Ship mortgages and other liens over vesselsTypes of ship mortgage
What types of ship mortgages exist and what obligations may a ship mortgage secure? Can contingent obligations, including swap obligations, be secured? Are there standardised forms?
Ship mortgages in Nigeria take the form of a statutory mortgage. The obligations secured by a ship mortgage may be a loan or other valuable consideration.
Contingent obligations, including swap obligations, can be secured.
Standardised forms obtainable from the Nigerian Ship Registration Office (NSRO), such as a mortgage to secure account current form, are used in Nigeria. The mortgage to secure account current form is accompanied by the deed of mortgage. The NSRO issues a mortgage certificate upon registration.Required form
Give details of any required form for ship mortgages in your jurisdiction.
The forms required for ship mortgages in Nigeria are the mortgage to secure account current form and the deed of mortgage. The mortgage to secure account current form sets out the basics of the mortgage, such as the mortgagee and the amount secured. The deed of mortgage sets out the security covenants.Registration of mortgages
Who maintains the register of mortgages? What information does it contain and where are such filings to be made? What is the effect of registration?
The register of mortgages is maintained by the Registrar of Ships and contains particulars of the mortgagee and details of the mortgage debt. The filings are made at the NSRO and copies of the following are placed in the mortgaged vessel’s file:
- the mortgage deed;
- the certificate of mortgage; and
- the mortgage to secure account current form.
Where the mortgagor is a company, the mortgage is also registered at the Nigerian companies’ registry, the Corporate Affairs Commission, Abuja (CAC). The information contained in the CAC register is as follows:
- a description and the date of creation of the instrument creating the mortgage;
- the amount secured under the mortgage;
- particulars of the mortgagee;
- short particulars of the mortgaged vessel; and
- the date of acquisition of the mortgaged vessel.
The effect of the registration is that the mortgage would be a legal mortgage with all the attendant rights of such a mortgage.
Must the total amount of the mortgage be stated therein? Must the mortgage contain a maturity date? Must the underlying debt instrument be filed with or attached to the recorded mortgage?
The total amount secured must be stated on the mortgage documents. The mortgage does not have to contain a maturity date. There is no requirement that the underlying debt instrument must be filed or attached to the recorded mortgage.
Can a mortgage be registered in the name of an agent or trustee for the benefit of multiple lenders?
A mortgage can be registered in the name of an agent or trustee for the benefit of multiple lenders. It is common practice to appoint a security trustee for the purpose of holding the security in a syndicated financing arrangement.Filings on transfer
If the mortgagee is an agent or trustee for a lending syndicate, must any filings be made upon transfer of a portion of the underlying debt among existing lenders or to a new lender?
To the extent that the value of the facility remains unchanged – that is, where there is no increase to the facility granted – there will be no need to pay additional stamp duties or undertake any further registration, and no further filings would be necessary.
If the mortgagee transfers its interest to a new lender, agent or trustee what filings are required? Is the mortgagor’s consent required?
If the mortgagee transfers its interest to another party, a copy of the instrument creating the transfer must be filed at the NSRO in accordance with section 58(2) of the Merchant Shipping Act 2007. Upon receipt of the transfer instrument the Registrar shall record the transfer by entering in the register the name of the transferee as the mortgagee. The Registrar will also endorse and sign on the mortgage and instrument effecting the transfer, a memorandum stating that the transfer has been so recorded, with the date and time of the record.
Where the mortgagor is a company and the mortgage is registered at the CAC, the instrument effecting the transfer shall also be filed at the CAC further to the provisions of section 222(1) and (2) of the Companies and Allied Matters Act 2020.
Usually the consent of the mortgagor will not be required, unless the agreement provides otherwise. However, it will be necessary to give notice of such a transfer.Maritime liens
What other maritime liens over vessels are recognised in your jurisdiction? Do these claims give rise to a right to arrest a vessel? In what circumstances may associated ships be arrested?
The following claims are recognised as secured by maritime liens on the vessel in Nigeria under the Admiralty Jurisdiction Act 1991 and the Merchant Shipping Act 2007 respectively:
- wages and other sums due to the master, officers and other members of the ship’s complement in respect of their employment on the ship;
- disbursements of the master on account of the ship;
- claims in respect of loss of life or personal injury occurring, whether on land or on water in direct connection with the operation of the ship;
- claims for damage done by a ship;
- claims for salvage, wreck removal and contribution in general average; and
- claims for ports, canals and other waterways, dues and pilotage dues.
The claims listed above all give rise to a right to arrest the vessel. Maritime liens under the Merchant Shipping Act, however, have a life span of one year. Associated ships cannot be arrested in Nigeria; only sister ships can be arrested.
What maritime liens rank higher than a mortgage lien?
Maritime liens all rank higher than a mortgage lien by virtue of section 67 of the Merchant Shipping Act 2007 (MSA). Under the MSA, maritime liens have a lifespan of one year from the date of the incident creating the lien.Non-mortgage liens
May non-mortgage liens be recorded over a vessel?
Yes, non-mortgage liens may be recorded over a vessel.‘Foreign’ flag vessels
Will mortgages on ‘foreign’ flag vessels be recognised in your jurisdiction? If so, do they share the same priority as those on vessels registered under the laws of your jurisdiction?
Mortgages on foreign-flagged vessels are recognised in Nigeria. A foreign mortgage has the same priority as those on vessels registered under the laws of Nigeria where the mortgage is enforced in Nigeria.Enforcement of mortgages
What is the procedure for enforcing a mortgage in your jurisdiction by way of foreclosure? Are interlocutory sales permitted? How long does a judicial sale take? What are the associated court costs and how are they calculated?
Enforcing a vessel mortgage by way of foreclosure in Nigeria is achieved through an action at the Federal High Court, which is the Nigerian admiralty court. Before commencing the action, the mortgagee would usually, in the event of a default, require the mortgagor to remedy the default within a specified time. Where the mortgagor fails to do so, the mortgagee will commence an action at the Federal High Court for the foreclosure of the mortgagor’s equity of redemption. The mortgagee’s relief before the court would include an order for the sale of the mortgaged vessel.
A claim arising from a vessel mortgage is a proprietary maritime claim under the Admiralty Jurisdiction Act and may be commenced in rem against the mortgaged vessel. The vessel would be arrested in the proceedings as security for the claims.
Where the mortgagee sells the vessel without an order of court, in exercise of a right of sale, the mortgagee would have a duty to account to the mortgagor for any amount realised in excess of the obligations.
Interlocutory sales are permitted in Nigeria. By Order 9, Rule 6(2) of the Admiralty Jurisdiction Procedure Rules 2011, where the owners of an arrested vessel fail to provide alternative security for release of the vessel within a period of six months from the date of arrest, the court may order a sale of the vessel upon the application of the arresting or any other interested party.
A judicial sale takes two months, on average, to conclude from the date of the order.
The costs associated with the judicial sale are mainly the expenses of the admiralty marshal. The Admiralty Jurisdiction Procedure Rules 2011 provide that the admiralty marshal’s expenses shall be 2 per cent of the proceeds of the sale.Sale by mortgagee
May a vessel be sold privately by a mortgagee? Will the sale discharge liens over the vessel?
By virtue of section 57(2) of the Merchant Shipping Act 2007, a registered mortgagee has power to sell the mortgaged vessel or a share thereof without notice and give effectual receipts for the purchase money.
Where, however, more than one mortgage is registered against a vessel, no subsequent mortgagee can sell the mortgage vessel without the written consent of all prior mortgagees unless with an order of court. The private sale will not discharge liens over the vessel.Default under mortgage
Will the courts of your jurisdiction enforce mortgage provisions stipulating the appointment of a receiver on default under the mortgage?
Yes, the Nigerian court will enforce mortgage provisions stipulating appointment of a receiver on default under the mortgage.Limitations on rights of self-help
What are the limitations on rights of self-help by a mortgagee?
A limitation on rights of self-help by a mortgagee is that the powers of sale can only be exercised for the purpose of realising its security when the mortgagor is in default. Where there are multiple persons registered as mortgagees of the same ship or share, a subsequent mortgagee shall not, except by the order of a court of competent jurisdiction, sell the ship or share without the consent of any prior mortgagee.Duties to owner or third-party creditors
What duties does a mortgagee owe to an owner or third-party creditors?
A mortgagee owes a duty of good faith to an owner or third-party creditors.