In a nutshell: The Parliament of the Republic of the Marshall Islands passed amendments to the Maritime Administration Act and the Preferred Ship Mortgage and Maritime Liens Act which took effect in the course of this year. The most notable amendments include the possibility of filing documents electronically, the power of the Marshall Islands Maritime Administrator („Maritime Administrator“) to strike off a vessel immediately in certain situations and the requirement to keep a notice of mortgage onboard of the relevant vessel instead of a certified copy of the mortgage document.

Electronic filing is now possible 

Under the new §119 of the Maritime Administration Act, it is now possible to submit any instrument or document or its copy to be registered, filed and recorded by the Maritime Administrator via electronic or digital transmission. This includes documents such as bill of sale, mortgage deed or mortgage discharge which are now accepted to be filed with the Marshall Islands ships registry electronically. In addition, such instrument or document may now also be signed using electronic or digital signature.

Although the Maritime Administration Act itself does not contain any further explanation on electronic or digital signature, §1.03 of the Marshall Islands Maritime Regulations differentiates between an electronic signature and a digital signature. Under the Marshall Islands Maritime Regulations, an electronic signature means „a legible scan or facsimile of a handwritten signature or an image thereof (…)“ and it does not include a digital signature. Separately, a digital signature is defined as a signature which „(…) is generated by software using a digital certificate issued by a Trust Service Provider or similar authority“ and a Trust Service Provider is defined as „a certificate authority issuing digital certificates for signers of digitally signed documents and instruments„.

Requirement for reregistration

With the amendment to §225 the Maritime Administration Act and §306 of the Preferred Ship Mortgage and Maritime Liens Act, the latest Certificate of Registry is no longer required to be attached to the bill of sale for the purpose of reregistration of a vessel which was already registered in the Marshall Islands following a sale or transfer of such vessel.

Effectiveness and recordation of a mortgage

Pursuant to §302 (1) of the Preferred Ship Mortgage and Maritime Liens Act, a mortgage will only be valid and effective upon its recordation. However, most practitioners previously interpreted the Preferred Ship Mortgage and Maritime Liens Act in a way that a mortgagor could only execute a mortgage once the vessel was legally owned by the mortgagor and the mortgagor was the registered owner of the vessel. This was also the practice that has been widely followed.

§302 (1) of the Preferred Ship Mortgage and Maritime Liens Act now contains an additional wording clarifying that a mortgagor may execute a mortgage prior to its filing date even though at that point of time, the mortgagor does not yet hold the title to the vessel, provided that the mortgage contains a provision that it shall only become valid and effective upon its recordation. This change will surely assist in transactions, specifically in the case of sale and purchase of a second-hand tonnage or taking delivery of a newbuild where the new owner or the buyer needs to secure the relating financing by way of a mortgage over the purchased vessel.

Further, §302 (3) of the Preferred Ship Mortgage and Maritime Liens Act has also been amended to affirm the practice which has always been in place namely that the Maritime Administrator will only record an instrument relating to, inter alia, sale, conveyance or mortgaging of a vessel if such instrument meets all recording requirements.

Maritime Administrator’s ability to immediately strike a vessel in certain situations

If a vessel is subject to a validly recorded ship mortgage, it has never been possible for the Maritime Administrator to delete her from the Register unless she has been lost, destroyed or transferred to another registry following a court sale. The Maritime Administrator is always required to notify the mortgagee prior to deleting the vessel in this case.

Following the recent amendment to §304 (2) of the Preferred Ship Mortgage and Maritime Liens Act, the Maritime Administrator now has an additional power to immediately strike a vessel from the Register following the receipt by the Maritime Administrator of evidence that the vessel has engaged in illegal activities or actions against the interest of the Maritime Administrator or the Marshall Islands as a whole. The amendment has been intentionally drafted as such to provide the Maritime Administrator with a discretion to immediately strike due to a wide range of situations. Examples would include breach of economic sanctions, sub-standard shipping practises or failure to comply with the requirements of the international maritime conventions. It remains to be seen what kind of evidence is required by the Maritime Administrator for this purpose. In such case, prior notification of the mortgagee is not required before the Maritime Administrator strikes the vessel unlike in the case of deleting as described above. However, the Maritime Administration’s action in deleting or striking the vessel does not impair the lien or preferred status of the mortgage and does not terminate a mortgagee’s interest in the vessel. This means that the mortgage remains recorded with the Maritime Administrator even after the vessel is stricken and it will remain so until an instrument releasing or otherwise discharging the mortgage is recorded with the Maritime Administrator.

Evidence of debt underlying a ship mortgage

§307 of the Preferred Ship Mortgage and Maritime Liens Act requires written evidence of debt to set out the amounts and the relevant dates to be provided to the Maritime Administrator for the purpose of recording any ship mortgage. The amendment to this section clarifies that such requirement may be satisfied by attaching to the mortgage the documents evidencing such debt, either in whole or in part and either with or without redactions, or by simply including a description of the debt terms (including the total amount) directly in the mortgage.

Mortgage to secure a debt up to the specified maximum amount

§309 (2) of the Preferred Ship Mortgage and Maritime Liens Act sets out that a ship mortgage may secure a pre-agreed maximum amount of debts or obligations of a debtor to a creditor within an agreed period of time. Additional clarifying wording is introduced to this section that the mortgage will secure such maximum amount „whether or not such debt or obligations arise pursuant to commitments under the relevant agreement between the debtor and the creditor existing at the time the Mortgage is recorded.“ It means that following this amendment, a mortgage which is executed and registered by a shipowner is validly securing the amount stated in the mortgage, even though the loan has not actually been disbursed by the lender.

Notice of mortgage onboard

Under the amended §314 of the Preferred Ship Mortgage and Maritime Liens Act the owner is no longer required to place a certified copy of a mortgage on board of the vessel. Instead, it is now only required to display a notice of mortgage on board.

For further questions, please do not hesitate to contact either Dr. Klaus Dimigen or Dr. Stefan Rindfleisch, both registered lawyers admitted to practice in the Marshall Islands.