Once a mortgage is registered, it ranks ahead of subsequently-registered mortgages according to the order of time in which it is produced to the Registrar and, given that it is considered as granting an executive title to a mortgagee, is rendered immediately enforceable without the need for lengthy court proceedings.

Indeed the mortgagee must simply file a judicial letter for payment in the court registry, calling upon the debtor to settle all outstanding indebtedness, which letter must also be served on the vessel, following which the mortgagee may immediately proceed to:

• Take possession of the vessel;
• Sell the vessel privately;
• Demand the judicial sale of the vessel; and
• Request a court approved private sale

The deed of covenants collateral to the Maltese mortgage is executed simultaneously with the said mortgage and reinforces the obligations contained in the mortgage and documents referred to therein.

Whether regulated by Maltese law or foreign law, the deed of covenants will generally contain an irrevocable power of attorney as additional security, which power of attorney may be submitted for registration with the Registrar in accordance with the provisions of article 17 of the Merchant Shipping Act (Chapter 234 Laws of Malta).

On the occurrence of an event of default, the power of attorney executed by the mortgagor authorises the mortgagee to apply for the closure of the Maltese Register of the vessel on behalf of the mortgagor and to pay all such fees, make all such declarations and receive all such certificates, including the deletion certificate, as may be necessary for the proper fulfilment of this mandate.

While such power of attorney is included as a matter of custom as an additional security in favour of the Mortgagee, the registration of such document is not essential for enforcement. Registration could however lead to acceleration of the enforcement process.

Once the power of attorney is registered, the Registrar will not require verification of the power and capacity of the signatory to execute the power of attorney and the Registrar may therefore expedite the closure of registry in the interests of the Mortgagee.

This mechanism is one of the additional modes of security available to the mortgagee which illustrates the wider protection offered to financiers under Maltese law and the notion that Maltese law is ultimately geared towards swift enforcement of a registered mortgage following the occurrence of an event of default or a breach of any of the terms and conditions of a registered mortgage.

For further information on this topic please contact Mark Fenech on mark.fenech@fenlex.com or Peter Grima on peter.grima@fenlex.com. 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.