Shipping

The purpose of this article is to highlight key reforms introduced in Act No. I of 2025 (the “Act”), aimed at strengthening Malta’s maritime sector.

New financing mechanism

While maritime financing once relied on the large traditional European banks, recent economic shifts and increased regulations, including the Basel Regulations (particularly Basel III and Basel IV), have led banks to reduce exposure to high-risk maritime loans, allowing financial leasing companies and investment funds to offer more flexible financing solutions.

In view of this transition, a new type of security instrument was introduced through the Act: the “finance charter instrument”. In terms of the proposed amendments, a financier is recognised and protected as such and shall no longer be limitedly considered as the registered owner of the financed vessel for the purposes of the vessel’s registration in Malta. This allows financiers to retain title to the vessel as security, while operators manage and use the vessel, making payments that can lead to eventual ownership. These changes offer greater legal certainty and protection for financiers, charterers and owners.

Strengthening protection for seafarers

The Act prioritises seafarers’ rights by extending the timeframe for wage claims from three months to twelve, in line with the International Labour Organisation’s Maritime Labour Convention (MLC) 2006, known as the ‘Seafarers’ Bill of Rights’. This change significantly improves protection for seafarers who often face challenges in recovering unpaid wages.

Driving digitalisation in maritime governance

Recognising the importance of modernising governance, the Act supports digitalisation in Malta’s maritime sector. By replacing traditional paper-based procedures with electronic communications, the Act aims to create a more efficient, transparent and accessible system. This shift to e-governance will reduce administrative delays and errors.

The drive to reduce administrative burdens is not unique to Malta but is part of a broader European trend. A key example is EU Regulation 2016/1191, which abolishes the apostille requirement for certain public documents. While it remains unclear whether this regulation applies to maritime documents, the underlying principle of reducing bureaucratic hurdles is evident. Moreover, the EU has made significant strides towards promoting electronic transactions through the eIDAS Regulation (EU) 910/2014, which provides a comprehensive legal framework for electronic identification and trust services.

Aligning with international standards

The Act addresses past compliance concerns, such as those raised in the 2019 Port State Control audit, which noted deficiencies in Malta-flagged vessels regarding safety equipment. The new legislation strengthens regulations to ensure compliance with the Safety of Life at Sea (SOLAS) Convention and other IMO conventions.

Reforming ship registration procedures

The Act removes the requirement for vessel identification markings on the keel. This requirement, long considered outdated by large shipyards in Asia, was highlighted as inefficient by the International Chamber of Shipping (ICS) in 2019. By eliminating this requirement, Malta is aligning with modern shipbuilding techniques and enhancing its attractiveness to global shipbuilders.

Additionally, the Act lowers the maximum age limit for vessel registration from 25 years to 20 years. According to a 2021 survey by Lloyd’s Register survey, older vessels pose higher safety and environmental risks. By ensuring that newer, safer vessels are registered under the Maltese flag, Malta strengthens its reputation for safety and environmental compliance.

Streamlining governance – powers of the registrar general:

The Act transfers certain powers from the Minister to the Registrar-General, reducing bureaucratic delays. This decentralisation allows for faster, more efficient decision-making and a more agile maritime administration, ultimately bolstering investor confidence.

Miscellaneous reforms:

The Act requires upfront payment for vessel registration fees and replaces ambiguous terms like ‘initial’ with ‘first’ and ‘annual’, making billing practices more transparent.

Further changes include improved mortgage registration procedures, including the assignment of index numbers for better tracking. The Act also introduces a new article, specifically addressing the registration of mortgages over ships under construction, providing a clear definition of what constitutes a ship under construction and outlining the procedures to be followed for registering such mortgages.

Additionally, the Act allows for flexibility in correcting registration errors and clarifies the Registrar-General’s role in judicial sales. The proposed Article 39B in the Act emphasises that “a party to a mortgage registered in accordance with this Act, with the consent of the other party or parties, may within seven days of the registration correct any error on the document”.

Conclusion – setting the stage for maritime excellence:

The proposed amendments reaffirm Malta’s position as a leading maritime jurisdiction. By streamlining operations, attracting new investment and ensuring the robustness of Malta’s legal framework, these reforms position the country to meet future challenges and thrive as a premier maritime hub.

Our legal team remains at the forefront of these developments, offering unparalleled expertise in navigating the evolving maritime legal landscape for our clients.

This article is the first in a series of articles that will be published by Ganado Advocates in the coming weeks.