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In-Depth Look : Clean Title on The Judicial Sale Of Ships Under The Beijing Convention
Setyawati Fitrianggraeni, Aga Kristiana Silaen, Deviana Bella Saputra[1]
INTRODUCTION
Problems particularly concerning the recognition of the judicial sale of ships by a foreign court have been encountered by the international shipping industry and therefore calls for consideration and solution. On 7 December 2022, the United Nations Convention on the International Effects of Judicial Sales of Ships (also known as “Beijing Convention”) was adopted by the UN General Assembly. Through the Beijing Convention, the purchaser is given legal certainty by ensuring a clean title for the ship through the judicial sale of the ship with the issuance of two instruments i.e., Notice of Judicial Sale (“Notice”) and Certificate of Judicial Sale (“Certificate”).
BEIJING CONVENTION CONFERS CLEAN TITLE ON THE PURCHASER
Under the Beijing Convention, the judicial sale of a ship confers a “clean title” meaning that the Purchaser acquires the vessel with a title that is free and clear of any encumbrances, mortgage or hypothèque and of any charge.[2] In order to achieve a Certificate that confers clean title, the judicial sale of ship must be preceded with the issuance of a Notice prior to the judicial sale of ship.
Notice
Pursuant to Article 4 of the Beijing Convention, a Notice must be given to the relevant parties related to the judicial sale of ships including the (i) the ship registry; (ii) all holders of any mortgage or hypothèque and any registered charge; (iii) all holders of maritime lien; (iv) the owner of the ship for the time being; and (v) in case the ship is granted bareboat charter registration, then the person registered as bareboat charterer in the register and the bareboat charter registry shall also be notified.[3]
In addition to the Notice to the Parties above, the Notice shall also be published by announcement in the press or other publication available in the State where the judicial sale of the ship is conducted (“State of Judicial Sale”) and transmitted to the online repository.[4]
Certificate of Clean Title
Pursuant to Article 5 of the Convention, and after the judicial sale has been concluded, the purchaser is entitled to obtain a Certificate issued either by (i) the court or other public authority who performed the judicial sale; or by (ii) another competent authority of the State of judicial sale.[5] To issue the certificate, these following conditions must be fulfilled:[6]
- The judicial sale has reached completion.
- The judicial sale has conferred clean title to the ship under the law of the state of judicial sale.
- The judicial sale was conducted in accordance with the requirement of:
- the law of the State of judicial sale
- the Beijing Convention
One of the elements contained in the Certificate is a statement that the judicial sale has conferred a clean title to the ship on the purchaser.[7] The Certificate can be either in the form of a physical certificate or electronic certificate; whereas an electronic certificate cannot be rejected merely because it is in electronic form.[8]
Online Repository for the Notice and Certificate
Pursuant to Article 11 of the Convention, both Notice and Certificate shall be transmitted promptly to the repository i.e., the Secretary General of the International Maritime Organization (“IMO”) or an institution named by UNCITRAL for publication.[9] This online repository must be freely accessible to any interested person or entity.
THE POWER OF THE CERTIFICATE
Exemption and Evidentiary Value
The Certificate under Beijing Convention is exempted from legalization or similar formality (Apostille is not required).[10] The production of the Certificate triggers the action for registration and deletion (Article 7) and prohibition of arrest (Article 8) which will be elaborated below. Article 5 paragraph 5 of the Convention prescribes that the information contained in the Certificate as sufficient evidence,[11] thereby, fulfilling the needs to have evidentiary value.[12][13][14]
International Effect on Judicial Sale After the Issuance of Certificate
Pursuant to Article 6 of the Beijing Convention, a judicial sale followed by the issuance of a Certificate shall have international effect, in every State Party of conferring clean title to the ship on the purchase.[15] This effect means that the Beijing Convention is “giving effect” to the foreign judicial sale and not recognition and enforcement of foreign judgment concerning that sale.[16]
However, it also bears noting that under Article 10 of the Beijing Convention, the judicial sale may not be effective if it is considered to be contrary to the State’s Party’s public policy.[17] But this refusal under public policy requires a compelling reason to explain why giving effect to a foreign judicial sale is contrary to an identified matter of public policy.[18]
Purchaser’s Right for Deletion and Registration
Furthermore, the existence of this Certificate provides the purchaser (or subsequent purchaser) the right for deletion and registration under Article 7 of the Convention, through a request to the registry or other competent authority, to:[19]
- Delete any mortgage or hypothèque and any registered charge attached to the ship that had been registered before completion of the judicial sale.
- Delete the ship from the register and issue a certificate of deletion for the purpose of new registration.
- Register the ship in the name of the purchaser or subsequent purchaser, provided further that the ship and the person in whose name the ship is to be registered meet the requirements of the law of the State of registration.
- Update the register with any other relevant particulars in the certificate of judicial sale.
Prohibition of Arrest of the Ship
Upon issuance of the Certificate, it is prohibited to arrest a ship for a claim arising from a pre-existing right or interest.
- If an application is brought before a court or other judicial authority in a State Party to arrest a ship, or to take any other similar measure against a ship for a claim arising before a judicial sale of the ship, the court or other judicial authority shall dismiss the application.
- If a ship is arrested or a similar measure is taken against a ship by order of a court or other judicial authority in a State Party for a claim arising prior to a judicial sale of the ship, the court or other judicial authority shall order the release of the ship.
SIGNATURE, RATIFICATION, ACCEPTANCE, APPROVAL, ACCESSION AND THE ENTRY INTO FORCE OF BEIJING CONVENTION
The Beijing Convention is open for signature by all States. Recently on 5 September 2023, it was opened for signatory and until mid-November 2023, a total of 17 nations has signed the Beijing Convention.[20] Since then, onwards, the Beijing Convention is also open for accession by all States.[21] Furthermore, it is subject to ratification, acceptance or approval by the signatory States.[22] Therefore, the signature does not establish the consent to be bound but represents the signatory state’s willingness to proceed to ratification, acceptance or approval.[23] The signatory act also creates an obligation to restrain, in good faith, from acts that would defeat the object and the purpose of the treaty. Beijing Convention is only applied to judicial sales ordered or approved after its entry into force i.e., 180 days after the date of the deposit of the third instrument of ratification, acceptance, approval or accession.[24] Until this article was written (13 December 2023) Indonesia has neither signed nor performed accession to this Beijing Convention.
CONCLUSION
The Beijing Convention provides a legal framework for the judicial sale of ship to ensure a clean title for the purchaser alongside with the right for deletion and registration of the ship and regulating the prohibition on arresting the ship. Therefore, it is hoped that the Beijing Convention shall kickstart a more harmonized regime for the international effects of judicial sales of ships.
REFERENCES
UNGA International Convention for International Effects of Judicial Sales of Ships (adopted on 7 December 2022, opened for signature 5 September 2023) (2023)
UNCITRAL United Nation Convention on the International Effects of Judicial Sales of Ships: with Explanatory Note prepared by UNCITRAL Secretariat (2023)
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Anggraeni and Partners, an Indonesian law practice with a worldwide vision, provides comprehensive legal solutions using forward-thinking strategies. We help clients manage legal risk and resolve disputes on admiralty and maritime law, complicated energy and commercial issues, arbitration and litigation, tortious claims handling, and cyber tech law.
S.F. Anggraeni
Managing Partner
Aga Kristiana Silaen
Middle Associate
Deviana Bella Saputra
Junior Associate
[1] Setyawati Fitrianggraeni holds the position of Managing Partner at Anggraeni and Partners in Indonesia. She also serves as an Assistant Professor at the Faculty of Law, University of Indonesia, and is currently pursuing a PhD at the World Maritime University in Malmo, Sweden. Additionally, Aga Kristiana Silaen is a Middle Associate at Anggraeni and Partners, and Deviana Bella Saputra is a Junior Associate at Anggraeni and Partners. The writers express their gratitude to Dr. Hary Elias for generously dedicating his time to provide valuable feedback on their article.
[2] UNGA International Convention for International Effects of Judicial Sales of Ships (adopted on 7 December 2022, opened for signature 5 September 2023) (2023) “Beijing Convention” Article 2 (c)
[3] Ibid., Article 4 para 3
[4] Ibid., Article 4 para 5
[5] Ibid., Article 5 para 1
[6] UNCITRAL United Nation Convention on the International Effects of Judicial Sales of Ships: with Explanatory Note prepared by UNCITRAL Secretariat (2023), Point 146 page 62
[7] Beijing Convention, Article 5 para 2 (b)
[8] Ibid., Article 5 para 6 and 7
[9] Ibid., Article 5 para 3 in conjunction with Article 11
[10] Explanatory Note, Point 159 page 66
[11] Beijing Convention, Article 5 para 4 and 5
[12] Ibid., 161 page 67
[13] Ibid., 161 page 67
[14] Beijing Convention, Article 5 para 4 and 5
[15] Ibid., Article 6
[16] Explanatory Note, Point 174 page 70
[17] Beijing Convention, Article 10
[18] Explanatory Note, Point 212 page 84
[19] Beijing Convention, Article 7 para 1
[20] Status: United Nations Convention on the international effects of judicial sales of ships (New York, 2022) (the ‘Beijing Convention on the Judicial Sale of ships’) commission on international trade law (no date) United Nations. Available at: https://uncitral.un.org/en/judicialsaleofships/status (Accessed: 12 December 2023)
[21] Beijing Convention, Article 17 para 3
[22] Beijing Convention, Article 17 para 2
[23] Vienna Convention on the Law of Treaties (1969), Article 10 and Article 18
[24] Beijing Convention, Article 21
