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German legislation

Extensive regulations for global transport carriers

Wide-ranging rules and regulations govern the construction, ownership and operation of a sea-going vessel in Germany. Besides the general provisions of public and civil law, special technical and commercial laws also have to be taken into consideration. Among others, these result from the fact that, as a global transport carrier, a sea-going vessel is subject to international standards which have in part been incorporated into German legislation.


Ship Rights Act and Code on Ship Registers


The legal framework for the purchase and the transfer of ownership of sea-going vessels registered in Germany is set forth in the Ship Rights Act (SchiffsRG). The rules on ship ownership contained in this act also lay down the conditions for creating a mortgage over a ship. The registration of this mortgage is essential as a precondition for the bank to provide ship financing. Also of importance in this context are the provisions of the Code on Ship Registers (SchRegO), which may be compared with the German Land Register Code. The ship register is maintained at the district courts, and is structured in the same way as the German land register with its three sections. The ship register fulfills both a private-law and a public-law function. The private-law function involves the classification of ships as sea-going vessels as well as the documentation and disclosure of ownership of, the lien over and of the usufruct of ships. The public-law function concerns the documentation of the right to fly the flag of a particular country in the form of a ship’s certificate of registry which is standardized pursuant to the Code on Ship Registers which has been issued pursuant to § 60 (2) of the Code.


Maritime Flag Law
 
The conditions governing the usage of the flag of a particular country, and therefore the nationality of sea-going ships, are contained in the Maritime Flag Law (FIRG). The provisions of this law are based on the idea that the ship flies the flag of the country in which it is registered. Accordingly, sea-going vessels which are owned by a natural person residing in Germany and with the nationality of Germany or of another EU country, or by a legal person or a trading partnership domiciled in Germany – and which are consequently registered in Germany – fly the German flag.

However, § 7 of the Maritime Flag Law, concerning bareboat flagging, provides for an exception to this rule by offering the possibility to separate registration and flag usage and to have a sea-going vessel registered under parallel registration in an open ship register (for instance in Liberia or Panama) for a period of two years.


§ 21 ff. Pfandbrief Act


The preconditions for the issuance of Ship Pfandbriefe, i.e. covered bonds backed by ship mortgages acquired, are set forth in the Pfandbrief Act. Special rules are stipulated in § 21 ff of the Pfandbrief Act which concern ships and ships under construction. These provisions are supplemented by the Regulation on the Determination of the Mortgage Lending Value of Ships (SchiffBelWertV), the subject of which is the determination of the MLV of duly registered ships and ships under construction.


Provisions of the German Income Tax Act


Of particular importance with regard to the taxation of the international operations of ships managed in Germany, moreover, are income tax law provisions. In accordance with the guidelines of the EU Commission for state aid, tonnage tax (§ 5a Income Tax Act (EStG)) was introduced in Germany in 1999. Tonnage tax is based on a special procedure for determining profits for the purpose of income and corporation tax, which are assessed according to the ship’s size (net tonnage as stated in the ship’s official measurement letter).

A sea-going vessel that touches the sovereign territories of different states on its journeys is subject to international law on various counts. A certain degree of harmonization of law is necessary for sea-going vessels to be operated commercially at international level, and ensures that merchant shipping is not restricted by arbitrary acts or by deviating requirements set by the different states to be passed .

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