Shipping Lawyer Ship Finance and Maritime Mortgages

Question 1

Under U.S. law, what statute governs the creation and enforcement of preferred ship mortgages?

Accepted Answer

Ship Mortgage Act of 1920 (now codified in 46 U.S.C. Chapter 313)

Answer

The Ship Mortgage Act, now codified in Chapter 313 of Title 46 U.S.C., governs preferred ship mortgages on U.S.-documented vessels and their enforcement in admiralty.

Question 2

What is a 'preferred ship mortgage' and what priority does it hold over other liens?

Accepted Answer

A ship mortgage that is duly recorded and preferred over all maritime liens except seamen's wages, salvage, and tort liens

Answer

A preferred ship mortgage is one recorded with the U.S. Coast Guard that has priority over all maritime liens except crew wages, general average, salvage, and maritime torts.

Question 3

What is a 'flag state' and why does it matter for ship financing?

Accepted Answer

The country of registration that determines the vessel's legal identity and which laws govern its mortgage

Answer

The flag state is the country in whose ship register the vessel is enrolled; it determines which country's laws govern registration, mortgage validity, and crew requirements.

Question 4

What is a 'bareboat charter registry' (BIR) and how does it affect ship mortgages?

Accepted Answer

A registry allowing a vessel registered in one country to operate under another flag for charter purposes

Answer

A bareboat charter registry (also called a parallel registry) allows a vessel on bareboat charter to fly the flag of the charterer's country while the primary mortgage registry remains in the home state.

Question 5

What is 'assignment of earnings' in ship finance?

Accepted Answer

A lender's security interest in the vessel's freight earnings and charter hire payments

Answer

Assignment of earnings is a security arrangement giving the ship mortgagee a priority claim over freight revenues and charter hire payable to the vessel owner.

Shipping Lawyer Practice Test

Shipping Lawyer Practice Test

Shipping Lawyer Ship Finance and Maritime Mortgages