By : Mohammed Al-Halwani
The United Nations Convention on the International Effects of Judicial Sales of Ships was signed by 15 countries: the People’s Republic of China; Burkina Faso; Comoros; El Salvador; Grenada; Honduras; Kiribati; Liberia; Sao Tome and Principe; Senegal; Sierra Leone; Singapore; Switzerland; only two Arab countries signed it, which are the Kingdom of Saudi Arabia and the Syrian Arab Republic.
The Beijing Convention on the Judicial Sale of Ships, as it is now known, was developed by the United Nations Commission on International Trade Law (UNCITRAL) to address the problem of the true new owners and those who finance the purchase of ships, for example. They find themselves dealing with previous creditors who claim the ship as collateral to obtain a loan.
The International Maritime Organization ( IMO ) welcomed the signing of the United Nations Convention on the International Effects of Judicial Sales of Ships, which was held in a ceremony in Beijing, Republic of China.
The Beijing Convention establishes a coordinated and simplified system that ensures cross-border recognition of judicial sales of ships, ensuring the smooth operation of international trade as well as protecting the rights of parties with an interest in the ship. Accordingly, a notice of judicial sale and a certificate of judicial sale must be issued in the state where the sale takes place.
Information on pending and completed judicial sales of ships will be accessible online through a dedicated unit on the International Maritime Organization‘s Integrated Global Shipping Information System (GISIS) platform.
By adopting the Convention on the International Effects of Judicial Sales of Ships, the International Maritime Organization encourages its member states to ratify it. Article 21 of the Convention states that it will enter into force 180 days after the date of deposit of the third instrument of ratification, acceptance, approval, or accession.
Jean-Engel de Boer, the Chief Legal Officer, represented the International Maritime Organization ( IMO ) at the signing ceremony. He then gave a keynote speech at the International Seminar on the Beijing Convention organized by the Supreme People’s Court of the People’s Republic of China, which followed the signing.
*Purpose
The General Assembly adopted, on 7 December 2022, the United Nations Convention on the International Effects of Judicial Sales of Ships, also known as the “Beijing Convention on the Judicial Sale of Ships”. This Convention establishes a harmonized system to make the judicial sale of ships have international effect, while preserving the domestic law that governs the judicial sale proceedings and the conditions under which judicial sales confer clean title. By ensuring legal certainty with respect to the ownership rights acquired by the purchaser of a ship during its international voyage, the Convention aims to maximize the price the ship can attract in the market and the proceeds available for distribution to creditors, and to facilitate international trade.
*Key Provisions
The Convention is based on the fundamental principle that a judicial sale carried out in a State Party, which confers clean title on the purchaser, shall have the same effect in all other States Parties (Article 6). The only exception to this principle is on the grounds of public policy (Article 10).
The convention system includes additional rules detailing how to enforce a judicial sale after its completion. The first rule requires the cancellation of the ship’s registration or its transfer upon request by the purchaser (Article 7). The second prohibits the arrest of the ship due to a claim arising from rights or interests that existed before (i.e., rights or interests extinguished by the sale) (Article 8). The third grants exclusive jurisdiction to the courts of the state of the judicial sale to hear challenges against the sale (Article 9).
To support the operation of the system and protect the rights of parties with an interest in the ship, the convention requires the issuance of two instruments: a notice of judicial sale (Article 4) and a certificate of judicial sale (Article 5). The convention also establishes an electronic repository for these instruments, which any interested person or entity can freely access (Article 11).
The convention system is “closed,” meaning it applies only among the contracting states (Article 3), but it is “not exclusive,” meaning it does not replace other bases for enforcing judicial sales, for example under more favorable domestic legal systems (Article 14).
*Additional Information
The UNCITRAL (United Nations Commission on International Trade Law) has prepared an explanatory note on this convention, containing detailed notes on each article to assist those studying or applying the convention.
Saudi Arabia has signed the “United Nations Convention on the International Effects of Judicial Sales of Ships” project, to be among the first signatory countries. The convention aims to establish a system that makes the judicial sale of ships internationally effective, while preserving the domestic legislation regulating the judicial sale procedures.
The Council of Ministers approved the delegation of the Minister of Commerce, chairman of the National Competitiveness Center—or his nominee—to sign the United Nations Convention on the International Effects of Judicial Sales of Ships during its session held on February 13, 1445, Hijri, corresponding to August 29, 2023. The Kingdom was represented in signing the project of the Convention yesterday in the Chinese capital, Beijing, by the Deputy Minister of Commerce and the CEO of the National Competitiveness Center, Dr. Iman bint Habas Al-Mutairi.
The project of the Convention aims to ensure legal certainty regarding the ownership rights acquired by the buyer of the ship during its international navigation, in addition to providing a fundamental rule that a judicial sale conducted in a state party to the Convention has the same effect in all other state parties.
The Convention also includes rules that outline how to enforce the judicial sale after its completion; among them are the cancellation of the ship’s registration in the registry, and the prohibition of seizing the ship due to claims arising from rights or interests existing prior to the judicial sale, in addition to granting exclusive jurisdiction to the courts of the state of the judicial sale to handle challenges related to the sale.
The Kingdom’s accession to the Convention came after studying the topics discussed by the working groups affiliated with the United Nations Commission on International Trade Law (UNCITRAL), specifically the sixth working group, in which Saudi experts representing the Ministries of Foreign Affairs, Justice, Commerce, Transport and Logistic Services, Investment, the General Authority for Small and Medium Enterprises (“Monsha’at”), the Saudi Center for Commercial Arbitration, and the Bankruptcy Committee participated, represented in the Permanent Coordination Committee chaired by the National Competitiveness Center, concerned with facilitating communication between the Kingdom and UNCITRAL and its working groups, in addition to working in integration with government agencies to develop and prepare the commercial legal environment in the Kingdom, in accordance with the best international practices adopted.
It should be noted that the project of the Convention, adopted by the United Nations General Assembly during its 77th session in December last year, constitutes a closed system, as it only applies between the states parties to it, in addition to not being an alternative to other bases for enforcing judicial sales within the states parties.
*Goals of the Beijing Convention on Judicial Sales of Ships:
The Convention aims to establish a system that makes judicial sales of ships enforceable internationally while preserving the domestic legislations that regulate judicial sale procedures.
The project of the Convention seeks to ensure legal certainty regarding the ownership rights acquired by the buyer of the ship during its international navigation, alongside providing a fundamental rule that a judicial sale conducted in a state party to the Convention has the same effect in all other state parties.
The Convention includes rules that outline how to enforce the judicial sale after its completion, including the requirement for the ship’s registry to cancel its registration or transfer ownership based on the buyer’s request, and the prohibition against seizing the ship due to a claim arising from a right or interest extinguished by the sale.
To support the operation of the system and protect the rights of the parties with an interest in the ship, the Convention stipulates the issuance of two instruments: a notice of judicial sale and a certificate of judicial sale, along with establishing an electronic repository for these instruments, which any interested person or entity can freely access.
