The IMO Legal Committee, 110th session, that took place 21-26 March, 2023, welcomed the adoption of the Convention on the International Effects of Judicial Sales of Ships, on 7 December 2022, by the General Assembly of the United Nations.
The UN General Assembly authorized a signing ceremony for the Convention to be held during September 2023 in Beijing and recommended the Convention to be known as the “Beijing Convention on the Judicial Sale of Ships”. The General Assembly calls on Governments and regional economic integration organizations to consider joining the convention to strengthen the international legal framework for shipping and navigation.
UN explain that in most States, courts have the authority to order the sale of a ship to satisfy a claim that is brought against the ship or shipowner. Such a claim is typically brought to foreclose a ship mortgage (in the event of default in repayment) or to enforce a maritime lien against the ship.
The judicial sale procedure is typically preceded by the arrest of the ship. While the international community has achieved significant progress in harmonizing rules on the arrest of ships, much less progress has been achieved in harmonizing rules on the judicial sale of ships, which remain subject to widely varying domestic laws. The Beijing Convention will enhance legal certainty by creating a uniform regime for the international effects of judicial sales of ships.
The Convention is expected to provide legal protection for purchasers of ships sold by judicial sale, while safeguarding the interests of shipowners and creditors. It does this by providing uniform rules that the clean title acquired by the purchaser in the ship will be recognized internationally, while requiring a certificate of judicial sale only to be issued if certain safeguards are met, including notification of the shipowner, creditors, and other interested parties.
It is expected that these safeguards will positively impact the price realized at judicial sales of ships, to the benefit of both shipowners and creditors, including lienholders and ship financiers. The International Maritime Organization will act as the repository of notices and certificates of judicial sales under the Convention.
The Convention has 23 Articles. Its central provision is contained in article 6 which states:
A Judicial sale for which a certificate of judicial sale referred to in article 5 has been issued shall have the effect in every other State Party of conferring clean title to the ship on the purchaser.
Various criteria need to be satisfied for the Convention to apply and for a judicial sale to have international effects, notably compliance with the notification criteria contained in article 4 and the issuance of a certificate of judicial sale by the court where the judicial sale takes place in accordance with article 5. Per Article 11, the Organization will serve as the repository for notices of judicial sales, using the GSIS system, the IMO Committee informed.