Maritime Law (Maritime Mortgage)

Maritime Mortgage

The new Egyptian maritime law organized the maritime mortgage in the Articles (14-58) with provisions similar to a great extent to the official mortgage discipline in the civil law.

The provisions set up in civil law concerning the official mortgage will be the reference if there is no text in the maritime commercial law concerning the maritime mortgage.

How will the maritime mortgage be established and how will it be registered?

The maritime mortgage is considered as an agreement upon trust as it isn't applied to the ship without a contract between the mortgage debtor (the ship owner) and the mortgage creditor.

The legal rules applicable are the same public rules cited in the Egyptian civil law. (Art.1033)

The maritime mortgage is unique in certain provisions concerning the place of mortgage, its form and the stipulation of registration in the ship register in order to make use of it against others.

• First:- The place of mortgages:

The maritime mortgage can't be levied upon anything other than a ship, whatever the purpose it is set for and whatever its cargo is.

The mortgage levied upon the ship extends to its attachments that are necessary in its investment.

Will the ship in common be mortgaged?

If the ship is owned in common by many persons, it maybe mortgaged with the consent of the owners, who possess at least three-quarters of the shares.

If this majority isn't available, the matter will be sued before the concerned court to decide the case in accordance with the interests of the owners in common. (Art.42)

The mortgage isn't necessarily be levied upon the whole ship, but it may be levied only on a share of one partner as the partner can mortgages his share of the ship. (Art 43/1)

Will the ship in the course of construction be mortgaged?

The legislator states that the ship in the course of construction may be mortgaged. (Art.44)

This mortgage will be preceded by admission to the registration office (where the ship lies) as the ship isn't registered on the ships register before its building is completed.

The mortgage must be registered in the ships register declaring this location, the length of the ship, its other dimensions and its approximate tonnage. (Art.44)

Will the shipwreck be mortgaged?

The mortgaged ship will still bear the mortgage even though it is damaged in a shipwreck but the mortgage levied upon it or a share of it is shifted to its wreck. (Art.43/1)

Will the transport fees and subsidies be mortgaged?

Although the mortgager keeps possession of the ship and its investment, the levied mortgage upon the ship will not be applied to the transport fees. (Art.43/2)

The subsidies and donations gifted by the state or any other public moral person to the ship may also be exempted from the mortgage. (Art.43/2)

Will the compensation for damages and the amount of insurance be mortgaged?

The compensation due to the owner for the damages occurring to the ship or for insurance contracts are set aside for mortgages by the maritime legislator. (Art.43/2)

The mortgage creditor may get his due rights from the insurance compensation provided that there must be an explicit agreement in the mortgage contract and the insurers accept that in writing or declare it explicitly.

What is the legal form wherein the maritime mortgage contract concluded?

The maritime mortgage is an official contract as Art.11/1 states that all disposals levied upon the ship should be performed through an official deed, otherwise it will be void.

So, the mortgage contract has to be written before the specified officer at one of the registration offices if the mortgage is to be levied on the public.

If the mortgage is to be levied abroad, the contract should be written before the Egyptian consul abroad. If there is none, it should be written before the specific local officer. (Art.11/2)

How will the maritime mortgage be registered?

The registration of the mortgage is done in the ships register office at the port office wherein the ship is registered.

If the mortgage is levied on a ship which is in the course of building, it will be registered in the ships register office at the registration office in whose circuit the place of building lies. (Art.45)

The procedures of registration:

• The mortgage levied on a ship and registered in the ship registration will be effective for ten years from the date of its performance. Then this registration should be renewed before the lapse of this period, otherwise it will be void so it can't be held against others.

• The renewal of the mortgage will be valid for another ten years from the date of the end of the first mortgage.

• If the debt guaranteed by the mortgage lapses for any reason or the mortgage lapses for invalidity, rescission or being given up by the creditor or the registration becomes void for any formal failure and there is no way to recover the registration, the mortgager and others who are hurt by its existence may ask for canceling it.

What are the effects of the maritime mortgage?

The maritime mortgage results in effects for both parties of the mortgage, as it also does so to the registration of the mortgage as:

• First: The effects on the mortgage debtor:

The ship mortgage doesn't deprive the mortgage debtor of the right of possession of the ship, but he keeps its possession, contradicting the mortgage on the movables.

So, the mortgage debtor can use his ship, invest it and dispose of it in all forms of disposing including the transferring of its ownership or remortgaging it if the mortgage creditor didn't register a minute of detention in the ship register.

Art.51 states that the disposition of the ship will be void after recording a minute of detention in the ship register.

• Second: The effects on the mortgage creditor:

The maritime contract lays to the mortgage creditor an in-kind right as the mortgage creditor is an ordinary creditor to the ship-owner, thus he will have a general guarantee on all properties of the mortgage debtor.

• Third: The effects of the maritime mortgage on others:

• The right of precedence:

The creditor mortgage precedes the normal creditors to the equipper but he comes next in grade to those who have privileged maritime rights.

If there are many mortgage creditors, the grade of each of them will be considered according to the priority of registering his mortgage.

This priority is considered on the basis of the date of registering each mortgage.

If many mortgages are registered in one day, all these mortgages will be equal in grade. (Art.50)

• The right of trace:

The maritime mortgage contracts give the mortgage creditor the privilege of tracing, as (Art.51) states, the mortgage creditor of a ship or a part of it can trace it whatever whom hand hold on it.

The disposal of the mortgaged ship will be void after the registration of the detention minute in the ships register.

What is the effect of a mortgage levied on a share of a ship?

If the mortgage is levied on a share of the ship, we must differentiate between two suppositions:

• If the mortgaged share is not more than half of the ship, the creditor can't take any procedures for the sale of the whole ship but he is capable of calling for the sale of the mortgaged part of it.

• If the mortgaged share is more than half of the ship, the creditor may, after performing the detention, get an order from the court for the sale of the whole ship.

May a mortgaged ship be sold to a foreigner?

Art.57 states that if the mortgaged ship is optionally sold to a foreigner, the sale will be void unless the mortgage creditor on the sale contract gives up the mortgage.

The violator of this article will be punished by imprisonment of not more than a year and a fine of not more than three thousand pounds for any of these punishments.

What are the causes of the maritime mortgage lapse?

The maritime mortgage lapses for one of the following reasons:

• The lapse of debt:

The debt lapses for many reasons such as:

- The payment of the debt.

- The giving up by the creditor.

• The destruction of the mortgaged ship:

The fact is that the levied mortgage remains but it is transferred to its wreck.

• The purgation:

The purgation is carried out by the force of the law in case of selling by auction, as the sale purges the ship all of the mortgages and the creditors' rights shift to the price. (Art.53)

• Waiving:

The maritime mortgage lapses when the creditor waives it.