Article 58 of the Italian Consolidated Law on Banking regulates a particular type of assignment, namely, bulk assignment of assets and legal relationships. Such category covers also any debts owed to banks and other financial institutions from shipowners, arising from loans granted to the latter for the purchase of ships.
Said assignment has been used very often recently to allow banks to divest of their financial exposure in the shipping sector. The transaction is structured as follows: a bank agrees to transfer all its receivables from shipping loans “in bulk”, typically to an investment fund, under a contract of assignment entered into by a simple private deed (without notarial certification).
Paragraph 2 of aforesaid Article 58 reads: “the assignee bank shall give notice of the assignment by entering it in the local companies’ register and publishing it in the Official Gazette of the Italian Republic”.
With respect to assigned debtors, the publication in the Official Gazette has the effect set out in Article 1264 of the Italian Civil Code (“assignment shall be enforceable against the assigned debtor either by acceptance of such assignment by the debtor or by notifying the debtor of the assignment”). Furthermore, paragraph 3 of Article 58 reads: “Liens and guarantees of any kind, regardless of who has issued them, or in any case existing in favour of the assignor, as well as the entries in the public registers of the deeds of purchase of assets acquired under finance leases included in the assignment shall retain their validity and their ranking in relation to the assignee, without any formality or special entry being required”.
Therefore, any guarantees, including ship mortgages, shall be automatically transferred to the assignee of the receivables, without any further formality being required. This means no deed will be required for the purpose of amending and/or acknowledging the mortgage.
However, an issue has emerged which the law still does not seem to have resolved, namely, the fact that, in the deed of mortgage registered with the Register of Ships, reference is still made to the assignor as the original mortgagee. Indeed, a ship mortgage may only be amended by filing a public deed or a certified private deed with the competent Port Authority under Article 2657 of the Civil Code (“Registration shall only be carried only by virtue of a judgment, a public deed or a private deed certified by a Notary or legally ascertained”).
As noted, the assignment contract at issue is entered into by a “simple” private agreement, with no filing with the competent Port Authority being required in order to update the mortgagee details. The non-update of such details with the Register might, however, cause problems in case of the ship being seized in a non-Italian port.
In such case, the court ordering the seizure should be provided with an extract from the Register including the details of the previous mortgagee (the assignor). This would leave the current mortgagee without legal protection, with him being prevented from protecting its rights before the court ordering the seizure.
All the above reasons lead to recognising the necessity to update the deed and, accordingly, to enter the new mortgagee’s details in the Register of Ships.
However, the law does not seem to clarify the procedure to be followed and there is some difference of opinion among Italian Port Authorities in that respect, of which we give some examples below.
The Port Authority of Naples (Naval Property Office) seems to advocate a less "strict" approach. Said Authority indeed argues that, since the mortgage has already been transferred to the new mortgagee without any formality or registration, in order to update the mortgagee’s details, it will be sufficient to file a copy of the Official Gazette whereby the assignment was notified, together with a note, drawn up in two originals, including details of the debtor and the creditor, the creditor’s address for service, the details of the deed, the maximum secured amount and the ship identification details. In this way, the notice of assignment published in the Official Gazette should be deemed as a mortgage novation and such novation as a registration.
Again, starting from the assumption that the mortgage has already been transferred as a result of notification in the Official Gazette, the Port Authority of Palermo – as far as we know – requires an application for an entry of change of mortgagee. Such application required by the Port Authority of Palermo seems to differ from the note required by the Port Authority of Naples from a formal point of view only (involving a direct request to the Port Authority), their content being however identical. However, reportedly, the Palermo Port Authority expressed its opinion only verbally. To date, we have no evidence of any case where the issue at stake has been dealt with in writing.
The Port Authority of Genoa appears to be the "strictest" port authority. Indeed, although admitting that a mortgage is in any event transferred as a result of the notification in the Official Gazette, it points out that, for the purposes of registration, reference should be made to Article 2657 of the Civil Code, which requires a judgment, a public deed or a notarised private deed.
Consequently, the Genoa Port Authority would seem to believe that the execution of the assignment contract as a public deed or a notarised private deed as well as the filing of a true-to-the-original copy of the same and of a double note including the above details shall be a necessary and sufficient condition. If not possible, the Genoa Port Authority would (as far as we are aware) seem to allow the filing of a deed (again, in the form of a public deed or a notarised private deed) whereby the assignor-mortgagee acknowledges and give notice of the assignment of the mortgage-backed debt.
The above leads to the conclusion that, in light of the "uncertainty" surrounding the issue at hand, the procedures to be followed in relation to any new mortgagee may differ depending on the Port Authority in whose Ship Register a ship is registered.
This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Emanuele Caretti.
