Beijing Convention on the Judicial Sale of Ships

• Shipping

A brief background

As we know, judicial bodies in many countries are empowered to sell the vessel in order to satisfy the claim against such vessel or her owner, usually in the framework of the procedure for enforcement of lien on the vessel or maritime lien. In most jurisdictions, judicial sale of the vessel has the legal effect of transferring net title to the buyer, thereby canceling all rights and interests previously related to the vessel, including mortgages and maritime liens. However, legal effects of foreign judicial sales differ; there are even examples of jurisdictions that do not recognize legal effects of the judicial sale conducted in another state.

Beijing Convention: what are its specifications and main goal?

The Convention is expected to facilitate legal defense for buyers of ships sold in the framework of court proceedings and to protect the interests of both shipowners and creditors. First of all, it is aimed to fix uniform rules whereunder the net title acquired by the buyer on such vessel will be recognized internationally, jointly with demand on issuing a Certificate of Sale only in compliance with certain guarantees, including notice to the shipowner, creditors and other persons. In general, the judicial sale effected in one State Party should have the same effect in every other State Party.

Such guarantees should have a positive effect on the price obtained in the process of judicial sale of the vessels, for the benefit of both shipowners and creditors, including the lien holder.

However, it should be noted that the Convention applies only to legal effects of the judicial sales; therefore, in fact the rules of judicial sales of ships shall remain the prerogative of national legislation.

Does the Convention prescribe any additional rules or requitements?

Apart from the aforesaid, the Convention provides the following additional legal effects caused by launching judicial sale:

1. Mandatory exclusion of the vessel from the Ship Register or transfer of the existing registration at the buyer’s request;

2. Prohibition to arrest the vessel by claim arising from the right or interest that existed in respect of this vessel before; and

3. Granting exclusive jurisdiction to the state where the judicial sale took place, in respect of considering the appeal against such sale.

What else interesting?

The Convention also provides practical mechanisms aimed to protect rights of the parties interested in the vessel by issuing two documents: a Notice of Judicial Sale and a Certificate of Judicial Sale, jointly with launching Online Register of such documents with free access thereto for any concerned person or entity, while the International Maritime Organization (IMO) will act as a depository for such notifications and certificates.

Also, creditors of debtor vessels, in particular mortgagees, will also have more guarantees for defense of their rights.

When and under which circumstances will the Convention enter into force?

Today, the Convention has already been adopted by the UN General Assembly, so the signing ceremony is going to be held in 2023 in Beijing as soon as possible. Its further application will depend on ratification, acceptance or approval by the signatory states, as well as on its openness to joining by any non-signatory state. The Convention will enter into force 180 days after deposit of the third instrument of ratification, the document on acceptance, approval or joining thereof.

We hope that adoption of the Beijing Convention will improve the process of acquiring vessels at auctions held by the court decisions and will make it safer. Interlegal law team is always ready to provide qualified legal assistance to your business and to assist in understanding the nuances of its international regulation.

Mykola Kozachenko

kozachenko@interlegal.com.ua

Diana Mykhailova

mykhailova@interlegal.com.ua