With shipping in Greece being a significant sector for the national economy, progress in this particular field continues unabated. Recent changes brought about by the new Code of Private Maritime Law have indeed altered the landscape on various issues and improved many shortcomings of decades regarding the legal operation of the shipping sector. Below, we mention the 10 most frequent questions that arise when discussing maritime matters and provide answers in a simple and understandable manner.

1.How can a ship be acquired today?

To answer this fundamental question, we must first distinguish between the acquisition of the ship as original (being made from scratch without the ship previously belonging to another) and derivative (the exact opposite). Thus, a ship can be acquired in an original manner today through the following methods:

• By construction, meaning through a contract between the shipbuilder and the shipowner whereby the former will build the ship on behalf of the latter. The shipbuilder may construct the ship for themselves, which is legally allowed, essentially making it a self-contract.
• By prescription, as we have mentioned in another text, when someone, by using the ship as if it were their own for a considerable period, acquires ownership from another, even though it did not initially belong to the user. Although the prerequisites do not change significantly from what we have mentioned, it is important to note that for regular prescription, a 3-year period of possession is prescribed, while for extraordinary prescription, on the contrary, a 10-year period is prescribed, which shortens the deadlines.

On the other hand, to acquire a ship derivatively, the following methods are provided by law:

• By transfer of the ship, due to a certain contract, which we will discuss more about immediately below.
• By inheritance, wherein this case, the same applies as with real estate, meaning that the acceptance of inheritance containing a ship must be transferred to the registry (equivalent to the mortgage office / Land Registry but for ships).
• By open auction, meaning if the shipowner has debts and forced seizure is imposed on the ship, it will be auctioned, and the highest bidder will automatically become the owner of the ship. However, the award report must also be recorded in the registry.

2. What should a valid ship transfer contract contain?

In essence, the transfer of a ship is nothing but a classic contract of Civil Law (such as sale, donation, exchange, etc.). Therefore, the requirements of the law do not change significantly; they are simply adjusted to the peculiarities of the ship.

Thus, the transferor of the ship must be its owner, something that can be easily verified through an investigation in the corresponding registry where the ship is registered. It is important that if the ship is seized, it cannot be transferred without the consent of the creditors of the shipowner who have imposed the seizure. Moreover, a ship cannot be transferred from a person who does not own it to a buyer, who, however, acts in good faith = ignores that the seller is not the owner of the ship (this can only happen with movable property under certain conditions).

Furthermore, a written agreement regarding the transfer of the ship is required, which can be done not only with a notarial but also with a private document. Therefore, the parties are free to choose the type of agreement, which they must record in the registry because if it is not registered, the transfer will be as if it never happened. From this, we see that with the registration of the agreement in the registry, the transfer is considered legally complete = the buyer does not need to take over the ship to be considered the owner.

3. Who is the shipowner exploiting the ship?

This term creates practical problems as it is confused with others. So, to put it simply, the shipowner is the one who exploits a ship that belongs to them for their own account = they can be a natural person and/or a company, a legal entity. The identity of the ship’s owner is easily ascertainable through an investigation in the registry because the name of the shipowner will be registered in the ship’s share with the corresponding notation.

It is not excluded for several individuals to jointly hold undivided shares of a ship, so all of them would be considered (and would be) shipowners of that ship. Another point to note is that if someone owns multiple ships, they do not have one ownership but as many as the ships they own. This matter is important for the debts of each ship and for tax purposes = each ship is treated as a separate entity, somewhat like a company.

As mentioned earlier, to be considered a shipowner, one must exploit the ship for their own account. However, the law does not mean that the shipowner is required to personally exploit the ship = they may use intermediaries for the exploitation of the ship, such as ship managers/charterers, which we will see below. Hence, it is important to distinguish when someone is exploiting the ship for their own account and when for the account of another (in the latter case, they are not considered a shipowner).

4. And their liability?

The rule here is that the shipowner is liable for the acts/omissions in contracts they conclude with others, as well as if they cause any wrongdoing in the course of their professional activities. Furthermore, the shipowner has additional liability under the law:

• For the acts/omissions of the captain during the performance of their duties. If the captain acts against third parties in violation of restrictions imposed by the shipowner in their contract, then the shipowner will not be bound by the captain’s acts only if the restriction was known to the third parties or if they were supposed to know.
• For the acts/omissions of the other crew members, provided that they occur during the performance of their work. Thus, actions of crew members entirely unrelated to their work (e.g., in a different location or outside their working hours) are not considered related to it and thus do not incur the shipowner’s liability for compensation against third parties.
• Moreover, if the shipowner transfers the ship to another, they will no longer be jointly liable with the buyer (the new shipowner) for the burdens/taxes/general debts that the ship had until the time of transfer. This is a legislative innovation that facilitates transactions and somewhat alleviates the shipowner’s liability at this point.
• It goes without saying that the shipowner is liable to the employees/crew members of the ship for wages, working conditions, legal permits, and a healthy work environment. For the relevant rights of the seafarer during their work, you can refer to our relevant text where we discuss them in detail.

5. How does it differ from a ship manager?

In contrast to the shipowner, a ship manager is someone who operates a ship belonging to another for their own account. For this reason, the ship manager needs to have the technical management of the ship = to have specialized knowledge. Of course, the ship manager does not need to exercise technical management themselves but can do so using the crew that mans the ship, such as the captain/navigator, etc.

For ship management to be valid, the relevant agreement between the shipowner and the ship manager = the declaration of ship management must be deposited with the port authority of the place where the ship is registered (something that can now be done electronically). However, the ship manager (legally) validly operates the ship even without this specific declaration being registered because it only matters in relation to third parties and not in the shipowner-ship manager relationship, where what they agreed upon applies.

If the above declaration has not been deposited with the port authority, then according to the law, it is considered that the shipowner is the one who operates the ship in question and not the ship manager. Thus, the former of the two will also be the one who will bear the liability we mentioned in the previous question, unless they prove otherwise = that is, that the ship manager is the one who actually operates the ship. The same is entitled to be proved by anyone who has a legal interest based on the law, such as the ship manager’s creditors or even the ship manager themselves.

6. Is it different from the ship agent?

The role of the ship agent is different from that of the shipowner and the ship manager. Indeed, the ship agent is an independent professional who takes on several responsibilities regarding the vessel, such as repairs, routine expenses, cargo management, etc. Their role is primarily administrative and executive regarding ship matters.

For this reason, the ship agent requires special authorization from the shipowner and/or the ship manager to act on their behalf. The ship agent binds the vessel with their actions and contracts with others. This special authorization mentioned above is granted to the ship agent through a ship agency agreement signed by the agent with the shipowner/ship manager.

As mentioned above, the limitations on the authority of the ship agent should be known to third parties so that the shipowner and/or ship manager can be relieved of liability if the agent acts beyond these limitations.

The ship agency agreement can be made orally according to the law=a written form is not required. It is obvious that the ship agent is entitled to compensation for the work and services provided on the vessel, as well as reimbursement for all expenses incurred on behalf of the vessel (e.g., if they prepay a quantity of food for the vessel’s supplies).

7. I want to collaborate with others on a ship. How do I proceed?

There are many who are interested in this specific sector. A common corporate form in the shipping industry is the type of co-ownership, where multiple co-owners jointly operate a ship.

The critical element of joint operation of the ship requires an agreement among the majority of shipowners (which, however, does not need to be in writing but can be verbal). Co-ownership as a company does not have legal personality, but it has its own property, which is clearly distinct from the individual property of the co-owners who are members of it. The shipowners are solely responsible for managing the co-ownership because decisions are made only by them=third parties who are not members of the company are not allowed to enter the management.

If there is an absolute majority of shares in making relevant decisions, the shipowners can represent the company in transactions and bind it by entering into contracts with third parties. If a co-owner wishes to transfer their share to another/third party, they can do so freely, and if there are any restrictions imposed by the corporate agreement, they apply only among the co-owners and do not apply against others.

8. How are the co-owners liable?

Although co-ownership as a company resembles more a partnership under commercial law (where unlimited and joint liability of the partners for the debts of the company is provided), however, a variation of the above rule applies to co-ownership. Thus, each co-owner is liable up to the amount of the share they hold in the co-ownership for its debts to third parties or even to the other co-owners.

For example, if a co-ownership member holds a 30% share and the co-ownership’s debts to third parties amount to 100,000 euros, then the maximum amount that the member will be called upon to pay is 30,000 euros exactly due to the amount of their share. Thus, the individual property of the co-owners is protected from superficial business moves that could lead the co-owners to financial ruin due to unlimited liability.

It is important to note that agreements that increase the liability of the co-owners or make it unlimited are void and do not have legal effect between them or against third parties. The opposite happens in the internal relations among the co-owners where their liability starts from the amount of their share and can be increased by a subsequent agreement among them; this concerns their liability regarding expenses, damages to the ship, etc.

9. How are claims secured on ships?

Due to the high economic value of the ship, the law treats it as movable property, but (on the ship) a mortgage can only be registered exceptionally under the general rules of Civil Law. Specifically, regarding maritime mortgages on ships:

• These are distinguished as simple and preferred mortgages. Essentially, the latter provides some additional rights to the mortgagee, such as taking over the operation of the ship (similar to the shipowner), or selling it without auction = by direct contract with another buyer without involving more parties.
• Both types of mortgages are established in the same way, by registering the relevant document in the maritime registry of the region where the ship is registered, to ensure publicity to third parties.
• The simple maritime mortgage can be established (also) by a declaration of the shipowner before a notary public, stating that he grants a mortgage on the ship for an existing claim.
• The preferred maritime mortgage can only be established by a contract between the shipowner and the mortgagee, again before a notary public, following the relevant provisions of the law.
• In general, if a simple maritime mortgage has been established on a ship, it can be converted into a preferred mortgage, while the opposite is not possible.
• What is critical in mortgages is the order in which they have been registered = the earlier a mortgage is registered, the higher priority it receives over the others, and thus the mortgagee with the highest priority will receive a larger sum after the auction of the ship.

10. What is the difference compared to maritime privileges?

The concept of maritime privilege is quite different from that of mortgage: this is because certain monetary claims against the ship as an economic unit are satisfied as a priority in the process of forced execution. This is exactly the notion of maritime privilege, which is an ‘enhanced’ monetary claim.

Maritime privileges also operate quite differently from mortgages, precisely because they do not need to be registered in the registry or maritime archive to have legal effect. They arise from the moment a claim against the ship is created, which they secure. Furthermore, they are directly provided by law and therefore cannot be created/strengthened/abolished by private will, only for the claims provided by law.

Moreover, maritime privileges take precedence over mortgages = the creditor who holds a maritime privilege will be satisfied first from the ship’s property, followed by the mortgagee. However, if the claim secured by the maritime privilege, for some reason, is extinguished or limited, then the maritime privilege, which is fully dependent on the claim, is correspondingly abolished or restricted.

Next to the client and his needs.

Athina Kontogianni-Lawyer

The above does not constitute legal advice, and no responsibility is assumed for it. For more information, please contact us.