Ann Fenech *
Partner Fenech & Fenech Advocates
It is probably quite accurate to state that Malta is home to possibly, every type of maritime activity making us maritime lawyers very lucky indeed to be practicing out of a jurisdiction which is synonymous with the maritime sector.
Malta straddles one of the busiest waterways in the world, equidistant from the Straits of Gibraltar and the Suez Canal and from Italy and Libya. This strategic location has meant that we have been occupied by every single power that has dominated over the Mediterranean basin since time immemorial including the Phoenicians, Carthaginians, Romans, Arabs, Normans, the Knights of St. John of Jerusalem, French and the British. In addition to our enviable location, Malta boasts the deepest natural harbour in the Mediterranean.
These two factors – location and physical geography have ensured that Malta has been used as a trading post first between the middle east and the southern shores of Europe and North Africa for hundreds of years and then as a trading post between the Far East and the southern shores of Europe and North Africa since the opening of the Suez Canal. Thus, anything to do with the carriage of goods by sea became second nature to Malta and the Maltese. Fast forwarding this to modern day, these activities were the precursor of Malta Freeport Terminals Ltd which today sees an average of 3 million TEU’s per annum passing through the terminal discharged from mother ships coming from the Far East to be loaded on feeder vessels to the European mainland.
The Knights of St. John of Jerusalem, in Malta for some 250 years used Malta as their base housing their substantial fleet, leading to the development of a thriving ship building and ship repair industry. When the British came to Malta in 1801 they built the most sophisticated system of dry docks in a number of the natural creeks within Grand Harbour. This dockyard was used as a substantial repair naval dockyard pre, during and post the 2nd world war. From a naval yard the Malta Drydocks became a commercial ship repair yard today owned by Palumbo Shipyards Ltd which is in turn owned by Messrs Palumbo and MSC, providing a first-class repair yard in the centre of the Mediterranean.
Other smaller creeks on the northern and southern shores of Valletta have been ideal for the development of yacht marinas with the Maltese being very keen yachtsmen leading to Malta being used as an ideal base for both local and foreign yachtsmen with interest in yachts. Malta has been featuring prominently in the Rolex Middle Sea Race since the 60’s and today several superyachts of over 100 meters use Malta as their base.
Our position lends itself to all other related maritime activities including the provisioning and supply industry, bunkering industry, towage and pilotage quite apart from a thriving cruise line industry with Malta being one of the most popular stops in cruise line itineraries.
It is therefore no small wonder that another hugely important maritime activity is of course our shipping register which we consider a very natural development of our maritime vocation. Today the Malta flag is the largest flag in Europe with over 86 million tons.
This substantial maritime activity lent itself to the development of a very healthy and robust maritime legal presence.
Any commercial activity must count on a stable, certain and reliable legal system. Prior to British rule in 1801, we had occupiers from continental Europe for centuries. Thus, our basic law was based on Roman law similar to Italy and to France. By the time the British arrived we already had a codified system of law with our British colonizers finding a highly developed legal system and a University which had already been churning out academics for over 200 years. However, the British period in Malta, 1801 to 1964, coincided with a very important legislative period in England during which a great number of maritime statutes were promulgated by the British Parliament. As a British colony these laws such the Vice Admiralty Court Acts, Merchant Shipping Acts, the Companies Act, and so many other important statutes became law in Malta.
As a result our Merchant Shipping Act today is based on the English model, the grounds of jurisdiction in Rem now contained in our Code of Organisation and Civil Procedure were first governed by the Vice Admiralty Acts of 1840 and later in 2006 were based entirely on the UK Supreme Court Act of 1981 and the grounds found in the Arrest of Ships Conventions of 1952 and 1999.
As far as the meteoric rise of the Malta flag is concerned, this has occurred because of a number of very interesting factors.
The law has been very carefully drafted and is subject to regular and periodic amendments to ensure that the legal regime supporting this important pillar of our maritime industry is constantly in line with the prevailing international conventions; English is an official language; the Registry is open on a 24 hour basis; Malta is a signatory to all the important international conventions ensuring the highest possible standards; it is on the white list of the Paris MOU; it has been a Council Member of the IMO for many years and finally and very importantly, whilst the atmosphere and dynamics are commercially driven with owners’ and charterers’ specific requirements in mind, Maltese law provides a great deal of security to a vessel’s creditors. Crew rank very high up in the list of creditors in the case of a defaulting owner as do the providers of supplies.
What is however very important and a decisive factor when considering the appropriate flag, is that mortgagees, the financiers of the acquisitions, enjoy a very privileged status under Maltese law. The mortgage is considered to be an executive title.
What this means is that in the case of a defaulting owner, a mortgagee can proceed directly against the vessel and enforce its executive title against the vessel without the need to commence an action on the merits. This has, on a number of occasions, proven to be the deciding factor in favour of the Malta flag.
In seeking financing from reputable lenders, very frequently owners find themselves in the position of having to suggest flags which give such financiers all the security and comfort they need. In this respect nothing beats providing the lender with a security which is certain and which is not dependent on interminable years in court in the event that things do not work out.
So very frequently it is the owners themselves who bring this important dynamic to the attention of financiers.
Of course, it is easy to talk about something as being possible and quite another to see how it actually works in practice. Unfortunately, as a result of both the 2008 global recession and as a result of the effect which the Covid 19 Pandemic has had on the international shipping sector, we have seen numerous owners go through very challenging times, struggling with repayments of their mortgages. On a number of occasions, the mortgages were refinanced, on other occasions mortgagees decided to cut their losses and proceed with the enforcement of their mortgages in Malta. Once the vessel is brought to Malta and arrested by the mortgagee it is possible for the mortgagee to have the vessel sold either in a judicial sale by auction or by virtue of a court approved private sale in a matter of 6 weeks. This brings to a quick conclusion what are usually interminable delays for the bankrupt owners, the mortgagees and importantly the crew who are often left languishing in no man’s land till these matters are resolved.
In addition to the above, our law is continuously being updated to provide for the necessary framework and solutions required by today’s international maritime community ranging from yachting to bunkering. All of this is evidence of the fact that our maritime legal practitioners work hand in glove with Transport Malta – the maritime regulator and the legislator with the aim of continuing to provide a maritime legal framework which can properly support all of these diverse aspects of the maritime sector which are constantly developing and in constant evolution in response to the ever changing demands of the international shipping community.
Finally an important link in the chain of all that is maritime law related in Malta is the Malta Maritime Law Association (MMLA) which is an association of maritime lawyers but which also allows other maritime service providers to be members of the association. The MMLA has a number of sub committees focused on different aspects of maritime law constantly on the look out to update and amend our laws.
The MMLA is frequently requested by the authorities to assist with the drafting and updating of our laws which have a direct impact on the maritime sector. This means that we have the privilege of having a direct say in how our maritime laws are developed in line with international practices, the development of the maritime industry and the exigencies of the country. Currently the MMLA is working on amendments to the Code of Organisation and Civil Procedure as well as the Merchant Shipping Act. In addition the MMLA is a very active member of the Comite Maritime International very often behind the original drafting of international maritime conventions. In fact it was the CMI which presented to UNCITRAL in May 2018, the Beijing Draft on the international effects of judicial sale and it has been my great pleasure to be the CMI chief co-ordinator for the project at UNCITRAL working group V1. Very recently on the 30th June 2022, the Commission at UNCITRAL following 3 years of intense deliberations, approved a draft convention and submitted to the General Assembly of the United Nations the draft convention on the international effects of judicial sale recommending its adoption at the General Assembly’s seventy seventh session. This convention will ensure that when ships are purchased in judicial sales free and unencumbered by bona fide purchasers, that clear title is given full effect in other state parties prohibiting any person from re-arresting that same vessel for debts prior to the judicial sale of the vessel.
Once Malta ratifies this Convention, there will be an additional advantage to having judicial sales conducted in Malta.
*Ann Fenech is also the President of the Malta Maritime Law Association and Vice President of the Comite Maritime International
