MERCHANT SHIPPING (AMENDMENT NO. 2) BILL

Order for Second Reading read.

6.05 p.m.

The Minister for Communications (Mr Yong Nyuk Lin): Sir, I beg to move, "That the Bill be now read a Second time.'

Members may recall that the new Registry of Singapore Ships was established in 1969 which was opened to foreign shipowners and which also provided exemption from Singapore income tax and other incentives. Since then the tonnage attracted to the Singapore flag has been satisfactory. In January 1969 there were 357 ships totalling 253,000 gross tons on the Register, and this increased to 489 ships totalling 574,775 tons as at 30th November, 1970.

On the mortgage of Singapore ships, the present Merchant Shipping Ordinance provides that until such time as regulations are made, the provisions of the United Kingdom law on ship mortages shall apply to Singapore ships. Unfortunately, this state of affairs does not appear to be satisfactory from the lenders' viewpoint, and after study of other mortgage systems and consultations with shipowners, international financial institutions and legal firms, a set of mortgage legislation has been drafted in the form of the Bill now before the House.

The objective is to formulate a simple and effective system which will make it attractive for banks and financial institutions to finance ships under the Singapore flag. Like any other valuable property, a ship may be pledged as a security for a loan or some other form of financial consideration, and it is common practice for ships to be built with concessional financing based on the mortgage of the ship. The interests of the mortgagee, namely, the lender, are protected through a system of registering mortgages, and any interested person may sight the register book in Singapore on payment of a small fee, or alternatively a certified copy of the register may be provided.

The Bill seeks to introduce specific provisions in the Ordinance to deal with the mortgage of Singapore ships and matters such as the rights and powers of the mortgagee and the priority of mortgages. The following important provisions may be noted:

Firstly, a mortgagor, i.e., the ship-owner, is obliged to disclose in writing to the mortgagee the existence of any prior mortgage or other liability before executing the mortgage. This is an additional safeguard for the lenders of money.

Secondly, a mortgage may be executed on a ship holding a provisional certificate of registration. If a bank is prepared to accept a mortgage on a provisional certificate of registration, there is no reason to refuse the registration of the mortgage.

Thirdly, a mortgage executed outside Singapore may be recorded by the Registrar in Singapore. At present all mortgages executed outside Singapore must be produced before the Registrar in Singapore for sighting and then registered, the registered time being the time the mortgage was produced and approved for registration by the Registrar. This does not appear to be a practical procedure particularly in the case of new buildings, where it is necessary to register the new ship at the time of delivery and simultaneously to record the mortgage. Under the new system, a mortgage executed outside Singapore will be approved and recorded by the Registrar in Singapore and the ship registration formalities simultaneously completed over the telephone. This arrangement has been stressed by international financial institutions and maritime lawyers as being most important.

Sir, I beg to move.

Question proposed.

6.12 p.m.

Mr P. Selvadurai (Bukit Panjang): Mr Govindasamy, Sir, I must first congratulate the Minister on introducing this Bill which would certainly enable Singapore to advance its interests in the running of a registry of convenience. Having listened to the Minister's speech, I was concerned with his remarks about the registration of a mortgage against the provisional registration of a vessel. The problem, in fact, amounts to this. If you have a person making a loan against a new ship that is being built as security, the lender would, of course, want to be properly secured in law. I notice that it would be possible for a lender to register a mortgage against the provisional registration of a ship, but the question is, what would happen if the provisional registration did not go through and become a complete legal registration? Is the lender affected to his disadvantage? If he is, would it not be possible for him to step into the shoes of the purchaser himself and proceed with the provisional registration and convert it into legal registration? If this cannot be done, his interest is not secured as against other legal interests in the vessel. I wonder if the Minister would look into this question.

Mr Yong Nyuk Lin: Sir, considering the fact that the Member for Bukit Panjang is legally trained and I am an ordinary layman, I do not think I should attempt to answer his technical question except to say that in drafting this Bill we have taken into account the legal aspects, consulted with various ship-owners in Singapore and international financial institutions. I must therefore assume that the point which the Member has raised has already been taken into account; but, as mentioned in my speech just now, the present provisions do make it necessary for the mortgagor, the person who owns the ship, to disclose in writing to the mortgagee the existence of any prior commitment. This, therefore, should be sufficient and clear enough for the second man who steps in that when he does lend extra money, there is someone who has priority and rights over his. I will say that the Member's point will be considered and perhaps he will be given a full answer after it has been cleared with the Solicitor-General's Office.

Question put, and agreed to.

Bill accordingly read a second time and committed to a committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. [Mr Yong Nyuk Lin].

Bill considered in Committee; reported without amendment; read a Third time and passed.