The main purpose of the reform, as explicitly indicated in the draft law No. 8419, is to simplify such procedures and strengthen the attractiveness of the flag of the Grand Duchy of Luxembourg.

The general target of the reform is the centralisation of ship registration procedures with the Luxembourg Maritime Authority (Commissariat aux affaires maritimes) (the “CAM”) to avoid, to the maximum possible extent, the interventions of various other administrations and offices.

Maritime Register of Ships

The first proposal to mention is having the maritime register of ships (registre maritime des navires) (the “RM”) under the direct authority of the CAM and the direct control of the office of a maritime mortgage keeper (conservateur des hypothèques maritimes) (the “CHM”) to be newly created within the CAM, whereas the register is currently kept under the authority of the member of the Government having the delegation to the maritime business.

Register of Real Rights over Ships

The second proposal is the introduction, beside the RM, of a register of real rights over ships (registre des droits réels sur navires) (the “RDR”), to be held under the direct control of the same CHM office within the CAM, whereas now the registration of the mortgages over ships is done at the Registration Duties, Estates and VAT Authority (the “AED”). The proposal also specifies that the mortgages currently registered with the AED will be resumed by the CHM office in the new RDR.

Registration procedures detailed by type

The third proposal is to widen the hypothesis under which a ship can be registered in the Grand Duchy of Luxembourg while specifying and maintaining a substantial link between the ship and the Luxembourg flag. The registration procedure is being detailed to clarify the steps, sometimes different, to follow under a registration with full ownership (en pleine propriété) or under a bareboat charter (en affrètement coque nue), to cope with the current practice pursuant to which the bareboat charter contract (which is similar to the leasing contract (crédit-bail) typical also of the aviation sector) is used as a credit instrument to purchase a boat/ship on the request by a lender (fréteur) but with the borrower-charterer (affréteur) that e.g. will follow the construction works of the boat/ship.

Inspiration from Aviation Rules

Not negligibly, as also explicitly reported in the draft law, many provisions thereof were inspired by the current Luxembourg aviation laws and regulations and, in particular:

- the creation of a separate seaworthiness certificate (certificat de navigabilité) like the airworthiness certificate in the aviation sector, whereby the new registration procedure and certificate will indicate only compliance with the administrative registration rules and the new seaworthiness certificate will indicate only compliance with the technical rules, whilst the actual registration procedure indicates compliance with both administrative registration and technical rules. This is important to differentiate the liabilities and the consequences of the respect or not of the administrative and/or technical rules from an international and coordinated (with other jurisdictions) approach, again to boost the attractiveness of the registration under the Luxembourg flag, in conjunction with the possibility to apply technical rules of another Country under which the seaworthiness certificate is issued;

- the mandatory use of written instrument (without imposing the intervention of a notary public) to establish the ownership titles;

- the possibility to create mortgages on the entire fleet or a portion thereof just with one global act;

- the possibility to provide mortgages not only to creditors but also to a security agent/trustee acting for the benefit of creditors;

- the deregistration procedure of a ship whereby there are inscriptions of creditors other than the owner and/or the charterer.   

Consequently, for the osmosis principle, we may also envisage that in the near future the aviation sector will, hopefully, benefit from a centralisation in the registration procedures, similar to what is now proposed by the draft law for the maritime sector.

English language only

Another very business-oriented proposal is the possibility to accept documents to be submitted to the CHM for the registrations into the RM and the RDR written directly in English only (without the need of a translation into any official language of the Grand Duchy of Luxembourg). This to cope with the best international practices in the maritime and financial sectors whereby English is the language principally used.

Tax reductions and exemptions

Interesting is also the proposal to establish tax reductions and exemptions to incite more ecologic navigation if ships are using renewable fuels or new equipment to improve the quality of ships being purchased or financed. This also to boost a modernisation of the Luxembourg maritime fleet, which is currently aged 11.5 years in average.

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Author: , Counsel in the Corporate, M&A and Private Equity Department at BSP.