On the draft Council decision on the conclusion, on behalf of the European Union, of the United Nations Convention on the International Effects of Judicial Sales of Ships

The United Nations Convention on the International Effects of Judicial Sales of Ships (the ‘Beijing Convention on the Judicial Sale of Ships’ or the ‘Convention’) was adopted by the United Nations General Assembly on December 7, 2022. It establishes a harmonized regime for the international effects of judicial sales of ships. This means that when a ship is sold in a court-ordered sale (judicial sale), under certain conditions conferring "full title" (free from mortgages, liens, and encumbrances), the sale has the same legal effects in all Contracting States.

The Convention requires the ship registry to deregister or transfer the registration at the request of the buyer after such a sale. It prohibits the seizure of the ship for pre-existing claims extinguished by the sale and grants exclusive jurisdiction to the courts of the State where the judicial sale takes place to decide on objections to the sale (other States cannot initiate new proceedings).

The Convention reduces uncertainty and fragmentation in cross-border maritime trade, ensures that a judicial sale in one country results in a reliable title recognized in others, facilitates trade, finance, ship sales, and protects creditors.

As rapporteur, I welcome the proposal of the Commission to the Council of the EU to adopt a decision on behalf of the EU to conclude the Convention. This means that the EU becomes a party to the parts that fall under EU competence. However, the adoption of the Convention raises certain legal issues that require both academic and political attention and also future consideration.

First, maritime law, ship registration, ship sales, judicial sale procedures, and related registration matters have historically largely fallen under national jurisdiction, reflecting national legal traditions, registration authorities, and policy choices. By having the EU conclude the Convention and obliging Member States to automatically recognize foreign judicial titles to sale upon ratification, Member States relinquish significant control over an area that touches upon their national sovereignty in the areas of maritime registration, property rights, insolvency law, and enforcement of creditors' rights.

Second, under the Convention, the courts of the State of sale have exclusive jurisdiction to hear appeals against the judicial sale. This means that other States where the ship may end up cannot re-examine the sale. For Member States, this limits their ability to protect local creditors or stakeholders (e.g., seafarers, tax authorities, suppliers, environmental regulators) who may have claims or interests if the ship is flying a different flag.

Third, uniform recognition of the "full title" in judicial sales could encourage operators to advocate for ship sales in jurisdictions with lax regulations or little oversight, knowing that the ship will be accepted everywhere. Over time, this could encourage "regulation shopping", weak standards, and flag-of-convenience dynamics – which could undermine stricter regulations within Member States. It could also undermine labour standards, safety, and environmental compliance if judicial sales and re-registration become too easy and subject to minimal oversight.

Ways to mitigate these concerns could be to include a broad exception for government policy/registry policy, allowing a Member State to refuse recognition or transfer of registration if there are interests related to the registry or the public interest such as flagging, safety, environmental standards, labour, taxes, national security. This would ensure that the recognition of foreign judicial sales does not override national safeguards for the public interest and regulations, and prevents "regulation shopping".

One could also consider allowing the reopening or review by the courts of the destination State under certain conditions (e.g., claims by creditors, violations of environmental or labour standards, fraud, tax evasion), even if the sale took place in another state. This limits the "exclusive jurisdiction" clause, by maintaining the ability of national courts to protect local stakeholders, enforce national law, and prevent abuse.

A transparency requirement and prior notification to all interested parties (creditors, seafarers, flag State authorities) in all potentially affected States, not just through a register/depository – with a mandatory consultation or objection period before the effects of the sale are recognized could be considered. This would ensure fairness and protects the rights of stakeholders, not just buyers and creditors.

The rapporteur declares under his exclusive responsibility that he did not include in his report input from interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register, or from representatives of public authorities of third countries, including their diplomatic missions and embassies, to be listed in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.