In 2006 Malta introduced a mechanism to increase the remedies that could be used by creditors against defaulting debtors: court approved sale of vessels. The rationale was to create a procedure that best suited the mortgagee and guaranteed the best possible outcome for creditors and the person acquiring the vessel.
The older private sale of a vessel procedure and the traditional judicial sale offer a free and unencumbered vessel to the winning bidder but fail to give an assurance that the sale’s outcome will provide creditors with a realistic and just price.
The court-approved sale was designed to extract the best elements of both systems. Banks or creditors can negotiate the highest possible price for the vessel with an interested buyer, who has the assurance that the vessel will be transferred free and unencumbered. Safeguards protect the rights of all interested parties, ensure that third-party creditors are notified of the sale, and to obtain the market price of the vessel.
Once all the interested parties are informed, the court fixes a date for the hearing within 10 days of the filing of the application. Court intervention is minimal and is primarily concerned with ascertaining that the vessel is sold for a price that reflects its true market value and that no other creditors have a justifiable claim to prevent the transfer of the vessel. The court issues its decree within days. The bank and buyer are free to negotiate the terms of sale and it is this flexibility that makes our system attractive.
As soon as the sale and conditions are approved by the court, it will nominate or approve a ‘curator’ who will be empowered to transfer the ship or vessel on behalf of the owner to the proposed buyer for the agreed and approved price. Once the sale is effected, all claims or demands against the vessel can only be enforced against the proceeds of the sale.
Malta has seen a steady increase in arrests recently and interest in and use of the mechanism is likely to continue in 2014.
This article was published in Fairplay (Vol. 378, Issue 6749).