The United Nations Commission on International Trade Law (UNCITRAL) approved on 30 June 2022 a draft convention (the Draft Convention) on the effect of judicial sales.
As Dentons Rodyk’s Associates Arina Rashid, Kavitha Ganesan and Intern Martin Liao, explain, the Draft Convention will now be put to the United Nations General Assembly to consider signature.
The Draft Convention aims to achieve international recognition by one country of orders by the courts of another country for the judicial sale of a vessel. Namely, it is a common feature in the domestic laws of many countries that when a ship is sold by judicial order, all claims against the ship are extinguished and transferred to her sale proceeds.
The purchaser also acquires a clean and unencumbered title to the vessel. However, the the Comité Maritime International (CMI) found that because of the divergence in approaches in each jurisdiction on the administration and conduct of judicial sales, problems often took place in deleting and re-registration of vessels, and in other situations where judicial sale orders made in one country were not recognised in other countries.
This lack of legal certainty created obstacles to an international understanding that all former claims against the ship were extinguished, which in turn slowed down international trade and commerce
Dentons Rodyk said.
The Draft Convention also aims to address the need for an international understanding regarding foreign judicial sale orders but adopting a model borrowed from the New York Convention of obligated recognition save for instances where there have been due process failures.
Furthermore, issues like the deletion of foreclosed vessels from their prior registries after the judicial sale and subsequent re-registration of the vessel are expressly addressed within the Draft Convention.
