Ship mortgages

Malta has established itself as a leading maritime hub, offering a robust legal framework for ship registration and financing. One important aspect of maritime financing is ship mortgages, which serve as a crucial mechanism for vessel owners to secure funding while offering lenders strong protection over their investment.

Ship mortgages in Malta are governed by the Merchant Shipping Act (Cap. 234 of the Laws of Malta). The Act provides a comprehensive and secure structure for ship mortgage registration, ensuring lenders have enforceable rights over the vessel in case of default. Maltese law is modelled on British maritime traditions, making it a trusted jurisdiction for ship financing.

A ship mortgage in Malta is a security over the vessel, granting the lender, known as the mortgagee, a security interest in case the borrower, known as the mortgagor, fails to fulfill the agreed financial obligations. The mortgage remains attached to the ship regardless of ownership changes, offering security to financiers.

For a ship mortgage to be legally valid, it must be registered with the Malta Ship Registry, which operates under Transport Malta. The registration process involves the following steps:

1. Execution of the Mortgage Deed – The mortgagor and mortgagee enter into a mortgage agreement, which must be signed and notarized.
2. Submission to the Malta Ship Registry – The mortgage deed, along with relevant documents, must be submitted to the Malta Ship Registry for official recording.
3. Recording and Issuance of Certificate – Once the registry records the mortgage, a certificate of registration is issued as evidence of the mortgage.
4. Public Record – The ship mortgage is publicly accessible, ensuring transparency and enhancing lender confidence.

A significant advantage of Maltese ship mortgages is the priority ranking system. Mortgages are ranked based on their registration date, with earlier-registered mortgages taking precedence over later ones. This prioritization ensures that senior lenders have first claims over the vessel in the event of enforcement.

Mortgagees enjoy various rights, including:

• The right to prevent the vessel’s sale without their consent.
• The ability to take possession of the vessel upon default.
• The right to enforce the mortgage through judicial sale, with proceeds used to settle outstanding debt.

In case of default, mortgage enforcement in Malta is straightforward and lender-friendly. The mortgagee can enforce their rights by applying for a judicial sale of the vessel. This is conducted through a court-supervised auction or private sale under judicial approval. Maltese courts ensure an efficient process, minimizing delays for creditors seeking recovery of funds.

Malta’s ship mortgage system provides a secure and attractive financing option for shipowners and lenders alike. With a clear legal framework, a well-regulated registration process, and strong enforcement mechanisms, Malta continues to be a preferred jurisdiction for maritime financing. Investors and financial institutions seeking a reliable ship mortgage structure can confidently look to Malta for their maritime asset protection and financing needs.

For more information or assistance with maritime and shipping matters, feel free to contact us at info@gtg.com.mt

Author: Dr Sarah M. Vella

Further Reading
Malta’s maritime sector is not only known for its efficient ship mortgage system but also for its diverse vessel registration options, each tailored to meet the operational and commercial needs of the international shipping community. One such option is bareboat charter registration, which offers flexibility for owners and charterers alike, especially in cross-border maritime operations. To explore how this works and its benefits under Maltese law, read our full article on Bareboat Charter Registration in Malta.

Whether you're navigating ship financing, ownership structures, chartering strategies, or maritime compliance, Malta remains a trusted and forward-looking jurisdiction backed by a solid legal and regulatory framework designed to support the global maritime industry.