Since time immemorial, vessels have been engaged in various trading activities across the world. Due to the vital impact which shipping activities have on our everyday lives, the regulation of vessels became inevitable and is in fact a topic which is under constant review in international fora, primarily to ensure that international safety standards are met.
International law consequently requires that vessels plying international waters and, in certain cases, those navigating local waters, be registered in a country which is referred to as a ‘flag state’. A vessel which hoists the flag of a chosen country is considered as forming part of the territory of its flag state and, from that moment, is regulated and bound by the law of that state. The flag state, the laws of which govern the operation of a vessel, exercises regulatory control over the vessel and is required to inspect it regularly with a view to ensure compliance with certain set standards.
With its centuries-old maritime tradition and as an EU member state, Malta has become the largest European maritime flag and also the seventh largest flag worldwide. Thanks to the unstinting efforts of government and the maritime industry, Malta has developed into a reputable flag of choice and quality which offers a wide array of international maritime services and fiscal incentives.
What indeed has led to the unprecedented success of the Maltese maritime flag? Over the last 25 years, the Maltese authorities have adopted stricter regulatory and legal procedures and also ensured that Malta became party to most of the major international maritime conventions of both the International Maritime Organisation and the International Labour Organisation. Malta flagships are bound to strictly adhere with the provisions of such international conventions and European directives and regulations. This development has inevitably placed Malta on the White List and Low Risk Ship List of the Paris Memorandum of Understanding. In turn, the most demanding and reputable ship owners and financiers have been attracted to the Malta flag.
The Malta Merchant Shipping Act 1973 (Cap. 234 Laws of Malta) regulates the registration and operation of vessels under the Malta flag and provides for the registration of all types of vessels, including those under construction, as well as other marine structures such as oil rigs and pontoons. The Malta Ship Registry is responsible for the registration of vessels under the Malta flag and the provision of all aspects of the day-to-day administration of Malta flag vessels. Routine safety inspections on board Maltese vessels are carried out on a regular basis by flag state appointed inspectors or through the services of inspectors employed by recognised classification societies which are members of the International Association of Classification Societies. This ensures that Malta flag vessels are fully compliant with the maritime rules and regulations which Malta adheres to.
The general rule is that a vessel will only be allowed registration under the Malta flag as long as evidence of seaworthiness is established by one of the classification societies. Furthermore, as a general rule, vessels cannot be registered in the Malta Ship Registry if they are 25 years of age and over.
One of the major attractions of the Malta maritime flag is that it offers a number of attractive advantages to owners and charterers of Malta registered vessels. These include tax incentives, no trade restrictions, low company formation and ship registration costs, no restrictions on the nationality of shareholders and directors of Maltese owning companies, eligibility of non-Maltese companies and individuals to own Malta flag vessels, limited restrictions on the nationality of crew carried on board Maltese vessels, and straightforward and quick registration procedures. The Malta Ship Registry also offers a 24-hour service, seven days a week in respect of urgent matters. This service is vital to the ship owner and is also mirrored by most local service providers.
Interestingly, financiers such as commercial banks and lending houses have been attracted to the Malta flag largely due to the ironclad security provided by the Maltese legislative structure. The Maltese system provides for the registration of mortgages by financiers (also known as mortgagees) over Malta flag vessels, which mortgages enjoy a significantly higher ranking over other privileged claims and also rank, in relation to other mortgages, according to the priority in date and time of their registration. A vessel registered under the Malta flag may not be deleted from the registry by its owner without the prior written consent of the mortgagee. In those cases where the Registrar of Ships may require the vessel to be struck off the register, a one-month notice in writing must first be given by the Registrar to the mortgagee and owner.
In case of default or breach of any of the conditions agreed upon between the mortgagee and the owner, Maltese law provides the mortgagee with various options and powers including the power to take possession and sell the ship. Under Maltese law, the registration of a mortgage provides the mortgagee with what is known as an ‘executive title in the event of a breach of the conditions agreed upon by the owner with the mortgagee, the mortgagee may proceed to take full possession of the vessel without first having to obtain a court judgement.
Apart from the possibility of selling a ship by judicial auction, the Maltese system also provides for court approved private sales wherein, on an application by a creditor with an executive title (as is the case of the mortgagee as explained earlier), the court may approve a private sale of a ship in favour of an identified buyer and in consideration of a determined price. Such court approved private sales have the same effect as judicial sales which grant title to the purchaser free from all privileges and encumbrances.
In recent years, the yachting industry has also witnessed significant expansion and some of the largest superyachts in the world have been attracted to our flag mainly due to the flagging, fiscal, financing and chartering advantages applicable to yachts in Malta. The yachting industry is constantly making strenuous efforts to ensure that yachting achieves the same level of success experienced in the merchant fleet registration sector.
Apart from efficiency and accessibility, Malta also offers a comprehensive legal and corporate support structure provided by reputable and experienced service providers together with a comprehensive range of maritime services including specialised ship repair, freeport facilities, bunkering services, ship supplies and towage services. This makes Malta an attractive one-stop-shop for owners, charterers, managers and financiers. Furthermore, the discussions currently being undertaken by government for the implementation of an updated National Integrated Maritime Policy, which will seek to reflect national needs in line with EU policies, is clear evidence of government’s unfailing efforts in the maritime field both locally and internationally.
Dr Lara Saguna Axiaq specialises in ship registration and ship finance law at Fenech & Fenech Advocates.
This article is not intended to offer professional advice and you should not act upon the matters referred to in it without seeking specific advice.