Insights

In three nearly identical judgements delivered on 3 October 2024, the Maltese Court of Appeal (the “Court of Appeal”), presided over by Chief Justice Mark Chetcuti, Judge Christian Falzon Scerri and Judge Josette Demicoli, addressed the extent of a shipowner’s standing in in rem proceedings against a vessel subject to bareboat charterparty agreement. The cases involved claims by Marlow Navigation Co. Ltd. (“Marlow”) and North by Northwest GmbH (“North by Northwest”) (together the “Claimants”), which sought to recover debts related to seafarer wages, crewing services, and bunkers supplied to the vessels MSC Bilbao and MSC Valencia. The Court of Appeal affirmed the principle that the charterer within a bareboat charterparty is granted full control and possession of the vessel, leaving the shipowner without locus standi to file an appeal on behalf of such vessel during the period of the charterparty.

Factual and Legal Background

Marlow, a Cyprus-registered company, initiated separate special summary proceedings against the vessels MSC Bilbao and MSC Valencia, where it claimed that it had provided crew management services and other services to the vessels, which were both subject to bareboat charterparty agreements. The respective bareboat charterers were, however, in default of their payment obligations. Therefore, Marlow paid the salaries, bonuses, and other amounts due to the crew members itself, and assumed their rights via an assignment of claims. On this basis, Marlow sought to recover the amounts it paid, totalling to €1,560,665.81 in respect of MSC Bilbao and €1,582,565.51 in respect of MSC Valencia, from the vessels directly under actions in rem (the “Marlow Actions”).

Similarly, North by Northwest, a German-registered company, initiated special summary proceedings against the vessel MSC Valencia. MSC Valencia had ordered bunkers but failed to pay for them, leading to the vessel’s manager paying for the bunkers and assigning the credit to North by Northwest. As such, North by Northwest instituted in rem proceedings, claiming a sum of €1,931,303.22 (the “North by Northwest Action”). In addition, the Claimants sought the issuance of precautionary arrest warrants against the vessels to secure their claims for the total sums owed, which the court granted.

At first instance, the vessels and the bareboat charterers did not contest the claims or the summary proceedings. However, the shipowners, AM Asia M13 Limited and AM Asia M14 Limited (the “Shipowners”), contested the Marlow Actions, asserting that the summary procedure should not apply and that they should be allowed to contest the proceedings as interested parties. The First Hall of the Civil Court (the “FHCC”) determined that since the validity of the bareboat charter agreements was not contested, the charterers had full control and possession of the vessels, as well as responsibility for the obligations arising from the bareboat charterparty agreements and the law. As such, the Shipowners had no locus standi to represent the vessels.

Given the non-contestation of the claims by the vessels, as represented by the bareboat charterers, the FHCC upheld the Claimants’ claims in judgements delivered on 1 December 2023, 18 January 2024, and 7 March 2024. In these judgements, the FHCC ordered the vessels to pay the sums claimed, plus costs and interest.

Basis of the Appeal and Legal Considerations

The Shipowners appealed the three judgements, raising the following main arguments:

• The judgments against the vessels caused them prejudice as the owners of such vessels, especially since they were not a party to any of the agreements between the Claimants and the bareboat charterers;
• It was unjust for the vessels to bear the responsibility for the debts incurred by the bareboat charterers; and
• They had locus standi in the appeal proceedings based on allegations of collusion and

In the appeal proceedings, the Court of Appeal focused primarily on the legal basis of the claims and appeals, and procedural issues. The Court of Appeal first noted that the special summary proceedings under Article 167 of the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta) (the “COCP”) were initiated by third-party creditors. With regards to the Marlow Actions, the crew members had assigned their claims against the vessel, arising under Article 742B(r) of the COCP, to Marlow. In the North by Northwest Actions, the vessel’s manager had assigned the credit against the vessel, arising in terms of Article 742B(o) of the COCP, to North by Northwest. These provisions respectively grant the Maltese civil courts in rem jurisdiction over vessels in claims:

• brought by the master, officers, or crew for wages and other sums owed in respect of their employment; and
• in respect of bunkers supplied to a

Under Article 742D of the COCP, an in rem action may be brought directly against a vessel where the person liable for an in personam action (i.e., the relevant person) was, at the time the claim arose, either an owner, charterer, or person in possession or control of the vessel, and remained the owner or bareboat charterer at the time the action is brought. Additionally, Article 84A of the Merchant Shipping Act (Chapter 234 of the Laws of Malta) (the “Merchant Shipping Act”) defines a “bareboat charter” as a lease or sub-lease of a ship for a specified period, granting the charterer full control and possession of the vessel, including the right to appoint the master and crew, though excluding the right to sell or mortgage the ship.

Based on the above provisions, the Court of Appeal concluded that at the time the claims arose the relevant persons were the bareboat charterers, and the representatives of the vessels were their respective masters. Hence, the bareboat charterers were the ones responsible for the debts incurred. Since the bareboat charterers also remained in control of the vessels when the actions were filed, with the bareboat charterparty agreements even remaining in force throughout the entirety of the proceedings, it was found that the legal requirements for in rem proceedings were satisfied.

The Court of Appeal went on to assess whether the legal procedure for special summary proceedings under Article 167 of the COCP was followed. In this regard, particular attention was given to the Claimants’ plea in each of the cases – that the appeal was irregular and null because it was filed by the Shipowners, who did not have the right to represent the vessels in actions in rem. The Court of Appeal reaffirmed the established principles governing in rem actions, stating that the proper defendants in such cases are the vessels themselves, represented by their masters or agents.

With regards to the issue of notification, Article 187(7) of the COCP requires that in actions against vessels, service is affected by the delivery of a copy of the pleading to the master thereof (or any other person acting in that behalf), or in the absence of such persons, on the agent thereof. Therefore, it was not necessary that the Shipowners be notified of the actions. In all three cases, the captain or the agent had been duly notified. The Court of Appeal further found that the proceedings before the FHCC had followed the proper legal procedure.

Commenting finally on the locus standi of the Shipowners in the appeal proceedings, the Court of Appeal considered two main points. First, it held that given that the vessel itself was the proper defendant in the proceedings, it was not possible for the Shipowners themselves to raise the appeal. Second, it emphasised that the Shipowners’ right to appeal was limited by Article 228(1) of the COCP, which prohibits appeals from judgements where claims have been admitted or where the party has waived its right to appeal. In these cases, the vessels had not opposed the claims at first instance, effectively admitting to the Claimants’ demands.

The Court of Appeal found that the facts that:

• the vessels are the proper defendants in the in rem actions;
• the bareboat charterers are granted full control and possession of the vessel during the charter period; and
• the vessels failed to contest the claims in the original proceedings,

precluded the Shipowners from appealing. It therefore upheld the Claimants’ preliminary plea, declaring the appeals irregular and null and ordered the vessels to pay the Claimants the full amounts claimed, along with judicial costs and interest.

Concluding Remarks

These cases serve as an important precedent in Malta regarding the rights and obligations of parties involved in bareboat charters. They underscore the principle that a vessel under a bareboat charterparty may be fully responsible for debts incurred by the charterer, and that the shipowner cannot interfere in an in rem action unless it has direct standing. These judgments also strengthen the protection afforded to creditors in maritime disputes, particularly where claims involve seafarers and the provision of goods and services.