Collection Of The Receivables Arising From Ship Mortgage

GENERAL INFORMATION

In accordance with the article 1350 of Turkish Commercial Code numbered 6102 (“TCC”), the precautionary or executive attachment of the vessels, enforcement sale of the vessels and all its consequences including the transfer of ownership of the vessel as well as all transactions in relation to the enforcement proceedings are subject to the laws of the country where the vessel is located at the time of enforcement.

Therefore, in terms of Turkish flagged and foreign flagged vessels, the law of the country where the vessel is located at the time of enforcement should be taken into consideration while making evaluations about the precautionary or executive attachment of the vessels, enforcement sale of the vessels and all its consequences including the transfer of ownership of the vessel as well as all transactions in relation to the enforcement proceedings.

Within the scope of this report, by taking into consideration the above mentioned issues, the evaluations will be provided under separate items for Turkish flagged vessels and foreign flagged vessels.

A) THE PRESENCE OF TURKISH FLAGGED VESSEL WITHIN TURKISH WATERS:

In case of presence of Turkish flagged vessel subject to the mortgage within Turkish waters, Turkish Law should be applied and primarily, in order to commence the legal proceedings the receivable should be due and payable.
Upon the receivable become due and payable, the below mentioned proceedings may be evaluated.

1. The arrest of the vessel with the precautionary attachment application against the vessel:

The receivables arising from mortgage of the vessel are deemed as “maritime claim” in accordance with the article 1352 of TCC. Pursuant thereto, so as to secure the receivable arising from mortgage and the arrest of the vessel subject to the mortgage, as per the article 1353/1 of TCC, the application can be made for the precautionary attachment decision to be rendered against the vessel.

In pursuant to the article 1354 of TCC, the courts being in the place where the vessel is anchored, berthed, moored or dry-docked or the below mentioned courts are competent to render precautionary attachment decision against the Turkish flagged vessels.

a) With regards to the vessels registered under a Turkish Ship Registry, the courts being in the place of the registry,
b) With regards to the vessels which are not registered, the courts being in the place where the owner of the vessel is located,
c) With regards to the vessels which are subject to special registry as per the article 941 of TCC, the courts being in the place where the charterer of the vessel is located.

Pursuant to the article 1364 of TCC, in the event that the precautionary attachment decision is rendered against the vessel, for the execution of the precautionary attachment decision, the claimant has to apply to the enforcement office, which is in the area where the vessel is or in the area where the court rendering the precautionary attachment decision is, within 3 working days as of the date of the precautionary attachment decision. Otherwise, the precautionary attachment decision will be null and void ipso facto.

Upon such application for the execution of the precautionary attachment decision, the competent enforcement office will be obliged to execute the precautionary attachment decision immediately and accordingly, in line with the article 1366 of TCC, the vessel subject to the precautionary attachment decision will be arrested by the enforcement office.

Apart from the execution of the precautionary attachment decision and arresting the vessel, the enforcement office is also obliged to inform the ship registry which the vessel is registered under about the precautionary attachment decision and arrest of the vessel. Such information should be given the next working day after the execution of the decision.

For the completion of the precautionary attachment proceedings, the creditor is obliged commence the enforcement proceedings or initiate the claim against the debtor within one month as of the date of the execution of the precautionary attachment decision. [If the execution of the precautionary attachment decision is performed without his presence, one month time will commence as of the date of the service of the execution record to him.]

2. The commencement of the enforcement proceeding without judgment for foreclosure of mortgage:

Besides the execution of the precautionary attachment decision and arrest of the vessel, the commencement of the enforcement proceeding without judgment for foreclosure of mortgage may be possible. The enforcement office being in the place where the registry of the vessel is or the enforcement office which executed the precautionary attachment as per the article 1364 of TCC will have exclusive jurisdiction.

The enforcement proceeding without judgment will be commenced in accordance with the article 148 of Turkish Enforcement and Bankruptcy Code (“TEBC”) and thus, the enforcement order should be prepared as per the article 48 of TEBC. Upon the submission of the enforcement order, the enforcement office will prepare the payment order with regards to the foreclosure of mortgage and serve the same to the debtor. In the event that the debtor is a different party than the owner of the vessel, besides the debtor, the payment order is also served to the owner of the vessel.

Due to the reason that no objection can be raised with regards to the mortgage in this kind of enforcement proceeding, the enforcement proceeding will be deemed as finalized provided that no indebtedness objections are submitted within 7 days as of the date of the service of the payment order.

In the event that the debtor will not make the payment of the debt within 30 days as of the date of the service of the payment order besides not submitting any objections with regards to the payment order, in accordance with the article 264/5 of TEBC the precautionary attachment decision which was rendered against the vessel previously will be finalized and becomes executive attachment. [If no precautionary attachment decision was rendered against the vessel previously and the enforcement proceeding without judgment for foreclosure of mortgage was commenced directly, then, in accordance with the article 78 of TEBC, the creditor may be entitled to enforce executive attachment over the vessel and demand the arrest of the vessel for the sale of the vessel.]

On the other hand, in the event that the debtor will submit indebtedness objections with regards to the payment order, such objections should be immediately served to the creditor and as of the date of such service, the creditor should proceed with the commencement of the legal cases for the cancellation of the objections.

3. The commencement of the enforcement proceeding with judgment for foreclosure of mortgage:

In the event that the agreement with regards to the mortgage of the vessel is executed before the ship registry in pursuant to the article 1015/2 of TCC, due to the reason that such mortgage agreement is deemed as “judgment”, it gives opportunity to the creditor to commence the enforcement proceeding with judgment. [In addition to this, provided that the conditions set out in the article 1030 of TCC are actualized; the creditor may again proceed with the commencement of the enforcement proceeding with judgment.]

As it is indicated for the enforcement proceeding without judgment section, for the enforcement proceedings with judgment, the enforcement office being in the place where the registry of the vessel is or the enforcement office which executed the precautionary attachment as per the article 1364 of TCC will have exclusive jurisdiction.

The enforcement proceeding with judgment will be commenced in line with the article 58 of TEBC and the enforcement office will prepare the payment order with regards to the foreclosure of mortgage and serve the same to the debtor. In the event that the debtor is a different party than the owner of the vessel, besides the debtor, the payment order is also served to the owner of the vessel.

In this kind of enforcement proceeding, as difference to the enforcement proceeding without judgment, the debtor or the owner of the vessel are not entitled to submit objections. Solely, the debtor or the owner of the vessel may submit suspension of execution decision.

4. Compulsory Auction: 

The sales of the Turkish flagged vessels which are registered are made in line with the articles of TEBC concerning the sale of immovable properties.

The legal period for the submission of the demand with regards to the sale of the vessel is 3 months as of the service of the payment order. After the expiry of this period, the enforcement proceeding will be null and void.

B) THE PRESENCE OF FOREIGN FLAGGED VESSEL WITHIN TURKISH WATERS:

In case of presence of foreign flagged vessel subject to the mortgage within Turkish waters, Turkish Law should be applied and as indicated with regards to the Turkish flagged vessels, primarily, in order to commence the legal proceedings the receivable should be due and payable.

Upon the receivable become due and payable, the below mentioned proceedings may be evaluated.

1. The arrest of the vessel with the precautionary attachment application against the vessel:

As indicated above, the receivables arising from mortgage of the vessel are deemed as “maritime claim” in accordance with the article 1352 of TCC. Pursuant thereto, so as to secure the receivable arising from mortgage and the arrest of the vessel subject to the mortgage, as per the article 1353/1 of TCC, the application can be made for the precautionary attachment decision to be rendered against the vessel.

In pursuant to the article 1355 of TCC, the courts being in the place where the foreign flagged vessel is anchored, berthed, moored or dry-docked are competent to render precautionary attachment decision against the foreign flagged vessels.

Pursuant to the article 1364 of TCC, in the event that the precautionary attachment decision is rendered against the vessel, for the execution of the precautionary attachment decision, the claimant has to apply to the enforcement office, which is in the area where the vessel is or in the area where the court rendering the precautionary attachment decision is, within 3 working days as of the date of the precautionary attachment decision. Otherwise, the precautionary attachment decision will be null and void ipso facto.

Upon such application for the execution of the precautionary attachment decision, the competent enforcement office will be obliged to execute the precautionary attachment decision immediately and accordingly, in line with the article 1366 of TCC, the vessel subject to the precautionary attachment decision will be arrested by the enforcement office.

Apart from the execution of the precautionary attachment decision and arresting the vessel, the enforcement office is also obliged to inform the consulate of the flag country about the precautionary attachment decision and arrest of the vessel. Such information should be given the next working day after the execution of the decision.

For the completion of the precautionary attachment proceedings, the creditor is obliged commence the enforcement proceedings or initiate the claim against the debtor within one month as of the date of the execution of the precautionary attachment decision. [If the execution of the precautionary attachment decision is performed without his presence, one month time will commence as of the date of the service of the execution record to him.]

2. The commencement of the enforcement proceeding without judgment for foreclosure of mortgage:

Besides the execution of the precautionary attachment decision and arrest of the vessel, the commencement of the enforcement proceeding without judgment for foreclosure of mortgage may be possible, as explained for Turkish flagged vessels. However, for the foreign flagged vessels, with difference to the Turkish flagged vessels, the enforcement office which executed the precautionary attachment as per the article 1364 of TCC will have exclusive jurisdiction.

The enforcement proceeding without judgment will be commenced in accordance with the article 148 of TEBC and thus, the enforcement order should be prepared as per the article 48 of TEBC. Upon the submission of the enforcement order, the enforcement office will prepare the payment order with regards to the foreclosure of mortgage and serve the same to the debtor. In the event that the debtor is a different party than the owner of the vessel, besides the debtor, the payment order is also served to the owner of the vessel. In pursuant to the article 1104/3 of TCC, the service, which should be made to the owner of the foreign flagged vessel, can be made to the master of the vessel.

The enforcement office should also inform the consulate of the flag country about the commencement of the enforcement proceeding for foreclosure of mortgage.

Due to the reason that no objection can be raised with regards to the mortgage in this kind of enforcement proceeding, the enforcement proceeding will be deemed as finalized provided that no indebtedness objections are submitted within 7 days as of the date of the service of the payment order.

In the event that the debtor will not make the payment of the debt within 30 days as of the date of the service of the payment order besides not submitting any objections with regards to the payment order, in accordance with the article 264/5 of TEBC the precautionary attachment decision which was rendered against the vessel previously will be finalized and becomes executive attachment. [If no precautionary attachment decision was rendered against the vessel previously and the enforcement proceeding without judgment for foreclosure of mortgage was commenced directly, then, in accordance with the article 78 of TEBC, the creditor may be entitled to enforce
executive attachment over the vessel and demand the arrest of the vessel for the sale of the vessel.]

On the other hand, in the event that the debtor will submit indebtedness objections with regards to the payment order, such objections should be immediately served to the creditor and as of the date of such service, the creditor should proceed with the commencement of the legal cases for the cancellation of the objections.

3. The commencement of the enforcement proceeding with judgment for foreclosure of mortgage:

As for the Turkish flagged vessels, in the event that the agreement with regards to the mortgage of the vessel is executed before the ship registry in pursuant to the article 1015/2 of TCC, due to the reason that such mortgage agreement is deemed as “judgment”, it gives opportunity to the creditor to commence the enforcement proceeding with judgment. [In addition to this, provided that the conditions set out in the article 1030 of TCC are actualized; the creditor may again proceed with the commencement of the enforcement proceeding with judgment.]

For the enforcement proceedings with judgment, the enforcement office being in the place where the registry of the vessel is or the enforcement office which executed the precautionary attachment as per the article 1364 of TCC will have exclusive jurisdiction.

The enforcement proceeding with judgment will be commenced in line with the article 58 of TEBC and the enforcement office will prepare the payment order with regards to the foreclosure of mortgage and serve the same to the debtor. In the event that the debtor is a different party than the owner of the vessel, besides the debtor, the payment order is also served to the owner of the vessel.

In this kind of enforcement proceeding, as difference to the enforcement proceeding without judgment, the debtor or the owner of the vessel are not entitled to submit objections. Solely, the debtor or the owner of the vessel may submit suspension of execution decision.

4. Compulsory Auction:

The sales of the foreign flagged vessels which are registered are made in line with the articles of TEBC concerning the sale of immovable properties. However, in the event that the sale of the vessel which is registered under foreign registry, the enforcement office should inform the consulate of the flag country and demand the registry records of the vessel. In the meantime, the creditor may also submit the certified copy of the registry records of the vessel to the enforcement office.

The legal period for the submission of the demand with regards to the sale of the vessel is 3 months as of the service of the payment order. After the expiry of this period, the enforcement proceeding will be null and void.

The announcement concerning the sale of the vessel is made in pursuant to the article 126 of TEBC and the below authorities/parties should be informed with regards to the announcement by the enforcement office or the related parties;

a) The related authority at the flag country of the vessel which is obliged to record the registry records of the vessel,
b) The creditors which are registered as the contractual mortgagees,
c) The creditors which have lien right provided that the same has been informed to the enforcement office,
d) The owner of the vessel which is registered at the ship registry.

If the above parties are not informed about the announcement, the sale of the vessel should be publicized through a newspaper which is circulated in the country where the ship registry is recorded and daily circulation of which should be above 50.000.

C) THE PRESENCE OF TURKISH OR FOREIGN FLAGGED VESSEL WITHIN FOREIGN WATERS:

As it is indicated above, the precautionary or executive attachment of the vessels, enforcement sale of the vessels and all its consequences including the transfer of ownership of the vessel as well as all transactions in relation to the enforcement proceedings are subject to the laws of the country where the vessel is located at the time of enforcement. Thereby, in case that a vessel subject to the mortgage is within foreign waters, the proceedings so as to secure the mortgage receivable are performed in pursuant to the law of that country.
However, in the event that a Turkish flagged vessel is within foreign waiters, it may be advisable to commence enforcement proceedings as per the item “A” of this report in Turkish jurisdiction.

On the other hand, even though the sale of the Turkish flagged vessel may be subject to law of another country, in pursuant to the articles of TCC, the auction for the sale of the vessel should be announced to the below authorities/parties at least 30 days before the auction by the authority which proceeds with the auction or the related parties;

a) Turkish Ship Registry under which the vessel is registered,
b) The owner of the vessel which is registered under the ship registry,
c) The other creditors which are registered under the ship registry.

If the above parties are not informed about the announcement, the sale of the Turkish flagged vessel should be publicized through a newspaper which is circulated in Turkey and daily circulation of which should be above 50.000. Otherwise, even though the vessel can be sold within foreign jurisdiction, the vessel and the creditors which were recorded to the ship registry are not deleted from Turkish Ship Registry.
We hope the above is of assistance and please do not hesitate to contact us should any queries arise.

GUR LAW FIRM