Maritime Liens and Mortgages

A maritime lien is a non-possessory security device that is created by operation of law. It is a legal fiction based upon the “personification” of the vessel. The vessel, itself, is regarded as a separate legal “person” and held liable in rem for its own torts and contractual obligations. It provides security for a claim while permitting the ship to proceed on her way in order to earn the freight or hire necessary to pay off the claim.

The maritime lien is different from the general common-law lien in several respects. Maritime liens are secret liens; they do not require recordation. In a fictional sense, maritime liens are considered to attach themselves to a particular vessel and follow that vessel wherever is goes and from owner to owner.

Traditional Liens

Maritime claims that give rise of maritime liens include the following claims: seamen’s wages; salvage; torts that arise under the general maritime law; general average; preferred ship mortgages; supplies, repairs, and other necessaries furnished to a vessel; towage, wharfage, pilotage, and stevedoring; damage or loss to cargo while aboard a vessel; claims by carriers for unpaid freight; and breach of charter parties. Although parties may waive or surrender the right to a maritime lien by contract or otherwise, they may not agree to confer a maritime lien where the law does not provide for one.

Contract Liens

Contract claims also may give rise to maritime liens because contracts for necessaries, repairs, and the like are intended for the benefit of the ship itself and contracts of affreightment and charter parties relate to the use of the ship. In order for a maritime lien to exist, there must be a maritime claim. Not all contracts that relate to vessels are classified as “maritime” contracts. The distinction between maritime and non-maritime contracts is important here because only maritime contracts may give rise to maritime liens: If a contract is not subject to admiralty jurisdiction, it cannot give rise to a maritime lien.

Liens for Necessaries

Part of the law of contract liens has been codified, primarily to provide protection to those who provide necessary services or supplies to vessels. The Federal Maritime Lien Act (FMLA) states that a person providing necessaries to a vessel on the order of the owner or person authorized by the owner…has a maritime lien on the vessel…[and] may bring a civil action in rem to enforce the lien…

The FMLA defines necessaries as including “repairs, supplies, towage and the use of a dry dock or marine railway”. The enumeration of specific necessaries is merely by way of illustration and is not preclusive. Necessaries have been held to include “most goods or services that are useful to the vessel, keep her out of danger, and enable her to perform her particular function….What is a “necessary” is to be determined relative to the requirements of the ship.

Ship Mortgages

The principal advantage of a preferred ship mortgage is that the mortgagee is entitled to a maritime lien enforceable through an in rem action against the vessel. In order to obtain a preferred ship mortgage, the Federal Ship Mortgage Act requires the satisfaction of certain statutory criteria, including mortgaging the entire vessel; substantially complying with the filing, recording, and discharge procedures; attaining or having a current application submitted for U.S. documentation of the vessel; and ensuring that the mortgagee meets the prescribed standards.

A foreign ship mortgage may also qualify as a preferred mortgage under the Act. To obtain such treatment in the United States, the foreign mortgage must be properly executed in accordance with the laws of the country where the vessel is documented, and be registered in a public registry at a central office or the port of registry of vessel.

The priority of a preferred mortgage line is based on the time of filing. The preferred mortgage lien has priority over all claims against the vessel except “for expenses and fees in custodia legis allowed by the court, costs imposed by the court, and preferred maritime liens. Foreign mortgage lien claims also are subordinate to any U.S.-based liens for necessaries.

Excerpts from Admiralty and Maritime Law by Professor Robert Force (Federal Judicial Center 2004).