Ship Mortgage in Croatian Law: Legal Nature, Effects, and Issues in Application

Abstract

The purpose of this paper is to analyse the institute of  ship mortgage in Croatian law, with particular emphasis on its legal nature, effects, and practical issues. The analysis encompasses the normative framework of the Maritime Code, case law, and international sources of law. The paper proceeds from the thesis that the dualism between ship mortgages and maritime liens causes legal uncertainty and increases financing risk. Ship mortgage represents one of the key instruments for financing maritime activities. A ship, as an object of rights, possesses a specific legal nature that requires deviation from the general rules of property law. It is precisely this specificity that generates a number of theoretical and practical issues that are the subject of this paper. The analysis also includes doctrinal positions and implications for legal certainty. The Maritime Code of the Republic of Croatia constitutes the fundamental source of law for this paper, particularly through the provisions of Articles 219–234, governing the registration of ships and ship mortgages, as well as Articles 241–254, governing maritime liens. The specific nature of ship mortgage, as a real right over another’s property effective erga omnes, derives from the fact that it concerns a movable asset treated as immovable property. This is also evident in the manner of regulating legal relationships through agreements on securing monetary claims by establishing a mortgage on a ship, which is presented in detail in the paper. Through the analysed case law for the purposes of this paper, the thesis has been confirmed that maritime liens take priority over mortgages, as well as that there is a clear emphasis on the limitation of the principle of reliance on registers, which demonstrates a deviation from general rules. The main issues include the slowness of procedures for registration and recording of ships and rights therein in ship registers, in relation to the evident conflict between mortgages and liens, particularly in light of the fact that the registration of maritime liens in ship registers is not mandatory. The conclusion is that a ship mortgage constitutes a developed but insufficiently balanced system, and that modernisation of the system through the digitalisation of registers, more precise regulation of priorities in the registration of encumbrances on ships, and the acceleration of enforcement proceedings would undoubtedly lead to greater legal certainty and ensure a balance between creditor protection and market functionality.