Current Developments in Shipping Law in the Marshall Islands

The Republic of the Marshall Islands (RMI) continues to be at the forefront of international ship and corporate registries with one of the largest white flag administrations with all international port state control regimes. Most importantly the jurisdiction is a leader for use by publicly traded shipping companies.

With effect from 10 April 2023, the Nitijela (Congress) approved significant changes to the RMI Maritime Act with adoption of the Preferred Ship Mortgage and Maritime Liens Act, to reflect the expanded role of flag state legislation in international commercial shipping. These modifications, as described below, represent a significant turn in the direction of efficiency and modernisation of the ship registration business and the worldwide maritime industry. The following sections of the RMI Maritime Act were amended.

Section 119

The section represents a significant modification to the law detailing adoption of provisions to permit the electronic filing of documentation to effect the registration of RMI flag ships. This includes filing of documents such as bill of sale, mortgage deed or mortgage discharge which can now be accepted for filing by the Marshall Islands ships registry via electronic means. The expanded statutory language permitted flexibility and the ability to accept manual, electronic and digital signatures. This amendment gives users of the RMI registry the ability to electronically submit instruments and documents to the RMI Maritime Administrator. Therefore, it no longer was necessary to send physical original executed documents to the RMI Administrator. This change further brought the MI registry into the digital age permitting the submission of a single electronic or digital copy.

In furtherance of this new provision, the Republic of the Marshall Islands passed the Digital Signature Regulations, 2024 (the “Digital Regulation”), which came into effect on 15 February 2024. The new legislation goes to show the Marshall Islands’ commitment to a fully digitalised documentation process with the aim of fast-tracking transactions and removing bottlenecks in the registration of RMI flag ships.

The Digital Regulation made clarification to the meaning of “electronic transmitted signature” in Section 3, which provides that, “for the avoidance of doubt, “electronically transmitted signature” as used in the Associations Law 1 includes a digital signature. “Digital signature” means a signature that is attached to a document by a person with the intent to sign the document where the signature is generated by software using a digital certificate issued by a Trust Service Provider or similar authority.” It is now settled that signing documents with software such as Adobe and DocuSign is now recognised under the Digital Regulation.

Section 302

The amendment contains additional wording which now clarifies that a mortgagor may execute a mortgage prior to its filing date even though at that point of time, the mortgagor does not yet hold the title to the vessel, provided that the mortgage contains a provision that it shall only become valid and effective upon its recordation. The modification makes it clear that a predated properly executed and acknowledged mortgage can be legitimate and effective upon recording. Additionally, the updated section guarantees that only instruments that satisfy all recording requirements will be allowed, with careful documentation of the date and time of recording. This change will surely assist in transactions, specifically in the case of sale and purchase of a second-hand tonnage or taking delivery of a newbuild where the new owner or the buyer needs to secure the relating financing by way of a mortgage over the purchased vessel.

Section 304

If a vessel is subject to a validly recorded ship mortgage, it has never been possible for the Maritime Administrator to delete her from the Register unless she has been lost, destroyed or transferred to another registry following a court sale. The Maritime Administrator is always required to notify the mortgagee prior to deleting the vessel in this case. The amendment to Section 304, grants the RMI Administrator the authority to immediately strike and withdraw the ability for a shipowner to fly the MI flag, if its vessel is engaged in illegal activity or actions against the interests of the RMI. The amendment seeks to provide the Maritime Administrator with a discretion to immediately strike due to a wide range of situations, such as economic sanctions, sub-standard shipping practices or failure to comply with the requirements of the international maritime conventions.

Section 306

The amended language removes the requirement to attach a copy to the Bill of Sale to the Certificate of Registry in connection with a vessel deletion from the MI ship registry and transfer to another ship registry administration. This amendment is in line with the amendments to Section 225 of the RMI Maritime Act; for reference, below is the old provision in Section 225:

“Whenever a documented vessel is sold or transferred wholly or partly without change of flag, or is altered in form or burden, by being lengthened or built upon, or from one denomination to another, by the mode or method of rigging or fitting, she shall be documented anew. Every such sale or transfer shall be evidenced by a written instrument in the nature of a bill of sale. Otherwise the vessel shall not be documented anew...”

Section 307

The Maritime Act was amended to clarify what may constitute written proof or evidence of the amounts and dates of any documents or evidence of mortgage debt to be submitted with or included in vessel mortgages, among other amendments affecting vessel registration and operation. The amendment states that such requirement may be satisfied by attaching to the mortgage the documents evidencing such debt, either in whole or in part and either with or without redactions, or by simply including a description of the debt terms (including the total amount) directly in the mortgage.

Section 309

This amendment clarifies how to treat advances or other value provided in accordance with an agreement. This means that, once a mortgage has been executed and registered by a shipowner, it is regarded as validly securing the loan amount stated in the mortgage, even when in reality, the loan has not been disbursed by the lender.

Section 314

This statutory amendment eliminated the existing law’s requirement to place a certified copy of a preferred mortgage instrument (Mortgages, Amendments, Assignments, Subordination Agreements, etc) on board the vessel. It is sufficient that a Notice of the Mortgage be posted on the vessel. Industry has accepted that this revision is in line with the wider movement in the maritime industry to streamline and digitise vessel documentation processes.

Summary

These changes demonstrate the RMI’s dedication to adopting new technologies and keeping up with global maritime standards. Digital signature rules, faster documentation procedures, and increased regulatory authority for the RMI Marine Administrator in instances of illicit activity are all examples of the forward-thinking approach to developing a robust and adaptable maritime legal system. The modifications not only show how the RMI’s maritime laws have evolved globally, but they also present the Marshall Islands as a leader in responding to the ever-changing needs of the maritime sector.