Hellenic Shipping News interviews Robyn Wood.
Isle of Man based shipping lawyer, Robyn Wood provided Hellenic Shipping News with input about the Isle of Man ship register, especially regarding its financing services, an issue widely acknowledged as important in today’s highly capital
intensive shipping industry.The Isle of Man Ship Registry is a modern registry with a strong emphasis on quality, high standards and an efficient service. It is a British Registry and as such its vessels are entitled to fly the red ensign and have access to the support of British consular services world-wide. The Isle of Man is now a “Centre of Excellence” for shipping with locally based expertise in ship management, ship finance, marine insurance, maritime law and trust and company formation with maritime expertise.
Is the Isle of Man flag an acceptable flag for owners considering obtaining finance for a vessel?
Yes, the Isle of Man is a quality flag and is recognised as such by lenders. Lenders considering matters such as the imposition and enforcement of acceptable safety and technical standards of vessels will have little cause for concern. The Isle of Man Register is highly regarded by the world’s Port State Control Authorities and is on the Paris MOU white list. It has also recently been rated
at the top of the annual Flag State Performance Table published by the Round Table of International Shipping Association (comprising International Chamber of Shipping, International Shipping Federation, BIMCO, INTERCARGO and INTERTANKO).
Also, the Isle of Man is a well regulated common law jurisdiction with an established offshore financial sector.Β It offers political, legal and economic stability.Β Businesses using the Isle of Man benefit from excellent support services such as legal advisors, ship management and company and trust administration companies.
The Isle of Man has maintained its coveted AAA credit rating from both Standard and Poor’s and Moody’s credit rating agencies since 2000 which underpins the Island’s reputation as a well regulated jurisdiction for international business.
Is there a requirement to useonly ship finance banks based in the Isle of Man?
No.Β The Isle of Man does not impose any requirement on lenders to have a place of business on the Island in order to finance Isle of Man flag ships, or to lend to Isle of Man incorporated companies.Β Shipping banks and institutions operate through their usual branches and without exception are comfortable with the Isle of Man ship mortgage and the security it provides.
The Isle of Man is in the same time zone as, and is an hour’s flight time away from London, and so is extremely convenient for the banks, lawyers and other shipping professionals who are based there.Β It is also only one or two hours behind other centres such as Germany and Greece.
English law is a common choice of law in shipping contracts and finance documents.Β Isle of Man contract and finance law is based on English law so there are no issues concerning enforcement or choice of law.Β As a jurisdiction, the Isle of Man does not cause a problem for banks or their lawyers, in relation to Isle of Man mortgages, other security documentation, issues of company law, hedging contracts or any other matters.Β Financing documents relating to Isle of Man ships (save for mortgages) are usually governed by English law.
What form of security is available to lenders in respect of Isle of Man flagged vessels?
The principle security is the Isle of Man Ship Mortgage. It is a short form mortgage (based on the English form) reciting in general terms the basis of the obligations secured by the mortgage and providing for the mortgage of the vessel to the mortgagee. The mortgage is registered against the vessel at the Isle of Man Ship Registry and the time and date of registration determines priority amongst registered mortgagees. The Merchant Shipping Act 1991 sets out clear priorities for mortgages following established English law and this provides comfort to lenders that their mortgage will be properly recorded, and will be recognised internationally.
As the mortgage is a short form mortgage it is usual for the owner and the mortgagee to enter into separate agreement known as a deed of covenants which is expressed to be collateral to the mortgage. This deed of covenants will contain the protective
covenants and provisions and may well contain a charge over the vessel.
In addition, owners usually grant assignments of the earnings, insurances and requisition compensation and other forms of security familiar to ship financing transactions.
In summary, there is nothing unusual about the forms of security taken over Isle of Man ships.Β This, coupled with the high standards of the Registry in general, gives great comfort to lenders.
Does the Isle of Man tax system facilitate shipping transactions?
Yes. There are no annual dues or tonnage taxes imposed by the Isle of Man Ship Registry. Shipping companies based on the Isle of Man pay corporate tax at the rate of 0%, this being the standard rate of corporation tax for all companies (including locally owned companies).
The Isle of Man does not charge any withholding taxes on interest payments or dividends made by Isle of Man companies to banks or other non-resident companies.
In addition in the Isle of Man there are also no death duties, no capital transfer or gift taxes and no capital gains or wealth tax.Β Personal income tax is charged at a maximum rate of 18% and subject to an annual cap of GBP100,000.
Does Isle of Man company law facilitate shipping transactions?
Isle of Man company legislation is modern and flexible based on English law. The traditional Isle of Man company statute is based
closely on English law.Β The Isle of Man has also introduced a new simplified flexible corporate vehicle with the introduction of the Companies Act 2006.Β This is designed partly to make company administration simple, straightforward,cost effective and competitive. The new corporate vehicle follows the international business company model which is available in a number of offshore jurisdictions and removes a number of traditional company law formalities such as capital maintenance rules, financial assistance and prescriptive accounting requirements. In addition, under the Companies Act 2006 interests of creditors (whose securities are registrable) are fully protected.
The rights of shareholders and creditors of all Isle of Man companies are upheld by a modern and effective regulatory and judicial system and which is fully compliant with international regulatory standards.
There is provision for the registration of charges against all Isle of Man companies, further protecting lenders and creditors.
Both forms of Isle of Man company are suitable for use in trading or asset holding structures, whether for the purposes of holding ships registered on the Isle of Man Ship Register (or any other register) , holding aircraft registered on the Isle of Man Aircraft Register (or any other register) or for any other purposes.
Has the Isle of Man Ship Registry been a success?
Since its establishment in 1984, the Isle of Man Registry and the shipping industry on the Isle of Man as a whole has seen continued growth.Β Over 400 merchant vessels are registered under the Isle of
Man flag, including fleets owned or operated by some of the world’s leading shipping companies.Β It continues to be seen as an offshore register which is efficient, service orientated, cost effective and whose ships are maintained and operated to the highest standards.
Nikos Roussanoglou, Hellenic Shipping Newsο»Ώ Wordwide