The shipping industry has for years encountered issues with the recognition of the judicial sale of ships by a foreign court. The United Nations Convention on the International Effects of the Judicial Sale of Ships (the “Convention”) paves the way towards greater harmonisation and commercial certainty for purchasers where the judicial sale occurs in one jurisdiction and registration of that vessel is sought in another jurisdiction.
The judicial sale of a vessel confers clean title, free and clear of all encumbrances, to a purchaser of that vessel. While the majority of the jurisdictions currently recognise the clean title acquired by purchasers, there are still a handful which refuse to recognise and give effect to this.
As a result, purchasers of vessels sold by judicial sales may nonetheless face claims from creditors which arose prior to the judicial sales. In addition to the possibility of arrests of the vessel by these creditors, the bona fide purchaser could also face difficulties in the deletion of the vessel from its registry, and in the subsequent re-registration of the vessel in another jurisdiction.
As informed, the Convention aims to resolve this issue by requiring a Certificate of Judicial Sale (the “Certificate”) to be issued by the court or authority conducting the judicial sale. The Certificate confers on the purchaser a clean title to the vessel and has the same legal effect in all states which are party to the Convention.
Under Article 11 of the Convention, the Certificate is to be promptly transmitted to the International Maritime Organization (IMO) as the repository for publication. The Certificate may be produced by a purchaser of a vessel to a registry or competent authority of a State Party for the purposes of:
- deleting a mortgage registered prior to the judicial sale against the vessel;
- deleting a vessel from the register; or
- registering a vessel with the registry, provided that the requirements of the law of the State of registration are met.
The Convention is a step in the right direction towards the harmonization of international regulation and commercial certainty for purchasers of vessels pursuant to judicial sales. Given the cross-border nature of the industry, the Certificate of Judicial Sale could potentially resolve a multitude of issues arising from the differing regimes for ship registration across the globe.
