judicial sale of ships, art. 8.3.
85.
M. Bogdan, Recueil des cours, Vol. 348, 2010, p. 166.
86.
O. Kahn-Freund, Recueil des cours, Vol. 143, 1974, p 173–174. See also Lauterpacht’s view in the case The Netherlands v. Sweden (the Boll case), 1958, ICJ Reports 1958, p 55.
87.
FD&D Cover for MOA Risks, “Writ Search Facility” and Maritime Liens Insurance for Second-hand Ships, 2012–2013 Policy Year, available at www.nepia.com -> publications -> club circulars-> circular 2012/009. See also W. Sharpe, Towards an International Instrument for Recognition of Judicial sales of Ships – Political Aspects, p 3, fn. 5. Available at www.comitemaritime.org -> uploads -> judicial sales -> paper of W. Sharpe. (last visited 02/07/2014).
88.
This could be done, for example, by agreeing that the lex registrationis is the law deciding on the existence and ranking of a certain claim.
89.
Mortgages and Liens Convention 1993, art. 2.
90.
See for example Belgium, where the draft of the new maritime code proposes the application of its own domestic law on the existence and ranking of claims instead of applying the more predictable lex registrationis as is currently done. See Blauwboek Proeve van Belgisch Scheepsvaartwetboek Privaatrecht, Blauwboek 3 schepen, para 3.385. available at www.zeerecht.be.
91.
See Chapter 2.
92.
P. Marlow, ‘Ships, flags and taxes’, in: C. Th. Grammenos (eds), The Handbook of Maritime Economics and Business [London, 2002] 512–529.
93.
See examples of loan documentation and indication memoranda included in the ‘Schiffsfinanzierung II’ course reading materials. The course was held at the Lehrstuhl für Corporate Finance and Ship Finance at the University of Hamburg. Course available at the website of the ‘Lehrstuhl’. http://www.corporate-finance-hamburg.de/ -> Lehre -> WiSe 2013/14 -> documents. Last visited 21/012014.
94.
D. Damar ‘Neues türkisches Handels-und Transportrecht’ in Transportrecht, 36(5), 178–191, 189 explaining that it was the ship financing sector taking the initiative to draft new legislation. See also “Chapter 6 -> V. Recognition -> 1. Recognition of the Court Decision.”

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Max Planck Institute for Comparative and International Private Law, Hamburg, Germany
Lief Bleyen

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Bleyen, L. (2016). Chapter 7 International Legal Framework for Recognition of Foreign Judicial Sales of Ships. In: Judicial Sales of Ships. Hamburg Studies on Maritime Affairs, vol 36. Springer, Cham. https://doi.org/10.1007/978-3-319-24376-4_7

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DOI: https://doi.org/10.1007/978-3-319-24376-4_7
Published: 17 December 2015
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