Insights

On 26 September 2024, the First Hall of the Civil Court delivered judgement on the case Malta Fishing Trading Limited (C 59493) (the “Plaintiff”) vs Al Safa Fishing Joint Stock (the “Defendant”) whereby the Plaintiff claimed that the Defendant owed them the amount of €1,575,653 in relation to the vessels SAFA II, SAFA III and SAFA IV and that it had the right to take ownership and title over these vessels.

Facts of the Case

The Defendant acquired (i) SAFA II on 25 January 2005; (ii) SAFA III on 8 April 2006; and (iii) SAFA IV on 28 March 2007 (collectively referred to as the “Vessels”). The Vessels were to be used in international waters under the Libyan flag for bluefin tuna fishing.

The funding of SAFA II was acquired through a financing contract entered into between the Defendant and Raphael Scannapieco, Janvier Scannapieco, Serge Di Rocco and Enrique Brull (“Financiers A”). Whilst the funding of SAFA III was made acquired through a separate financing contract entered into between the Defendant and Raphael Scannapieco, Janvier Scannapieco and Serge Di Rocco (“Financiers B”, and together with Financiers A referred to as the “Financiers”).

Both of the contracts entered into with the Financiers contained a clause stating that in the event that the Defendant did not pay its debts due in relation to the vessels, SAFA II and SAFA III, the Financiers had a right to acquire title over these vessels as compensations.

The Plaintiff highlighted that the financing contracts with the Financiers were actually made through a foreign company called “BDS” due to various transfer of shares by the Financiers. Moreover, on 20 December 2007, BDS assigned its credit against the Defendant, in relation to the financing of SAFA II and SAFA III, to a company called “Armement Scannapieco” (“AS”).

When the Defendant purchased SAFA IV, the financing of this vessel was made by AS and they proceeded to enter into an agreement to lease the vessel to a company whose ultimate owner was the same investor who financed this vessel and within this agreement was a clause where the Defendant had an obligation to transfer SAFA IV back to the financing company at the end of the lease. During this period, it was noted that Defendant was asked by AS several times to pay the sum due, but they remained in default.

On 1 July 2019, AS assigned its claim against the Defendant to the Plaintiff where the Plaintiff became the new creditor in relation to the Vessels. Despite this assignment, the Defendant continued to default its obligations and as a result, the Plaintiff sought damages and initiated legal action against the Defendant.

The plaintiff sought damages of €1,575,653, the unpaid debts owed by the Defendant for the Vessels and ownership over these Vessels as compensation in accordance with the financing contracts.

The Defendant argued that the Plaintiff could not bring such a case against it since they were not notified of this assignment in terms of Article 1471 of Chapter 16 of the Laws of Malta (the “Maltese Civil Code”) which states that:

“The assignee may not, in regard to third parties, exercise the rights assigned to him except after due notice of the assignment has been given to the debtor, by means of a judicial act, by the assignee himself or by the assignor”.

Considerations of the Court

The Court considered the various contracts, which included the sales, financing and bareboat charter and noted that the main issue was based on the assignment made between AS and the Plaintiff. The Court also remarked that the Plaintiff was seeking damages in the sum of €1,575,653 and was also claiming title over the Vessels.

The Court began its analysis on the assignment and highlighted the Defendant’s claim that the assignment was not carried out in accordance with Maltese law. The Court also acknowledged the Plaintiff’s argument that the assignment was made in accordance with French law where the defendant was notified through a letter of notification dated 26 September 2019 (the “Notification Letter”) and that Maltese law did not apply in this case. The Plaintiff had referred to the Rome I Regulation and cited Article 3(1) which provides that “a contract shall be governed by the law chosen by the parties”.  In brief, the Rome I Regulations are a European Union Law Regulation which help determine which national law should apply to contractual obligations in commercial matters where more than one country in the European Union are involved, in this case both France and Malta. Further to this claim, the Court indicated that it must first consider whether the contract of assignment is regulated by French law to determine whether the assignment is valid or not and the Court pointed out that the contract did not specify that French law will apply. Therefore, the Plaintiff’s argument referencing Article 3(1) of the Rome I Regulation was deemed insufficient. The Court explained that in the absence of such a clause, it would need to determine if the option to regulate the contract by French law was “clearly manifested through the terms of the contract or the circumstances of this case”. To decide this, the Court noted the following matters:

1. The contract was made in Malta with three copies being produced in Malta;
2. The assignment of the debt was made to a Maltese company and the contract also stated that such assignment would apply in accordance with the provisions of Articles 1321 to 1326 Civil Code. The Court remarked that that the contract only stated, “Civil Code” and that there was no reference to a French Civil Code and the Court highlighted that Civil Code is also something that was found under Maltese law; and
3. The Court explained that the fact that the contract was in French did not mean that French law applied.

Based on the above points, the Court concluded that French law had not been “clearly manifested” by AS and the Plaintiff, and that it could not agree with the Plaintiff’s claim. The Court, following its considerations, concluded that Maltese law applied to the assignment.

The Court examined the Notification Letter in terms of Maltese law and concluded that this letter had not been delivered by means of a judicial act in accordance with Article 1471 of the Maltese Civil Code.

The Court also made reference to Article 1473 of the Maltese Civil Code which states that the notification is not necessary if the debtor has accepted the assignment and considered whether the defendant had in any way accepted the assignment. However, the Plaintiff had not brought any proof showing that the Defendant company accepted the assignment made between AS and the Plaintiff.

In conclusion to its analysis, the Court decided that the Plaintiff was not in fact a creditor of the Defendant and as a result, dismissed the Plaintiff’s claim for €1,575,653, thereby ruling in favour of the Defendant.

Concluding Remarks

This case highlights the intricacies in the drafting of contracts, which underscores the importance of the choice of law between parties, especially given that such maritime transactions are generally on an international level. The Court’s dismissal of the Plaintiff’s claims serves as an important reminder for parties involved in such transactions and contracts, to carefully determine which law they are referring to, and understand its implications in order to adhere to the relevant procedural requirements unique to each jurisdiction and thereby ensure enforceability and avoid potential setbacks.

Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in The Malta Independent on 30/10/2024.