Ship buyers will start being protected against double arrest under a United Nations agreement signed in Beijing on Tuesday.
The Convention on the International Effects of Judicial Sales of Ships, which was drafted by Comite Maritime International (CMI), is of particular interest to Malta.
CMI president Ann Fenech, who addressed a symposium following the signing of the agreement by 15 countries told Times of Malta: “It is important that when a purchaser of a ship in a properly held judicial sale buys a ship free and unencumbered, he can take his ship to any port without fear of re-arrest by the vessel’s previous creditors.
"It is only when this is secured that a purchaser will pay the best price, increasing the pot for distribution amongst the vessel's creditors."
The international convention, Fenech said, was of particular importance to Malta because the island had a number of judicial sales, was an important maritime nation and had the largest flag in Europe.
Apart from ensuring ships will not be subjected to re-arrest, the agreement will also ensure that registrars of ships will delete the sold vessels, previous mortgages and encumbrances and then register the ships in the names of the new owners while registering mortgages in the names of the new financiers.
The absence of such assurances has so far had a negative impact on potential purchasers who would be reluctant to pay the best price in judicial sales in the interest of all the creditors if they ran the risk of having the ships they purchased re-arrested by old creditors.
Financiers are also reluctant to finance ships without such assurances, Fenech explained.
Fenech recalled that it was at the Malta Colloquium in 2018 that the international shipping industry called for such a convention and the United Nations Commission on International Trade Law (UNCITRAL) had agreed to take on a draft convention prepared by CMI.
The draft was concluded in June 2022 and adopted by the General Assembly of the United Nations in December.
In April of this year, a symposium was held in Malta under the auspices of the Foreign Affairs Ministry, UNCITRAL and the CMI. Maltese ministers responsible for transport, home affairs and foreign affairs pledged their support for the convention.
On Tuesday, the convention was signed by 15 countries: China, Burkino Faso, Comoros, El Salvador, Grenada, Honduras, Kiribati, Liberia Sao Tome and Principe, Saudi Arabia, Senegal Sierra Leone, Singapore and Switzerland.
It will come into force when it is ratified by three state parties.
The EU has pledged its support for the convention and the Commission has already approved a policy to be adopted by the EU Council which will clear the way for EU member states to sign and ratify the convention.
Maltese Ambassador to China John Busuttil was also present at the signing ceremony.