Acquisition of the Status of a Sea Vessel by the Object

The concept of a vessel can be considered both from the general positions of civil law and from the positions of special regulation. The rules of civil law make it possible to determine the place of an object in the system of classification of objects of civil rights and to determine the legal regime applicable to it. So, in accordance with paragraph 2 part 1 Art. 130 of the Civil Code of the Russian Federation (hereinafter – the CC of the RF) sea vessels subject to state registration are immovable property items. Accordingly, sea vessels that are not subject to state registration are movable property items. According to clause 1.1 of Art. 33 of the Merchant Shipping Code of the Russian Federation, these include boats and other floating equipment that are accessories of the vessel, vessels weighing up to 200 kilograms inclusive and with engine power (if installed) up to 8 kilowatts inclusive, as well as sports sailing vessels, the length of which should not exceed 9 meters, which do not have engines and which are not equipped with resting places, undecked non-self-propelled vessels, the length of which must not exceed 12 meters. Special regulation, in turn, provides for the definition of a vessel, taking into account its technical characteristics necessary for its use for merchant shipping. In accordance with Art. 7 of the Merchant Shipping Code of the Russian Federation (hereinafter – the MSC of the RF), a ship is understood as a self-propelled or non-self-propelled floating structure used for merchant shipping.

Accordingly, the considered objects have two statuses: sea vessels and real estate. According to the current legislation, it is assumed that the objects have these two statuses at the same time. However, in practice, cases arise that demonstrate that this is not always the case. For example, the Federal Commercial (“Arbitrazh”) Court of the Far-Eastern District considered case No. А59-4400/2010, in which the object lost the characteristics of the vessel – the vessel was constructively lost, however, for the purpose of determining the procedure for the Territorial Administration of the Federal Agency for State Property Management in the Sakhalin Region to conduct tenders, from which it was supposed to be sold according to the court, it was still real estate. When considering this case, the courts came to the conclusion that the recognition of the vessel as constructively lost does not automatically entail the loss of its immovable property status. In case No. А40-1715/15, the Commercial (“Arbitrazh”) Court of the Moscow District concluded that the offshore ice-resistant stationary platform, registered in the register of ships as a vessel, is not a vessel within the meaning of Art. 7 of the MSC of the RF, but it is an immovable item due to its strong connection with the seabed. The court indicated that registration as a ship in the ship register was required for the purpose of registration of ownership by the owner of the platform, as well as for the purpose of complying with the requirements for mandatory classification and survey in order to determine and satisfy the suitability of an offshore fixed platform for safe operation in accordance with its purpose, since other forms, special for registration of offshore stationary platforms, are not approved by the legislation. Accordingly, in order to answer the question at what moment an object becomes a sea vessel, it is necessary to consider its status of an immovable item, its status of a sea vessel, the ratio of these statuses: are they really both must be present at the same time, or in practice situations may arise, when the two statuses “diverge” not as a result of a mishandling of the case by the court or a gap in legislation. Since the question posed requires deep research, in this article the author does not set herself the goal of providing an exhaustive answer to it. In this article, the author will try to raise issues that require resolution when determining the moment when a structure acquires the status of an immovable item and the status of a sea vessel, to outline the positions existing in doctrine and case law, and to present her position.

As mentioned above, from the point of view of civil law, seagoing vessels can be both immovable and movable items. At the moment, the CC of the RF does not explicitly indicate at what point an object becomes an immovable item. The doctrine identifies three possible approaches to this issue: 1) from the moment the object first has the properties of a strong connection with the earth; 2) from the moment of cadastral registration as an immovable item (for buildings, structures – commissioning and registration in the register of capital construction objects); 3) from the moment of state registration of the right to an immovable item¹. As part of the ongoing reform of law property, the working groups formed by the Council under the President of the Russian Federation for the codification and improvement of civil legislation have developed a draft federal law No. 47538-6 “On Amendments to Parts One, Two, Three, and Four of the Civil Code of the Russian Federation, as well as in certain legislative acts of the Russian Federation” (hereinafter referred to as the Draft)². The Draft proposes to directly fix the third approach, according to which an immovable item is considered as an independent object of civil rights from the moment of state registration of the initial right to it. So, the key aspect, which is emphasized in the Draft in the provisions on immovable property, is the state registration of the original right to the object. It is from the moment of such registration that the corresponding immovable items are considered to exist as objects of civil rights³ (for example, clause 2 of Article 141.2, Article 141.5, clause 3 of Article 141.6, 141.8 as amended by the Draft).

R.S. Bevzenko in his writings repeatedly points out that, despite the absence of a direct indication in the current legislation, at the moment this approach should also be applied⁴. So, the academic gives an answer to the question of what constitutes a building from the point of view of law, the right to which is not registered, based on the fact that the Russian Federation has adopted a model of a registration system based on the principle of deposit⁵, in accordance with which the rights to real estate do not arise without an entry in the register (clause 2 of Article 8.1, Article 219 of the CC of the RF)⁶. Accordingly, it is impossible to have ownership of an immovable item without an entry about it in the register. In turn, it is impossible to make an entry about the right in the register without first opening the section for the corresponding object. This means that real estate as an item appears according to the general rule only after the opening of the register section and the initial registration of the ownership of the item. Otherwise, until the moment of registration of the right to an item, it would be ownerless⁷. This approach is also reflected in case law: the Judicial Chamber for Economic Disputes of the Supreme Court of the Russian Federation, in its Decision No. 306-ES17-3016 (2) dated August 14, 2017, indicated that in the absence of registration of rights to the object, it was not formally put into circulation as an object of real estate. Accordingly, R.S. Bevzenko criticizes the position of the Supreme Court of the Russian Federation (hereinafter – the Supreme Court), expressed in paragraph 38 of the Resolution of the Plenary Session of the Supreme Court of the Russian Federation of 23.06.2015 No. 25 “On the application by courts of some provisions of Section I of Part One of the Civil Code of the Russian Federation” (hereinafter – Resolution of the Plenary Session of the Supreme Court No. 25), according to which, as a general rule, state registration of the right to an item is not a prerequisite for its recognition as an object of real estate. Criticism of this position of the Supreme Court was also expressed by E.A. Sukhanov, who does not agree with the approach in which state registration of rights to real estate contrary to the law becomes not the only one, but only one of many possible evidence of the existence of such a right, and this registration itself, in fact, turns into an empty formality⁸.

At the same time, other positions are expressed in the doctrine. For example, N.N. Averchenko rejects this approach, pointing out that state registration of rights is not a sign of an immovable item, but a consequence of its legal regime: by the time of registration, the immovable item must already exist by definition. N.N. Averchenko, on the contrary, supports the position of the Supreme Court, expressed in paragraph 38 of the Resolution of the Plenary Session of the Supreme Court No. 25. In his opinion, an immovable item should be considered an independent object from the moment of its cadastral registration (for buildings, structures – commissioning and registration in the register of objects capital construction). In this case, the purpose of accounting should be to determine the spatial boundaries of immovable things under Art. 130 of the CC of the RF, and items that do not have a strong connection to the ground (modular pavilion) and (or) independence (reclamation system, asphalt pavement) should be excluded from it⁹.

N.N. Averchenko’s notion what objects should be excluded from the register, allows us to raise the question of whether all objects registered as real estate, and, accordingly, passed the state cadastral registration, are immovable items? R.S. Bevzenko gives a negative answer to this question, pointing out that the state registration of rights to any objects does not automatically turn them into immovable items by itself, and it is necessary to establish the actual presence of a particular object of an immovable property stipulated by the CC of the RF. This approach is also confirmed by numerous case law¹⁰. I would like to agree with this position, since the existing practice demonstrates, firstly, the lack of a uniform approach to the concept of immovable property, which entails cases of registering monuments, tennis courts, tombstones as real estate, and secondly, the presence of a corruption-generating factor in cases when there is a registration as real estate of objects that are not, for the purpose of the subsequent registration of rights to land plots under such objects by virtue of the principle of the unity of the fate of a land plot and objects on it¹¹. Perhaps, it is from these positions that one should take the position of the Supreme Court, expressed in paragraph 38 of the Resolution of the Plenum No. 25, and interpret it in such a way that the presence of state registration of the right to an item is not sufficient confirmation that this item is an object of real estate.

The above discussion confirms the conclusion of E.A. Sukhanov that the significance of the division of items into movable and immovable, fundamental for civil law, has not yet been adequately understood either by domestic legislation, or by civil doctrine, or by law enforcement practice¹².

State registration in relation to sea vessels has several differences from state registration in relation to “classic” real estate objects. Firstly, both the registration of the courts themselves and the registration of rights to them, their restrictions (encumbrances) are carried out. Secondly, the Federal Law of 13.07.2015 No. 218-FZ “On State Registration of Real Estate” (clause 8 of Article 1 of this law) does not apply to sea vessels subject to state registration, a reference to which is contained in clause 6 of article 131 of the CC of the RF, and the MSC of the RF (part 1.1 Article 33 of the MSC of the RF) and by-laws adopted in accordance with it. Registration of rights to ships, their restrictions (encumbrances) also has a statutory character (clause 3, Article 33 of the MSC of the RF). Leaving aside the question of the validity of the existence of registration and the courts themselves and rights to them in the form in which it currently exists, it is worth noting that the existence of registration of the courts themselves simplifies the task of determining the moment at which the corresponding object becomes immovable. It appears that seagoing vessels acquire immovable status at the time of their registration in the ship register.

In turn, for the emergence, change, transfer and termination of rights to movables, as a general rule, strict formalities are not required¹³. Recognition of an object as a movable item is not associated with the implementation of state registration of such an object or rights to it. Accordingly, we can come to the conclusion that an object becomes a movable item from the moment of its creation or appearance.

Considering the “classic” movable and immovable items, and taking into account their different physical properties, the difference in approaches to the moment of recognition of such items as independent objects of rights seems justified. Meanwhile, as applied to seagoing vessels, taking into account those introduced in clause 1.1 of Art. 33 of the MSC of the RF formal technical data for dividing ships into those subject to state registration and, accordingly, recognized as immovable items, and not subject to state registration and, accordingly, recognized as movable items, a rather interesting situation is developing. So, for example, a ship with a mass of 200 kilograms and an engine power of 8 kilowatts will be a movable item, the title to which will arise from the moment of its construction, while a ship with a mass of 201 kilograms and an engine power of 9 kilowatts will be an immovable item, the title to which will arise from the moment of its registration in the register of ships. Based on how the norms on sea vessels are formulated in the current legislation, the legislator must propose criteria for the separation of ships subject to state registration and ships not subject to state registration, which, in turn, entails the application of a different legal regime to ships which technical characteristics differ slightly. Perhaps the solution could be the consolidation of a different approach to sea vessels in the legislation. So, for example, the Draft provides that sea vessels will be movable items, to which the rules on immovable items can be applied in cases stipulated by law.

As mentioned above, the MSC of the RF provides three characteristics that a ship must have: self-propelled or non-self-propelled, buoyant and the ability to be used for merchant shipping. Since the definition of a vessel provides for both self-propelled and non-self-propelled, which covers all objects, regardless of their ability to be independently propelled, and also refers to the purposes of merchant shipping, the list of which is given in Art. 2 of the MSC of the RF and is open, then such characteristic as buoyancy is of decisive importance. It is also important to emphasize that the use of the term “structure” means that the vessel is a man-made object.

In foreign jurisdictions, a similar approach is applied to the definition of sea-going vessels in terms of the criteria used, however these criteria may be assessed differently. So, for example, in Greece, in accordance with Art. 1 of the Greek Code of Private Maritime Law¹⁴ the following definition of a vessel is given: “any vessel with a registered tonnage of at least 10 tons, designed to sail at sea using its own propulsion means”. In the Republic of Korea, when defining a seagoing vessel, the criterion of its use in maritime navigation for the purpose of participating in merchant shipping or other profitable activities and the criterion of self-propelledness are also used. Thus, mobile units, especially fixed structures that are not self-propelled, most likely will not be recognized by the vessel. In this regard, for a long time it was considered that barges used only for the transport of goods did not fall within the meaning of a ship, but in the end it was decided to expand the scope of application of the provisions on seagoing vessels to barges (Article 1–2 of the Law on Ships)¹⁵. Thus, neither Greece nor the Republic of Korea distinguishes buoyancy separately, nor are non-self-propelled objects considered vessels.

It can be noted that neither in the Russian Federation nor in such foreign jurisdictions as Greece and the Republic of Korea, the definition of a vessel does not include registration as a criterion. In the doctrine, there are different positions on whether the registration of a ship in the register of ships is a criterion for assigning a structure to a ship. For example, V.N. Gutsulyak notes that registration refers to a set of legal features inherent only to a ship¹⁶. In turn, A.P. Nikitina believes that the registration does not determine the vessel itself, but its nationality, owner and compliance with the established requirements¹⁷. A different approach exists in case law as well. Thus, the Commercial (“Arbitrazh”) Court of the Moscow District in its ruling on case No. А40-215352/2014 indicated that the exclusion of the vessel from the state ship register indicates that this object is not a vessel, and from the moment of exclusion of the vessel from the register instead of the ownership of the vessel from the former the shipowner has a right to an item that was previously recognized by the ship¹⁸. The Fourteenth Commercial (“Arbitrazh”) Appellate Court, whose decision in case A05-9138/2017 was upheld by the Resolution of the Commercial (“Arbitrazh”) Court of the North-Western District, ruled that from the content of Articles 7, 409 of the MSC of the RF it follows that state registration does not apply to the mandatory legal features of a vessel in the ship register. The status of the vessel in the situation under consideration and the possibility of its application are assessed by the court taking into account the actual circumstances of the event. It seems that registration is not a mandatory criterion for classifying a structure as a ship, and a structure becomes a ship when it acquires buoyancy and is used for merchant shipping. This conclusion can be confirmed by an example of the structures specified in clause 1.1 of Art. 33 of the MSC of the RF, which are not subject to registration, however, are directly called by law as vessels, as well as structures, the registration of which is not mandatory. These are ships under construction. So, in accordance with paragraph 3 of Art. 376 of the MSC of the RF, the ownership of a ship under construction can be registered in the register of ships under construction, provided that a keel is laid, or equivalent construction work confirmed by an expert opinion is carried out. The ability to register ships under construction is due to the practical needs of the participants in the shipping business in registering a mortgage and prioritizing the lender providing financing for the construction of the ship. Of course, the recognition of such an object as a vessel, although under construction, is a fiction, since at this stage of construction it does not have buoyancy, it is not a “structure”. Ships under construction are subject to their own keel-laying criterion or confirmation of equivalent construction work. And it seems that the moment when the relevant work was carried out, the object will be a ship under construction, regardless of whether it was registered in this capacity. Thus, at the moment, the discrepancy between the two statuses of a structure occurs at the stage of their formation: first, the structure acquires the properties of a ship and becomes such, then it is registered in the register of ships and is considered as an immovable item.

Thus, based on the analysis of the doctrine and case law, it can be concluded that the status of the structure as a sea vessel, its status as an immovable item, the ratio of these statuses, the moment of acquiring this status by the structure are not fully comprehended. It can be concluded that a structure acquires the status of an immovable item from the moment of its registration as a vessel in the register of ships, the status of a sea vessel – from the moment of the actual acquisition of the properties of a sea vessel, mainly buoyancy. The questions posed are of great theoretical and practical interest and require further research. ■

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