Contributed By Gurbani & Co
The Maritime Port Authority of Singapore is the port authority, port regulator and port planner, and basically regulates port activities in Singapore. This does not involve monitoring reports from owners. However, where there is movement of vessels into/out of the port, notifications and filings are required by the Maritime Port Authority of Singapore. Forms for filing can be found on their website: mpa.gov.sg/web/portal/home/finance-e-services/forms/port-of-singapore.
The Competition (Block Exemption for Liner Shipping Agreements) Order exempts liner shipping agreements from Section 34 of the Competition Act which otherwise prohibits agreements, decisions and concerted practices that have as their object or effect the prevention, restriction or distortion of competition in Singapore. The exemption is in effect until 31 December 2020.
To qualify for exemption, the liner shipping agreement must adhere to the following conditions:
Market limit is defined by reference to the aggregate market share of the parties to a liner shipping agreement in a market, collectively not exceeding 50%, calculated with reference to:
As at the end of 2019, Singapore was ranked fifth out of the top ten flag states, with 97,816,315 gross tonnage registered under its flag. In terms of number of vessels, Singapore is ranked second with 4,962 vessels.
Singapore has ratified the following maritime conventions:
The following classification societies are recognised in Singapore:
In addition to the usual (permanent) registration, provisional registration of a vessel is permitted. Provisional registration is valid for one year without the possibility of extension. The vessel must be transferred to the permanent register before the end of this period. No fee is charged for the transfer.
Profits derived from the operation of a Singapore vessel are exempt from Singapore income tax.
Owners of Singapore flagged ships must be Singapore citizens/permanent residents or bodies corporate incorporated in Singapore.
Singapore does not have any cabotage laws.
Singapore has a well-developed shipping finance sector and offers shipping players both traditional and innovative financing solutions.
There are more than 20 major banks with shipping finance portfolios based here and a wide array of alternative financing options are available, including shipping trusts and listing on the Singapore Exchange (SGX). The accessibility and availability of financial institutions, boutique shipping investment banks and private equity arrangers with operations in Singapore makes this a preferred location for many owners, operators and brokers.
A First Priority Statutory Mortgage (in the form prescribed in the Singapore Merchant Shipping Act) must be registered with the Registry of Ships, Singapore.
A charge under Section 131 of the Singapore Companies Act must also be registered with the Singapore Accounting & Corporate Regulatory Authority within 30 days of the creation of the First Priority Statutory Mortgage.
Financial institutions or banks typically require the borrower to provide security for ship finance. Securities obtained may include:
Other than ship mortgages, some of the usual collateral securities include:
Information regarding the ship and her mortgage status is available to the public, and such information may be obtained upon application and payment of a prescribed fee. The link to the Singapore Registry of Ships is: mpa.gov.sg/web/portal/home/singapore-registry-of-ships.
The Registry of Ships, Singapore, will issue the following transcripts:
It is possible to obtain certain certificates on the same day as they are requested (depending on the type of certificate requested).
The Continuous Synopsis Record Certificate is required for reflagging or registration of second-hand ships. An application can be made to the Maritime and Port Authority of Singapore for the certificate, using CSR application form 2.
Registration fees payable to the Registry of Ships, Singapore, are charged according to the gross tonnage of the vessel at SGD48 plus SGD1 per 100 gross tons or part thereof. (Please note that goods and services tax is currently 7%, chargeable on the said registration fees).
It is possible for a vessel to be subject to several mortgages. The Singapore Merchant Shipping Act allows for more than one mortgage to be registered against a vessel (there is no express requirement in the said act that the consent of the existing mortgagee is required). Please note, however, that most (if not all) mortgage documents will contain a prohibition against the creation/registration of subsequent mortgages by the owner without the prior written consent of the existing mortgagee, and any breach of this prohibition will result in an event of default under the said mortgage documents.
If a “pledge agreement” amounts to a mortgage of a vessel under the provisions of the Singapore Merchant Shipping Act, it will be subject to registration and may be registered against the ship.
The ranking of priorities as typically applied by the Singapore court is as follows:
1) port dues;
2) sheriff’s costs and expenses;
3) plaintiff’s legal costs of arrest;
4) maritime liens that arose prior to arrest;
5) possessory liens;
6) maritime liens post-arrest;
7) mortgagee’s claim; and
8) claims by other claimants having statutory liens over the vessel.
Registered ship mortgages rank below maritime liens but above all other unsecured claims.
Under the provisions of the Singapore Merchant Shipping Act, the transfer of a vessel will not be registered by the Registrar of Ships if there is any unsatisfied mortgage entered in the vessel’s register, unless, the vessel or any share therein is transferred to a person qualified to own a ship in Singapore, and the mortgagee has given its consent in writing. Once a mortgage has been discharged, the owner is required to update the Registry.
The Maritime and Port Authority of Singapore is empowered to distrain or arrest a vessel for non-payment of dues to the Authority and it may further sell the vessel and use the sale proceeds towards satisfaction of such outstanding dues.
Bank loans secured by a mortgage are favoured by owners with smaller-sized fleets, while owners with a larger fleet of vessels may utilise a business trust and raise funds through the trust.
Fleet mortgages and syndicated loans are quite commonly used in Singapore. Their use depends on the size of the loan facility and the requirements of the lender and/or borrower.
Banks do take into consideration the flag of the vessel, as the law of the flag will determine the nature and characteristics of the mortgage, which is a fundamental part of the bank’s security. A bank will want to ensure that the vessel and mortgage registration systems (as well as the legal system) of the vessel’s flag state are acceptable to it (or at the very least, do not impose or present any onerous or unusual terms or obstacles to the protection and/or enforcement of the bank's security interests).
It does appear that securitisation is used more than before, as owners prefer to use their cash for other purposes.
The decrease in the participation of capital markets in shipping transactions over the past several years may partly be attributable to depressed freight rates and oversupply of ships. Stagnant oil prices have also had a particular impact on the offshore oil and gas sector. Singapore has a substantial share of ownership and interests in the offshore oil and gas sector and the collapse of this sector in the last few years has affected lenders and the appetite for lending to this sector.
The International Labour Organisation's (ILO) and International Maritime Organisation's (IMO) current conventions relating to labour laws have been ratified and are enforced in Singapore.
Owners of Singapore-registered ships can employ officers and crew of any nationality. However, all crew must meet the standards of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW) 1978.
There is no minimum wage required by Singapore law, but since Singapore has ratified the IMO’s Maritime Labour Convention, any minimum wage prescribed under the IMO will be applicable.
The causes for justified dismissal are usually stated in the employment contract or the collective bargaining agreement.
A seaman who suffers a work-related injury while on board a Singapore-registered vessel, regardless of the location of the vessel, is covered by the Singapore Work Injury Compensation Act (Cap 354). Compensation is based on the scale set out in the Third Schedule of the Work Injury Compensation Act. The seaman will typically look to the shipowner’s P&I club for compensation.
Maritime labour disputes are resolved either in court, in Singapore’s High Court, or through arbitration, depending on the dispute resolution clause in the employment contract.
Arrangements for repatriation are usually stated in the employment contract or in the collective bargaining agreement.
The Singapore Maritime Officers’ Union implements a collective bargaining agreement designed by the ITF. Singapore-flagged ships are strongly encouraged to use this collective bargaining agreement.
The High Court of Singapore has jurisdiction to hear maritime cases and there are two to three High Court judges assigned to hear maritime cases. Appeals from the High Court are made to the Court of Appeal.
How a maritime dispute is determined will depend on the dispute resolution clause in the contract; it could be by way of arbitration or court proceedings. If there is no underlying contract, disputes are typically solved by court proceedings. The court is capable of handling proceedings whether effected in rem or in personam, and by and large, the Singapore courts have a reputation for moving cases along quickly.
Arbitration and mediation are alternative conflict resolution measures, but the differences between them have become less apparent since the enactment of the Mediation Act. With effect from 1 November 2017, mediation agreements have been enforceable as a court order in Singapore.
If the sale of the vessel arises from an order of the court, the court will supervise the sale of the vessel, including the appraisement of the value of the vessel and the advertisement of the sale. The sale typically takes place as a public auction, at which each interested bidder will tender their bid to the sheriff of the Singapore court in a sealed envelope. On the appointed date, the sheriff will open the bids and the highest bidder (assuming the bid exceeds the appraised value of the vessel) will be invited to sign the contract for the purchase of the vessel.
Types of bonds required to/for:
The foreign resolution or treaty may first have to be converted into an enforceable Singapore judgment or order, after which, it may be enforced as a Singapore judgment or order. Alternatively, the claimant may sue afresh in Singapore on the basis of the underlying foreign resolution or treaty, using the foreign resolution or treaty as proof of the strength of their claim, and then proceed with an application for a summary judgment of the claim.
Unless specifically provided otherwise in the underlying contract from which the dispute stemmed, the Singapore court applies the commonly accepted order of priorities under common law to the order of maritime claims, and the ranking of priorities as typically applied by the Singapore court is as follows:
Registered ship mortgages rank below maritime liens, but above all other unsecured claims.
Vessels under the same registered ownership as the offending vessel may be arrested, but vessels within the same group or belonging to an affiliate but not under the same registered ownership as the offending vessel, may not be arrested.
Singapore has ratified the LLMC 1996 Protocol including the 2012 Amendments. Consequently, the applicable limits will be those of the 2012 Amendments. The applicable limits came into operation on 29 December 2019.
Maritime claims are generally disposed of via normal judicial proceedings, including extreme cases such as bankruptcy. If insolvency proceedings are brought against a shipowner before the claimant has had a chance to issue proceedings for a maritime claim, the claimant may, as a result of the insolvency proceedings, miss the opportunity to bring their claim, against the res and/or the shipowning company.
The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory (ACRA) launched the Variable Capital Companies (VCC) framework on 15 January 2020.
The VCC is a corporate vehicle for investment funds. Fund managers will be able to constitute investment funds as VCCs across both traditional and alternative strategies, and as open-end or closed-end funds. Fund managers may incorporate new VCCs or re-domicile their existing investment funds by transferring their registration to Singapore as VCCs. This can be done via ACRA’s online application form at vcc.bizfile.gov.sg.
Singapore follows a territorial tax system; companies and individuals are taxed mainly on Singapore-sourced income. Foreign-sourced income will be taxed when it is remitted or deemed remitted into Singapore, unless the income was already subject to taxes in a jurisdiction with headline tax rates of at least 15%.
If a shipowning company ceases to exist, it cannot be sued. Neither can it defend any suits (because it has ceased to exist).
Singapore has concluded the following international tax agreements:
A DTA between Singapore and another jurisdiction avoids double taxation of income earned in one jurisdiction by a resident living in another jurisdiction. A DTA also clarifies the taxing rights between Singapore and its treaty partner on income arising from cross-border economic activities between the two jurisdictions. These agreements also provide for reduction or exemption of tax on certain types of income.
At present, Singapore has 60 comprehensive DTAs and seven limited DTAs in force. A DTA minimises tax barriers to the cross-border flow of trade, investment, technical know-how and expertise between two treaty countries. Through the DTA, taxpayers engaged in cross-border business will enjoy certainty on the taxing rights of both countries, benefit from the elimination of double taxation, and gain access to a platform to settle tax disputes.