C.M.I. COMITE MARITIME INTERNATIONAL COLLOQUIUM ON PROTECTION AGAINST INSOLVENCY IN MARITIME LAW TULANE 1987 C.M.I. COMITE MARITIME INTERNATIONAL COLLOQUIUM ON PROTECTION AGAINST INSOLVENCY IN MARITIME LAW CHAIRMAN: PROFESSOR F. BERLINGIERI CONVENER AND GENERAL RAPPORTEUR: PROFESSOR J. SCHULTSZ TULANE LAW SCHOOL- MARITIME LAW CENTER NEW ORLEANS, LOUISIANA, U.S.A. 9TH 12TH NOVEMBER, 1987 CO-HOSTS: THE MARITIME LAW ASSOCIATION OF THE UNITED STATES AND THE MARITIME LAW CENTER OF THE TULANE LAW SCHOOL FOREWORD Maritime law is both the result of conflicting private interests and a powerful influence on the resolution of those conflicts. A substantial part of it consists of a search for a harmony between individual interests in relationships such as between owner and charterer or carrier and shipper. From early days, ho-wever, institutions like general average and liens and hypotheques concentrated upon the community of creditors either by creating legal ties among creditors without their express consent or, in the opposite direction, by allowing an individual creditor to assert a stronger individual right enabling him to leave the general creditors' unsafe raft. But whatever detailed provisions maritime law may have to offer to those engaged in the maritime industry, the moment may come when the possibility of having to apply the general law of insolvency looms ahead. In a period when renowned non- maritime companies and conglomerates startle the public with bleak notices about their financial condition, the shipping community has not been immuneon the contrary. The purpose of the Colloquium -which the Comité International Maritime has organised in New Orleans in November 1987 is to enable those engaged in maritime law to try not only to have their individual clocks chime together, but perhaps more importantly, to discuss solutions which increasingly force themselves on creditors in non-maritime insolvencies as well: although the traditional remedy of bankruptcy, if indeed it is one, has to an ever-growing extent been supplanted by moratoria, surseance or Chapter 11 solutions, practice has shown the importance of other more pragmatic devices allowing problems to be solved without the interference of state appointed officials such as trustees or liquidators. Even so, the bankruptcy or moratorium hypotheses remain of the utmost practical importance, although they often raise acute questions of difference of treatment between creditors within or outside the country of bankruptcy. Whatever comes out of the Colloquium, the discussion can hardly fail to be absorbing, if not passionate. This bundle of papers prepared by experts from various fields and countries sets out to prepare the participants for those discussions to an even greater degree than emanates already from their own experience. Jan C. Schultsz September 1987 LOCAL ARRANGEMENTS COMMITTEE John W. Sims, Chairman Receiving and listing registrations. 504-566-1311 Deposit of funds and payment of obligations. Hotel reservations. Ann S. Hopkins Administrator, Tulane Maritime Law Center 504-865-5928 Brunswick G. Deutsch CMI Reception at Plimsoll Club. 504-581-5141 Donald A. Lindquist 504-585-7000 Walter Carroll, Jr. MLA Reception at the Historic New 504-523-6451 Orleans Collection. Warren M. Fans 504-581-6373 Robert B. Acomb, Jr. Ladies Entertainment Functions, Tourist 504-582-8000 Guidance and Logistics Liaison. iv BIOGRAPHIES Richard B. Barnett, B.A. J.D., partner in Haight, Gardner, Poor and Havens, New York, attorneys, is no stranger to writing and lecturing. He is author of the chapter on maritime financing in "Asset Based Financing" (published by Matthew Bender) and has lectured on ship financing for Seatrade seminars and on the same subject and on "doing business with China" for the Practising Law Institute. He is chairman of the Commitee on Marine Finance of the Maritime Law Association of the United States. Francesco Berlingieri, President of the CMI, was an officer in the Italian Navy during the War. He graduated in Law in 1944 and started his career in his father's office in Genoa in 1946. He took part in all the CMI conferences, becoming a titulary member of CMI in 1955, a member of the Executive Council in 1972 and President in succession to Mr. Lilar in 1976. He assisted the English Government in reviewing the functioning of the Commercial Court, and was elected Honorary Member of the U.S. Maritime Law Association and of the Canadian Bar Association. He is the author of numerous books and ariticles. Graeme Bowtle, who acknowledges invaluable assistance from Stephen Hoffmeyr (Barrister at Law) and Rob Merkin (Director of Research at Richards Butler) in the preparation of his paper, is himself a partner of some seniority in that firm, which he joined in 1965. Before that he read Jurisprudence at New College, Oxford. He has specialised in asset financing, in particular, ship financing. Emery W. Harper, attorney and partner in the law firm of Lord Day and Lord, New York, collected a B.A. cum laude from Amherst College in 1958, and thereafter a LL.B. from Yale University in 1961. He started practice in New York in 1962. Since then he has written, lectured and advised internationally making maritime liens and mortgages and maritime financing his speciality. His most recent publication is "The Hybrid LienMaritime Liens giving rise to causes of action in contract and tort" (II Diritto Marittimo, 1986). John Honour M. A. (Oxon), Westminster School and Christchurch, joined the management of the West of England P. and I. Association in 1955 and is now consultant to West of England Services. He was Director there from 1982 to 1986. His long association with that firm followed active war service in the Far East when he was made Captain, and six years practice at the English Bar. He was joint editor with Sir William McNair of one of the earlier editions of Temperley's "Merchant Shipping Acts". Takeo Kubota, following his graduation from the Law Course at Chuo University in 1960 and from the Legal Institute of the Supreme Court in 1963, joined the Tokyo law firm of Braun, Moriya, Hoashi and Kubota of which he is now a partner. He immediately started to practise in the maritime field and in the same year became registered as a Marine Proctor to act in Marine Enquiry Board hearings. He was appointed as maritime arbitrator to the Japan Shipping Exchange, Inc. (Tokyo) in 1984. Ole Lund, is a graduate of Oslo University, which awarded him the Scientific Degree Lic. Juris in 1958 for a comparative study of maritime law. He was assistant professor in the Faculty of Laws from 1961 to 1965, and since 1969 he has been attorney at the Supreme Court of Norway. He started his own law firm in 1986, and holds or has held official positions in a wide range of shipping and financial concerns. Perhaps his longest association has been with Nordisk Skibsrederforeningen, from 1965 to 1975, and again as President from 1978 to 1986. He is Chairman of the Maritime Law Association of Norway. Ralf Richter, professor of Maritime and Commercial Law at WilhelmPieck University, Rostock, took his first degree at the University of Leipzig. He holds Doctorates from the Martin Luther University at Halle-Wittenberg (1968) and from the Academy of State and Legal Science at Potsdam-Babelsberg (1977). He is an arbitrator and a member of the Board of the International Court of Arbitration of Marine and Inland Navigation at Gdynia. He is also President of the Maritime Law Association of the G.D.R. Jan Sehultsz has been involved with maritime law throughout his professional life. His Doctorate was awarded in 1955 by the University of Amsterdam where he is now professor of maritime law, for a thesis on the Transfer of Property in Comparative Law and Conflict of Law. In the same year he became an attorney. He is a partner in the law firm of Blackstone Rueb and Van Boeschoten and president of the MLA of the Netherlands. He serves on the CMI Executive Council and, as an arbitrator, on the board of Nederlands Artibrage Instituut and on the CMI-ICC arbitration facility. Roger Wilman, has more than twenty years commercial and merchant banking experience, the last fifteen dealing exclusively with the shipping industry, particularly advising on and arranging ship financing packages for major shipowning and shipbuilding companies. He is currently Director of Lloyds Export and Project Finance Ltd. where his responsibility is to tailor financing packages to take account of particular problems relating to ship ownership, registration, operation, crewing and chartering. He is an associate member of the Institute of Bankers and holds the Institute's Diplomas in Taxation and Investment. vi TABLE OF CONTENTS Foreward Local Arrangements Committee iv Biographical notes v-vi PART I PRELIMINARY PAPERS THE PROTECTION OF MORTGAGEE BANKS IN ENGLISH LAW Graeme Bowtle Introduction 1 Security 1 Mortgage on ship 1 Assignment of insurances 4 Assignment of earnings 10 Enforcement of security 12 Foreclosure 12 Judicial sale 13 Mortgagees' power of sale 16 Sale by mortgagee as attorney in fact for owner 17 Insolvency Act 1986 18 Forum selection 19 Summary 22 Notes 23 Appendices 25 THE PROTECTION OF MORTGAGEE BANKS THE AMERICAN LEGAL BACKGROUND Emery Harper The non-maritime basis of state law 35 The U.C.C. 36 Summary 44 American and English Ship Mortgages compared 45 Formalities of recordation 46 Subject of the security 47 vii Arrest of ships 52 Evidence 53 Notice 54 Mechanics 55 Judicial Sale 59 Grounds 59 Notice 60 Appraisal 62 Conduct 62 Effect