EU/International legislation

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.

United Nations Convention on the Law of the Sea

The most important agreement in international maritime law is the United Nations Convention on the Law of the Sea of 1982. This convention is, so to speak, a kind of constituton of shipping; it is the responsibility of the International Tribunal for the Law of the Sea in Hamburg to ensure that it is observed. Under this convention, the flag states are given the main responsibility for the ships sailing under their flag. In this way, the powers of intervention of other states during the journey of a ship through the exclusive zones of coastal states are limited.

The IMO and its standards

In addition, the International Maritime Organisation (IMO) defines specific framework conditions for shipping. The IMO currently counts 166 signatories, and pursues the objective of regulating at international level all non-economic issues that concern commercial shipping and improve safety at sea and marine environment protection. Special mention should be made here of the provisions of the Convention for the Safety of Life at Sea (SOLAS) and the standards contained in the Convention for the Prevention of Pollution from Ships (MARPOL). Moreover, the IMO has developed a number of agreements especially for shipping to harmonize civil and commercial law .

European fundamental freedoms in shipping

The European Union (EU), too, exerts an influence on the regulations that govern the operation of sea-going vessels. The fundamental freedoms set forth in the European Convention for the Protection of Human Rights and Fundamental Freedoms (free movement of goods, freedom of movement of persons, free movement of services, and free movement of capital and payments) are of outstanding importance for commercial shipping. Furthermore, the operation of ships is governed by regulations and directives passed at European level; these concern, for instance, customs law, value added and consumer tax law, competition law, commercial and civil law, and environmental law.

Panama, Liberia, the Bahamas

Of importance in connection with ship finance, moreover, are the legal systems of the states which operate an open ship register, such as Panama, Liberia and the Bahamas. The registration of a vessel in such a register, or a temporary flagging, entitles the shipowner to operate the vessel according to the regulations of that state. However, a ship mortgage on a ship registered abroad must – to be included in cover for a Pfandbrief – meet the stringent conditions of § 22 par. 5 of the Pfandbrief Act with reference to the laws of the state in whose register the ship is registered. The ship mortgage loan contract itself is often subject to English law even when a foreign borrower is involved.  

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