The United Nations Commission on International Trade Law (UNCITRAL) has recently approved a draft convention on the effects of judicial sale of ships, marking the next step in a project which was first commenced in 2007 by the Comitè Maritime International (CMI). The draft convention seeks to achieve greater harmonisation within the international community of the legal effects of a judicial sale of a vessel.
The applicable domestic laws of several countries facilitate a procedure of vessel sale by court order, granting the purchaser thereof a clean and unencumbered title over the vessel, free of all mortgages, liens and other encumbrances. Any existing claims against the vessel following the sale would be extinguished, instead being enforceable against the proceeds of the sale (rather than the vessel itself).
However, while such laws seek to achieve a common outcome, the process governing the judicial sale and related administrative matters may differ considerably from one country to the next. Regrettably, this leads to a situation where one country may not recognise a judicial sale of a vessel in another country, with the result that a bona fide purchaser may face issues with the deletion and re-registration of a vessel (particularly where a mortgagee is involved), and may even face claims from former creditors of the vessel despite the sale. This in turn undermines legal certainty and adversely affects international commerce.
The draft convention (also known as the Beijing Convention) therefore provides for the compulsory recognition of foreign judicial sale orders (except in cases of issues of due process) and also seeks to address matters concerning the deletion and re-registration of judicially sold vessels.
The Beijing Convention has now been submitted to the United Nations General Assembly. It is expected to be adopted in September 2022, and to then be formally open for signature as soon as practicable in 2023.
The annotated fifth version of the draft convention is available here and a commentary is available here.
Fortior is hopeful that this is the latest positive step in achieving greater harmonisation on a fundamental aspect of international maritime law. If you are interested in learning more about this subject, or are seeking assistance concerning the judicial sale of ships and related matters, please feel free to contact Giles Xuereb, Of Counsel, or get in touch with your usual contact at Fortior.