Marshall Islands Legal Opinions For Ship Mortgages

Marshall Islands Legal Opinions For Ship Mortgages

In connection with term and revolving facilities, loan agreements, or shipping mortgages, called “Preferred Ship Mortgages,” for vessels registered under the flag of the Marshall Islands, the banks and financial institutions lending money to the vessel owners often require shipping mortgage legal opinions. In preparation for rendering such a legal opinion, Marshall Islands counsel must review and investigate the loan documents, organizational documents of the borrower, resolutions adopted and certified copies of corporate minutes or written consents relating to the organization of the borrower and to discussions held or actions taken with respect to the transactions contemplated by the loan documents, and any documents, agreements and certificates as considered necessary or appropriate in connection with the opinion rendered for that certain transaction.

Upon review of the relevant documents, Marshall Islands counsel may opine, among several other things, as to whether the borrower is the sole owner of record; that the Preferred Ship Mortgage duly filed constitutes a preferred mortgage in accordance with Marshall Islands maritime law; and that there are no liens of record against the vessel other than the Preferred Ship Mortgage.

Marshall Islands Lawyers will review the relevant documents and expeditiously draft a shipping mortgage legal opinion appropriate to the transaction. We can also draft the shipping mortgage itself and assist with the recordation of the shipping mortgage in accordance with Marshall Islands maritime law.

 

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Marshall Islands Ship Mortgages and Maritime Liens: Recording

Marshall Islands Ship Mortgages and Maritime Liens: Recording

Title 47, Chapter 3 of the Marshall Islands Revised Code (“MIRC”) governs Marshall Islands ship mortgages and maritime liens. It is referred to as the Preferred Ship Mortgage and Maritime Liens Act (the “Act”).

A sale, conveyance, hypothecation, mortgage or assignment of mortgage of any vessel is not valid against any person other than the grantor or mortgagor, his heirs or devises and persons having actual notice unless the instrument evidencing such transaction is recorded with International Registries, Inc. (“IRI”). 47 MIRC 302. A valid mortgage, which at the time it is made includes the whole of any vessel, will have a preferred status as of the date of its recordation. 47 MIRC 303.

International Registries, Inc. (IRI), headquartered near Washington, DC, in Reston, Virginia, in the United States, is the “central office of the Maritime Administrator, in the United States of America” for purposes of the Act, and its 25 offices in major shipping and financial centers around the world are duly authorized agents having full authority to record ship mortgages, conveyances, bills of sale, and other maritime documentation. 47 MIRC 302.

IRI will record such instruments in the order they are received in appropriate indexes showing: (a) the name of the vessel; (b) the names of the parties; (c) the time and date of receipt of the instrument affected; (d) the interest in the vessel transferred or affected; and (e) the amount or amounts of the direct or contingent obligations, including advances and repayments, that are or may become secured by the mortgage. 47 MIRC 302.

IRI will not record a mortgage unless it states the interest of the mortgagor in the vessel and the interest so mortgaged. Further, a mortgage or instrument of release or discharge will not be recorded unless it bears an apostille issued by a competent authority of a State Party to the Hague Convention of 5 October 1961, as amended, or has been acknowledged or is submitted with such other proof of due execution. 47 MIRC 305.

IRI will record a mortgage or related instrument submitted to it in proper form and will, upon request, issue a Certified Extract of the Preferred Mortgage Index of the public register as evidence of recordation of a Preferred Ship Mortgage. Furthermore, upon request, IRI will issue a Certificate of Ownership and Encumbrance (“COE”) setting forth all recorded mortgages, encumbrances and related instruments with respect to a vessel registered in the Marshall Islands as of the time and date of its issuance. 47 MIRC 307.

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Case Brief: Shareholder Derivative Suit – DryShips, Inc.

Case Brief: Shareholder Derivative Suit – DryShips, Inc.

In its October 5, 2011 opinion, the Marshall Islands Supreme Court affirmed the decision of the Marshall Islands High Court in a derivative suit whereby the Plaintiff, shareholder of DryShips, Inc. (a Marshall Islands corporation headquartered in Athens, Greece), sued the Board of Directors dismissing Plaintiff’s amended complaint. Plaintiff alleged that Defendants breached their fiduciary duty of good faith, committed waste by approving transactions that were not the product of good faith business judgment, and were unjustly enriched at DryShips’ expense. Plaintiff, however, did not make a demand on the DryShips Board before instituting the action against Defendants.

In the amended complaint, Plaintiff asserted that any such demand would have been “futile and useless … because the Board is incapable of making an independent and disinterested decision to institute and vigorously prosecute this action.” Absent a demand on the Board, Defendants moved the High Court to dismiss the amended complaint. The High Court agreed with Defendants and dismissed the amended complaint, concluding that it did “not contain particularized allegations that raise a reasonable doubt that at the time the lawsuit was filed a majority of the directors were disinterested and independent or that the challenged transactions were the product of a valid exercise of business judgment.” Although Plaintiff was permitted to move for leave to amend the amended complaint, he chose to appeal the High Court’s decision.

Applying Delaware law as required by the Marshall Islands Revised Code (52 MIRC, Part I, § 13), the Supreme Court affirmed dismissal of the amended complaint concluding that Plaintiff did not meet the two-part test for demand futility set forth in Aronson v. Lewis, 473 A.2d 805 (Del. 1984), overruled in part on other grounds by Brehm v. Eisner, 746 A.3d 244 (Del. 2000). Under that test, courts “must decide whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment.” Aronson, 473 A.2d at 814.

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