Back in 2016, the Maltese legislator introduced amendments to the Civil Code with a view of doing away with certain cumbersome formalities, and to offer more protection to lessors, within the context of a ship or aircraft leasing arrangement. Whilst these amendments affected both the shipping sector and aviation industry, the focus of this news brief will be on the implications for the “lease” of ships, which was defined as meaning the chartering of vessels, whereby possession is given to a lessee and expressly includes bareboat charterparties.

One noteworthy, and at the time novel change enacted, related to the hierarchy in case of any conflict/s between (a) the contractual terms agreed upon by the parties and (b) the provisions of the Civil Code itself. The law was amended to expressly provide that in case of any conflict, the provisions of the former, together with applicable international usages of trade, would legally prevail over the other provisions in the Code.

The 2016 amendments sought to specifically carve out the application of somewhat archaic provisions imposing impractical procedural obligations on the lessor. For instance, Maltese law generally dictates that in the case of an event of default under a lease agreement, should the non-defaulting party wish to terminate the lease, then such termination can only take effect upon a judicial act being served on the defaulting party.  As one may appreciate, this requirement makes little sense when dealing with a lessor and lessee of a ship, who are likely not even domiciled in Malta. Likewise, such a requirement could possibly allow an unscrupulous lessee to avoid service and delay the termination of the lease.

Since 2016, the above obligation is no longer relevant to ship leasing arrangements governed by Maltese law. Such leases may now simply be dissolved or terminated upon a notice of default being given in writing by the lessor (or mortgagee who ipso jure maintains such a right unless it is expressly waived) to the lessee. Such termination is valid without the need of any judicial confirmation and even where the lessee objects to same. Naturally, the law does give the lessee remedies to subsequently seek damages should it believe the lease agreement was wrongly terminated. Once such notice is given, the lessor may take back possession of the ship or aircraft. Moreover, Article 1526(5) dictates that the courts should “render full support to the lessor or the mortgagee” to ensure that it can take back possession as expeditiously as possible.

Earlier this year, the legislator deemed it fit to introduce another set of amendments to our law, which once again are aimed at offering further protection to the lessor (and mortgagee) within the context of a leasing arrangement or bareboat charterparty governed by Maltese law. Whilst the 2016 Civil Code amendments sought to give the lessor the necessary substantial rights to be able to immediately terminate the lease or bareboat charterparty and to take back possession of the ship, our law lacked the appropriate enforcement tools to cater for a situation where the lessee does not voluntarily give back possession.

The legislator thus felt it necessary to introduce a suitable enforcement mechanism to ensure that the lessor or mortgagee has an effective remedy at law, should it face any difficulties when seeking to take back possession. Act XXXVII of 2021 introduced the warrant of ejectment or expulsion from seagoing vessels or aircrafts as the latest enforcement measure to be added to our Code of Organization and Civil Procedure (the COCP).

Effectively, the new executive warrant provides a new tool to lessors (or possibly, the mortgagees, and even owners where the ship is bareboat chartered) who wish to exercise their right to take back possession of a ship but are faced with an element of resistance from the lessee or operator.  The 2021 amendments also revised the wording of Article 1526(5) of the Civil Code by essentially specifying that the lessor may seek the Court’s help by filing an application in court.

The new Article 384A(1) of the COCP affords a lessor or mortgagee the right to file such an application to request the Court to order the ejectment or expulsion of an operator, lessee or other occupant from on board the vessel within four to eight days from the issuance of the new warrant. Should the lessee or operator fail to comply with such an order, then the court executing officer is empowered at law to remove the said lessee or operator from on board the ship. The law also provides that the vessel in question which is listed in the warrant of ejectment or eviction shall be detained and that the provisions which apply to executive ship arrests would also similarly apply to such detained ships.  The warrant application is drawn up using a standard statutory form found under the COCP.  The applicant simply needs to fill in the details of the vessel in question, the details of the notice of default and termination, as well as the location of the vessel within the Maltese jurisdiction.

This new warrant coupled with the obligation imposed on our courts to facilitate the repossession of ships should hopefully serve to safeguard further the interests and rights of lessors and mortgagees involved in financial and operational ship leasing arrangements.

How can we help?

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us personally on adrian.attard@fenechlaw.com

©Fenech & Fenech Advocates 2021

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.