World Maritime University The Maritime Commons: Digital Repository of the World Maritime University World Maritime University Dissertations Dissertations 1988 Maritime liens and mortgages Yemane Tekle WMU Follow this and additional works at: https://commons.wmu.se/all_dissertations Recommended Citation Tekle, Yemane, "Maritime liens and mortgages" (1988). World Maritime University Dissertations. 844. https://commons.wmu.se/all_dissertations/844 This Dissertation is brought to you courtesy of Maritime Commons. Open Access items may be downloaded for non-commercial, fair use academic purposes. No items may be hosted on another server or web site without express written permission from the World Maritime University. For more information, please contact [email protected]. WORLD MARITIME UNIVERSITY MARITIME LIENS AND MORTOAOES BY YEMANE TEKLE OCTOBER 19 8 Q MALMO,SWEDEN WOFtLO MAR I T I ME UN I VERS I TY MALMO,SWEDEN MA.1R I T I ME L I ENS ANO MORTGAGES by YEMANE TEKLE ETHIOPIA A pa.per submitted to the World Maritime University in a partial satisfaction of the requirements for the award of a The contents of this paper refelects my own personal views and are not necessarily endorsed by the University. Signature: Date: October 26,1988 Paper directed and assessed by Mr.Carlos Moreno Lecturer of Maritime Law World Maritime University aind Co-directed and assessed by Professor Dr.Edgar Gold, Visiting professor of maritime law at the World Maritime University; Professor of Law and Associate director Dalhouse University, Canada AC KMOWLEGEMENT I am very grateful to Mr.Carlos Moreno maritime law lecturer at the World Maritime University and Professor Dr.Edgar Gold visiting professor of maritime law at the World Maritime University,for their scholarly, positive,constructive comments,suggestions and criticisms on both the outline and the first draft of the paper. Their outstanding encouragement and supervision made this paper successfully completed. I would like to give heartly thanks to Professor Dr.Francesco Berlingieri President ’ Comite' Maritime International;Professor of maritime law,University of Genoa,for his kind assistance and co-operation this paper has received. My profound thanks to the head of World Maritime University library' Mr.Richard Poisson and his staff for their kind co-operation. I owe special debts of gratitude to the Marine Transport Authority for having given me the opportunity to attend the two years course at the World Maritime University in Mai mo*, Sweden. Finally,my deepest appreciation goes to my Swedish family friends Miss.Carl Anders Henriks and Mr.Carl Anders Henriks for all- their encouragement, kindness and hospitality during my stay in Malm^. C OISTTEMTS Page ACKNOWLEDGEMENT................ ................ INTRODUCTION............................. .......... iv CHAPTER I HISTORICAL BACKGROUND........................ 1 1.1 The Origin of Maritime Liens....... 1 1.2 Historical Prospective of Mortgages.... 4 II. THE NATURE OR CHARACTERSTICS OF MARITIME LIENS AND MORTGAGES/HYPOTHEQUES............. 7 2.1 Definitions of Concepts....... 8 2.1.1 Maritime Liens................ 8 2.1.2 Mortgages....... 11 2.1.3. Hypotheques............... 12 2.1.4. Arrest......................... 13 2.2. General Characterstics of Maritime Liens and Mortgages.............. 15 2.2.1. Characterstics of Maritime Liens................... 15 2.2.2. Characterstics of maritime Liens Under Ethiopian Law..... 23 2.2.3. Characterstic Features of Mortgages/Hypotheque.......... 26 -i— CHAPTER Page III. TYPES OF MARITIME LIENS........................ 32 3.1. The Master and The Seamen............ 33 3.2. Cargo Owner............................ 37 3.3. Passengers...... 38 3.A. Collision damage.......... 39 3.5. Salvage.................... A3 3.6. General Average................... A8 3.7. Master's Disbursement................... 52 3.8. Bottomry and Respondentia.............. 5A IV. ORDER OF PRIORITIES OF MARITIME LIENS...... 61 A.l. Priorities of Maritime Liens With Respect to Non—Maritime Liens.......... 62 A.2. Maritime Liens Arising out of: A.2.1. Different Voyages......... 63 A.2.2. The Same Voyage........... 65 V. EXTINCTION OF MARITIME LIENS..-................ 73 5.1. Period of Limitation................... 7A 5.2. Judicial Sale.................... 81 5.3. Laches.................... 8A • VI. THE PRESENT CONVENTIONS....................... 89 6.1. The Convention of 1926................. 90 6.2. The Convention of 1967..... 98 6.3. Convention Relating to Registration of Rights In Respect of Vessels Under Construction, 1967..... ........ .1OA -ii- CHAPTER * Page 6.4. International Convention Relating to the Arrest of Seagoing Ships, 1952.................... 105 VII. PROBLEMS IN THE CURRENT SITUATION............. 109 7.1. F-.ailure of the Present Convention on Maritime Liens and Mortgages..........110 7.2. Different National Approaches......... 116 7.2.1. Claims Giving Rise to Maritime Liens.......................... 7.2.2. Property Encumbered by a Maritime Lien........ 119 7.2.3. The Extinction of Maritime Liens by Laps of Time.......121 7.2.4. Transfer or Assignment of Maritime Liens.................122 7.2.5. Mortgages...................... 123 7.2.6. Priorities.............. ......125 VIII. THE ROLE OF INSURANCE.... ......................134 IX. FUTURE TREND OF THE PRESENT CONVENTIONS....... 146 CONCLUSION...................................... 161 BIBLIOGRAPHY.................................... 165 ANNEXES*-I. The Convention of 1926. II- The Convention of 1967. III- Table Identifying the Various Maritime Liens Recognized by National Legislations. IV. Draft Articles (Revision) -iii- I KTTFiODUCT I ON The purpose of this paper is to discuss and examine the factors restricting the establishment and expansion of merchant marine in developing countries. Long-term financing was essential for the development of merchant fleet,and that the security more readily avai­ lable was the vessel" itself5therefore there should be a need to ensure the best possible protection of the mort­ gagee. However,because the current situation in regard to maritime liens and mortgages is one of a disunified international regime,the interest of the mortgagee is not satisfactorily protected today. Thus it drew attention to the lack of appropriate national framework,which of made it impossible to register a ship in a developing country under conditions that would enable a lender to obtian a mortgage on a ship and to recover his money in the event of a default in repayments. Further,it also discuss the need of national or international legal pro­ visions relating to the securities given to banks and financial institutions when vessels are ordered and bought in shipyards or bought on the second hand market. The author noted that mi^ritime liens and mort­ gages were inextricably connected with each other and that,accordingly was essential that they be treated together. A maritime lien is defined as a type of privi­ leged security for preferred claims against a ship for -iv- services rendered to it or damage done by it,to be put into effect by legal processCi.e against the ship),which will make it possible to arrest and sell the vessel in order to satisfy the claim. A maritime lien is an incident of most maritime transactions. The underlying claim can be tortious or contractual in nature. Thus,a maritime lien exists as a result of collision or cargo damage and in some,but not a11,cases of personal injury. Suppliers of both goods and services normaly aquire a maritime lien. Seamen are given a lien for unpaid wages,and liens exist to secure a salvage award and unpaid general average. A maritime lien attaches automatically to a vessel whenever there arises in respect of that ship a claim which according to the applicable law,is secured by a maritime lien. Maritime liens are valid against all who have an interest in the ship and this validity opera­ tes without any need to register the lien. This means that,in general it is valid even against the person who takes the ship in good—faith without knowledge of the lien or the claim giving rise to it. Further,in princi­ ple mi^ritime liens take priority over other creditors of shipowner whether their claims are secured by registered mortgage or in other ways. On the other hand,shipping is a capital intensive industry and large sums of money were needed for the building,equipping and operation of ships. Thus,the availability of adequate financing possibilities for the creation and expansion of merchant fleets by developing countries has been another permanent concern for these countries. Therefore,in order to purchase -V- existing vessel or order the building of new vessel, particularly for the developing countries,it is necessary for finance to be freely available. To encourage the provisions of finance,a method has been developed in most national systems of assuring financiers that their loans are protected. Mortgages <!at common law!) and hypathegues (in civil law) are designed to provide security to the lender of money, i.e since shipping is a capital intensive industry and because the resources of ownership are 1imited,mortgages are intended to accelerate the pace expansion of the industry. One of the resources of raising capital for finance is the commercial banks credit. The commercial banks provide the bulk of finance for ship buyers. The loans are usually at medium term with a flactuating rate of interest and they are called term loans which by defi­ nition are business credits with maturity of more than one year and less