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Enforceability of a Maltese Registered Mortgage – an update following the decision delivered by the Court of Appeal (Superior Jurisdiction) on the 17th of June 2019

As reported in our article of the 11th of February 2019, the the Court of Appeal (Superior Jurisdiction) delivered a groundbreaking judgment on the 8th of February 2019 by means of which the Court declared that the vessel MV Bright Star, which was sold by judicial auction in Jamaica, was not so sold “free and unencumbered” in view of the mortgage held by our clients, Jebmed SRL, which was still burthening the vessel. Since the Jamaican authorities refused to recognize the mortgage as an executive title, the mortgage did not devolve on the proceeds of the sale and therefore did not discharge the vessel from the effects of the mortgage.

Following the delivery of the aforementioned judgment, MV Bright Star filed a second application by means of which it challenged the validity of the arrest of the vessel on procedural grounds, which application was upheld by means of a decision of the First Hall of the Civil Court. Jebmed SRL appealed this decision and by means of a decision delivered by the Court of Appeal (Superior Jurisdiction) on the 17th of June 2019, the appeal was upheld and the application filed by MV Bright Star was rejected in its entirety.

In analyzing the merits of the case, the Court of Appeal reiterated that the vessel was not sold “free and unencumbered” and that the mortgage still burthened the vessel. Consequently, the arrest of the vessel whilst bunkering in Maltese territorial waters was legal and valid at law and Jebmed SRL was well within its rights to so arrest the vessel in order to enforce its executive title against the vessel

By means of this second judgment delivered by the Court of Appeal (Superior Jurisdiction), the Maltese Courts have delivered a bold statement within the international maritime scene – that Malta will safeguard mortgagees and financers of vessels registered in Malta. This second judgement reaffirms the need for stronger international conventions on the mutual recognition of judicial sales and mortgages. Malta, being one of the largest ship registries in the world, has vociferously established that the presumption that a vessel purchased via a judicial sale is “free and unencumbered” is not sacred, incontestable and indisputable. The position adopted by the Court of Appeal (Superior Jurisdiction) protects the mortgagees and financers from abusive practices aimed at cleansing a vessel from its burthens via judicial sales in jurisdictions which fail to recognize the executive nature of a mortgage under Maltese law.

Jebmed SRL was represented by Dr Jonathan Thompson and Dr Marlon Borg from the Litigation Department of DF Advocates.

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