Ship Financein 18 jurisdictions worldwide

2014

Contributing editor: Lawrence Rutkowski
Published by
Getting the Deal Throughin association with:
Adepetun, Caxton-Martins, Agbor & Segun
Arias, Fabrega & Fabrega
Clifford Chance
Ehlermann Rindfleisch Gadow
Fenech & Fenech Advocates
Haridass Ho & Partners
Holman Fenwick Willan LLP
Joseph & Partners
Jurinflot International Law Office
Kincaid – Mendes Vianna Advogados
Liberian International Ship and Corporate Registry
Norton Rose Fulbright
Seward & Kissel LLPS Friedman & Co, Advocates
Stephenson Harwood AARPI
V&P Law Firm
Vedder Price PC
Wikborg, Rein & Co Advokatfirma DA
Wintell & Co
Yoshida & Partners



Ship Finance 2014
Contributing editor:
Lawrence Rutkowski
Seward & Kissel LLP

Getting the Deal Through is delighted to
publish the first edition of Ship Finance, a
new volume in our series of annual reports,
which provide international analysis in key
areas of law and policy.
Following the format adopted throughout
the series, the same key questions areanswered by leading practitioners in each of
the 18 jurisdictions featured.
Every effort has been made to ensure thatmatters of concern to readers are covered.
However, specific legal advice should always
be sought from experienced local advisers.
Getting the Deal Through publications are
updated annually in print. Please ensure
you are always referring to the latest print
edition or to the online version at www.
gettingthedealthrough.com
Getting the Deal Through gratefully
acknowledges the efforts of all thecontributors to this volume, who werechosen for their recognised expertise.
Getting the Deal Through would also like toextend special thanks to contributing editor
Lawrence Rutkowski of Seward & Kissel LLP
for his assistance in devising and editing
this volume.

CONTENTS

Global Overview

3

Melanie Mishra Pillai
Joseph & Partners

Brazil4

Malta58

Camila Mendes Vianna Cardoso
Kincaid – Mendes Vianna Advogados

Mark Fenech and Lara Saguna Axiaq
Fenech & Fenech Advocates

China10

Marshall Islands

James Hu, Lawrence Chen, Mervyn Chen
and Jasmine Liu
Wintell & Co

Francis X Nolan III
Vedder Price PC

Alain Gautron and Ezio Dal Maso
Stephenson Harwood AARPI

Stefan RindfleischEhlermann Rindfleisch Gadow

Gaute Gjelsten, Henrik Hagberg andSolveig Frostad
Wikborg, Rein & Co Advokatfirma DA

Greece28

Panama83

John Papapetros, Christina Economides
and Dimitris Manolopoulos
V&P Law Firm

Jorge Loaiza III
Arias, Fabrega & Fabrega
Russia88

Hong Kong

35

Alastair MacAulay
Clifford Chance

Michael Safran
S Friedman & Co, Advocates

V HariharanHaridass Ho & Partners
United KingdomJapan

Visit www.gettingthedealthrough.com

Norio Nakamura
Yoshida & Partners

Law
Business
Research

Zaharoula (Hara) Gisholt andBrad L Berman
Liberian International Ship and Corporate
Registry and Norton Rose FulbrightPublished by
Law Business Research Ltd
87 Lancaster Road
London, W11 1QQ, UK
Tel: +44 20 7908 1188
Fax: +44 20 7229 6910
© Law Business Research Ltd 2014
No photocopying: copyright licences do not apply.

98

Tony Rice and Ian Hughes
Holman Fenwick Willan LLP
United States

Publisher
Gideon Roberton
gideon.roberton@lbresearch.com

Dan Whitedan.white@lbresearch.com

Alexander Mednikov
Jurinflot International Law Office
Singapore94

Israel41

Liberia47

Alan Leealan.lee@lbresearch.com

Funke Agbor and Chisa Uba
Adepetun, Caxton-Martins, Agbor & Segun
Norway78

Germany22

LondonJuly 2014

Business development managers
George Ingledew
george.ingledew@lbresearch.com

66

Nigeria72
France16

Getting the Deal ThroughSubscriptions
Sophie Pallier
subscriptions@gettingthedealthrough.com

Malaysia52

Lawrence Rutkowski
Seward & Kissel LLP

106

Lawrence Rutkowski
Seward & Kissel LLP

The information provided in this publication is
general and may not apply in a specific situation.
Legal advice should always be sought before
taking any legal action based on the information
provided. This information is not intended tocreate, nor does receipt of it constitute, a lawyer–
client relationship. The publishers and authors
accept no responsibility for any acts or omissions
contained herein. Although the information
provided is accurate as of July 2014, be advisedthat this is a developing area.
Printed and distributed byEncompass Print Solutions
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ISSN 2056-4015

www.gettingthedealthrough.com 1Yoshida & Partners

JAPAN

Japan
Norio Nakamura
Yoshida & Partners

Due diligence1

How does one demonstrate title to or legal ownership of a vessel
registered under the laws of your jurisdiction?

Vessels are registered at a competent office of the Legal Affairs
Bureau. Registration of vessels is intended to announce the legal
position (rights and obligations) of the parties involved in vessels inview of private law. Vessels are also recorded at a competent office of
the Transport Bureau, for the purpose of administrative supervision.
National certificates of vessels are issued by the Transport Bureau
upon the vessel being duly registered and recorded.
Title to or legal ownership of a vessel is demonstrated by atranscript of the ship register issued by the Legal Affairs Bureau, inwhich the name and address of the shipowners and the date and thecause of acquisition of the title are stated.
2

How can one determine whether there are any liens recorded overa vessel?

A mortgage on a vessel can be recognised in a transcript of the ship
register, but there are no means of determining whether there are anyliens over a vessel because non-registered liens (eg, maritime liens orother liens on a vessel) are not entered in the ship register.
3

How does one determine whether there are any security
agreements, liens, charges or other encumbrances granted
by a vessel owner or affiliated party who might be a borrower,
guarantor or other credit party in connection with a vessel financetransaction?

We can determine the nature and amount of credit that has been
secured by a mortgage upon viewing a transcript of the ship registry.
However, security agreements, liens, charges or other encumbrances
are neither registered in the ship register nor disclosed to the publicby the Legal Affairs Bureau.
4

Can one determine whether an obligor registered in yourjurisdiction is duly organised and in good standing from a searchof a public registry?

From the certified commercial register it is possible to determine
whether an entity has been duly organised and is in good standing.
A transcript of the commercial register can be obtained by anyone at
the Legal Affairs Bureau with an application fee of ¥600.
5Can the shareholders or other equity interest holders, directors
and officers or other authorised signatories of an obligor
organised in your jurisdiction be determined from a searchof a public registry? If not, how are these parties customarily
identified?

Only the name and address of the representative director and thename of other directors of an entity in question can be determinedby viewing a transcript of the commercial register issued by the
Legal Affairs Bureau. Shareholders or other equity interest holders,www.gettingthedealthrough.com

officers or other authorised signatories of an obligor organised inJapan are neither registered nor determined.
6

What corporate or other entity action is necessary for an obligor
to enter into or guarantee a debt obligation? When is action by
the board of directors or other governing body required? Must
shareholders approve a guarantee?

Any guarantee to secure debts or obligations of the principal mustbe given in writing pursuant to the civil law and be made before theprincipal debts or obligations cease to exist.
If the guarantee is made by a corporation, a certain internal
procedure is required. If the amount of guarantee to be made by acorporation would result in it falling into ‘a large amount of debt’
stipulated in the corporation law, prior approval by the board of
directors is required. A company may devolve the authorisation forsuch approval to a resolution of the shareholders’ meeting if it specifies the provision in the articles of incorporation.
7

Must foreign lenders qualify to do business in your jurisdiction
to extend credit to a borrower organised in your jurisdiction?
Will foreign creditors be deemed resident as a consequence ofmaking a loan or other extension of credit to an obligor within yourjurisdiction?

Foreign lenders (banks and other lenders) are required under thebanking law to qualify to do business in Japan to extend credit toa borrower organised in Japan if the finance is made there as in thecourse of business.
Repayment8

Is central bank or other regulatory approval required for repaymentof a loan in foreign currency?

Repayment of a loan is effective in a currency designated in a loan
agreement. If the agreement designates a foreign currency for repayment, no particular regulatory approval is required other than acertain requirement under the foreign exchange and foreign tradecontrol law, such as an ex post facto report.
9

Do usury laws limit the interest payable to a lender in respect of avessel financing?

If the Japanese law is designated as a governing law of a financeagreement, the interest rate restriction law is applied. It limits theinterest to up to 15 per cent per annum where the amount of theprincipal credit is more than ¥1 million.
10 Are withholding taxes payable on principal or interest payments to
non-resident lenders?

Non-resident lenders are required to pay a withholding tax, in principle, at 20 per cent on the interest to be earned from the domestic borrower. Where the tax convention is applied, the rate may be
reduced. For the period of 25 years from 2013 to 2037, withholding

JAPANtax of 20.42 per cent is payable due to the requirement for the special reconstruction income tax.
Registration of vessels
11 What vessels are eligible for registration under the flag of yourcountry? Are offshore drilling rigs or mobile offshore drilling units
considered vessels under the laws of your jurisdiction? What isthe effect of registration?

Vessels more than 20 gross tons are eligible for registration. Vessels
less than 20 gross tons and those solely or mainly propelled by oars
are excluded from the requirement to register under the ship law.
Offshore drilling rigs or mobile offshore drilling units, which
are not intended to be used for carriage of passengers or cargo, areexcluded from the concept of a vessel. If objects are taken as outof the vessel concept, they are deemed to be structures on land or
moveable properties, where the owners of the object are not entitled
to limitation of liability as shipowners and maritime lien over thevessel is not created.
12 Who may register a vessel in your jurisdiction?

The following parties may register a vessel:• the Japanese government or a Japanese government authority;• a Japanese national; or• a legal entity incorporated under Japanese law of which the representative director and two-thirds of executive officers must be
Japanese nationals.
13 Is there an alternate registry for international shipping
operations?

There is no alternate registry in Japan for international shipping
operations, such as an offshore register, for foreign owners to havetheir vessels registered.
Ship mortgages and other liens over vessels
14 What types of ship mortgages exist and what obligations may aship mortgage secure? Can contingent obligations, including swap
obligations, be secured? Are there standardised forms?

Japan has two types of ship mortgage:(i) the standard mortgage, which secures a specified credit together
with its interest which has fallen due in the last two years; and(ii) a revolving mortgage, which secures unspecified credits created ina specific contracts with the obligor for continuous transactions
or created in a certain kinds of transactions with the obligor.
Contingent obligations or swap obligations may be secured by astandard mortgage as far as the obligation is specified when themortgage is provided. Unspecified obligations may be the targetof the revolving mortgage and are subject to the condition of (ii)above. There are no particular standardised forms for registry of
the mortgage and a comprehensive English-style deed of covenants
is not required.
15 Give details of any required form for ship mortgages in yourjurisdiction?

As mentioned in question 14, there is no particular required form.
In a mortgage deed, creditors, debtors and the secured credit must atleast be identified. The principal amount is to be applied in Japanesecurrency.
16 Who maintains the register of mortgages? What information doesit contain and where are such filings to be made? What is theeffect of registration?

The register of mortgages is maintained by the competent Legal
Affairs Bureau. The register of mortgage contains:

Yoshida & Partners
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the date of filings;
the secured credit;
the kind of mortgage;
the amount of the secured credit at the time of register; andthe name and address of a mortgagee and debtor.

Upon a mortgage on the vessel being registered, it keeps a priority
over rights of the third party such as subordinated mortgages or
new owners of the vessel but is behind maritime lines created on
the vessel.
17 Must the total amount of the mortgage be stated therein? Must
the mortgage contain a maturity date? Must the underlying debt
instrument be filed with or attached to the recorded mortgage?

The amount of a credit secured by the mortgage is stated for the
standard mortgage and the maximum amount of the mortgage isstated for the revolving mortgage. A maturity date is not recordedin the mortgage. The underlying debt instrument such as the loan
agreement and the mortgage deed must be provided to the Legal
Affairs Bureau in filing the mortgage but these instruments are not
filed with or attached to the recorded mortgage.
18 Can a mortgage be registered in the name of an agent or trustee
for the benefit of multiple lenders?

A mortgage cannot be registered in the name of an agent or trustee
for the benefit of multiple lenders and the mortgagee must be thecreditor of the secured credit.
19 If the mortgagee is an agent or trustee for a lending syndicate,must any filings be made upon transfer of a portion of theunderlying debt among existing lenders or to a new lender?

The mortgagee must be the creditor of the secured credit and theagent or trustee for a lending syndicate cannot be registered as amortgagee. If an agent or trustee for a lending syndicate wishes tobe registered as a single mortgagee, all of the underlying debt must
be obtained and transferred from the lending syndicate to the agent
or the trustee.
20 If the mortgagee transfers its interest to a new lender, agent ortrustee, what filings are required? Is the mortgagor’s consent
required?

If the mortgagee assigns the credit secured by the mortgage to athird party, the mortgage is also assigned to such party following
the transfer of the secured credit and the mortgagor’s consent is not
required.
In order to perfect the assignment of the credit, the notice of
the assignment or the acknowledgement of the assignment must be
made attaching a fixed-date certificate. Under the civil law, assignment of a claim may not be accepted by the obligor or any otherthird party unless the assignor gives a notice to the obligor or the
obligor has acknowledged the same, and such notice or acknowledgement must have the fixed date to be effective against the third
party other than the obligor. A fixed-date certificate is obtainable
by either a content-certified mail or certification by a notary public.
21 What other maritime liens over vessels are recognised inyour jurisdiction? Do these claims give rise to a right to arresta vessel? In what circumstances may associated ships bearrested?

The following claims would create a maritime lien, by which thevessel may be arrested:• costs incurred from the auction sales of the vessel after the auction procedure is commenced;• costs to maintain the vessel at the last port;• tax and other dues for her voyage;

Getting the Deal Through – Ship Finance 2014

Yoshida & Partners
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pilotage and towage;
salvage and general average;
claims arisen out of necessity to continue her voyage;
crew’s claim under the employment contract;
claims arisen out of ship sales, construction, equipment but
before her departure and claims for equipment, provisions or
bunker for her last voyage; andclaims under the Japanese COGSA or the law concerning limitation of liability of shipowners or the law concerning compensation for damage from oil pollution by ship.

Associated ships may be arrested by way of ‘provisional attachment’, similar to the Mareva injunction under English law, but not
on maritime liens. Provisional attachment is only to preserve assets(eg, vessels) of the debtor as owner from being disposed of until the
judgment or arbitration award becomes enforceable. The arrestor
must provide a counter security to the court in cash or by a bondissued by a bank or a foreign bank admitted by Japanese laws.
22 What maritime liens rank higher than a mortgage lien?

Maritime liens on the vessel mentioned in question 21 have a priority over the ship mortgage even if they are created after the mortgage
is registered.
23 May non-mortgage liens be recorded over a vessel?

We have no means of recording non-mortgage liens over a vessel.
24 Will mortgages on ‘foreign’ flag vessels be recognised in yourjurisdiction? If so, do they share the same priority as those on
vessels registered under the laws of your jurisdiction?

There is a legal dispute on the issue of whether the mortgage on foreign flag vessels is recognised in Japan. Japanese courts have in fact
accepted enforcement of the foreign ship mortgage in many shiparrest cases but a few courts refuse to recognise by reason that it
does not have any ground of Japanese law. If the foreign ship mortgage is recognised, it has the same priority as those registered underJapanese law.
25 What is the procedure for enforcing a mortgage in your jurisdiction
by way of foreclosure? Are interlocutory sales permitted? Howlong does a judicial sale take? What are the associated court
costs and how are they calculated?

If a debtor is in default under the loan agreement or other contracts,
the mortgagee may apply for judicial auction sale of the vessel. The
mortgagee first needs to arrest a vessel in Japan as a precondition
for the court to order the commencement of the judicial auction
sale proceedings, for which a vessel must be put in a possession of
the court-marshal. After the court orders the commencement of theproceedings, the vessel is physically maintained by a ship-manager
appointed by the court until she is sold. In the meantime, the court
inspects and makes a valuation of the vessel to determine the minimum price for bidding. A judicial auction is made by way of open
bids or tender bids upon consultation with the financer as mortgagee.
Interlocutory sales are not provided for under Japanese law. It
usually takes several months to have a judicial sale. Costs that theapplicant must bear are the deposit ordered by the court for thevessel’s expected maintenance and preservation costs or expenses,
including port charge, crew wages, insurance, bunker, etc, for several
months until the vessel is sold.
26 May a vessel be sold privately by a mortgagee? Will the saledischarge liens over the vessel?

A vessel may be sold out of court privately by a mortgagee according
to the terms and conditions provided in a mortgage deed. However,in a private sale, liens over the vessel are not discharged without

www.gettingthedealthrough.com

JAPANsettling lien-claims while any liens are discharged through a judicial
auction sale. Thus, if it is expected that the vessel may be subject alien, financers must bear risks of a lien in selling a vessel by a privatesale.
27 What are the limitations on rights of self-help by a mortgagee?

A mortgagee is allowed to bid for and purchase a vessel by itself inthe same way as the law normally requires and there is no particular
limitation on the right of self-help.
28 What duties does a mortgagee owe to an owner or third-party
creditors?

A mortgagee does not obtain any possession of the vessel and theowner is allowed to use the vessel. Thus, a mortgagee does not owe
any duties or responsibility to the owner or other third-party creditors in connection with the use of the vessel.
Collateral
29 May finance leases or other charters be recorded over vessels
flagged under the laws of your jurisdiction?

Rights that can be registered over vessels under Japanese law areownership, mortgage and lease only. In a certain scheme for financelease, (i) where a finance lessor holds the right of ownership of thevessel, he or she is registered as owner and the right to lease of thevessel may be registered in the name of a lessee, and (ii) where afinance lessee obtains the right of ownership of the vessel, he or she isregistered as owner but the lessor’s credit is not registered as security
because there are no means to register such interests in Japan. The
title to lease by a bareboat charter may be recorded as a lease if it
falls in the meaning of ‘lease’ under Japanese law.
30 May finance leases be recharacterised by a court as a financing
contract? If so, is there any procedure for protecting the lessor’s
interest against third-party creditors?

A judgment of the Supreme Court in 1995 mentioned, in a dispute
under the corporate reorganisation proceedings, with regard to afinance lease contract with full-payout scheme, that monthly payment for lease by the lessee was not valued to monthly use of theleased object and the substantial nature of this finance lease was togive the lessee financial benefits.
It is thought in the proceedings of a lessee’s bankruptcy, civil
rehabilitation or corporate reorganisation that unpaid credits forfinance lease may be categorised in a secured claim, not an unsecured claim.
31 How is a security interest created over earnings of a vessel,
charter contracts, insurances, etc? How are these security
interests perfected?

Assignment of a charter contract (eg, earning of a vessel or charterhire) or insurance is often created as security interests by a contract
between the financer and the owner.
Charterparty or charter hire may be assigned by the assignor
with a notice of assignment issued by the assignor to the assignee
and an acknowledgment by the assignee. In order to perfect thesaid assignment, a notice of the assignment by the assignor or an
acknowledgement by the assignee must have a fixed-date certificate(see question 20).
Security interests over the insurance can be created by a pledge
or a mortgage by transfer. To perfect the pledge or mortgage bytransfer of the insurance, a notice of pledge or transfer from thepledger to the insurer or an acknowledgment by the insurer, having
a fixed-date certificate, is required (see question 20). A title of thepledge or the mortgage by transfer can be registered at the Legal
Affairs Bureau, in which case a notice by the pledgor or an acknowledgment by insurer is not required to have perfection.

JAPAN

Yoshida & Partners

32 Must security interests against non-vessel collateral be registered
to be enforceable? If so, where are such filings made?

38 Is there an optional tonnage tax exempting vessel owners fromtax on income?

One of the typical security interests against non-vessel collateral forship finance other than mortgage is a pledge of corporate shares
which the borrower owns (for registration see question 35).
In Japan, financers often require a borrower to provide a personal guarantee issued by directors of the borrower or a corporate
guarantee issued by affiliated companies. No register filings are
required.

Japan adopted the tonnage tax regime from 2008 replacing thestandard corporate tax regime. A tax base of tonnage tax is calculated on the net tonnage of the trading vessels and its rate is (i) if it
pays at each entry to open ports, ¥16 per net tonnage, and (ii) in caseof a lump-sum payment for one year, ¥48 per tonnage.

33 How is a security interest over a deposit account established?
How is a security interest perfected?

Japan’s tonnage tax regime is applicable only to Japanese flagged
vessels.

A security interest over a deposit account may be established by wayof a pledge agreement between a financer as pledgee and a borrower
as pledgor. In order to perfect the said pledge of a deposit account,a notice of the assignment by a pledgor or an acknowledgement by
a bank of the said deposit account, having a fixed-date certificate, isrequired (see question 20).
34 How are security interests in non-vessel collateral enforced?

Security interests in non-vessel collateral are enforceable according
to the contracts between the financier and the borrower or by a lawof a place where each security interest exists or is located.
A share pledge is enforceable by the law under which the company is incorporated, details of which are mentioned in question 35.
35 How are share pledges for vessel financings established? Are
share pledges or share charges common in your jurisdiction?

Share pledges or transferable mortgages over the share are available for financers as security of the loan credit. It is construed under
the international conflict law of Japan that share pledges for vessel
financings may be established by the law under which the company
is incorporated and Japanese law is applicable when it is designatedas governing law of the share pledges.
In Japan, share pledge is established (i) by physical delivery of
the share certificate if it is issued by the company, (ii) by recording
the pledgee in the book-entry transfer form if the share certificate
is not issued by the company but the book-entry transfer system isadopted, or (iii) by recording the pledgee in the shareholder list of
the company if such company neither issues the share certificate nor
adopt the book-entry stock system.
36 Is there a risk that a pledgee, before or after exercise of the sharepledge, may be exposed to debts or other liabilities of the pledged
company?

A pledgee would not be exposed to a risk of having debt or liabilitiesof the pledged company beyond the value of the shares before orafter exercise of the share pledge.
Tax considerations for vessel owners
37 Is the income earned by the owners of vessels registered in yourjurisdiction subject to domestic taxation? At what rate?

The parties who are allowed ownerhip of Japanese flagged vessels
is limited to the Japanese government, Japanese nationals or a company incorporated by Japanese law as mentioned in question 12.
Assuming a Japanese vessel make a profit, the owners as a corporatebody (they must be a Japanese entity) are to bear (i) a fixed property
tax for vessels, a corporation inhabitance tax or a business income
tax as local taxes and also (ii) a corporate tax as a national tax. A
rate of a corporate tax is presently 25.5 per cent and the total effective tax rate is 35.64 per cent after 1 April 2015.

39 What special tax incentives are available to shipowners
registering vessels in your jurisdiction?

40 Are there any other noteworthy tax provisions specificallyapplicable to shipping, shipping income or ship finance?

There is no particular tax regime favorable to shipowners incorporated in other jurisdictions.
Insolvency and restructuring
41 Is there a general scheme of reorganisation or insolvency
administration in your jurisdiction?

Procedures for re-organisation or insolvency are stipulated in different laws. For example, the Bankruptcy Law provides for bankruptcy of an individual or a corporation who wishes to close its
business. The Civil Rehabilitation Law provides for rehabilitationof an individual or a corporation and the Corporate Reorganisation
Law provides for reorganisation of a corporation only. In the former
proceedings, the current executives may continue to keep management of the company but in the latter proceedings, the managementof the company is fully succeeded by the trustee.
In bankruptcy proceedings or civil rehabilitation, the credits
secured by a ship mortgage are enforceable at any time out of theproceedings, but in a corporate reorganisation, even the ship mortgage must follow the reorganisation plan and may not be enforced
voluntarily out of the proceedings.
42 Will the courts of your jurisdiction respect the rulings of a foreign
court presiding over reorganisation or liquidation proceedings?

Japan has legislation concerning recognition and assistance forforeign insolvency proceedings following the model law for recognition and assistance of the foreign insolvency proceedings formulated by United Nations Commission on International Trade Law(UNCITRAL).
Tokyo District Court has exclusive jurisdiction over this matter and the applicant is required to put up a deposit decided by the
court. The court may order suspension of the attachment or otherproceedings over the property in Japan and, if necessary, may prohibit disposal of the property to assist the foreign proceedings.
43 What is the order of priority among creditors? In whatcircumstances will creditors be required to disgorge paymentsfrom an insolvent company?

The following claims are given priority to recover from the bankruptcy estate before the liquidating distribution is made to relevantbankruptcy creditors:• expenses for court proceedings performed for the common
interest of bankruptcy creditors;• expenses for the administration, realisation and liquidating distribution of the bankruptcy estate;• tax, etc arising from a cause that has occurred before the commencement of the bankruptcy proceedings, for which, by thetime of commencement of the bankruptcy proceedings, the due

Getting the Deal Through – Ship Finance 2014

Yoshida & Partners•

date of payment has not yet arrived or one year has not yet
elapsed after the due date of payment; andclaims arising from an act conducted by a bankruptcy trusteewith respect to the bankruptcy estate.

JAPAN
•

•
Bankruptcy claims, for which a general statutory lien or any othergeneral priority exists over property that belongs to the bankruptcy
estate, have a priority over other general bankruptcy claims, such as:• tax etc arising from a cause that has occurred before the commencement of the bankruptcy proceedings, for which, by thetime of commencement of the bankruptcy proceedings, the due
date of payment has elapsed more than one year after the due
date of payment;• unpaid fees for a pension insurance or health insurance; and• unpaid wages.
A creditor may be required to disgorge payments from an insolvent
company if he or she knew the fact that receiving payment in preference would prejudice other creditors.
44 May a vessel owner provide security on behalf of other relatedor unrelated companies? What are the requirements for it to be
enforceable?

An owner of a vessel may provide security on behalf of other relatedor unrelated companies and no particular relation between theowner and debtor or borrower is required. To enforce the mortgage
on the vessel in such cases, upon the event of default having been
occurred on the principal debtor or borrower, the vessel must firstbe arrested by the mortgagee as creditor in Japan to put her in thepossession of the court-marshal.
45 Is there a law of fraudulent transfer that permits a third party
creditor to challenge, for example, the grant of a mortgage
because of insolvency of the mortgagor or insufficientconsideration received by the mortgagor in exchange for the grantof the mortgage?

The bankruptcy law provides legal effects when a fraudulent transfer (prejudicial act to creditors) has been made by a debtor, mortgagor or others. The following acts may be avoided by a bankruptcy
trustee after the commencement of the bankruptcy proceedings isdeclared:•

acts conducted by the debtor having knowledge that the said
acts would prejudice creditors, or acts which prejudice creditors
and have been conducted after the payment was suspended orfiling of the bankruptcy proceedings had taken place;gratuitous acts or onerous acts equal to gratuitous acts conducted by the debtor after or six months before the payment
was suspended; oracts conducted to give security for a debt or to settle a debt after
the debtor became insolvent or the bankruptcy proceedings
were filed provided that a creditor must knew the fact that the
debtor was insolvent, payment has been suspended or the bankruptcy proceedings was filed.

The above rights of avoidance may not be exercised after two years
have elapsed since the bankruptcy proceedings were commenced.
46 How may a creditor petition the courts of your jurisdiction to
declare a debtor bankrupt or compel liquidation of an insolvent
obligor?

Any creditors may apply for a debtor bankrupt upon putting up a
deposit to the court. The court will order much higher deposit thana debtor application for bankruptcy case. The applicant creditor
must make prima facie proof as to the applicant’s credit and debtor’s
insolvency. The court will hold a hearing with both the applicant
and the debtor before declaring the commencement of the bankruptcy proceedings.
47 Has your jurisdiction adopted the Model Netting Act of theInternational Swaps and Derivatives Association (ISDA)? If not,may a swap provider exercise its close-out netting rights under an
ISDA master agreement despite an obligor’s insolvency?

Japan has not adopted the Model Netting Act of the International
Swaps and Derivatives Association (ISDA). However, there are someprovisions that reflect the netting regime for certain transactions in
the bankruptcy law, the civil rehabilitation law, the corporate reorganisation law and the special law called the Law on Collective
Liquidation of Specified Transaction Conducted by Financial
Institutions. These provisions are applicable to the netting between
two parties but not among multiple parties.

Yoshida & Partners
Norio Nakamura

norio@japanlaw.co.jp

4th fl., Suitengu-Hokushin bldg.
1-39-5 Nihombashi-kakigaracho
Chuo-ku
Tokyo
Japan

Tel: +81 3 5695 4188
Fax: +81 3 5695 4187
www.japanlaw.co.jp

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Data Protection & Privacy
Debt Capital Markets
Dispute Resolution
Domains & Domain Names
Dominance
e-CommerceElectricity Regulation
Enforcement of Foreign Judgments
Environment
Foreign Investment Review
FranchiseGas Regulation
Insurance & Reinsurance
Insurance Litigation
Intellectual Property & Antitrust
Investment Treaty Arbitration
Islamic Finance & Markets
Labour & Employment

LicensingLife Sciences
Mediation
Merger Control
Mergers & Acquisitions
MiningOil Regulation
Outsourcing
Patents
Pensions & Retirement Plans
Pharmaceutical Antitrust
Private Antitrust Litigation
Private Client
Private Equity
Product Liability
Product Recall
Project FinancePublic Procurement
Real Estate
Restructuring & Insolvency
Right of Publicity
Securities Finance
Shipbuilding
Shipping
State Aid
Tax Controversy
Tax on Inbound Investment
Telecoms & Media
Trade & Customs
Trademarks
Vertical Agreements

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SHIP FINANCE 2014

ISSN 2056-4015