Registration of ships under Greek flag “as foreign capitals”
Greek entrepreneurs are entitled to invest their foreign capital in Greek flag ships either by ordering new buildings in the various shipyards of the world or by acquiring second hand ships of foreign flag and register them to the Greek shipping registry. The -invested in shipowning- foreign capital is protected under art.13 of legislative decree 2687/53 relating to the “investments and protection of foreign capital” as this was authentically interpreted by legislative decree 2928/54, in conjunction to the first four chapters A-D of section A of Law 27/75 as in force. The above two laws enjoy increased typical legal status as per art.107 of the Constitution and they supersede any ordinary legislation· they may be repealed or revised only by a formal revision of the Constitution itself.
The ministerial decision [egritiki praksi] issued on the basis of art. 13 constitutes the individual “statute” of each vessel registered as foreign capital. Its provisions may deviate from any rule governing the common flag as well as from any other rule of civil, fiscal or administrative law. The existence of this deviatory regime makes unrequired the creation of a parallel register (international or offshore) in Greece, as it is the case for the majority of EU Member States. The above ministerial decision provides, inter alia, for the following:
a. The shipowners have the right to change the flag of the ship, to sell to any foreign physical person or any foreign legal entity, to charter out, to accept preferred mortgages, liens and encumbrances on the ship, in their absolute freedom, without the need for any governmental authorities’ prior permission or consent. In addition, the shipowners have the absolute discretion to invest or to deposit any gross income or revenue deriving from the commercial management or the sale proceeds of the ship, the insurance compensation which may be claimed due to an accident or any other reason or the loan obtained from any financial institution and they are not obligated to import these monies to Greece for whatever reason. The same rights, as per the above, are enjoyed by the mortgagors (banks or any financial institution).
b. The gross revenue and income which derives from the commercial exploitation of the ship can be transferred in and out and is not subject to any restriction whatsoever imposed by the Greek legislation.
c. Not with standing the provisions of the Greek legislation for the safe manning and crew composition of the Greek ships, the Greek flag ships (under art.13) should obligatorily have five Greek seamen of any ranking, the Master included, and one student of AEN (mercantile marine academy) provided that the ships do not exceed 40000grt approximately and six Greek seamen of any ranking, the Master of the ship included, and one student of AEN (mercantile marine academy), for the ships over and above 40000grt. The remaining crew for a complete crew composition of any ship in accordance with its tonnage may consist of foreign seamen of any nationality. The terms and conditions of their recruitment as well as their wages and their overall bonuses and overtime should be in compliance with the law of their country of origin or they may be determined in accordance with the bilateral agreements between the Union of Greek Shipowners and their representative labour union, but cannot be inferior than the ILO standards at any time. The foreign seamen and officers recruited as above and their employers are not under obligation to pay any social security contribution.
d. The specifications of the hull and machinery as well as the annual, bi-annual, intermediate and special surveys are considered to be done in accordance with the requirements of the law and are determined by the foreign classification societies dully recognized by the Greek government (i.e. American Bureau of Shipping, Lloyds Register of Shipping, DNV/Germanischer Lloyd, Bureau Veritas, NKK, RINA and the Korean Registry of Shipping).
e. Taxation of those ships (generally based on the tonnage tax) is governed by the provisions of clauses 12, 13 and 14 of the ministerial decision in conjunction with chapters A up to D of section A of the Law 27/75 as in force. All the above provisions, applicable as long as the ship is registered under Greek flag, are considered as a unique interrelated framework. The calculation of the tonnage tax itself is effectuated in accordance with L.27/75 and is based on the age and the grt of the ship, with a 4% increase every 5 years. The current tonnage tax has already included the 4% increase for the period 2013 - 2018. At this stage, it has to be noted that an important modification to the tonnage tax was introduced by the recent L. 4301/2014 having literally doubled the tax due, as from September 2014. In fact, art. 42 para 1 L. 4301/2014 incorporates and grants obligatory force to a Memorandum of Understanding entered between the Greek State and the shipping community for a voluntary contribution to the state and consists of 12 articles. The mutual agreement of the 18th of July 2013, signed by the parties on the same date, was ratified a year later on the 31st of July 2014 and it became the Law 4301/2014. In the article 3 of this mutual agreement there is a defined calculation of the voluntary contribution which for the Greek flag ships is the exact double of the annual paid tonnage tax and for the foreign flag ships exactly the double of the tonnage tax which is applicable since the beginning of 2013, as provided by Law 4110 of 23 January 2013 which has been included in art.26 of Law 27/75. The period of this contribution, initially agreed for 3 years, was consequently extended by art. 42 L. 4301/2014 to 4 years. Thus, the amount payable every year has been modified as follows: instead of 140 million euros per year for 3 years it became 105 million euros for 4 years, the total contribution remaining the same i.e. 420 million euros.
f. A special corporate structure, named “Special Shipping Enterprise (E.N.E.)” may be established for the ownership and the commercial exploitation of ships-foreing capitals. Articles 16-17 of the ministerial decision contain a quite detailed framework regarding its establishment, its articles of incorporation, its registration to the Registry of shipping companies under certain conditions, the share capital and the controlling interests. The E.N.E. is not subjected to corporate income tax obligation neither its shareholders nor its ultimate beneficial owners. Moreover, it is not subjected to any capital gain tax and any capital accumulation tax either at the time of its incorporation or at any later stage, for example in case of an increase of its share capital. The legal structure of this E.N.E is based to a great extend to the laws 959/79 and the Greek law of societe anonyme 2190/1920 as in force today. Despite its advantages, it has been rarely used in practice.
g. Furthermore there is reference to the right of registration of preferred mortgage on the Greek flag ships on behalf of the shipbuilders, banks and financial institutions or any other Greek or foreign company or incorporation in dollars or any other foreign currency and also detailed provisions for the protection of the mortgagors. Should any dispute arise between the shipowners and the Greek state or between the mortgagors and the Greek state, regarding the interpretation and the implementation of the ministerial decision which is issued always as per the clauses and provisions of art.13 of the legislative decree 2687/53, the matter in dispute shall be referred to the Greek arbitration proceedings, provided for in the Code of Civil Procedure.
h. Finally, clause 26 of the ministerial decision of article 13 of the legislative decree 2687/53 provides that the stock certificates of the shipowning company, foreign or ENE, may be transferred to a holding company which has been established and incorporated or which is going to be established and incorporated for the purpose of being public i.e. listed in the Greek or any foreign stock exchange, subject that in this particular case the commercial and technical management of the ships will continue to be assigned to shipping companies controlled in majority by Greek interests and subject to a further condition that these shipmanagement companies will continue to have the same obligations and responsibilities of the representative/guarantor as mentioned in clause 1 of the ministerial decision. The system of registration of ships as foreign capitals has been proved beneficial both to the shipping industry and the public interest as a whole, despite its long age. The Greek shipowners can manage and operate those ships freely worldwide, they can secure finance by registering preferred mortgages any other liens and encumbrances to the benefit of the banks and financial institutions, they can maintain their income as retain earnings in their banks or distributing in way of dividend to the shareholders and also transfer the ships or the shares of the shipowning companies freely and without any restriction. The Greek shipowners enjoy all the administrative and tax privileges, as determined by the above legal framework and commercially exploit and manage their ships under Greek flag either from Greece or from abroad.
Ownership, operation and management of foreign-flagged ships
Greek entrepreneurs are also entitled to invest capital in ships flying foreign flag and to enjoy the same privileged tax regime as of the Greek flag ships under the condition that their foreign flag ships will be managed by shipping companies which are either Greek or foreign established in Greece under the provisions of art.25 Law 27/75 as in force. The differences between the regulatory framework of the Greek flag ships and the regulatory framework of foreign flag ships owned by Greeks (and / or foreigners) under art.26 Law 27/75 as in force are the following:
a. The commercial and technical management of the Greek owned foreign flag ships should be assigned always to Greek shipping companies or foreign shipping companies established in Greece, unlike the Greek flag ships which can be managed by any manager, without restriction on nationality or establishment grounds.
b. The legal framework for the foreign flag ships is provided by the art.26 L. 27/75 and has no constitutional force and protection, as it is not included in the first four chapters A-D of L. 27/75. Thus, it can be amended or repealed, at any time, by a newer legal instrument. Pursuant to the aforementioned art.262 and regarding the taxation of ships flying foreign flag, it is to be noted that tonnage tax was imposed for the first time (by L. 4110/2013) on the foreign flagged ships the owners of which, Greek and foreigners natural persons (ultimate beneficial owners), enjoy the same tax benefits as the owners of the Greek flagged ships, provided that these ships are managed in Greece either by Greek shipping companies (usually EPE/Ltd which have to be subjected to the provisions of art. 25 Law 27/75 as in force) or by foreign shipping companies established in Greece under the provisions of art.25 Law 27/75 as in force. The foreign-flagged vessels were also subesequently subjected to the “voluntary” double tonnage tax, established by the Memorandum of Understanding between the Greek State and the maritime community, as ratified by L. 4301/2014.
c. The last remarks related to the transfer of shares of shipowning companies. Art. 26 L. 27/75 stipulates that the transfer of any shares of any Greek or foreign shipowning company of Greek or foreign flag ships as well as the shares of any holding company which holds directly or indirectly the shares of any shipowning company, is exempted from any transfer tax irrespective of the cause of the transfer.
The characteristics of Greek Maritime Law
Greek Maritime Law may be qualified as investor-friendly, mainly due to its openness to the international conventions. The Code of Private Maritime Law (hereinafter KIND) is traditionally cited as the main legal instrument in this field; however, this statement has to be attenuated by the following clarifications:
KIND was adopted by L. 3816/1958, in line to the general tendency of all maritime countries to promote national codes. Due to its temporal vicinity to the Civil Code, adopted in 1946, KIND was heavily influenced by the German legal theory and the German institutions, although the latter were rather unsuitable to the shipping industry. KIND has been criticized, from the very beginning, for its conservative character and its incapacity to respond to the modern needs of the maritime commerce. This divergence was confirmed by the fact that a few months following the entry into force of the KIND, a new legislative decree was promulgated in order to incorporate into the Greek legal order the “preferred mortgage” (leg. Decree 3899/1958), considered as a basic tool facilitating the financing of the shipping industry. At that time, the Greek Maritime Law was adhering, substantially but not formally, to the uniform international rules. Thus, the Sixth Part of the KIND governing the contract of charter lato sensu, is highly inspired by the Hague Rules, although this Convention was not yet ratified by Greece. The main difference was that the KIND opted for a uniform and hybrid regime of both charter and maritime transport contracts, on the basis of Hague Rules.
However, during the last decades, the Greek legislator has marked a different approach, consisting in ratifying directly the international instruments and incorporating them as such in the national legal order. The advantage lies in uniformity both at interpretation and implementation level. For example, Hague-Visby Rules were ratified by L. 2107/1992, definitely taking out from the scope of KIND, the maritime transport of goods (both international and national). Other major international conventions were also ratified: i.e. CLC 1992 by P.D. 197/1995 & 286/2002, Bunkers Convention 2001 by L. 3393/2005, Salvage Convention 1989 by L. 2391/96, Athens Convention 1974 and Protocol 2000 by L. 1922/1991 & L. 4195/2013, LLMC 1976/1996 by L. 1923/1991 & L. 3743/2009, Maritime Labour Convention 2006 by L. 4078/2012. It has to be kept in mind that, due to the tacit amendment procedure, a number of recent accepted modifications are automatically incorporated into the national legal order, unless the concerned State has expressed formal disagreement. Such an example is the recent amendment of LLMC 1976/1996 by Resolution Leg. 5(99) adopted on 19.4.2012 increasing limitation amounts as from 8.6.2015. In addition, EU action adds a new regulatory level which, as far as shipping is concerned, it either enhances international standards or it anticipates their entry into force. A characteristic example is Reg. 392/2009 on the liability of carrier of passengers by sea in the event of accidents, which provides for the compulsory application of Athens Protocol 2002 in all EU Member States. That means that legal counsels should first check whether a case is governed by international rules (ratified by the Greek State) and/or EU rules binding within the Greek legal order, before reverting to the national code of private maritime law.
The impact of the new code of civil procedure (GCCP)
The Law 4335/2015 brought some significant changes in the GCCP and thus in the procedural field regarding the litigation of maritime disputes, as GCCP includes special provisions relating to ships.
The main amendments introduced by the new law regarding this subject, are primarily located in the eighth book of the Code, relating to enforcement. The relevant chapter includes special provisions for auctions of vessels, i.e. in Articles 1011 et seq.
Under art. 1011 (§ 2), the ship’s arrest procedure sets a requirement for service of a copy of the writ of seizure to be done, not only to the harbor master but also to the master of the vessel and the Navy Retirement Fund. The time limit for service has been extended from two to three days from the day the arrest of the vessel was enforced.
Moreover, the new law has added to the GCCP the new article 1011A, which contains specific provisions for the vessel’s auction. The auction is programmed on the first working Wednesday 40 days after the enforcement of the arrest. The provision also contains specific rules on the procedure and time limits for caveat under art. 933 and 954 and for the stay of proceedings under art. 1000. There has also been a significant amendment regarding the stage of auction’s conduct, as the notice on wall and the service of a summary of the writ of seizure are abolished. Under the new wording of art. 1012, the only requirement is the filing of a copy of the writ of seizure to the employee of the auction.
The new law contains rules concerning the jurisdiction of the courts on maritime disputes. In particular, article 1, article ninth § 17 of the Law 4335/2015, new section was added at the end of par. 2 of the article 51 of l. 2172/1993, which provides for maritime disputes outside Attica, the concurrent jurisdiction of Piraeus Court of First Instance.
It remains to be seen how the above amendments will affect efficiency and predictability of legal solutions. The outcome has to be assessed in the next editions of Digest.
1. See also L. 814/1978 and particularly art. 35 as amended by art. 25 L.4110/2013 and the L. 791/1978 art. 1 paras 1 and 2 (the latter as added by para D of art. 11 L. 3816/2010).
2. The provisions of art. 25 and art. 26 L. 27/75 have been amended by the following Laws: L. 4110/2013 art. 24, L. 4111/2013 art. 43, L. 4141/2013 art. 45 par.1, L. 4150/2013 art. 21and art. 31, L. 4301/2014 art. 42.
