Current developmentsi Developments in policy and legislation
One of the most important developments in transport finance over the past several years was enacted by Decree-Law 8/2009, of 7 January, which amended the Commercial Code to include the credits guaranteed by mortgages or pledges over the vessel in the third position of the ranking of privileges over the vessel.
This measure was followed, in 2011, by Portugal's withdrawal from the Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages, adopted in Brussels on 10 April 1926.
In fact, up until those legislative measures were introduced, mortgages would be ranked in a less favourable way (from the credit institutions' perspective), which was presumably preventing registrations in Portugal (and in MAR). These changes were a turning point for creditors, which to some extent contributed to the growth of MAR.
Very recently, Decree-Law 43/2018, of 18 June, created a National System for Vessels and Maritimes, which aims at centralising and publicising all registrations and certifications concerning maritime activity. Shortly after, DL 92/2018 enacted a simplified register of vessels and crafts.
DL 92/2018 is currently a fundamental piece of the legislative framework in the ordinary register. DL 92/2018 addresses a variety of register matters, such as bareboat charter in, the formalities of bills of sale or specificities of the mortgages. The provisions of DL 92/2018 on the register of vessels entered into force on 1 January 2019.
On a different matter, DL 92/2018 put into place a special tax regime where the tax base is based on the tonnage of the ships and crafts (tonnage tax).ii Trends and outlook for the future
Portugal is regaining its importance in the shipping sector, and specifically in the asset finance industry through MAR. In fact, the second registry in Portugal has undergone a steady and sustainable increase over the past years and is drawing the attention of shipowners and finance parties alike. At the end of 2018, MAR had 662 ships. In 2017, MAR had 562 vessels and in 2016 MAR had 491 vessels (40 commercial yachts, 73 recreational craft and 378 commercial vessels), with a gross tonnage of 12,076,294. At the end of the previous year of 2015, a total of 399 vessels were registered, with a gross tonnage of 7,925,042. The average age of the ships dropped from 11.9 years in 2015 to 11.8 in 2016, and currently it is 11.7 years. In our experience, lenders from jurisdictions as varied as Spain, China and Japan are relying on Madeiran mortgages to secure financing.
MAR is not only impressive in numbers. Its safety and quality standards maintain sound recognition worldwide. As a consequence, vessels flying the Portuguese flag were included, for the first time in 2017, in the index Qualship 21 of the United States Coast Guard. Likewise, Portugal maintained its position in the White List of the Paris MoU on Port State Control, which will be valid until June 2019.
The growth of MAR has been drawing public attention to maritime issues, particularly regarding the concerns of creditors in the financing of vessels and tax issues from the exploitation of the same. As a consequence, the ordinary register is seeking to mimic MAR. On the other hand, there are ongoing – and much needed – modernisation efforts in areas adjacent to the shipping register.
A broad, planned reform of the legal framework applicable to the maritime and transport sector in Portugal is long overdue. The legislative measures that came to light in 2019 are aligned towards the correct goals but, to some extent, lack in coherence. Notwithstanding this, the current refocusing of legislative efforts in the shipping sector is very exciting. We can anticipate that this once forgotten sector will increasingly be more dynamic.