Italy: The New Law On The "International Register Vessel" In Italy

In order to check the overwhelming flagging out of Italian vessels and conversely to attract back to the Italian Registry the consistent tonnage that had slipped away under foreign and particular "Flag of Convenience" registries, Italy has recently enacted a new piece of legislation (by virtue of the statute n° 30 dated 27.2.98 becoming effective on 1.3.98) establishing the "International Registry of vessel".

Thanks to this new Open Register the Italian government hopes to recover the national private fleet that has tremendously decreased in the last decade (-40% circa) and was said to be bound for extinction within 2005 if this trend lasted.

Data made available from the Association of Italian Ship owners (Confitarma) say in fact that from 1979 until 1996 271 vessels were flagged out and almost 17.500 Italian seafarers lost their employment.

The reason for this is - no doubt - the excessive costs concerning the fiscal and labour regime of the "First Register", which is now the central aspect considered by the piece of legislation in issue.

Before this, in 1989 in order to recover a situation that even then appeared to be critical, the Italian Parliament enacted the "Bare Boat Charter Registration" Law by virtue of which a vessel may be chartered to a foreign company under a flag of a second State while it remains formally registered in Italy and the Italian flag is temporarily suspended.

Despite the beneficial impact as far as the fiscal aspects are concerned, as a matter of fact the management of such ships took most of the national shipping industry and also seafarer skills and experience outside the Italian borders.

It is worth noticing that in order to curtail the expanding "Flag of convenience" phenomenon even the UE had previously tried to create the so called EUROS (EU- Register of Shipping), but with no result.

While Italy has arrived late to the goal of a second registry, other countries, first of all Norway (NIS), have already taken advantage of this for many years with a dramatic increase of the national tonnage and number of seafarers. It would appear also that the beneficial effect are experienced even by the national administration that, despite the lower taxation, can recover more from the wealthy shipping companies.

The Law N° 30 Of 27.2.98.

The relevant articles of the Law concerning the "International Registry" are only seven but, like any piece of Italian legislation, they are rather complex since they refer to various articles of the Maritime Code and statutes which in their turn often make cross reference to further piece of legislation.

Art.1: Establishment Of The International Register.

The Register is divided into three sections in which merchant vessels employed in international trade only can be entered upon authorisation by the Ministry of Transport and Navigation, taking in account the Special Collective Wage Agreement agreed by the Unions.

A vessel registered with the International Register cannot be employed in cabotage trading, id est the carriage of passengers or goods by sea between ports in any Member State, including the overseas territories of the State, as defined by Council Regulation no. 3577/92 of 7th December 1992 applying the principle of freedom to maritime transport within Member State.

(a) Vessels belonging to Italian or EU nationals, on the condition that the vessels belong for a share exceeding twelve carats to Italian or EU individuals, corporate bodies or entities;

(b) Vessels belonging to non EU shipowners newly built or vessels coming from a foreign but not EU register belonging to individuals, corporate bodies or foreign but not EU entities who take over the effective control of the vessel directly through a permanent organisation in the national territory with management assigned to Italian/EU individuals, corporate bodies or entities having their domicile in the port of registry of the vessel and who undertake all responsibility for its management before Administration authorities and third parties with a declaration to be submitted to the office where the vessel is registered, according to regulations providing for "shipowners declaration".

(c) Vessels belonging to non EU shipowners under regime of temporary suspension from non EU register following bare boat charter.

Besides government vessel, fishing vessels and pleasure boats may not be registered under the International Registry.

Art.2: Crewing.

Article 318 of the Maritime Code establishes that the crew of national vessels manned in Italian ports must consist entirely of Italian nationals (and now from other countries belonging to EU). Such a situation will persist even under the International Register regarding vessels registered upon 1st January 1998 according to articles 146 and 148 of the Navigation Code or those assimilated through agreement between the Social Partners.

These vessels shall be manned entirely by Italian/EU crews and shall have at least one deck cadet officer and one cadet engineer embarked.

However, by virtue of art.2 of Law n° 30 the crew of vessels coming from foreign registers under bare boat charter according to articles 28 and 29 of the Law 14 June 1989 n.234 may be made of six Italians only; save for the Master, the Chief Officer and the Chief Engineer that shall be compulsory Italians, the remaining three crew members may be chosen among Officers and Petty Officers, under the above condition that at least one deck cadet officer and one cadet engineer shall be embarked.

The same above requirement shall apply to vessels purchased abroad or anyhow coming from foreign registers as well newly built vessels delivered to the shipowners on a date subsequent to the effective date of the law coming into force.

As far as personnel not being a part of the crew are concerned, priority must be given to Italian personnel with a training and working contract, in compliance with Law 19th December 1984 no. 863. Failing the availability of such personnel, any workers (i.e. different from Italian/EU citizens) can be recruited.

The crew employed on the vessels must be in possession of certificates issued or recognised by the Italian Administration or any other Administration of a State signatory of the International Convention on a Standard of Training, Certification and Watchkeeping for Seafarers adopted in London on 7th July 1978 and ratified by Law 21st November 1985 no. 739.

It shall be borne in mind that a pre-requisite for eligibility is the existence of an agreement between the Trade Unions representing employers and employees respectively to be filed before the Register Office of the vessel.

Art.3: Law Governing Recruitment Contract.

As a general principle of maritime law the law governing the recruitment contracts is the law of the flag of the vessel, unless otherwise agreed by the parties insofar as vessel of foreign flag only.

Law n° 30 has substantially innovated the matter establishing that the economic, normative, social security and insurance conditions for seafarers on board vessels registered with the International Register shall be governed by the law of the recruitment agreement and by the collective agreement entered between with Trade Unions.

As far as non EU seafarers are concerned, the recruitment contract shall be governed by the law agreed by the parties and in accordance with the relative ILO Conventions.

The minimum economic, wage and insurance conditions ought to be fixed by the Trade Unions that undersigned the collective agreement and this will apply even regarding non EU workers.

Finally, it worth noticing that the welfare and social security contributions due by law are escluded for personnel embarked on vessels under the International Registry.

Art.4: Fiscal Regime

As already commented, the actual new item of the International Register is the more favourable fiscal conditions applicable to members: the income of the employment of vessels registered under the International Register shall be taxed at a percentage of 20%.

Also, the managers of vessels under the International Register will benefit from a "tax credit" corresponding to the income tax of the individual person due for salaries paid to the ship's personnel embarked on board the same vessels, such a credit being not considered in the calculation of the taxable income.

Another important fiscal alleviation consists in the reduction from 7.5% to 0.05% of the tax imposed upon the hull & machinery insurance premium that is granted for any vessel and not only for those registered with the International Register. Due to the difficult wording of the relevant article, it is doubtful whether this substantial reduction (that constitute as a matter of fact an actual withdrawal) of the taxation upon insurance premium will apply also to other types of covers. The general trend inclined to say that this should include the "risk of navigation" in general and so it embraces loss of hire, charterers’ and shipowners’ liability policies, inclusive of P&I covers.

Art.5:General Framework Of The Law.

As previously established by the DPR 21st February 1990, n. 66 regarding chartering out of Italian flag vessels, the vessels entered in the International Register are subject to the general provisions, regulations, EU Law and to International Conventions applicable to vessels registered under national rolls and register or under bare boat charter regime.

Art.5 clarifies that ownership hypothecation, maritime liens, encumbrances, creation, transfer and redemption of same, together with forms related to recording in the register are governed by the law of the underlying register also for vessels under a bare boat charter regime.

By virtue of the International Register, passenger vessels may host casinos and gambling games in the course of navigation outside the Italian territorial waters but inside the Mediterranean Sea, and not limited anymore to the Straits as it was before.

Law n° 30 has introduced some amendments to the Maritime Code (artt.157 and159) by virtue of which a vessel entered with the International Register may be deleted by the Administration.

Save for special provisions concerning vessels belonging to individuals, it is established that, when a foreigner (non EU) acquires the ownership of the vessel entered under the International Register pursuant to an order of the Administration, after having heard from the recorded creditors and the Social Welfare Offices, the vessel shall be deleted.

Accordingly, whenever non-nationals of Member State share more than 18 carats of the ownership of the vessel, the Administration of the port of Register will provide for the deletion from the Register.