IS IT POSSIBLE FOR FOREIGN-FLAGGED SHIPS TO BE SOLD IN Türkiye?

"Is it possible to sell foreign-flagged ships in Türkiye?" is a question of interest both nationally and internationally.

Article 931 of Law No. 6102 defines a ship as follows: "Any vehicle that is intended for a specific purpose, requires movement in water, has the ability to float, and is not excessively small, shall be considered a 'ship' for the purposes of this Law, even if it does not have the ability to move on its own.".

According to the Turkish Civil Code, ships are movable property. However, some legal opinions argue that ships are considered immovable property because they are registered in the same registry as immovable property, subject to mortgages, seizures, forced sale, and possess other rights.

Just as individuals are bound to a state by citizenship, ships are bound to a state by nationality and are subject to that state's laws. Ships with nationality are called flagged ships. Nationality is acquired when a ship is registered in a state's registry and flies that state's flag. Article 91 of the United Nations Convention on the Law of the Sea grants each state the right to regulate the characteristics that ships flying its flag must possess. Therefore, the flag carried by a ship indicates which registry the ship is registered in and which state's laws it is subject to. The characteristics required for ships to fly the Turkish flag are regulated in Articles 940 and subsequent articles of the Turkish Commercial Code.

Foreign-flagged vessels are those that do not fly the Turkish flag and are registered in the registry of another state. Therefore, the element of "foreignness" in the case of foreign-flagged vessels stems from the registry. There is no regulation in various laws that would prevent the sale of foreign-flagged vessels in Türkiye. According to Article 26 of the Turkish Code of Obligations, parties have the freedom of contract to determine the content of a contract, provided it is not contrary to law. Therefore, a contract for the sale of a foreign vessel can be concluded in Türkiye. As is often confused in practice, concluding a contract in Türkiye does not involve the transfer of ownership to third parties. As previously stated, a vessel is subject to the rules of the registry of the country to which it is registered. Therefore, for the transfer of ownership of a foreign vessel to third parties to be legally binding, the transfer and registration process must be completed in the registry where the vessel is registered.

The ship registry is, so to speak, the identity of the ship. The ship's owner, name, port of registration, technical specifications, mortgages, liens, real rights, and usufruct rights are all regulated in the ship registry. The rules for transferring ownership of ships registered in the Turkish ship registry are regulated in Article 1001 of Law No. 6102. For the transfer of ownership of foreign-flagged ships, however, the rules governing the transfer must be considered in conjunction with the Turkish Commercial Code (TTK) and the Private International Law Act (MÖHUK), due to the ship being registered in another country's registry.

Article 24 of the Turkish Code of Private International Law stipulates that in contractual obligations, the parties may, by their explicit will, determine the law applicable to them. If the parties do not choose a legal system, the law most closely related to the contract shall apply. This law shall be the law of the habitual residence of the debtor at the time of the conclusion of the contract; in contracts concluded for commercial or professional purposes, the law of the debtor's place of business, or if there is no such place of business, the law of their domicile; and if the debtor has multiple places of business, the law of the place of business most closely related to the contract. However, if, according to all the circumstances, a law more closely related to the contract exists, the contract shall be subject to that law.

If a ship is registered in the maritime registry with real rights, mortgages, pledges, liens, or usufruct rights, the laws of the state where the ship is registered will apply, as these will affect third parties. If a mortgage arises in another country and a sales contract is sought in Türkiye, the mortgage does not terminate; its effect continues.

The sale of a ship involves multi-stage legal procedures due to the high economic value of the vessels and their registration in international registries. These multi-stage procedures include: drafting the contract, examining the legal status of the ship, checking the registry records, investigating existing mortgages, completing the transfer of ownership in the foreign registry, and, if necessary, transferring it to the Turkish flag. Because of these multi-stage procedures, it undergoes a much more rigorous scrutiny than other sales of movable property.

When examining the ship's registry, the buyer should obtain a mortgage release document, bank consent, and proof of debt repayment from the seller to protect themselves from third parties purchasing the vessel with a mortgage.

Standard contracts are used when drawing up a ship sale contract. The most common of these internationally is the BİMCO SALEFROM contract. The contract includes the sale price, payment method, delivery location, delivery date, transfer of risk, technical condition of the ship, delivery of documents, and dispute resolution methods. Transfer of ownership, changes in registration, and removal of mortgages cannot be regulated by this contract. In other words, while a contract can be drawn up in Türkiye, it will not automatically result in registration in Turkey or transfer to the Turkish flag.

The transfer of ownership takes place within the registry system of the state where the ship is registered. The Certificate of Sale shows the ship information, the sale price, the transfer date, and the new owner. If the new owner is to transfer the ship to a new registry after the transfer, this is done with a deregistration certificate.

Regulations concerning the transfer of foreign-flagged vessels to the Turkish registry are governed by Article 6102 of the Turkish Commercial Code and Article 4490 of the Turkish International Ship Registry Law, as well as the Law amending the Decree Law No. 491.

The sale of foreign-flagged vessels in Türkiye requires considering numerous legal and administrative factors, including the vessel's registration status, flag state regulations, customs procedures, tax liabilities, and contracts to be drawn up between the parties. Therefore, consulting a lawyer experienced in maritime law is crucial to ensure the sale is conducted legally and to prevent potential disputes.