In a bold move to secure its position as a global maritime leader, Malta has introduced sweeping reforms through Act No. I of 2025.
These changes promise to revolutionise the maritime sector, offering unprecedented oppor-tunities for growth and innovation.
New financing mechanism: a game changer
The Act introduces a groundbreaking finance charter instrument, providing financiers with greater legal certainty and protection.
This new security instrument allows financiers to retain title to the vessel as security while operators manage and use the vessel, making payments that can lead to eventual ownership.
This shift addresses the challenges posed by traditional maritime financing, which has seen a decline due to economic shifts and stringent regulations like Basel III and IV.
The finance charter instrument, introduced under Article 49B, provides a legal framework for securing lessors’ rights in ship financing. Key provisions include:
• Registration of finance charter instruments: Similar to a mortgage, the finance charter instrument is registered in the ship’s register, ensuring legal recognition and protection.
• Scope of obligations covered: The instrument secures various financial and operational obligations, including hire payments and performance of charter agreements.
• Prior consent of mortgagees: Written consent from registered mortgagees is required before registering a finance charter instrument, preventing conflicts with existing creditors.
• Priority of claims: The instrument holds privileged status, superior to unsecured claimsbut subordinate to existing mortgages and certain privileged claims like crew wages and port dues.
• Preservation of mortgage rights: Existing mortgage rights remain unaffected, allowing flexibility for finance lessors to secure additional financing.
• Enforcement of repossession rights: Lessors have a statutory right to repossess the vessel in case of default, reinforcing their contractual rights.
Clarifying lease structures: precision in regulation
The Act builds upon key principles from the Maltese Civil Code, integrating its lease concept into maritime legislation. It establishes a clear distinction between finance charters and bareboat charters, ensuring that leasing structures designed for vessel financing are precisely regulated.
The Act strengthens dual registration, allowing for separate registration certificates for registered owners and lessees, and prioritises contractual agreements over rigid Civil Code provisions.
Empowering seafarers
In a move to bolster seafarers’ rights, the Act extends the time frame for wage claims from three months to 12, aligning with the International Labour Organisation’s Maritime Labour Convention (MLC) 2006. This extension significantly improves protection for seafarers, ensuring they have ample time to recover unpaid wages.
Digitalisation: steering towards efficiency
Recognising the need for modernisation, the Act supports the digitalisation of Malta’s maritime sector. By replacing traditional paper-based procedures with electronic communications, the Act aims to create a more efficient, transparent and accessible system.
This transition to e-governance is part of a broader European trend to reduce administrative burdens and promote electronic transactions.
Global standards: aligning with leading international practices
The Act addresses past compliance concerns, such as those highlighted in the 2019 Port State Control audit, by strengthening regulations to ensure adherence to the Safety of Life at Sea (SOLAS) Convention and other IMO conventions.
These measures enhance the safety and reliability of vessels flagged in Malta.
Modernising ship registration
To align with modern shipbuilding techniques, the Act removes the outdated requirement for vessel identification markings on the keel.
It also lowers the maximum age limit for vessel registration from 25 years to 20 years, ensuring that newer, safer vessels are registered under the Maltese flag.
These changes enhance Malta’s attractiveness to global shipbuilders and reinforce its commitment to safety and environmental compliance.
Streamlined governance
The Act decentralises certain powers from the minister to the registrar general, reducing bureaucratic delays and enabling faster, more efficient decision-making. This shift bolsters investor confidence and promotes a more agile maritime administration.
Conclusion
As Malta navigates these transformative changes, the maritime sector stands on the brink of a new era. These reforms not only strengthen our legal framework but also pave the way for innovation and growth.
Sarah Demicoli is a trainee advocate, Aviation, Shipping and Yachting, at Ganado Advocates.