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• How would you define a "preferential
debt" (i.e. priority claim) according to the UAE law?
•
When will a preferential debt be time
barred?
•
What priority would a mortgagee have?
How
would you define a "preferential debt" (i.e. priority
claim) according to the UAE law?
According
to Article 84 of the UAE Maritime Code, the following debts
are considered to be preferential debts.
Article
84
The
following and only the following debts shall be priority debts:
a. Judicial costs incurred in protecting and selling the vessel,
and distributing the proceeds thereof, as well as loading,
lighthouse and port charges, and other dues and taxes of the
same type, pilotage fees, compensation for damage caused to
port installations, dock and navigation lanes, the costs of
removing obstacles to navigation caused by the vessel, and
costs of towing and maintenance of the vessel from the time
of its arrival at the last harbour.
b . Debts arising out of a contract for the employment of
the master and crew, and other persons bound by a contract
of maritime employment on board the vessel.
c. Monies due for assistance and salvage, and the share of
the vessel in general marine average.
d. Compensation due for collisions and other navigational
accidents, compensation due for bodily injuries to the passengers
and crew, and compensation for loss or damage to goods and
possessions.
e . Debts arising out of contracts made by the master, and
operations carried out by him outside the port of registration
of the vessel within the scope of his lawful powers for an
actual requirement dictated by the maintenance of the vessel
or the continuance of its voyage, whether or not the master
is also the owner of the vessel, or whether the debt is due
to him, or to persons undertaking supply, or lenders, persons
who have repaired the vessel, or other contractors.
f. Breakdowns and damage giving rise to a right of compensation
in favour of the charterers of the vessel.
g. All premiums for insurance effected on the hull, equipment
and fittings of the vessel due in respect of the last insured
voyage, in cases where the insurance was effected for that
voyage, or for the last period of insurance if the insurance
was effected for a specified period, but provided that in
either case the total does not exceed the premiums for one
year.
The
above debts are set in order of preference and priority. However,
there has been much speculation over the meaning of Article
84 (e), particularly given that a mortgage ranks after the
"priority debts" mentioned in Article 84 (a) (b)
(c) (d) and (e). The reason for the speculation is the words
"debts arising out of contracts made by the Master",
and whether this incorporates all service requirements ordered
by the owners, including agency services and ship repair,
or whether this simply means emergency measures taken by the
Master for the preservation of the vessel. Preferential debts
however will come to an end if the following conditions take
place.
Article
92
Priority rights over the vessel shall expire:
a . Upon the judicial sale of the vessel.
b. Upon the voluntary sale of the vessel if, before the payment
of the price,
the purchaser has taken the following steps:-
i. he
has registered the contract of sale on the Register of Ships.
ii.
he has placed a notice on the notice board at the Registration
Bureau of the vessel containing
particulars of the sale, the price, and the name and residence
of the purchaser.
iii.
he has published a resume of the contract of sale, mentioning
the price, and the name
and residence of the purchaser, which publication must be
made twice with an interval
of eight days, in a widely circulating local newspaper.
Priority
rights shall be transferred to the proceeds of sale if within
thirty days of the last publication in the newspapers the
priority creditors notify the old owner and the new owner
of their objection to the payment of the price. Nevertheless,
the creditors' priority shall remain in force as against the
price unless it has been paid or distributed.
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When
will a preferential debt be time barred?
According
to Article 93 of the UAE Maritime Code, a preferential debt
will be time barred pursuant to the following conditions:
Article 93
1. Upon there being an objection, and
in the absence of a lawful excuse, no claims shall be heard
in respect of priority rights against the vessel after the
expiry of one year save claims relating to priority rights
securing debts for supplies referred to in subparagraph (e)
of Article 84, which shall not be permitted after the expiry
of six months.
2. The period referred to in the foregoing subsection shall
commence to run as follows:-
a.
In relation to priority rights securing payment for assistance
and salvage,
from the day the said operations were terminated.
b.
In relation to priority rights securing compensation for collision
and other accidents,
and
bodily injuries, from the date the damage occurred.
c.
In relation to a priority right relating to loss of or damage
to goods and chattels,
from the day the goods or chattels were or should have been
delivered .
d.
In relation to repairs, supplies and all other cases referred
to in
subparagraph
(e) of Article 84, from the date the debt arose.
In all other cases, the period shall commence from the day
the debt falls due.
3. The fact of the master, the sailors and other persons bound
by a contract of work on the vessel being permitted to receive
sums in advance or on account shall not result in the debts
referred to in subparagraph (b) of Article 84 being regarded
as being due for payment before the time specified therefor.
4. The periods herein before set out shall be extended up
to three years if it is not possible to arrest the ship to
which the priority right attaches in the territorial waters
of the State in which the claimant has his place of residence
or head office. Only such persons may benefit by this provision
who are nationals of the State or who are nationals of a State
the legislation whereof contains a similar provision.
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What
priority would a mortgagee have?
Article 105
1. The mortgage shall rank directly
after the priority debts referred to in subparagraphs (a),
(b), (c), (d), and (e) of Article 84. Debts secured by a mortgage
shall rank in order of the dates of registration thereof.
2. If two or more mortgages are effected against a vessel
or against a share in it, they shall rank in order of registration
even if they were registered on the same day.
3. Registration shall result in the interest on the debt being
secured for the last two years in addition to the interest
for the current year at the time of the auction, and such
interest shall rank in the same order as the principal sum
of the debt.
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