Private judicial yacht sales should be ‘free and unencumbered’
Yacht sales ordered by courts should be “free and unencumbered”, the Superyacht Finance Forum was told.
Judicial yacht sales should be “free and unencumbered” by historic unpaid debt to avoid uncertainty and “the chaotic situation” that has beset some vessels, such as the commercial vessel Bright Star, Ann Fenech vice-president of the Comité Maritime International (CMI), told Superyacht Investor.
The bulk carrier Bright Star was the subject of a judicial or court-ordered sale in Jamaica last year. But the successful bidder was then pursued for unpaid debts accrued by the vessel in its earlier life. ”The vessel was the subject of a court-ordered sale transferring a clean title; so the new owners paid top dollar for the vessel,” Fenech told this to us at the Superyacht Finance Forum in Monaco on Tuesday (September 24), ahead of the Monaco Yacht Show.
“Then the old mortgagee arrested the ship for an old debt. That’s a chaotic situation leading to huge uncertainty in international trade which we need to avoid,” said Fenech, who is managing partner with the law firm Fenech & Fenech Advocates, based in Valletta, Malta.
Arrested in Malta by old creditors
The remedy was the recognition of judicial sales as being free and unencumbered by following historic debt in all countries. “It is important that [prospective] purchasers and their financiers have the assurance of knowing that debt does not follow the vessel around.”
The CMI, which was founded in 1891 with the aim of unifying International Martine Law, is discussing plans to ensure judicial vessel sales are universally recognised as being free and unencumbered. The draft proposal of the CMI has been accepted as a working document by the United Nations Commission on International Trade Law (UNCITRAL), with the second Draft published earlier this month, and will be discussed at the next meeting of UNCITRAL in November.
“Hopefully, this time next year we will be closer to agreeing an international conventional [on judicial sales],” Fenech told the Superyacht Finance Forum, in the Café de Paris, Monaco.
‘Agreeing an international convention’
Fenech later explained to Superyacht Investor that free and unencumbered sales of vessels by court order would be the best outcome for all parties. “Everyone will benefit from such sales. The higher the price of the vessel in a judicial sale [backed by the assurance it was unencumbered], the better the return for the financier, who would have financed the original deal, the owner and the other creditors,” said Fenech.
Also, prospective buyers would be reassured by the knowledge that their intended purchases would not later become the target for a legal challenge for historic unpaid debt.
Meanwhile, don’t miss four key trends in evidence at The Monaco Yacht Show, which took place at Port Hercules between September 25th to 28th.