The instrument shall eliminate the problem of deleting the maritime vessel from the ship registry of one state if the judicial decision to sell has been made in another state.

The main idea of the Convention is that for the state of registry the effect of the sale should be exactly the same as in the state where the decision to sell took place.

To clarify: a court in one state decides to sale the ship, registered in another state; the court decision is executed, and a ship is sold at a public auction. How shall the record of right in the register where the ship is registered be deleted? The Convention offers a mechanism – the issuance by the court a certificate of judicial sale, which serves as the basis for changing or extinguishing the entry of the former right holder in the registry of another state.

The Convention is expected to provide legal protection for purchasers of ships sold by judicial sale, while safeguarding the interests of shipowners and creditors. It does this by providing uniform rules that the clean title acquired by the purchaser in the ship will be recognized internationally, while requiring a certificate of judicial sale only to be issued if certain safeguards are met, including notification of the shipowner, creditors, and other interested parties. It is expected that these safeguards will positively impact the price realized at judicial sales of ships, to the benefit of both shipowners and creditors, including lienholders and ship financiers. The International Maritime Organization will act as the repository of notices and certificates of judicial sales under the Convention¹.

Let us focus on the details of the regulation inherent in the Convention and the critical remarks that have been given at the sessions of the relevant CMI working group.

Recipients of the Convention

The Convention applies only to the judicial sale of ships if the judicial sale is conducted in the territories of a state, which ratified the Convention (State Party). The Convention shall not apply to warships or naval auxiliaries, or other vessels owned or operated by a State and used, immediately prior to the time of judicial sale, only on government non-commercial service.

In Article 4 of the Convention, it is declared that the judicial sale of ships shall be conducted in accordance with the law of the state of judicial sale. However, the enforcement of the decision shall be in the state, where the title to the ship is registered. In other words, the Convention applies to the judicial sale of ships, when the state of registration and the state of the court is different.

One of the drafters of the Convention noted that just as the apostille had once replaced the legalisation of documents, the certificate of sale of a ship is now intended to replace the recognition and enforcement of a foreign judgment in the state where the ship is registered.

Certificate of judicial sale and notification of a persons, who have interest. Unresolved issues regarding the sending of notifications and the negotiability of the certificate

Court or other public authority shall issue the certificate of judicial sale to the purchaser. This certificate is the sole and sufficient basis to delete from the registry the previous title and any mortgage or hypotheque and any registered charges. The certificate has the effect in every state party of the Convention (follows from Ar. 4, 6, 7).

Persons, mentioned in the Convention, the court or public authority should notify about the judicial sale of a ship. These persons are: registry of ships; all holders of any mortgage or hypotheque and any registered charge; all holders of a maritime lien; owner; bareboat charterer (Ar. 4). The notice of judicial sale shall be given in accordance with the law of a state of judicial sale. Information about the addresses shall be taken from the register (Ar. 4, p. 7). Moreover, the notice of judicial sale shall be published in the press available in the state of judicial state. Such publication is important for the persons, whose rights or charges are not registered. Otherwise, they would not get notified by the public authority.

The certificate is issued, and the notice is made in one of the working languages of the repository – Secretary – General of the International Maritime Organization – (Ar. 4, p. 6; Ar. 11, p. 1).² If the language of the state of judicial sale is different, a translation shall be accomplished.

The above regulation raises a number of questions. In particular, who will translate the certificate into the language of the country where the register is maintained and who will send out the relevant notifications?

From the Ar. 5 follows that the notification lies on the court or public authority.

From p. 3 Ar. 8 it follows that the court or other authority may request the person requesting the certificate to produce a certificate translation into official language.

In searching answers to the questions posed, there remains a sense of understatement. Apparently, when the Convention would be ratified, each State must formulate answers to the questions in light of its domestic legal system. In particular, the crucial question is – who should send the notifications and according to what procedure. There are two procedures in each State – notification of legally relevant events and notification of court hearings. Which procedure should be preferred by the Convention is not clear.

Article 5 declares that court issues the certificate to the purchaser. The form of the certificate is in Annex 2 to the Convention. The certificate may be in the electronic form.

The certificate is a separate document, which proves the judicial sale of a ship. It serves grounds for changing information in the registry (Ar. 7).

An unclear issue is whether the certificate can be sold. In the previous versions of the Convention, the purchaser could sell the certificate before the relevant changes in the ship registry. This idea was criticized and eventually the regulation of the sale of the certificate was excluded. However, the question remained whether the lack of regulation meant a prohibition on selling the certificate? Probably, yes. The purchaser can change the record of entitlement and subsequently, as the owner of the vessel, sell her. The certificate itself does not have negotiability. At the same time, it is not clear from Article 7 of the Convention who is meant to be the subsequent purchaser who has the right to obtain the certificate and deal with the deletion from the register of the former owner’s record of right and all encumbrances on the ship.

The guarantee of clean title and no arrest of the ship after judicial sale

Convention guarantees to the purchaser a clean title and termination of all charges, mortgages, and bareboat charter registration (Ar. 7), also it prohibited to arrest the ship in any state party after the decision of judicial sale was taken.

During the discussion of the Convention, the participants showed that the mechanism for communicating information to the court considering whether a ship should be arrested is not clear.

The point is that the court must notify the registrar. However, it is not clear what the registrar must do. The Convention does not say that the registrar must make a note in the register about the judicial sale. Consequently, the court may not find out that the ship is under sale and arrest it. The owner of the ship may notify the court, but it might not always be in his interest to do so.

The exclusive jurisdiction of the court of judicial sale

In the Article 9 of the Convention declared the exclusive jurisdiction of the court of judicial sale to hear any claim or application to avoid a judicial sale of ship. Among such claims might be claims challenging the title of the owner of the ship whose debts are being foreclosed on.

During the discussion of the Convention at the CMI’s International Working Group session at the October 2022 Conference in Antwerp, a question was raised about the mechanism for a claimant, who could be challenging title to the ship, for revealing that the decision of judicial sale had taken place. Unfortunately, no clear answer to this question was provided, but it was noted that the likelihood of such a claim is very unlikely.

Circumstances in which judicial sale of ships has no international effect. Contradiction between judicial sale and public policy of a state, where the ship is registered

In the Article 10 of the Convention declared that a judicial sale of ship shall not have the international effect, if the decision is in contradiction to the public policy of a state, where the ship is registered.

During the discussion of this article, one participant made a joke that lawyers would not be out of work with such a provision in the Convention. Public policy is one of the most difficult notions of international law.

Subsequent articles of the Convention, – articles 11–23, – deal with the interaction between states with regard to the ratification, entry into force and other matters of public international law.

The applicability of the Convention depends on whether different States ratify it. Especially those states where the issue of public sale of a ship is not rare – China, Singapore, Turkey. ■

Overview prepared by Maria Erokhova

Notes