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Acquisition of Ship’s Property

In its basic sense, property gives the rightful owner rights, such as preservation, claim and ownership on the property they own. In the case of ships’ property, the integral parts and accessories of the ship are evaluated within the scope of ownership. It is important to also and clearly identify issues that are not included in the property.

In accordance with the Turkish Commercial Code articles 996 and 997 in line with the International Private Law in terms of the applicable law regarding ships; The Turkish Commercial Code will be applied to the vessels registered in the Turkish ship registry, and the provisions regarding movables will be applied in terms of ownership and limited real rights for the vessels not registered in the ship registry.

As for ships that do not have a place of registration; real rights will be subject to the law of the place where they are located. In this article, the topics of acquisition of ship’ s property will be included.

1. Original Acquisition of Property

Acquisition of property by appropriation

The right to original acquisition of property belongs only to the state, and in the event that the ship is derelict or abandoned, the state acquires property of the ship by original acquisition with registering this ship in the ship register.

Commercial Code Article 998 – (1) The right to own a derelict ship belongs only to the State. A derelict ship is a ship whose ownership cannot be understood from the registry records or whose ownership has been duly abandoned.

(2) The state acquires property of the ship by registering itself as an owner in the ship registry.

Acquisition of property by statute of limitations 

If a registered ship is recorded with the owner of the ship, even though she is not the shipowner, and if she holds as a possessor for five years without a lawsuit and uninterruptedly over this record, she acquires the ownership of the ship. The beginning of the period starts from the date of registration of the ship. There may be issues such as suspension and toll of the statute of limitations within the specified period. In this case, it is necessary to file a lawsuit due to the termination of the statute of limitations with the determination of situations such as changing or re-acquiring the subject of possession.

A person who has been in possession of a ship for 10 years as a reversioner, although it had to be registered in the registry, without a lawsuit and uninterruptedly, has the right to request the registration of the ship in his own name.  Registration is only possible by filing a case. In the circumstances, a counteraction under the name of registration case must be filed against the registry office where the ship is registered or must be registered.

The court calls interested parties to report their objections by setting a maximum period of three months with an announcement to be made in a newspaper with a circulation of more than fifty thousand and distributed at the domestic level. If it is not challenged or the appeal is rejected, registration is decided. Before the registration decision is made, if a third person is registered as the owner or if an objection is given to the registry that the ship registry is not correct due to the ownership of the third party, the registration decision would not be valid for the third party.

With the registration decision issued by the court, the reversioner acquires ownership of the ship as soon as he registers himself in the register.

In the registration case filed due to extraordinary statute of limitations, if the court accepts, the new owner registration is made in place of the former owner of the ship.   In this case, since the ship will be derelict between the old owner and the new owner, an annotation should be requested to be added to the ship registry to prevent loss of rights.

2. Acquisition of Ownership by Transfer of Title

What is meant by the transfer of ownership is, the agreement of the parties on the terms of the transfer and the completion of the necessary legal procedures for the transfer. In this context, they must enter into a written agreement for the transfer of a ship registered in the ship registry, and the signatures must be notarised.

Turkish Commercial Code article 1001, while specifying the form of the transfer does not include the requirement that the transfer should be notarised, but there is a requirement that the signatures be notarised. Accordingly, the parties can also make their written agreements at the ship registry office.

In the justification of the law, it was stated that the intended issue should be done in writing since the possession has passed into and the movable has a great economic value.

There is an opinion that the actual delivery of the ship will be possible with the start of duty of the ship’s crew of the real or legal person who took over the ownership.

Purchase, sale, barter, shipbuilding agreement can be counted as agreements that arises the obligation of passage of title. A separate explanation is required for the transfer of ownership for the ships registered and not registered in the ship registry. Unless otherwise agreed by the parties, the scope of the transfer is the ownership of the existing additions at the time of transfer becomes the subject of transfer, along with the ownership of the ship.

  • Ships not registered in the ship registry: Since the provisions of the Turkish Civil Code will apply for Turkish ships without registration, the transfer of possession will be required for the transfer of the whole or share of the ship. According to article 763 of the Civil Code; “A person who acquires possession of a movable in good faith and as the owner, becomes the owner of that thing, in cases where the acquisition is protected according to the provisions of possession even if the transferor does not have the authority to transfer the property.”  Accordingly, a person who inherits the ownership of a ship that is not registered in the register, to become the owner in good faith, shall retain the ownership acquired by that person in accordance with the provisions of the ownership, even if the transferor does not have the right to transfer the ownership.
  • According to the decision of the 19. Civil Chamber of the Court of Cassation; There is no dispute between the parties that the subject boat is not registered in the ship registry and that it originally belonged to the defendant … . Since the subject boat is not registered in the ship registry, it has the effect of securities and its sale is subject to the provisions of securities.
  • Ships registered in the ship registry: Ships registered in the registry can do so with a written contract, notarised signature, and transfer of possession within the scope of TCC art. 1001, as explained above. It is possible to carry out this transfer at the ship registry office. 
  • Share of ship and interest share registered in the register: While registration is required for the transfer of the interest share, Registration is not obligatory for ships registered in the registry that are not operated in the form of association of shipowners. In other words, the transfer of the interest shares on the ship registered in the register must be recorded in the ship register. In the association of shipowners, each of the affrighted shareholder can transfer their interest shares without the consent and approval of the other shareholders. However, if the ship’s right to raise the Turkish flag will be lost after this transfer, then the approval of other shareholders is required for the transfer. If it is decided to pay the debt or repair the ship after sailing, shareholder who does not agree with the decision may leave her share instead of paying this debt. In that case, she does not have to make the necessary payment. A shareholder who wishes to exercise such a right must notify the owners, of its decision through a notary public or to the registry office.

For ship’s property to continue to have an effect on lease and freight contracts, these contracts must be annotated in the ship registry. In this way, commentary may be effective and bear consequences on subsequent owners.

Some decisions on registration to the register are as follows:

According to the decision of T.R 15. Civil Chambers of the Court of Cassations; The action is about the request to transfer the claim subject to enforcement proceedings of the plaintiff filed against the landowners and the contractor based on the authorisation certificate, obtained from the enforcement office according to the article 94/II of the Bankruptcy and Enforcement Law, and to the limited work fee to the execution follow-up file made with the collection from the land owners.

According to the article 94/II of the Bankruptcy and Enforcement Law, it has been provided that the property or other real rights that the debtor has not rejected due to inheritance or any other reason and has not yet registered in the land registry and ship registry can be claimed by the creditor on behalf of the debtor, upon request, the enforcement office will notify the land registry or ship registry office and, if necessary, the court on that the creditor may follow this transaction; and according to the article 94/II of the Bankruptcy and Enforcement Law, only the registration of property and real rights in the name of the debtor can be requested based on the authorisation certificate to be obtained from the enforcement office…

In the decision of court of Cassation’s Assembly of Civil Chambers:

Decision of the Court of First Instance: It is decided that the yacht in question is registered in the Turkish ship registry, and the sales contract of the registered ships should be made officially, for this reason, that the contract between the parties is not a valid contract, and the plaintiff declares his will to withdraw from the contract by taking back the ship delivered to the defendant, that the defendant also did not fulfil the action he had undertaken according to the agreement between them, and everyone should return what he bought because the contract between the parties was not valid, … moreover, to the acceptance of the original case on the grounds that the partnership cannot be considered as a true partnership as explained above and cancellation of the defendant’s share in the company; with the acceptance of the counter action and the collection of 107.100,00 Euro from the counter party company; to rejection of the merged case.

During negotiations at the Assembly of Civil Chambers; the shares of the original case should be opened by the transferor …, also, the decision made in the original case was not capable of execution, for this reason, it cannot be said that the decision is final since it will not produce results, and that the main case can be reversed by making an appeal examination ex officio, therefore, although it was claimed that the decision to resist should be reversed for this different reason, this opinion was not adopted by the majority of the Board for the reasons explained above.

3. Loss of Ownership

In cases such as wreck of a ship, becoming a carcass, sinking, destruction, and the loss of the ship, the ownership of the ship registered in the register ceases. However, the liability of the shipowner for damage to the environment, resulting from the removal of the ship’s wreckage, continues.  In addition, it is possible to lose ownership by abandoning the ship.

According to the T.R 11. Civil Chamber of the Court of Cassation; According to the court, the remitter and the scope of the whole file, it was decided that the ship Düden lost its right to raise the Turkish flag as a result of the valid confiscation process by the Brazilian State Authorities, as the property was originally acquired by confiscation, all mortgage and pledge rights on the ship were also terminated, since the plaintiff purchased the ship in the tender opened by the Brazilian State, free from all rights in rem, the mortgage right previously placed on the ship by the defendant Emlak Bankası has also ended, since it is possible for a ship that has lost the right to raise the Turkish flag, its registration can be deleted acceptance of the case on the grounds that the request for the deletion of the Düden vessel’s registration in the Turkish ship registry was in accordance with the aforementioned law…to the abandonment of the ship from the Turkish National Ship Registry, to the determination of the ownership of the ship in question belongs to plaintiff shipowner Lyra Navigation Maritime Ltd Company, and with the rejection of all appeals of the defendants’ representatives, it was decided to approve the judgment found in accordance with the procedure and the law.

Conclusion:

The acquisition of ownership of ships may be based on reasons arising from public and private law. The state has the right to register on behalf of the public on a derelict ship. In terms of written contracts between the parties, the transfer of the ship is possible, and a separate registration requirement has been imposed for the association of shipowners as an exception.

Registration cases and actions of nullity are often encountered in practice due to erroneous registration, failure of the parties to fulfil their obligations after the contract, or disputes arising from portion of the inheritance.

This article was originally published in Mondaq.

Hull Insurance and General Average in Turkey

Marine hull insurance covers the damages that happen to an insured ship or other insurable parts of it, during the voyage, carrying cargo, during dispatch, anchorage, or repair.

This coverage comprises all physical losses or perils, liabilities, and expenses of third parties, which arise from perils of the sea. They are known as “Marine Hull” among the Lloyd’s London market.

This insurance type has a small capacity, and they constitute %2 of the global non-life insurance. Nevertheless, it is a well-specialised field that provides exclusive coverages for different perils.

The main marine insurance market is in London which has the 18% of the global maritime premium. London market is represented by unions organised under Lloyd’s Underwriters Association and, on the other side also represented by International Underwriting Association.

The second biggest market is in Japan which has the 16% of the global premium, and they are followed by the USA with %13 and Germany – Norway with 9%.

Marine insurance, especially Ocean Hull, has similarities with non-life reinsurance than other direct insurance types. It starts with the construction of the ship in foreign countries, and it does not have to be in a certain place. When the ship is launched, it can be open to traffic with cargo owners, insurers, and directors worldwide.

In addition to this, in general, the crew is a combination of different nationalities. The flag of the ship is usually the flag of the owner’s country or any other country, where is not a part of the ship’s traffic.

Second, the type, which is named Ocean Hulls, has high insurance values. Therefore, in general, more than one insurer from different countries share the risk. These works proceed through brokers.

The third resemblance between marine insurance and non-life reinsurance is, those policies are usually issued for the one-year period except for one-time coverages.

As the fourth, mostly the result of the above explanation, the premium circulation is not stable and therefore the demands are changeable.

Apart from natural variations, that affect the occurrence of the damage, volatility may also be the result of changes in the deductible amounts, increased risks, variations of international regulations, or exposure of risk.

Hull and Machinery Insurances

The word “marine” is a comprehensive concept which embodies notions “hull”, “cargo”, “marine liability” and “offshore”.

In order to define “a ship”,; a ship is a sea vessel, which is not very small, that can move on the sea and the usage of the ship depends on its movability. Hull is a wider concept than a ship and it means a thing which is hallowed and voluminous.

It is a general concept for ships and sea vessels. An insurance type HULL AND MACHINERY provides a coverage for ship and its machinery.

Although, in theory, H&M is not a compulsory insurance, it has become compulsory in practice to avoid problems that may happen on the controls of the international ports.

In the H&M Coverage, the insurable interests are, integral parts of the ship and additions of the ship that belong to the owner. In addition to this, subject to the insurer’s approval, sea vessels, which cannot be defined as a ship; houseboats, floating crane, barge, floating restaurants, sea motorcycles, etc. can be a subject of the policy.

From a different perspective, what real dangers in the marine industry are? They can be classified like in the below:

  • (A) Damage to the insured or loss of the insured, whether the insured is a ship or an oil rig, cargo, or another concept which is in the marine concept.
  • (B) Every kind of liabilities.
  • (C) Loss of profit that arises from a temporary malfunction due to an accident.
  • (D) Expenses arising from an accident, which can be compensated under Marine Insurance Policy.

Hull Policy is a united assurance for risks under the scope of A, B, and D. Such that, for the united risks, an insurer can only be responsible for threefold of the insured amount. However, if the liability covered under the policy is exceeded, the exceeded amount is usually covered by P&I Clubs. Rules may show differences for every P&I Club since there are limited clubs that work under these conditions.

For the corporate objective, vessels are divided as Coasting Vessel and Ocean Vessel. Ocean Hull is also named “Bluewater Boat”. While ocean vessels have an international character, which refers to any ship that is part of international maritime trade, coasting vessels are generally used in inland waters.

Although coasting vessels can describe other small vessels such as fishing boats, coastal ferries, barges, etc., there is not a certain line to separate these notions. While damages to fishing boats and damages they have caused may be covered under the marine policy, the lives of fishers and loss of their profits may not be covered even if they are under the scope the marine insurance.

When we evaluate the other headline of our topic, General Average, it can be described as “voluntary sacrifices and extraordinary expenses in a voyage to protect the ship or cargo from a danger.”. At Article 1272 / III of the Turkish Commercial Code, it is stated that damages will be appropriated between ship, cargo, and carriage. This article is in accordance with Article A of York- Antwerp Rules. Because freight of a charterer, fuel for the time charter, or container of a commercial manager can also be subject to a general average.

For the existence of the general average, the ship and cargo should be together. Therefore, there will be no general average if the ship sails without cargo. However, a ship that sails without cargo and without charter-party, can be protected against extraordinary expenses and voluntary sacrifices with additional clauses to policy.

Being exposed to a sea danger is not a compulsory matter for declaring a general average. To illustrate it; the extension of the fire in the dock to the ship or cutting the anchor in order to prevent the spread of flames can also be a reason for the general average. In addition to this; even if the ship and cargo do are not damaged on the same level, declaration of the general average would be proper.

There is a condition for a proper general average declaration, real danger. Estimated danger or proximate danger is not sufficient for the general average. A precedent Supreme Court of Turkey decision states that the general average cannot be declared when the ship is grounded by its master’s own negligence. Therefore, the faulty party cannot claim any compensation and also is responsible to related parties for damage that arose by his own negligence. Further, in the case “Watson v Fireman’s Fund Insurance”; the court held that; even if the master has a margin of error, spilling water because of the estimation that there is a fire and this fire will cause damage to goods in holds is not proper for declaring a general average and the master is responsible from the damages arose from the water.

Does the master have to wait until the appearance of real danger? An answer for this question is stated by Roche J. in “THE MAKIS” case. Roche J. held that; the danger does not have to be immediate or occur right away, the danger must not be imaginary.

In general average situation, actions and expenses should also be extraordinary. Although it is open for an opposite interpretation, there is an important case that can set an example. “Wilson v Bank of Victoria”; The ROYAL STANDARD was a large sailing ship with an auxiliary steam screw. She sailed on a voyage from Australia to England carrying a cargo of gold and about 500 tons of bunker coal. Eleven days into the voyage she hit an iceberg and suffered so much damage to her masts and sails that, in practical terms, she lost all power of sailing. She reached Rio de Janeiro under steam alone and nearly exhausted her stock of coal. The expense that made, in that case, was not held as extraordinary and the general average was not accepted.

After the above explanations about the “Hull Insurance” and “General Average”; it should be explained in such a circumstance which insurer bears which damage? This will be determined after the apportionment of damages. In principle, H&M Insurer bears the “damages to the ship” and Cargo Insurer bears the “damages to the cargo”. “Gaps” that were left behind from the dispatch period, are filled by the liability insurer.

Due to article 66/4 of Marine Insurance Act 1906; if the assured has incurred a general average expenditure, without claiming from other relevant parties of the general average he may claim expenses directly from the insurer. If hull insurance does not cover the full expenses, the remaining amount will be covered by P&I Club.

If some expenses are not under the coverage of the hull insurance, marine vessels liability insurance will bear those expenses. As an example, to this situation, if the real value of the ship is higher than the insured value, or rejection of the compensation claim by the cargo insurer because of breach of the carriage contract by the carrier.

The general average Absorption Clause is regulated with IHC 2002’s article 43, a part of the English Hull Clauses. Subject to insurer’s written approval, insured has right of choice. If the insured will not claim any demand from other relevant parties to the general average, the insurer will waive his right to subrogate. However, this situation is against article 1472 of the Turkish Commercial Code and therefore otherwise cannot be agreed upon since the code is compulsory.

Another point about Hull Insurances that should be mentioned; the question of whether there is a direct right to claim from the insurer. Although there is a chance to claim directly from the insurer in most countries and in Turkey, this right is not accepted under English Law. However, the direct claim right is provided, if the right of compensation of third parties are covered in the policy, in Denmark under Insurance Policies Code, Article 95.

As an example, “The Yusuf Cepnioglu” is an important case for this subject. The injured party brought an action in Turkey, directly to the P&I Club. High Court evaluated the case whether there is a need for an anti-suit injunction or not. The foreign law was discussed that gives a chance of a right of direct claim. Court of Appeal decided that, although the right of a direct claim is a contractual right, it is not an independent right and, the court allowed the anti-suit injunction. This decision of the Court of Appeal is important because it is about the right of a direct claim against and current.

In conclusion, Marine Insurance has an important role to ease maritime commerce and international trade. Since “Marine Insurance” is proceeded as a legal contract, “marine Insurance Law” plays a significant role in the field. English Law is the dominant law about maritime law.

GSI Göksu Safi Işık Attorney Partnership Release

The arrival of both hard and soft copies of the GSI Summer Release, which is the issue of great co-ordination and excitement and sharing it with you dear readers and friends have always been the most exciting moment of all the stages.

Our attorneys are the main asset of the firm. Our attorney team is composed of finely tuned individuals who are very experienced, dynamic and enthusiastic. They are all graduates of reputable universities in Turkey and abroad. Along with Turkish, our lawyers offer services in English, as well as other major languages, including French, German, Arabic and Russian.

GSI provides legal services in a wide range of areas. Our firm advises both national and international companies doing business in Turkey and the region.

GSI is comprised of more than 100 lawyers, counsellors and administrative staff who are recognised for their expertise in their fields as well as their professional skills. Our attorneys are all graduates of reputable universities in Turkey and abroad. Along with Turkish, our lawyers offer services in English, as well as other major languages.

Paralegal and administrative staff plays an important assisting role in providing legal services at the highest standards of quality. We currently employ 20 administrative staff as well as 10 paralegals.

GSI are committed to providing our clients with sector-specific expertise and the best legal practices in Turkish jurisprudence and international law within professional ethics and our corporate values under the motto of ‘delivering peace of mind’.

GSI is comprised of more than 100 lawyers, counsellors and administrative staff, who are all recognised for their expertise in their fields as well as their professional skills.

GSI do also work with either in-house and external counsellors who are either recognised academics in their fields of researches or practitioners who have previously served in seniority either in judiciary or regulatory bodies. Our counsellors also do actively take role in our professional development programs such as mentoring, internal training and publication programs.

Turkish Citizenship by Investment

Citizenship by Investment is a method of obtaining citizenship of a country through investments in specific industries approved by the government. This includes real estate and economic contribution through donation.

The Regulation of Implementation of the Turkish Citizenship Law has been amended by Presidential Decree No:106 effective from the date of publishing which is 19.09.2018. In accordance with the Turkish Citizenship Law No:5901.

Regulation enables foreign investors to acquire Turkish Citizenship exceptionally by investment ways as below:

  1. to make fixed capital investment worth minimum 500.000 USD, equivalent foreign currency or equivalent amount of TL, to undertake not to transfer the company for following three years and to have the investment determined by the Ministry of Industry and Technology,
  2. to purchase real estate worth minimum 250.000 USD, equivalent foreign currency or equivalent amount of TL, to put an annotation onto the title deed stating that property shall not be sold in the following three years and to have the investment determined by the Ministry of Environment and Urbanism,
  3. to sign preliminary sales contract intended for the real estate, which has construction servitude or condominium registration, worth minimum 250.000 USD, equivalent foreign currency or equivalent amount of TL and to make the such payment in advance, to put an annotation states that preliminary sales contract shall not be transferred or abandoned for following three years onto the title deed and to have the investment determined by the Ministry of Environment and Urbanism,
  4. to employ minimum fifty employees and have such employment determined by the Ministry of Family, Labor and Social Services,
  5. to deposit minimum USD 500.000 USD, equivalent foreign currency or the equivalent amount of TL in banks operating in Turkey and to undertake not to withdraw the deposit for the following three years and to have such barred deposit determined by the Banking Regulation and Supervision Agency,
  6. to purchase public borrowing instruments worth minimum USD 500.000 USD, equivalent foreign currency or the equivalent amount of TL and to undertake keeping the instruments for following three years and to have the investment determined by the Ministry of Treasury and Finance,
  7. to purchase real estate investment trust or venture capital fund shares worth minimum 500.000 USD, equivalent foreign currency or the equivalent amount of TL and to undertake keeping the instruments for following three years and to have the investment determined by the Ministry of Treasury and Finance.

Ministry of Interior, General Directorate of Civil Registration and Citizenship has published Instruction of Procedures and Principles Regarding Acquisition of Turkish Citizenship by Foreign Investors which regulates the process of the application.

The Instruction foresees that exclusive / joint offices shall be established in Ankara and Istanbul. Officers of General Directorate of Civil Registration and Citizenship, General Directorate of Migration Management and Determination Institutions shall provide the services in conjunction.

  • Applicants completed the investment according the Regulation, shall apply for Certificate of Conformity to the Determination Institutions. Obtaining the Certificate of Conformity allows the applicants apply for citizenship and residency permit referred to in article 31/j of the Law on Foreigners and International Protection No:6458 with joint documents. Application for citizenship shall be made to the Exclusive/Joint Offices with granted residency permit and required documents for citizenship. Required documents are as follows:
  • Applicant’s passport as translated and notarised.
  • In case of statelessness, documents which certifies statelessness
  • Birth Certificate or any official document covers applicant’s birth date/birth place/parents’ name information such as identity register copy.
  • In the event of lack of birth date information; signed declaration to recognise Turkish Civil Registry Services Act’s authorisation
  • Certificate states applicant’s civil status such as married, divorced or widowed: Marriage Certificate, Divorce Certificate, Death Certificate.
  • If applicant is married; identity register copy or similar document proves the family bond of spouse and children
  • If the child is in the guardianship of one parent; document states consent of the other parent as translated and notarised / certified by the authorised officer in Turkey, or document states consent of the other parent admitted from foreign representative offices / authorised institutions as translated, notarised and authorised by the Turkish Consulate/Apostille
  • Criminal record
  • 6 biometric photos
  • Receipt of Application Fee
  • Health Insurance
  • The Certificate of Conformity

Certificate of Conformity granted by the pertinent Authority is required to complete the application file as a determination of the investment. In acquisition of Turkish Citizenship through real estate purchase procedure, an application to authorised Directorate of Land Registry which is related to Ministry of Environment and Urbanisation, shall be made to obtain a Certificate of Conformity.

This document purports to indicate that the monetary value of the real estate purchase has exceeded the threshold figure of 250.000USD, and a record has been entered into land registry record stating that the ownership status shall not change for a period of three years.

In acquisition of Turkish Citizenship through bank deposit, an application to Department of Financial Consumer Relations of the Banking Regulatory Authority, shall be made to obtain a Certificate of Conformity purports to indicate that, 500.000 USD or equivalent amount of other currencies have already been deposited at a bank operating in Turkey and a record has been entered into the bank account inhibiting the withdrawal of the money for a period of three years.

Foreign investors who had been granted with the Turkish Citizenship should meet abovementioned requirements for the duration which has stated in the Regulation.

In case the investor fails to maintain such requirements, determination institutions would notify General Directorate of Civil Registration and Citizenship and General Directorate of Migration Management. Subsequently, citizenship status shall be revoked in accordance with article 31 of the Law.