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Enforceability of a Maltese Registered Mortgage

The Superior Courts of Appeal in Malta composed of, Chief Judge Joseph Azzopardi, Judge Giannino Caruana Demajo and Judge Noel Cuschieri, delivered a groundbreaking judgment in the case of Dr Marlon Borg noe v. MV Bright Star, which judgment has set an unprecedented bar in the international shipping industry, particularly in light of the fact that Malta boasts to have one of the largest shipping registries worldwide. Our clients, Jebmed SRL have been proven right in arresting a bulk carrier, MV Bright Star previously MV Trading Fabrizia, on the 19th June 2018 whilst such vessel was bunkering in Maltese territorial waters. Such arrest was made after the vessel was sold by virtue of a judicial sale held in Jamaica, which sale failed to acknowledge the effects of a Maltese registered mortgage on the vessel, by virtue of which Jebmed SRL had been designated as first ranking creditors.

Lawyers representing MV Bright Star argued that once the vessel was sold to Bluefin Marine Limited, pursuant to a judicial sale held in Jamaica on the 9th January 2018, such sale was made “free and unencumbered”. Hence, Jebmed SRL had no right to arrest the vessel since the mortgagees claim would pass on to the proceeds of the sale. However the Superior Courts of Appeal in Malta found in favour of Jebmed’s position by concluding that it is not sufficient for the courts in Jamaica to have considered the Maltese registered mortgage solely as proof of Jebmed’s credit, so much so that the courts in Jamaica reserved the sum of 3 million dollars for Jebmed to submit its claim. The Superior Courts of Appeal in Malta held that the Jamaican courts had to apply Maltese law relative to the mortgage in its entirety and that thereby Jebmed should have been the first creditors to have been paid from the proceeds of the vessel’s sale. Therefore, the Superior Courts of Appeal in Malta further concluded that Malta cannot acknowledge the sale in Jamaica as having been made as “free and unencumbered” and this in line with the principle of reciprocity.

By means of this judgment, the Maltese courts have delivered a statement within the international scene, that Malta will not accept judicial sales as having the effect of being ‘‘free and unencumbered’’ if the rights of the mortgagee are not fully safeguarded during such judicial sales. The months ahead will be exciting, as we shall follow how the industry, P&I Clubs in particular, shall react to the implications of such a judgment, particularly in light of the fact that Malta boasts to have one of the largest ship registries worldwide.

Jebmed Srl were represented by Dr Marlon Borg and Dr Jonathan Thompson from our Litigation Department.

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