This was an appeal from a decision by the Changwon District Court on 10 April 2013 (Judgment 2012Na5173).

Held: Appeal dismissed.

Articles 60.1 and 60.2 of the Act on Private International Law provide for the applicable law for maritime commerce. They state:

The matters under the following subparagraphs on maritime commerce shall be governed by the law of the country of registry of the ship:

1. The ownership and the mortgage on a ship, the maritime lien, and other real rights on a ship;

2. The order of priority of security interests on a ship; ...

As an exception to this designation of the governing law, art 8.1 of the Act on Private International Law stipulates that '[i]n case the applicable law specified by this Act is less related to the corresponding legal relations and the law of another country, which is most closely connected with such legal relations, evidently exists, the law of the other country shall govern'.

In light of the contents and purpose of each of the above provisions, the governing law that determines whether a maritime lien is established based on a seafarer's wage claim, or the priority between maritime liens and the ship mortgage is, in principle, the law of the country of registration of the ship. This has the advantage of convenience where the shipment is only related to the country of registration, and the nationality of the actual ship owner or ship operator, the main place of business, the ship's main destination and base, the nationality of the seafarers, and the employment contract of the seafarers, etc, is related to the country of registration. Where the place where the juristic act establishing the secured claim of the ship mortgage was performed, or where the court where the ship auction is proceeding, or interested parties are participating in the auction proceeding in a specific country other than the country of registration, the applicable law may be different. If there is a law of another country more closely related to the aforementioned legal relationship, the law of that other country should be regarded as the governing law.

The trial Court found that the owner of the vessel in this case, Emerald Line Overseas Inc, was just a company on paper (a so-called offshore company) established for the purpose of convenience, and had no particular relationship with the country of registration, Panama. First Shipping, the de facto owner and charterer, is a Korean corporation, and its CEO and executives are Koreans. The crew of the vessel in this case, including the plaintiffs, who are the captain and chief engineer of the vessel, are Korean or Southeast Asian, and none of the crew members are from Panama.

As it is stipulated that matters other than those stipulated in the contract are governed by the Seafarers Act and the Labour Standards Act of the Republic of Korea, the laws of the Republic of Korea apply to the employment relationship between the captain and the head of the agency. Considering the circumstances of the judgment, most of the creditors who participated in the auction procedure of the vessel included Korean corporations or nationals, having no particular relationship with the country of Panama. Since the law most closely related to the existence and priority between the plaintiffs' wages maritime lien and the defendant's mortgage right is Korean commercial law, not Panamanian law, in this regard, art 8.1 of the Act on Private International Law applies. According to the Korean Act on Commercial Law, the plaintiffs' wage claim is a claim which enjoys maritime lien status and takes precedence over the defendant's mortgage right [although the Korean Act is modelled on the MLM Convention 1993, Korea is not a party to the Convention].

On the basis of the above legal principles, the judgment of the lower Court was just, and there was no irregularity in its findings.