Liberia Introduces New Mortgagee Act to Safeguard Maritime Interests
The Liberian Registry has become the first ship registry outside the EU to introduce an initiative to significantly strengthen security for ship mortgagees, and for shipping generally, as it continues to proactively seek ways to help shipowners and financiers survive the current economic recession.
On May 22, 2009, the Government of Liberia enacted the new Insolvency of Foreign Mortgagees Act, which amends Liberian maritime law to address issues regarding the insolvency of foreign mortgagees under a Liberian mortgage.
The initiative has been welcomed by leading owners and financiers, and has received an emphatic endorsement from, among others, the German maritime community. German banks are among the world’s leading ship finance institutions, and German owners have a strong – and growing - commitment to the Liberian Registry. Under the new legislation, Liberian-registered ship mortgages will now be eligible as underlying security for German covered bond certificates (‘Pfandbrief’).
These covered bonds are collaterised by long-term assets such as mortgages, and are based on EU model law. They have equivalents in other EU countries and are considered an attractive means by which to raise capital. Investors have confidence in the reliability of the product, and the law provides the necessary legal security to protect investors' interests. In the theoretical event that a bank which has issued such a bond becomes insolvent, the security provided by the other banks involved in the bond scheme is made available only to the covered bond creditors to satisfy their claims. Thus, they are not affected by the insolvency of a bank involved in the scheme.
The Liberian Insolvency of Foreign Mortgagees Act was drafted in consultation with Hamburg and US-based lawyers as well as representatives of the international financial community. It follows the provisions of both the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law, and Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the Reorganisation and Winding up of Credit Institutions. As such, the Act’s language is familiar and accessible for lawyers, judges and arbitrators in the UK, US, and several other countries. Most significantly, the Act provides that ship mortgages registered with Liberia now qualify as assets to back up a German Pfandbrief, without the quantitative limitations which generally apply to non-EU registries.
Scott Bergeron, Chief Operating Officer of the Liberian International Ship & Corporate Registry (LISCR), the US-based manager of the Liberian Registry, says, “Especially in these difficult times, this initiative significantly strengthens security not only for ship financing banks, but also for the whole maritime industry. Liberia’s new insolvency law recognizes that, in the event of the insolvency of the mortgagee, certain levels of protection may be in place, and full recognition should be given to the appropriate jurisdiction.”
Captain Jörg Molzahn, Managing Director of the Liberian Registry’s Hamburg office, adds, “As no other open registry has introduced similar solutions, the new law underlines the Liberian Registry's leading role as the world’s most proactive ship registry, and one that provides not only ideas but also solutions to the problems facing the maritime community. Liberia is the fastest growing quality ship registry in the world, and we are confident that the new Insolvency of Foreign Mortgagees Act will increase its attractiveness and competiveness still further.”
The Liberian Registry is one of the world’s largest and most active shipping registers, with a long-established track record of combining the highest standards for vessels and crews with the highest standards of responsive service to owners. It has recently surpassed all-time tonnage records, with over 3,060 ships exceeding 91 gt currently registered.
PHOTO: Scott Bergeron, Chief Operating Officer of the Liberian International Ship & Corporate Registry (LISCR)