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Explanatory note1

I Overview of the Convention

A Objective

• 1. In many States, courts have the authority to order the sale of a ship to satisfy a legal claim. Such a claim is typically brought against the ship or shipowner to foreclose a ship mortgage (in the event of default in repayment) or to enforce a maritime lien against the ship. The judicial sale procedure is typically preceded by the arrest of the ship.
• 2. While the international community has achieved significant progress in harmonizing rules on the arrest of ships,2 much less progress has been achieved in harmonizing rules on the judicial sale of ships.3 As such, it remains for each State to prescribe the rules governing the procedure and legal effect of judicial sales ordered by its courts, although in many States the judicial sale has the legal effect of conferring “clean title” on the purchaser (i.e. it extinguishes all rights and interests that were previously attached to the ship, including mortgages and maritime liens). It also remains for each State to prescribe the rules governing the legal effect within its jurisdiction of foreign judicial sales.
• 3. The United Nations Convention on the International Effects of Judicial Sales of Ships (hereinafter “Convention”) harmonizes the latter rules. Put in another way,

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  the Convention establishes a harmonized regime for giving international effect to judicial sales, while preserving domestic law governing the procedure of judicial sales and the circumstances in which judicial sales confer clean title. By ensuring legal certainty as to the title that the purchaser acquires in the ship as it navigates internationally, the Convention is designed to maximize the price that the ship is able to attract in the market and the proceeds available for distribution among creditors, and to promote international trade.

B Outline

• 4. The basic rule of the Convention is that a judicial sale conducted in one State Party which has the effect of conferring clean title on the purchaser has the same effect in every other State Party (article 6). The basic rule is subject only to a public policy exception (article 10).
• 5. The Convention regime prescribes additional rules which establish how a judicial sale is given effect after completion. The first is a requirement that the ship registry deregister the ship or transfer registration at the request of the purchaser (article 7). The second is a prohibition on arresting the ship for a claim arising from a pre-existing right or interest (i.e. a right or interest extinguished by the sale) (article 8). The third is the conferral of exclusive jurisdiction on the courts of the State of judicial sale to hear a challenge to the judicial sale (article 9).
• 6. To support the operation of the regime and to safeguard the rights of parties with an interest in the ship, the Convention provides for the issuance of two instruments: a notice of judicial sale (article 4) and a certificate of judicial sale (article 5). It also establishes an online repository of those instruments which is freely accessible to any interested person or entity (article 11).
• 7. The Convention regime is “closed”, in the sense that it applies only among States Parties (article 3). Yet it is “not exclusive”, in the sense that it does not displace other bases for giving effect to judicial sales (article 14).

C Drafting history

• 8. The Convention was prepared by the United Nations Commission on International Trade Law (UNCITRAL) between 2019 and 2022.
• 9. The project originated in a proposal by the Comité Maritime International (CMI) to the fiftieth session of the Commission (Vienna, 3–21 July 2017) for possible future work on cross-border issues related to the judicial sale of ships

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  (A/CN.9/923). The proposal drew attention to problems arising around the world from the failure to give recognition to foreign judgments ordering the sale of ships. It was stated that a short, self-contained instrument along the lines of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958)4 could provide a solution to those problems by enabling clean title to vessels to be recognized across borders. While swift resolution of the questions raised by the proposal was encouraged, it was agreed within the Commission that additional information in respect of the breadth of the problem would be useful.5
• 10. The Commission therefore requested the CMI to develop and advance the proposal by holding a colloquium so as to provide additional information to the Commission and allow it to take an informed decision in due course. The Commission further agreed that UNCITRAL, through its secretariat, and States would support and participate in the colloquium and to revisit the matter at a future session.6 To that end, following a request from the Government of Malta, the UNCITRAL secretariat extended a formal invitation to all member and observer States of UNCITRAL to participate in a high-level technical colloquium in respect of the cross-border judicial sale of ships.
• 11. The colloquium, which took place in February 2018, resulted in a number of findings. It was agreed that the “lack of legal certainty in relation to the clean title which a judicial sale is intended to confer on a buyer” led to problems in the de-registration process in the country of the former flag.7 It was also agreed that the lack of legal certainty created obstacles in respect of the clearance of all former encumbrances and liens, which in turn created a risk of costly and lengthy proceedings, thereby interrupting trade and shipping. Finally, there was broad agreement that the gap could be filled from a legal perspective by providing an instrument on the recognition of judicial sales of ships.
• 12. At its fifty-first session (New York, 25 June–13 July 2018), the Commission considered a proposal from the Government of Switzerland on possible future work on cross-border issues related to the judicial sale of ships (A/CN.9/944/Rev.1). The proposal summarized the outcomes and conclusions of the colloquium and requested that UNCITRAL undertake work to develop an international instrument on foreign judicial sales of ships and their recognition.
• 13. In support of the proposal, it was noted within the Commission that the lack of recognition of the judicial sale of ships had the potential to affect many areas of international trade and commerce, not simply the shipping industry, with several

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  examples of that impact being provided. In support of work being undertaken by UNCITRAL, various parallels were drawn between the work being undertaken on recognition of insolvency-related judgments and a possible instrument on the judicial sale of ships.8
• 14. The Commission considered the proposal together with other suggestions for future work in the context of its deliberations on its work programme at its fifty-first session. After discussion, it was agreed that the topic of judicial sale of ships should be added to the work programme of the Commission.
• 15. At its thirty-fifth session (New York, 13–17 May 2019), Working Group VI considered the topic for the first time (A/CN.9/973), and decided that the draft convention on the recognition of foreign judicial sales of ships, prepared by the CMI and approved by the CMI Assembly in 2014 (known as the “Beijing Draft”), would provide a useful basis for discussion (ibid., para. 25). At its fifty-second session (Vienna, 8–19 July 2019), the Commission expressed its satisfaction with the progress made by the Working Group.9
• 16. At its thirty-sixth session (Vienna, 18–22 November 2019), the Working Group continued its work on the basis of a first revision of the Beijing Draft (A/CN.9/WG.VI/WP.84), which had been prepared by the Secretariat to incorporate the deliberations and decisions of the Working Group at its thirty-fifth session (A/CN.9/1007). The Working Group considered several key provisions of the first revision (ibid., paras. 11–98) and expressed a preliminary view that the instrument should take the form of a convention, while agreeing that a final decision on the matter should be made at a future session (ibid., para. 99). At the resumed fifty-third session of the Commission (Vienna, 14–18 September 2020), support was expressed for the instrument taking the form of a convention, with the observation being made that only a convention was capable of ensuring the level of uniformity needed to affirm the international effects of judicial sales of ships.10 The Commission confirmed that the Working Group should continue its work to prepare an international instrument on the topic.11
• 17. At its thirty-seventh session (Vienna, 14–18 December 2020), the Working Group continued its work on the basis of a second revision of the Beijing Draft (A/CN.9/WG.VI/WP.87), which had been prepared by the Secretariat to incorporate the deliberations and decisions of the Working Group at its thirty-sixth session (A/CN.9/1047/Rev.1). The Working Group proceeded with an article-by- article consideration of the second revision (ibid., paras. 19–109) and agreed to

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  continue working on the assumption that the instrument would take the form of a convention (ibid., para. 15). At its thirty-eighth session (New York, 19–23 April 2021), the Working Group considered several outstanding issues from its thirty- seventh session on the basis of a third revision of the Beijing Draft (A/CN.9/ WG.VI/WP.90), as well as proposals relating to the grounds for avoidance and to defining the time of judicial sale (A/CN.9/1053). At the fifty-fourth session of the Commission (Vienna, 28 June–16 July 2021), satisfaction was expressed with the progress made by the Working Group.12
• 18. At its thirty-ninth session (Vienna, 18–22 October 2021), the Working Group proceeded with a further article-by-article review of the draft convention on the basis of a fourth revision of the Beijing Draft (A/CN.9/WG.VI/WP.92), and made progress in its consideration of several open issues, including (a) dealing with clean title sales, (b) the content and function of the notice requirements for judicial sales benefiting from the recognition regime under the draft convention, (c) the content and issuance of the certificate of judicial sale, and (d) the functioning of the proposed repository mechanism (A/CN.9/1089).
• 19. At its fortieth session (New York 7–11 February 2022), the Working Group completed a further article-by-article review of the substantive provisions of a draft convention and considered the preamble and final clauses of the draft convention on the basis of a fifth revision of the “Beijing Draft” that had been prepared by the Secretariat (A/CN.9/WG.VI/WP.94). The Working Group requested the Secretariat to revise the draft convention to reflect its deliberations and decisions during the session, and to transmit the revised draft to the Commission for consideration and possible approval at its fifty-fifth session (A/CN.9/1095). The Working Group also requested the Secretariat to circulate the revised draft to all Governments and relevant international organizations for comment, and to compile the comments received for the consideration of the Commission.
• 20. At its fifty-fifth session (New York, 27 June–15 July 2022), the Commission considered the revised draft (A/CN.9/1108) and a compilation of comments submitted by States and international organizations (A/CN.9/1109, A/CN.9/1109/ Add.1, A/CN.9/1109/Add.2 and A/CN.9/1109/Add.3). The Commission finalized the text and, on 30 June 2022, approved the draft convention and submitted it to the General Assembly for adoption.13 The General Assembly adopted the Convention on 7 December 2022 by its resolution 77/100.

II

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Article-by-article remarks

Preamble

• 21. The preamble recites the objective of the Convention and the considerations that led to its conclusion. It also recalls the connection between the Convention and the work of UNCITRAL, under whose auspices the Convention was prepared.
• 22. The first paragraph is common to many legislative texts prepared by UNCITRAL. Together with the second paragraph, it situates the Convention within the mandate of UNCITRAL to promote the “progressive harmonization and unification of the law of international trade”.14 The third paragraph reflects the belief of the drafters that the Convention will contribute to maximizing the price that a ship attracts in the market, and the proceeds available for distribution among creditors, by ensuring legal certainty as to the title that the purchaser acquires in the ship as it navigates internationally. The fourth paragraph reflects the objective of the Convention to establish a harmonized regime for giving international effect to judicial sales. It also alludes to the safeguards in the Convention that are aimed at protecting the rights of parties with an interest in the ship, including lienholders and ship financiers.

Article 1. Purpose

• 23. Article 1 declares – in positive terms – the basic operation of the Convention. It contrasts with article 3, which delimits its substantive and geographic scope of application.
• 24. Article 1 makes it clear that the Convention is concerned only with the “effects” of a judicial sale and thus not with the conduct of the judicial sale itself.

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  This is confirmed in article 4, paragraph 1, although the provisions of the Convention dealing with the notice of judicial sale may have an “indirect” impact on the procedure of the judicial sale (see remarks below on article 4, paragraph 1).