Law of Ship Mortgages

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The conflict of laws

4.1 Introduction

4.1.1 This chapter addresses primarily the question of the law which, by application of English conflict of laws principles, governs the proprietary aspects of a registered ship mortgage. The answer that most lawyers would instinctively give is that the voluntary creation or transfer of a proprietary interest in a registered ship, whether by way of sale or security, is governed by the law of the ship’s register and not by the law of the physical location of the ship (the lex situs).1 However, it is not possible to state this unquestioningly.2 The issue arose relatively recently in relation to ships, albeit not in relation to mortgages or other registered interests, in a case that was decided in two phases (The WD Fairway).3 Shortly afterwards the issue arose in a case relating to mortgages of aircraft, again in a case decided in two phases (Blue Sky).4 The result of Blue Sky was that a mortgage

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expressed to be governed by English law executed and registered over a United Kingdom registered aircraft when it was physically located in the Netherlands was held to be invalid as a security interest because it did not satisfy the requirements of Dutch domestic law for the creation of security over an aircraft. The focus of this chapter is specifically how the issue as regards registered ships is treated as a matter of the English conflict of laws. At the risk of overgeneralisation, recognition of the law of the ship’s register is the international norm as regards ships, based on principles of comity and, possibly, on some residual application or survival of the lex maritima.5 The position worldwide cannot, however, be taken for granted. This is indicated by the long-standing but not widely accepted attempts to address the issue of recognition of foreign mortgages by international conventions, namely the Maritime Liens and Mortgages Conventions of 1926, 1967 and 1993.6 The recognition of foreign mortgages has recently arisen in litigation in Brazil, still current at the time of writing, in relation to the FPSO OSX 3.7 The English law issue - if indeed there is an issue at all - is not as such an issue relating to the recognition of foreign ship mortgages in a general sense. It is, rather, whether the rigid English conflict of laws application of the lex situs to the creation or transfer of a proprietary interest in a tangible movable,8 irrespective of any express choice of law, applies to registered ships - whether United Kingdom registered ships or foreign registered ships.

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