Is it compulsory to buy insurance for mortgaged ships in Vietnam?

Is it compulsory to buy insurance for mortgaged ships in Vietnam?

In case a Vietnamese ship is mortgaged, does the shipowner need to buy insurance? Thanks for advice.

Reply:

According to Article 38 of the 2015 Vietnam Maritime Code, rules of ship mortgage:

1. Transfer of ownership of a mortgaged ship shall not be allowed, unless otherwise approved by the mortgagee.

2. The shipowner must buy insurance for mortgaged ship, unless otherwise agreed upon in the mortgage agreement.

3. If the mortgagee has transferred the whole or a part of ownership of the debt secured by a ship secured by a mortgaged ship to other person, such ship mortgage shall also be transferred in an equivalent manner.

...

Thus, the shipowner is not required to buy insurance for the mortgaged ship if in the mortgage contract the parties agree not to buy insurance in Vietnam.

Is it compulsory to buy insurance for mortgaged ships in Vietnam? (Image from the Internet)

If the mortgaged ship sinks in Vietnam, who does the insurance pay for?

SNB enterprise operates in the field of maritime transport. Due to development needs, businesses need to buy a new ship to serve sea transport activities. After appraisal, the bank agrees to lend with collateral being the ship that the business will buy. In addition, the bank also requires businesses to buy additional insurance for ships, the insurance company is a subsidiary of the bank. Is it correct for the bank to require additional insurance? In case the ship sinks and cannot be salvaged, who will the insurance pay for?

Reply:

Pursuant to Article 295 of the 2015 Civil Code, regulations on collateral are as follows:

1. Collateral must be under the ownership rights of the securing party, except for the cases of lien on property or title retention.

2. Collateral may be described generally but must be identified.

3. Collateral may be existing property or off-plan property.

4. The value of collateral may be greater, equal or smaller than the value of the secured obligation.

At the same time, based on Clause 2, Article 38 of the 2015 Vietnam Maritime Code, on ship mortgages as follows:

2. The shipowner must buy insurance for mortgaged ship, unless otherwise agreed upon in the mortgage agreement.

Thus, buying insurance when mortgaging a ship is the shipowner's obligation according to the law in Vietnam.

Regarding who the insurance will pay when damage occurs, it is necessary to clearly determine what insurance this is and what is the scope of the insurance? According to the content you provided, it can be said that this is collateral insurance (ship material insurance). The meaning of this insurance is that when the ship is completely damaged, the shipowner must bear two risks, including the risk of insolvency with the bank; On the bank's side, there will be bad debts that are highly unlikely to be recovered. So the role of insurance here is to reduce risks for both sides. So when there is an accident where the ship sinks and cannot be salvaged, the insurance will pay a compensation amount, with priority paid to the bank and other expenses incurred. If there is a balance left, your business will receive it. 

What is registration of Vietnamese ship mortgage? 

Let me ask: What are regulations on registration of Vietnamese ship mortgage?  I am currently working at a coastal administrative unit. We are very interested in regulations related to ships. Especially about ship ownership. Can I ask which legal document regulates this? Thank you and I hope to receive an answer soon! nguyenquynh90***.

Reply:

Registering a mortgage on Vietnamese ships is guided in Article 39 of the 2015 Vietnam Maritime Code, accordingly:

1. Registration of Vietnamese ship mortgage shall include the following basic contents:

a) Name, place of office of the mortgagee and the shipowner;

b) Name and nationality of the mortgaged ship;

c) Mortgage sum, interest rate and debt repayment due date.

2. Mortgaging of a Vietnamese ship shall become effective if such mortgaging is recorded in the national register of ships of Vietnam.

3. Information about registration of the mortgaged Vietnamese ship shall be provided for persons who request such information.

4. Persons who register the ship mortgage and those who use information about the ship mortgage shall be liable for statutory fees.

5. The Government shall provide specific provisions on registration of mortgaging of Vietnamese ship.

Above is our response to registration of Vietnamese ship mortgage, as stipulated in the 2015 Vietnam Maritime Code. Please refer to this document for better understanding.

Best regards!