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Trends and developments
Are there any notable trends or recent legal developments in your jurisdiction’s shipping industry?
A substantial portion of Malaysian shipping serves the oil and gas sector. Due to the slump in this industry, many offshore support vessel operators cannot find employment. This also means that the rate of off-hire and termination of charters has increased. Conventional shipping is still depressed. As a result of the CGM CMA Group’s takeover of Singapore’s NOL, the line has begun to shift its operations from Malaysia to Singapore.
In the face of the weak economy, China’s ‘one belt, one road’ investments in Malaysia are much welcomed, including financing for a new port in Malacca and developing the east coast of peninsular Malaysia.
Which ships are eligible for registration in the national shipping register(s) and which parties may register ships?
In general, all ships except riverine vessels weighing more than 15 tons or fishing vessels are eligible for registration. There are two registries for ship registration. Ships can be registered under Part IIA of the Merchant Shipping Ordinance, which is the domestic register; this is open to Malaysian shipowners and companies which are majority owned and managed by Malaysians. The other registry is the Malaysian International Ship Registry, which is open to Malaysian corporations which are majority owned by non-Malaysians.
What are the procedural and documentary requirements for registration?
The application for registration is made by submitting the following:
- the application form;
- a statutory declaration of the owner containing the prescribed particulars;
- a notice of the proposed name;
- proof of Malaysian citizenship if the applicant is an individual or the following if the applicant is a corporation:
- a certified copy of the memorandum and articles of association;
- certification under common seal that the majority shareholding (including voting share of the corporation) is held by Malaysian citizens who are free from trust or obligation in favour of non-Malaysians; and
- an authority form appointing the public officer authorised to make declarations on behalf of the owner;
- the builder’s certificate, for registration of newly built vessels;
- the deletion certificate, where the vessel was previously registered with another port;
- the authenticated original bill of sale;
- the certificate of survey issued by the surveyor of ships;
- the memorandum as to the registration of the managing owners; and
- certification from the Customs Department as to import duty.
The application is submitted to one of the ports of registry at Penang, Port Klang, Kuching or Kota Kinabalu for the domestic register and at Labuan for the international register. The vessel must be surveyed and marked before acceptance of registration.
Grounds for refusal
On what grounds may a registration application be refused?
Registration may be refused if the ship-owning company does not meet the Malaysian shareholding and management requirement.
Are there any particular advantages of flying your jurisdiction’s flag?
The Malaysian Ship Register is one of the most economical registers in the world and includes many established carriers (eg, MISC and other energy carriers). Vessels flying the Malaysian flag can carry domestic cargo (ie, cargo between Malaysian ports).
Liens and mortgages
How are encumbrances such as maritime liens and mortgages registered in your jurisdiction and what are the effects of registration?
There is a procedure for the registration of statutory mortgages. Registration protects lenders’ interests and accords the mortgage priority status.
Securable claims and priority
What claims can be secured by maritime liens and what is the order of priority?
The following claims are categorised as maritime liens:
- damage done by a ship;
- seamen's wages; and
- bottomry and respondentia.
The order of priority is as follows:
- the sheriff’s sale commission;
- the sheriff’s expenses;
- costs of the arresting party;
- maritime liens;
- possessory liens;
- mortgages; and
- statutory liens.
Under what circumstances are maritime liens extinguished?
By judicial sale.
Are foreign liens recognised in your jurisdiction?
No. The categorisation and recognition of liens follow the lex fori (ie, the Malaysian categorisation, which is similar to the English position).
Transfer and assignment
Which rules govern the transfer and assignment of liens, mortgages and other encumbrances?
This area is relatively untested in Malaysia.
Grounds for arrest
Under what circumstances can a ship be arrested in order to secure a claim against it?
The claim must be an established in rem claim in terms of subject matter and meet other procedural requirements under the UK Supreme Court Act 1981.
Can a ship be arrested to secure a non-maritime claim?
No, the in rem jurisdiction follows the established categories.
Can a ship be arrested to secure a claim against a sister ship?
What are the procedural and documentary requirements for seeking arrest of a ship?
The arresting party must file the application with a certificate of urgency to secure the swift issuance of both the arrest warrant and writ in rem. The court requires both an undertaking and an arrest deposit. The grounds for invoking the admiralty jurisdiction of the court are set out in the UK Supreme Court Act 1981, which has been adopted by the Malaysian courts.
What security must the arresting party put up in order to secure arrest of a ship and how is this security calculated?
The arresting party must put up a security deposit of RM15,000.
What security can the arrested party provide for release of an arrested ship?
The security must be either a financial guarantee within the jurisdiction or a protection and indemnity (P&I) undertaking from an established P&I club.
Judicial sale of ships
What is the legal procedure for the judicial sale of ships in your jurisdiction?
Judicial sale is available if the owner of the arrested vessel does not settle the claim or put up acceptable security for the claim. The arresting party can apply for sale pendente lite (ie, pending litigation).
Under what circumstances are foreign sales recognised?
A foreign sale by order of a foreign court will be treated under the conflict of law rules as to the recognition of the foreign judgment. Under these rules, a judgment in rem or order of sale pronounced by a court of competent jurisdiction is conclusive and binding in Malaysia, not only between parties and privies (as in the case of a judgment in personam), but globally.
Limitation of liability
What parties may limit liability for maritime claims?
The Malaysian limitation regime follows the Convention on Limitation of Liability for Maritime Claims 1976, as amended by the Protocol of 1996 to Amend the Convention on Limitation of Liability for Maritime Claims 1976 (‘the 1976 convention’). Under Article 1 of the 1976 convention, the following persons are entitled to claim limitation:
- the shipowner (which can refer to the owner, charterer, manager and operator of a seagoing ship);
- the salvor (ie, any person rendering services in direct connection with salvage operations);
- any person for whose act, neglect or default the shipowner or salvor is responsible; and
- the insurer of liability for claims subject to limitation in accordance with the 1976 convention (which is entitled to the same benefits of the 1976 convention as the assured).
For what claims can liability be limited? Are any claims explicitly exempt from the limitation of liability?
Under Article 2 of the 1976 convention, the following claims (regardless of the basis of liability) are subject to limitation of liability:
- claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;
- claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
- claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;
- claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board the ship;
- claims of a person for the removal, destruction or the rendering harmless of the cargo of the ship; and
- claims of a person other than the person liable in respect of the measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with the 1976 convention, and further loss caused by such measures.
Limitation may be disallowed in circumstances set out in Article 4 of the 1976 convention, which states that:
“A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”
What limits are set for eligible claims?
The general limits are set out in Article 6 of the 1976 convention. In particular, the limits of liability for claims other than those mentioned in Article 7 of the convention (ie, passenger claims) are calculated as follows:
- In respect of claims for loss of life or personal injury:
- 2 million units of account (ie, the special drawing rights as defined by the International Monetary Fund) for a ship with a tonnage not exceeding 2,000 tons; and
- for a ship with a tonnage exceeding 2,000 tons, the following amount in addition to the 2 million units of account mentioned above:
- 800 units of account for each ton from 2,001 tons to 30,000 tons;
- 600 units of account for each ton from 30,001 tons to 70,000 tons; and
- 400 units of account for each ton in excess of 70,000 tons; and
- In respect of all other claims:
- 1 million units of account for a ship with a tonnage not exceeding 2,000 tons; and
- for a ship with a tonnage exceeding 2,000 tons, the following amount in addition to the 1 million units of account mentioned above:
- 400 units of account for each ton from 2,001 tons to 30,000 tons;
- 300 units of account for each ton from 30,001 tons to 70,000 tons; and
- 200 units of account for each ton in excess of 70,000 tons.
What rules and procedures govern the establishment of limitation funds?
The procedure is set out in Order 70 Rules 35 to 38 of the Rules of Court 2012.
How are liability funds distributed?
According to Article 12(1) of the 1976 convention, the fund is distributed among the claimants in proportion to their established claims against the fund.
The registrar will decide on the manner of distribution under Order 70 Rule 23 of the Rules of Court. The funds can be distributed by agreement, but if any dispute arises as to the distribution, only after this is resolved.
Carriage of goods
Is your jurisdiction party to any international conventions on the carriage of goods by sea? If so, does the relevant domestic implementing law contain any notable modifications (eg, extensions to the scope of application)?
The Malaysian Carriage of Goods by Sea Act incorporates the Hague Rules for shipments from a Malaysian port.
What is the official extent of the carrier’s responsibility for goods?
The Carriage of Goods by Sea Act adopts the Hague Rules scheme in this regard.
Contractual limitation of liability
May parties contract out of any legal provisions governing cargo liability?
No; this is prohibited under the Hague Rules, which will invalidate any attempt. However, this may be possible for areas outside the scope of the Hague Rules.
Title to sue
Who has title to sue on a bill of lading?
The buyer and seller have title, subject to their having possessory rights to the cargo.
What is the time bar for cargo claims?
One year under the Hague Rules.
Definition of ‘carrier’ and ‘goods’
How are ‘carrier’ and ‘goods’ defined in respect of cargo claims? Is there any especially pertinent case law on this issue?
The Malaysian Carriage of Goods by Sea Act adopts the definition set out in Article I of the Hague Rules.
Defences available to carrier
Under what circumstances may the carrier rely on the perils of the sea defence? What other defences are available to the carrier?
The defences available are those stipulated under Article IV Rule 2 of the Hague Rules.
What legal protections and defences against cargo claims are available to agents of the carrier and other third parties (eg, Himalaya clauses)?
The mechanism of the Himalaya clause is effective to extend the defences.
Deviation from route
Under what circumstances is deviation from the agreed route allowed?
Deviation is allowed under Article IV Rule 4 of the Hague Rules for the saving of life or property at sea.
Claims against shipper
What claims can the carrier pursue in respect of the shipper’s failure to meet its obligations?
The carrier can pursue a claim against the shipper for loss or damage caused directly and indirectly.
Multimodal carriage of goods
How is multimodal carriage regulated in your jurisdiction?
There is no regulation of multimodal carriage. Parties may regulate their dealings by contract.
Collision and pollution
What rules and procedures (under both domestic and international law) apply to the prevention of, liability for and remedy of:
The liability provisions are found in the Merchant Shipping (Collision Regulations ) Order 1984, which incorporates the International Regulations for Preventing Collisions at Sea 1972, as amended on November 19 1981.
(b) Oil pollution?
The liability provisions are found in the Merchant Shipping Oil and Bunker Oil Pollution Act 1994. The act incorporates into Malaysian law the 1969 Civil Liability Convention and the 1971 Fund Convention.
(c) Other environmental damage caused by a ship?
This is set out in the Environmental Quality Act and its regulations.
What is the legal regime governing salvage and general average?
Part X of the Merchant Shipping Ordinance 1952 deals with wreck and salvage. No statutory provisions deal with general average. Both salvage and general average are covered in the English forms of marine hull and cargo insurance.
Places of refuge
What framework governs access to places of refuge for ships in distress?
The Marine Department uses the National Oil Spill Contingency Plan as a guide in this respect.
What rules and procedures apply to the removal of wrecks in your jurisdiction?
Part X of the Merchant Shipping Ordinance 1952 deals with wrecks and their removal.
Under what circumstances can the authorities order removal of wreckage?
Where the wreck is likely to become an obstruction or danger to navigation or a public nuisance, the receiver of wrecks can take possession of and raise, remove or destroy the wreck.
What maritime risks must be covered under the law and what is the mandatory level of coverage?
Malaysian registered vessels must be insured by Malaysian licensed insurers. Vessels entering Malaysian waters must also have a certificate of insurance or other financial security as provided under the Civil Liability Convention and the Bunkers Convention.
Insurable risks and ships
What other risks are typically covered by marine insurance contracts concluded in your jurisdiction and what ships are insurable?
The normal risks covered are the hull and machinery of the vessels covered by marine hull insurance and cargo covered by marine cargo insurance. Protection and indemnity clubs provide liability cover for cargo and other claims, including pollution cover.
What is the legal regime governing marine insurers’ subrogation rights?
The UK Marine Insurance Act 1906 governs this area and applies with respect to the choice of English provisions in the marine hull and marine cargo insurance policies. The act also applies with respect to the application of English law pursuant to the Civil Law Act.
Jurisdiction and dispute resolution
What courts are empowered to hear maritime cases in your jurisdiction?
All courts are competent. However, the admiralty jurisdiction is exercised only by the high courts. The Malaysian Admiralty Court (established in 2010) has subject matter jurisdiction over admiralty and shipping matters.
Exclusive jurisdiction and arbitration clauses
Under what conditions will exclusive jurisdiction and arbitration clauses in shipping contracts be held as valid?
The courts lean towards upholding exclusive jurisdiction clauses and will stay an action brought in breach of the clause, unless strong cause is shown as to why the case should not be tried in the agreed jurisdiction. Arbitration clauses are recognised and given effect by the Malaysian courts.
What is the general state and prevalence of maritime arbitration in your jurisdiction?
Maritime arbitration is a common type of dispute resolution, as parties enter into charterparties which invariably contain arbitration clauses. There is a growing trend for the arbitration to have a regional seat (eg, Singapore or Malaysia). The increase in maritime arbitration held in Malaysia is to a great extent due to the promotional and educational efforts of the Kuala Lumpur Regional Centre for Arbitration, which has increased awareness of the availability of qualified arbitrators in Malaysia.
Recognition and enforcement
What regimes govern the recognition and enforcement of foreign judgments and arbitral awards?
Arrangements for the reciprocal enforcement of foreign judgments are available with Commonwealth countries. Malaysia is a signatory to the New York Convention and accepts registrations of arbitral awards from other member countries of the convention.
What regime governs the imposition of security measures on ships and in port facilities?
The applicable regime is the International Ship and Port Facility Security (ISPS) Code, which is incorporated into the Merchant Shipping Ordinance and enforced by the Marine Department.
What rules apply to the qualification and conduct of security officers on ships and in port facilities? Are armed guards allowed on ships?
The applicable regime is the ISPS Code, which is incorporated into the Merchant Shipping Ordinance and enforced by the Marine Department. The rules are silent on the use of armed guards.
What rules govern the provision of security information to port authorities?
These rules are set out in the ISPS Code, which is enforced by the Marine Department.