News

18/01/2016

Brazilian special registry (REB) as an alternative for foreign vessels

NORDIC LIGHT: Aiming to stimulate the internal market and shipbuilding industry, Law no. 9.432/97 established a restriction in Brazilian waters for cabotage, inland navigation and offshore and port support activities. 

 

In this sense, only Brazilian Shipping Companies (EBNs) are allowed to perform such types of navigation in Brazil. EBNs are regulated by the National Agency for Water Transportation (ANTAQ) and must comply with certain technical, legal and financial requirements.

 

Such types of navigation shall only be performed by Brazilian-flagged vessels, or foreign-flagged vessels chartered by EBNs in specific circumstances. One of those hypotheses is the absence or unavailability of Brazilian vessels of the type and size adequate to the intended navigation, evidenced by means of a consultation to other EBNs (“circularization”).

 

During circularization, it is possible for EBNs to block the charter of the foreign vessel for the entire period requested or only part of it. If this happens, the domestic vessel must be contracted. If not, authorization for the foreign vessel is issued for up to one year.

 

Due to Brazilian present scenario of crisis, several charter contracts have been terminated, leading to more Brazilian flags available and using their right to block foreign vessels. Hence, shipowners are seeking alternatives to guarantee the operation of their foreign vessels in Brazil, and the most advisable option is to fly the Brazilian flag by means of registry of the vessel at the Brazilian Special Registry – REB.

 

REB is available for Brazilian vessels and foreign vessels bareboat chartered to EBNs, without the need of circularization, as long as the EBN has sufficient tonnage. The foreign vessel has its original flag temporarily suspended, receiving a provisory Brazilian flag and enjoying all regulatory benefits of Brazilian vessels, not being subject to the risk of blockage. 

 

In what concerns the tonnage requirement, EBNs are allowed to charter under REB foreign vessels with twice the Deadweight Tonnage of its vessels of similar type under construction in a Brazilian shipyard, plus half the Deadweight Tonnage of its Brazilian vessels already concluded and owned (no restriction towards the vessel’s type), in any event guaranteed the right to charter at least one vessel of equivalent size. 

 

In February 2015, ANTAQ established the possibility of transference of Deadweight Tonnage from one EBN to another, by means of execution of a bareboat charter and a separate agreement ruling the tonnage assignment.

 

In this scenario, the vessel bareboat chartered to grant the tonnage must be chartered for at least thirty six months, and operated effectively and continuously in the authorized type of navigation by the charterer. 

 

REB has no impacts on mortgages registered abroad over the vessel, since it is a simple flag registration. Notwithstanding, it is necessary to confirm if the financing agreement permits the bareboat charter of the vessel to an EBN, as well as the country of origin of the flag authorizes the provisory suspension of the flag.

 

To conclude, we highlight that Brazil is a signatory of the Brussels Convention of 1926, which recognizes the validity of mortgages registered in the other signatory countries, but it is not signatory of the International Convention of 1993. In this sense, the validity of foreign mortgages in Brazil is a controversial matter – but we believe that we have strong arguments to defend its enforcement.

 

By Fernanda Martinez Campos Cotecchia and Luisa Falcão dos Santos Wernec, Kincaid | Mendes Vianna Advogados, for Nordic Light

 

 

 

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