The General Assembly of the United Nations adopted the United Nations Convention on the International Effects of Judicial Sales of Ships
February 01, 2023.
The General Assembly of the United Nations adopted the United Nations Convention on the International Effects of Judicial Sales of Ships
On 7th December 2022 the General Assembly of the United Nations adopted the United Nations Convention on the International Effects of Judicial Sales of Ships.
The signing ceremony will take place at the earliest convenience this year in Beijing. In that sense, the Convention has been already better known as the Beijing Convention on Judicial sales.
Upon its entry into force, the Beijing Convention is expected to have a great practical significance.
The Comité Maritime International (CMI) was among firsts to realize the compelling need for creating international legal instrument of this kind. The CMI’s project was presented to the United Nations Commission on International Trade Law (UNCITRAL) in July 2017. After few years of hard work which gathered world-known names from maritime law, the UNCITAL came up with the Convention draft which has been just adopted by the UN.
The purpose of the Convention is to unify the rules on recognition of effects of judicial sale of ships worldwide. It is known that courts in many countries have authority to conduct ship sale to satisfy the claim against the ship or the shipowner, usually within the procedure of enforcement of ship mortgage or maritime lien. In most jurisdictions, the judicial sale of ship has the legal effect of conferring “clean title” on the purchaser, i.e. it extinguishes all rights and interests that were previously attached to the ship, including mortgages and maritime liens. However, the legal effects of foreign judicial sales vary from state to state and there are even examples of jurisdictions which do not recognize legal effects of judicial sale conducted in another state.
Basic idea behind the Convention is that judicial sale conducted in one State Party which has the effect of conferring clean title on the purchaser has the same effect in every other State Party, subject only to a public policy exception. The Convention will apply to the judicial sale of a ship if (a) the judicial sale is conducted in a State Party and (b) the ship was physically within the territory of the State of judicial sale at the time of the sale.
The Convention is concerned with effects of judicial sales and thus not with the rules on judicial sale of ships (which are left in domain of national law) or effects of judgments in respect of such sales.
Apart from the above, the Convention prescribes additional rules for giving effect to the judicial sale:
- requirement that the ship registry deregisters the ship or transfers registration at the request of the purchaser;
- prohibition on arresting the ship for a claim arising from a pre-existing right or interest and
- conferral of exclusive jurisdiction on the courts of the State of judicial sale to hear a challenge to the judicial sale.
The Convention also provides practical mechanisms for protection of rights of parties with interest in the ship through issuance of two instruments – a notice of judicial sale and a certificate of judicial sale. It also establishes an online register of those instruments which is freely accessible to any interested person or entity whilst the International Maritime Organization (IMO) will act as the repository of such notices and certificates.
In contrast to the laws on the arrest of ships, so far the laws on the judicial sale of ships had not gone through an extensive harmonisation process. Some jurisdictions seem to have enacted more favourable laws than others, which often causes lenders to direct the financed ship to a ‘friendly’ jurisdiction or to wait until the ship calls at a port in such a jurisdiction. The mobility of the ship and the differences between jurisdictions causes litigants to actively engage in ‘forum shopping’ with the goal of obtaining a quick and adequate recovery of any invested money and at the same time creating a free and unencumbered title over the sold ship. That being said, The Beijing Convention on Judicial sales provides perspective and modern legal mechanisms for international unification of maritime law. If embraced by the maritime community at least as the Arrest Convention, the Beijing Convention will provide much better legal protection of the parties acquiring the ownership on ships through judicial sale.
As a country which became an emerging superyacht destination with a tendency of promoting the national yacht and ships registry, Montenegro should favorably consider ratifying the Beijing Convention which could form a basis for reform and improvement of national laws on this topic.