Discussions on Transfer of Mortgaged Ships without Mortgagee’s Consent under Chinese Law

Article 17 of Maritime Code of China provides that after establishing mortgage on a ship, the mortgagor shall not transfer the ship without the consent of the mortgagee. Such provision is substantially the same with item 2 of Article 191 of Property Law of China, which provides that in the course of mortgage, mortgagor shall not transfer the mortgaged property without the consent of the mortgagee, except where the transferee repays the loan for the debtors and extinguishes the mortgage. However, item 1 of Article 49 of Security Law of China provides as follows: in the course of mortgage, if the mortgagor transfers the mortgaged property the mortgage of which has been registered, the mortgagor shall notify the mortgagee and inform the transferee that the property under transfer has been mortgaged, and failure to notify the mortgagee or failure to inform the transferee will void the transfer. Apparently, Property Law modified the rules established under Security Law. In this regard, the Interpretations on Property Law explains as follows: in reality, normally the mortgagee will not find that the mortgaged property has been transferred without notifying the mortgagee or informing the transferee until the mortgagee tries to enforce the mortgage. This paper is not focusing on Article 17 of Maritime Code only, but pays more attention to item 2 of Article 191 of Property Law and its underlying civil law principles.