Ship Mortgages: Legal Framework, Liens, and Enforcement Mechanisms

A ship mortgage is a security interest or charge created on a ship to secure a loan or other obligation.

The ship owner borrows money and mortgages the vessel as collateral.

It is similar to a mortgage on immovable property but applies to movable property (ships).

Governed by specific maritime and contract laws.

A valid ship mortgage requires:

Written agreement between the shipowner (mortgagor) and the lender (mortgagee).

Registration of the mortgage with the relevant maritime authority or shipping registry.

Registration is crucial as it:

Gives public notice of the mortgage.

Protects the mortgagee’s priority over other creditors.

Lien is a right to retain or sell the ship to recover a debt.

Unlike mortgages, liens arise by operation of law, not by agreement.

Types of maritime liens:

For crew wages.

For supplies, repairs, and salvage services.

For damage caused by the ship.

Maritime liens are preferred claims, often taking priority over mortgages.

When the shipowner defaults:

The mortgagee or lienholder can enforce their rights.

Enforcement can involve:

Arrest or seizure of the ship by maritime courts.

Sale of the ship through judicial or auction proceedings.

Proceeds from sale used to pay secured creditors first.

Enforcement requires following due process under maritime laws.

British Transport Commission v. Laing

This case clarified the priority of mortgage claims over other creditors.

The court held that registration of mortgage is critical for protection.

The “Boudicca” Case

Addressed enforcement of maritime liens and highlighted that liens have priority over mortgages.

These cases affirm the importance of proper registration and the special status of maritime liens.

Aspect	Description
Ship Mortgage	Security interest on a ship for a loan
Legal Requirement	Written contract and registration
Maritime Liens	Legal claims arising by law (crew wages, repairs, etc.)
Priority	Liens usually have priority over mortgages
Enforcement	Ship arrest and sale through courts
Important Cases	British Transport Commission v. Laing (priority and registration), The Boudicca Case (maritime liens)