Shipping Law In Ireland - A Guide

Author:Ms Helen Noble and Ruth McKeon
Profession:Matheson
 
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Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

There are very few, if any, ship building contracts that are governed by Irish law. Applying Irish contractual law, title of the ship will pass from the shipbuilder to the shipowner as per the terms and conditions provided for in the shipbuilding contract. The contract will generally contain detailed provisions surrounding payment and title. Although the parties are free to agree to the title of the ship transferring at any time prior to the delivery of the ship, such as upon the payment of the first instalment of the purchase price, it will generally pass on delivery. As a general rule, the final instalment payment will occur simultaneously upon delivery.

2 What formalities need to be complied with for the refund guarantee to be valid?

Under Irish law there are a number of formalities to be complied with in order for a guarantee to be enforceable:

it must be given for consideration; it must be in writing in accordance with the Statute of Frauds 1695; and it must be properly signed by someone who has the authority to sign on the bank's behalf. It is also vital to ensure that the company's constitutional documentation empowers it to enter into a guarantee. The shipbuilding contract will contain specified defaults for which the builder will become liable, such as prolonged delay. Such default provisions must not be overly restrictive or else the guarantee will not become accessible.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

Under Irish law, the court has discretion to make an order for specific performance of the shipbuilding contract, which will include delivery of the ship. In the High Court decision of Aranbel Limited v Darcy and Others (2010) IEHC 272, Mr Justice Clarke emphasised that an order of specific performance will not be made where there is no reasonable prospect of the order concerned being complied with. Thus, achieving a successful order will very much depend on which stage the ship build is at. Alternatively the court may make an order for damages.

4 Where the vessel is defective and damage results, would a claim lie in product liability against the shipbuilder at the suit of the shipowner; a purchaser from the original shipowner; or a third party that has sustained damage?

A claim for product liability can be made under statute, contract or tort.

Statute

Section 2(1) of the Defective Products Act 1991 sets down a strict liability regime for damages caused by a defective product, although the onus of proving the damage, defect and causal relationship remains on the plaintiff by virtue of section 4 of the Act.

Under section 2(2) of the 1991 Act, a producer is taken to mean:

the producer of a raw material, the manufacturer of a finished product or of a component part; the importer of a product; any person putting their name, trademark or other distinguishing feature on the product; and any person supplying a product whose producer or importer cannot be identified. In this case, the person liable will be the shipbuilder or any manufacturer of component parts or raw materials. Section 7(1) provides for a three-year limitation term for the initiation of proceedings under the Act - in addition, the producer will no longer be liable 10 years after the date on which the product was put into circulation.

Contract

Where the vessel is defective, the shipbuilder will also generally be liable for damages in respect of any loss sustained due to a breach of contract. The shipbuilding contract will generally set out the remedies for a damaged or defective vessel. It will also generally contain exclusion clauses, warranties or time limits outside of which no claims can be pursued.

Tort

A tortious action fills a void by providing relief for persons who either do not have the benefit of a contractual relationship with the shipbuilder, such as a third party that has sustained damage, or indeed any subsequent purchaser from the original shipowner. This will allow for a claim under the tort of negligence. In contrast to an action for breach of contract, the fundamental purpose of an award of damages in tort is to put the party concerned back into the position they would have been in had the wrongdoing not occurred.

In decisions such as Ward v McMaster (1989) ILRM 400, the Irish courts have held that in order to succeed in a tortious claim, the claimant will need to show that the shipbuilder:

owed a duty of care; breached that duty of care; and caused the claimant damage as a result of the breach. In order to establish the existence of a duty of care, the claimant will need to show a relationship of proximity between the parties such that the alleged wrongdoer would be aware that carelessness on its part is likely to cause damage to the claimant. However, it is always important to note that any such claim may be restricted by warranties provided in the original shipbuilding contract.

The limitation periods for initiating proceedings are discussed in detail in question 49.

Ship registration and mortgages

5 What vessels are eligible for registration under the flag of your country? Is it possible to register vessels under construction under the flag of your country?

Section 18(1) of the Mercantile Marine Act 1955 and the Fisheries (Consolidation) Act 1959, as amended by the Fisheries (Amendment) Act 1962 and the Fisheries (Amendment) Act 1983 provide that the following categories of vessel are obliged to register:

ships wholly owned by persons being citizens of Ireland or Irish bodies corporate and are not registered under the law of another country; and fishing vessels 35 feet and over in length wholly owned by qualified persons or bodies. The following categories of vessel are exempt from the obligation to register:

ships not exceeding 15 net register tons weight (other than fishing vessels over 35 feet in length) provided they are used only in navigation on the rivers, canals, lakes or coasts of Ireland, Great Britain, the Channel Islands or the Isle of Man, or within the territorial waters off their coasts; ships acquired before the passing of the Principal Act in 1955; ships in respect of which the minister has, under section 21 of the Act, consented to registry under the law of another country; and ships owned by Irish citizens not ordinarily resident in the state. Where the delivery of a newly built ship to the purchasers does not take place until after completion of trials, an official number may be allocated on a provisional basis. 6 What are the requirements for company formation?

Company formation in Ireland is principally governed by the Companies Acts, 1963-2009. A limited company can be established for the purpose of registering a vessel. The main requirements to form a company in Ireland are:

memorandum of association: this sets out the purpose for which the company is being established - objects and powers of the company, the authorised share capital of the company, etc; articles of association: these highlight how the business of the company will be carried on. There are various model articles which may be tailored to suit any company. These articles form a contract between a company and its members and deal with the internal regulation of the company; and company registration form A1: a form A1 must be completed by the directors and the company secretary. The declarant must also state the classification of the activity of the company. The registration fees for incorporating the company must also be paid. When all the documents and fees have been lodged in the Companies Registration Office, a certificate of incorporation will be issued. All companies must have at least one company secretary and a minimum of two directors, one of whom is required to be a resident of the European Economic Area. An EEA resident director is not required where the company posts a bond in a prescribed form, to the value of e25,395.

Once established, a company has a number of post-incorporation obligations including the maintenance of statutory registers, preparation of audited financial statements and the filing of an annual return.

7 Is dual registration and flagging out possible and what is the procedure?

Under section 18(1) of the Mercantile Marine Act 1955, unless it is an exempted vessel, a vessel owned by an Irish citizen or company must register in Ireland. If the owner wishes to flag the vessel outside of Ireland, it must obtain permission of the minister to register the vessel under the law of another country, pursuant to section 21 of the 1955 Act. Dual flagging is not possible.

8 Who maintains the register of mortgages and what information does it contain?

The register of mortgages is maintained by the revenue commissioners. The following particulars are registered in the register book:

name of the ship and her port of registry; details of tonnage and build outlined in the certificate of survey; particulars of the ship's origin as stated in the declaration of ownership; name and description of the registered owner or owners as stated in the declaration of ownership, and if there are more owners than one, the share proportions that they hold. In respect of individuals the description should included details of occupation and the place of residence, while the principal place of business should be specified where bodies corporate are concerned; and the registrar's name and the date in full as shown in the fees and deeds book. The following details are also to be entered by the registrar in the relevant columns of the register book:

the transaction number; the reference letter in the case of a mortgage; the full name of the owner/owners as they appear on the declaration of ownership, or the mortgagor; the number of shares held by each owner; the...

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