Starboard: Draft Convention on the effect of judicial sales of vessels approved by UNCITRAL

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The United Nations Commission on International Trade Law (UNCITRAL) approved on 30 June 2022 a draft convention (the Draft Convention) on the effects of judicial sales. The Draft Convention will now be put to the United Nations General Assembly to consider signature. The Draft Convention originated from a long-standing project of the Comité Maritime International (CMI) commenced in 2007 and eventually known as the ‘Beijing Draft’1 which was adopted by the CMI in its 2014 Hamburg Conference. In 2018, the Draft Convention was accepted by UNCITRAL into its work programme.

The object of the Draft Convention is to achieve international recognition by one country of orders by the courts of another country for the judicial sale of a vessel. It is a common feature in the domestic laws of many countries that when a ship is sold by judicial order, all claims against the ship, including any maritime liens or mortgages, are extinguished and transferred to her sale proceeds. The purchaser also acquires a clean and unencumbered title to the vessel. However, the CMI discovered that due to the divergence in approaches in each jurisdiction on the administration and conduct of judicial sales, problems often arise in deleting and re-registration of vessels, and in other situations where judicial sale orders made in one country were not recognised in other countries. This lack of legal certainty created obstacles to an international understanding that all former claims against the ship were extinguished, which in turn slowed down international trade and commerce.

The Draft Convention aims to be an international instrument that address the need for an international understanding regarding foreign judicial sale orders but adopting a model borrowed from the New York Convention of obligated recognition save for instances where there have been due process failures. Also, issues such as the deletion of foreclosed vessels from their prior registries after the judicial sale and subsequent re-registration of the vessel are expressly addressed within the Draft Convention.

Starboard will continue to monitor this development closely and provide readers with the latest updates in this regard.

Senior Partner Lawrence Teh was part of the International Working Group established by the CMI to discuss and work on the Draft Convention. The Singapore delegation to UNCITRAL was an early supporter of the Draft Convention in the UNCITRAL sessions through to final approval.

 

Dentons Rodyk thanks and acknowledges Associates Arina Rashid and Kavitha Ganesan and Intern Martin Liao for their contributions to this article.

1 After the CMI Beijing conference in 2012

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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