Document Type : Original Article
Authors
1
Professor of Law, Faculty of Law, Shahid Beheshti University, Tehran, Iran Corresponding Author Email: gh-hamed@sbu.ac.ir
2
Ph.D. Candidate, Faculty of Law, Shahid Beheshti University, Tehran, Iran
Abstract
Shipping is a capital-intensive industry and is widely regarded as a hallmark of developed economies. However, securing financing for shipbuilding orders presents one of the most significant challenges for both shipyards and shipowners as buyers. On the one hand, investors typically extend financial facilities only upon receiving sufficient and reliable guarantees for the repayment of principal and interest. On the other hand, those seeking financing tend to utilize the construction project itself as collateral to maximize the credit secured. Consequently, mortgaging ships under construction has become a desirable and essential method to ensure the repayment of principal and interest associated with the financing of vessel construction. The Iranian Maritime Act recognizes a vessel under construction—prior to its completion and launching—as having the status of a ship and accepts its mortgage as a maritime mortgage, despite lacking detailed regulations or specific criteria pertaining to this process. This research underscores that a maritime mortgage constitutes an independent contractual arrangement and is not merely a subdivision of civil law mortgage contracts. It concludes that, for maritime mortgages—including those on vessels under construction—formal registration of the lien is a prerequisite for validity. However, given the peculiar nature and specific requirements of this field, the delivery of the vessel is not a condition for the validity of such liens. This study further demonstrates that the Maritime Act’s current solution—limiting the remedy for default to judicial sale—is misaligned with industry needs and warrants revision. Failure to register a ship results in the removal of the mortgage from the scope of maritime law regulations. Moreover, dual registration of vessels emerges as an additional obstacle to mortgage enforcement. Iranian maritime law currently lacks explicit provisions in this regard; once a ship is registered within Iranian jurisdiction, it is considered an Iranian vessel regardless of whether it was previously registered elsewhere. Furthermore, conflicts of law—in particular, diverging national interpretations of priority rights and privileges—pose significant obstacles to the enforcement and realization of remedies. Under conflict of laws principles, the law of the court executing the auction and judgment assumes jurisdiction, which may differ from Iranian law, potentially affecting the priority hierarchy and rights recognition. Additionally, sanctions imposed on banking and shipping sectors can impede the full enforcement and continuity of maritime mortgages, Contrastingly, under English maritime law, a vessel under construction is not recognized as a ship until the completion and delivery to the buyer, and therefore, it is not subject to the provisions of the Merchant Shipping Act 1995. Nevertheless, mortgaging such vessels remains feasible under common law principles of personal property and equitable doctrines, often through two separate mortgages grounded in common law and equity, rather than maritime mortgage regulations. These alternative legal mechanisms warrant further examination.
Keywords
Main Subjects
)