Within the arena of asset finance, mortgages over ships on the shipping registry in St Vincent and the Grenadines is a popular option for many lending agents, banks and institutions because it is an effective way to secure loans, charges, various forms of facility agreements and other obligations.
A ship mortgage once effectively registered is a means to seize and sell the ship, where the enforcement provisions operate, to recover any unpaid indebtedness or unexecuted obligation between the mortgagor/borrower and the mortgagee or security trustee.
Can you define a ship mortgage?
A ship mortgage is a statutory form of encumbrance or charge recognised in SVG over a registered ship. The legal regime in SVG that governs this is section 68-74F of the Shipping Act 2004, as amended entitled “Mortgages and Liens” found on the official svg-marad.com website. Additionally, SVG is a party to the International Convention on Maritime Liens and Mortgages, 1993 which it acceded to 11 March 1997. The text of the convention is found as an annex to the above-mentioned Shipping Act. See the Shipping Act here.
Under the Eastern Caribbean Supreme Court Civil Procedure Rules part 70, it may form part of a legitimate claim where a ship can be arrested by the High Court’s Admiralty Marshal pending the outcome of the underlying claim.
Although there is a reference to a prescribed form in the Shipping Act, there is no standard form of what a mortgage should look like but must nevertheless conform to the required formalities (see section 68 (4)).
Important Considerations:
1) Ensure that the Ship is registered
Mortgages may only be registered against ships that are registered. It is important to conduct thorough due diligence on the Global Integrates Shipping Information System (GISIS) and other publicly available software or websites. It is far more useful to confirm this directly with the friendly and responsive staff at the Shipping Registry SVG Maritime Administration (SVGMARAD).
2) Understand the true importance of an IMO Number
An International Maritime Organisation Number better known as an IMO number is a unique 7-digit number that is placed on the stern of a ship. Regardless of flag change and the selling and buying of the ship, this number never changes and stays with the ship throughout its life. This is different and separate from the “official numbers” given to ships by various shipping registries. The IMO number is recognised by most governments including SVG and it is an effective way of ensuring your mortgage instrument has the correct subject and description of the ship. This can also help identify the ship’s transcript of registry.
3) Identify Any Charges or Claims against the Ship by procuring the Transcript of Registry
Mortgages are ranked on a “first registered” basis in SVG and it is breathtakingly terrifying to learn that your mortgage is ranked 5th place below other, claims, banks and lenders. The transcript of registry will reveal any other mortgages, encumbrances or other liens and charges attached to the ship. This is paramount in due diligence.
4) SVG Mortgages can be registered digitally
Under their procedure on the SVGMARAD website, mortgages may be registered on the provision of clear executed digital copies of mortgages and payment of the requisite fees. For the originals to be released, however, you must courier the executed originals to the Registry Office. This has proven very useful to the banks and lending institutions that have instructed Temple Stoke because it aids in streamlining the process and removing delays. This is especially important when closing and drawing down financing is on a time-sensitive schedule.
Ship mortgages remain an important part of ship finance and a useful measure for lenders/ mortgagees to take to secure their loans and obligations.
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Chevanev Charles is a practicing lawyer at Temple Stoke who specialises in maritime law including ship and asset finance, mortgage drafting and various maritime issues. He is an LL.M graduate of the International Maritime Law Institute, Malta. He may be reached at info@templestoke.com or through the contact form on www.templestoke.com.
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