ROADMAP

Title of the initiative

Recommendation from the Commission to the Council to authorise the Commission to open negotiations for the conclusion of an instrument on the judicial sale of ships in the framework of the United Nations Commission on International Trade law (UNCITRAL)

Lead DG – responsible unit – AP Number

DG JUST-A1

Date of roadmap

Likely Type of initiative

Recommendation for a Council Decision

Indicative Planning

Q2 2021

Additional Information

This initiative is necessary for the Commission to be in a position to take on the negotiation in view of the exclusive external competence of the Union.

This Roadmap aims to inform stakeholders about the Commission's work in order to allow them to provide feedback and to participate effectively in future consultation activities. Stakeholders are in particular invited to provide views on the Commission's understanding of the problem and possible solutions and to make available any relevant information that they may have. The Roadmap is provided for information purposes only and its content may change. This Roadmap does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content.

A. Context, Problem definition and Subsidiarity Check

Context

An international instrument dealing with judicial sale of ships is being prepared in the framework of the United Nations Commission on International Trade Law (UNCITRAL) 1 , which is a body established by and subordinate to the General assembly of the General Assembly of the United Nations.

In its fifty-first session in 2018, the UNCITRAL Commission agreed that its Working Group VI (Judicial Sale of Ships) should commence work on the topic of judicial sale of ships to address cross-border problems arising from a gap in the legal framework and develop possible solutions, including the feasibility of preparing a convention.

Problem the initiative aims to tackle

A judicial sale of a ship typically takes place when ship owners fail to pay their creditors. It usually occurs without the approval of the owner of a ship and is initiated by unpaid creditors with the goal of obtaining recovery of claims against the ship or the ship-owner.

The situation today is that each State unilaterally decides the conditions under which a judicial sale of a ship conducted in another State shall have effects under its national law, including for purposes of registration and deregistration of that ship. The current state of affairs can lead to the failure to recognize the clean title acquired by the purchaser of a ship in a judicial sale, which consequently leads to difficulties in deregistering the ship from its presale registry and to the risk of subsequent arrest of the ship for presale claims.

This situation creates legal uncertainty and a lack of uniformity as regards the international effects of a judicial sale. The absence of a set of uniform and common rules at international level means that EU stakeholders, and specifically prospective purchasers, at present, are not afforded the necessary and adequate protection, which in turn discourages international maritime trade and commerce.

The future instrument will potentially reduce legal uncertainty, and purchasers, and subsequent purchasers, will be able to take clean title to the ship sold by judicial auction and be able to de-flag the ship from its pre-sale registry and re-flag the ship in the purchaser’s selected registry so as to be able to trade the vessel appropriately without the threat of costly delays and expensive litigation or the threat of further arrests by pre-sale creditors.

In turn, this will enable the purchased ship to trade freely and ensures that the ship will realize a greater sale price, which will benefit all the related parties, including creditors. Moreover, it will also permit financiers to provide ship finance with greater confidence since the purchase of vessels is generally financed by a ship mortgage where the financier’s main security for repayment is the ship itself.

Intense exploratory discussions have been on-going in Working Group VI of UNCITRAL since May 2019 on this topic prior to the recent decision to aim at the adoption of a binding international convention. Work will continue on this project based on a draft text, prepared by the UNCITRAL Secretariat, which reflects the opinions expressed so far during these discussions. Therefore, the draft uniform text, which would take the form of a convention, reflects the prevailing view among States as to the general approach to be taken in the negotiations. However, the draft text is still open as long as the discussions at the level of the Working Group are not completed.

The preparations for the sessions of the Working Group on this project have been made in full transparency and in cooperation with the Member States. The Member States were regularly briefed and consulted before and also during these sessions.

.

Basis for EU intervention (legal basis and subsidiarity check )

The initiative is based on Article 218 (3) and (4) of Treaty on the Functioning of the European Union (TFEU) on international agreements and Article 81 (TFEU) on judicial cooperation in civil and commercial matters. Providing the European Commission with a mandate to negotiate on behalf of the EU would result in a lesser risk of legal uncertainty and fragmentation. The subsidiarity principle does not apply because of the EU’s exclusive external competence.

B. What does the initiative aim to achieve and how

The objective of the recommendation to the Council is to define the negotiating mandate to be followed by the Union as represented by the European Commission. The Union has exclusive competence for the conclusion of an international agreement in so far as its conclusion may affect common rules or alter their scope. On the basis of the draft texts currently under consideration for a future convention on judicial sale of ships, there appears to be a risk that EU rules may be affected by the future UNCITRAL instrument, specifically the Brussels I Regulation (Recast) 2 on matters relating for instance exclusive jurisdiction and the Service of Documents Regulation 3 . The recommendation to open negotiations aims at ensuring that the future instrument whereby the contracting States would undertake to recognize the acquisition of a clean title by the purchaser of the ship sold by judicial auction subject to certain procedural guarantees protecting the rights of all interested parties, and which would limit the remedies available to interested parties to challenge the validity of the judicial sale and the subsequent transfers of the ownership in the ship could increase legal certainty for EU parties engaged in international maritime trade and commerce and also potentially reduce related costs and delays for the parties involved.

The overall objective of the UNCITRAL project for the EU is to facilitate and encourage international maritime trade and commerce by ensuring the required degree of uniformity, transparency and legal certainty in the judicial sale of ships and by facilitating on that basis the recognition of the outcome of such sale, thereby meeting the commercial needs of the maritime industry as well as the financial industry.

To achieve this, the European Commission must open negotiations with the participating members of UNCITRAL Working Group VI, for which it needs a mandate from the Council, in the form of a Commission’s Recommendation for a Council Decision authorising the opening of negotiations. The Commission intends to present such a recommendation for a Council Decision authorising the opening of negotiations and adopting defined negotiating directives. On the basis of these directives, the European Commission as negotiator would consult with the Council Working Party on Civil Law Matters (General Questions) and coordination of Member States’ positions would be ensured throughout the negotiations. The European Parliament would be informed at all stages of the procedure.

In view of the Union’s exclusive external competence, the Union needs to negotiate as these are multilateral negotiations which are being conducted as a result of a mandate given by the UNCITRAL Commission, in a body where the EU has enhanced observer status. As a result, the Union needs a mandate to participate in these negotiations.

C. Better regulation

Consultation strategy

Moreover, Member States were regularly informed and consulted in the Council Working Party on Civil Law Matters (General Questions) on the different options and the coordinated lines to take in the framework of the discussions of UNCITRAL's Working Group VI prior to the decision taken at the its 37th session of the Working Group VI (Judicial Sale of Ships) in December 2020 to aim at the adoption of a binding international convention on judicial sale of ships. In addition, the delegates of the Member States were regularly consulted on the spot in either Vienna or New York during the sessions of the Working Group.

A public consultation will be carried out at a later stage together with an impact Assessment prior to any proposal for signature/ratification of the future convention.

Impact assessment

Given the evolving nature of the substance of the convention, it cannot be foreseen at this stage what will be the outcome of the negotiations at international level and consequently it is not possible to clearly identify impacts ex ante at this stage. The outcome of the negotiations shall in the future need to be carefully analysed, including its impact and added value for the EU.

In view of the aforementioned aspects no Impact Assessment can or should be carried out at this stage. Rather, an Impact Assessment will be conducted before any proposal for signature and ratification of the Convention. The Impact Assessment prior to signature/ratification of the future convention will also assess the coherence of the instrument with the EU acquis.

(1)   https://uncitral.un.org/en/working_groups/6/sale_ships  
(2)  Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 351, 20.12.2012, p. 1–32).
(3) Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 351, 20.12.2012, p. 1–32).