The news has been full of the Mexican regulatory reforms in the energy sector, which aim to liberalise the sector and encourage greater foreign investment. As foreign investors, shipowners, operators and oil companies look towards new and exciting opportunities in Mexico, we look at some key questions for parties who are considering the practicalities of registering or operating a ship in Mexico.
Does the registration of a ship in Mexico require the owner to be a Mexican entity?
It is usually the case that the owner of a Mexican flag ship must be a Mexican entity. In addition, the Mexican owner will need to be at least 51 per cent owned by Mexican entities in order to avoid breaching Mexican foreign investment legislation. This ownership requirement will need to be particularly considered where the choice of a ship's flag has implications for a wider transaction structure (such as secured financing arrangements).
It is, however, possible to register a ship in Mexico that is owned by non-Mexican entities, provided that the ship is leased to a Mexican entity under an agreement which qualifies as a finance lease from a Mexican law perspective. The terms of the finance lease would be broadly similar to an ordinary bareboat charter, but must also include, amongst other items, a breakdown of principal instalments and interest payments, an obligation to purchase the ship, and a number of mandatory provisions required by Mexican law.
Must the ship comply with any local crewing requirements?
It is normally the case that officers and crew of a ship registered in Mexico must be Mexican nationals.
Given the anticipated expansion of the offshore service vessel sector in Mexico, following the reforms mentioned above, it will be interesting to see to what extent the Mexican authorities will consider relaxing or altering these requirements, in order to encourage foreign expertise and capacity to be deployed in Mexico.
How long does the registration process take?
Typical ship registration documents will be required and an inspection will have to be arranged by a registry representative. The availability of the registry representative may vary and it is recommended that the inspection is arranged as early as possible to avoid unforeseen delays.
Following the completion of these steps, the process should take anything from two to three business days but this will vary on a case by case basis.
Can a ship have dual registration in Mexico and elsewhere?