A lawyer representing a bulker arrested in Malta is continuing to contest a controversial ruling that a mortgagee is free to seize a ship even after it has been sold at auction.
Ann Fenech, managing partner of Fenech & Fenech Advocates, told TradeWinds the decision by Malta's Superior Courts of Appeal to back mortgagee Jebmed has been met by "a tsunami of disapproval by all practicing maritime lawyers of standing."
The 23,000-dwt Bright Star (built 2011, ex Trading Fabrizia) was sold at auction in Jamaica in January 2018. The buyer was Bluefin Marine of Greece for $10.3m.
However, the ship was arrested on 19 June 2018 while bunkering in Maltese territorial waters at the request of Italy-based Jebmed.
Jebmed argued that the judicial sale held in Jamaica failed to “acknowledge the effects of a Maltese-registered mortgage” on the vessel.
Two decisions at the island's top court have since gone in Jebmed's favour.
But Fenech said this is not the end of the matter.
A separate court process is continuing in the Maltese courts in a bid to lift the arrest and have it declared illegal.
This is in the process of being heard by a judge specialised in shipping.
Fenech said the appeal decision "appears to conflict with established practice and Maltese law."
Erroneous ruling?
Section 37 D of the Merchant Shipping Act states: “Where a ship has been sold pursuant to an order or with the approval of a competent court within whose jurisdiction the vessel was at the time of the sale, the interest of the mortgagees as well as of any other creditor in the ship shall pass on to the proceeds of the sale of the ship.”
Fenech added: "The Court of Appeal erroneously, in our view, concluded that this meant that the creditors actually had to get paid out of the proceeds and if they did not get paid out of the proceeds then the mortgagee would have the right to continue to pursue the vessel.
"The failure of recognition of properly held judicial sales will cause a tremendous amount of uncertainty and will throw the market of judicial sales into a complete free fall."
Fenech said: "No buyer would be remotely interested in paying top dollar for a vessel in a judicial sale if the transfer of the vessel is not free and unencumbered which will have very negative effects on mortgagees and creditors of ships who will stand no chance of getting paid out of the proceeds of the sale if the sale does not attract the best price."
She added that Jebmed has made no effort to be paid from the proceeds of the judicial sale in Jamaica, despite $3m being put aside there for use by the mortgagee.
