Maritime co-ownership: the ship does not belong to the legal entity but to the co-owners

Imagine you are the owner of a sailboat moored in the port of Villefranche-sur-Mer, shared with two other enthusiasts. You have invested part of your savings in this beautiful ship, but one day a dispute arises: one of the co-owners damaged the boat by taking it out of the fleet without agreement. To whom does the claim for compensation belong? To the co-ownership as a legal entity, or to each co-owner individually? This question, seemingly technical, has very concrete consequences on your rights.

The French Supreme Court, in a judgment of 19 December 2018 (No. 17-20.122), has ruled: the ship held in maritime co-ownership is not an asset of the co-ownership as a legal entity, but belongs to each co-owner in proportion to their share. Simply put, the maritime co-ownership does not own the ship; it is the co-owners together who own it in undivided shares. This distinction is crucial for determining who can take legal action or receive compensation.

In this article, I will explain simply the facts, the Court's reasoning, and above all what this changes for you, whether you are a co-owner of a pleasure boat or a nautical professional. We will also look at practical tips to avoid disputes, and I will illustrate with concrete examples from the Nice region.

The facts: a story like many others

Mr. X, a resident of Nice, was a co-owner of a ship with two other people: Mr. Y and a management company. Each held shares in a maritime co-ownership governed by the law of 3 January 1967. A dispute arose: according to the others, Mr. Y had caused damage by taking the ship out of the fleet without authorisation, resulting in loss. He had also received an advance payment of 200,000 francs on the liquidation of the co-ownership, but the other co-owners believed that this sum should be repaid to the co-ownership.

The dispute was first brought before the Commercial Court of Nice, then before the Court of Appeal of Aix-en-Provence. The lower courts ordered Mr. Y to pay compensation to the co-ownership, considering that the ship formed part of the assets of the legal entity "co-ownership". Mr. Y appealed to the Supreme Court, arguing that maritime co-ownership has no separate patrimony: the ship belongs to the co-owners as undivided owners.

The Supreme Court agreed with him. It set aside the appeal judgment, recalling that the ship held in maritime co-ownership is not an asset of the co-ownership as a legal entity, but belongs to each co-owner in proportion to their share. Consequently, the claim for compensation does not belong to the co-ownership but to the co-owners individually. This decision was handed down on 19 December 2018, in a case where the amounts at stake were significant: the disputed advance was 200,000 francs (approximately €30,500).

The reasoning of the court — explained

To understand the judgment, we must go back to the legal nature of maritime co-ownership. Unlike co-ownership of buildings (law of 1965), maritime co-ownership is a forced undivided ownership: the co-owners are undivided owners of the ship, but they may decide to form a legal entity (often a company) to manage the ship. However, this legal entity is not the owner of the ship; it only manages it.

The Supreme Court relies on Article 8 of the law of 3 January 1967, which provides that the ship is the undivided property of the co-owners. It rejects the idea of a separate patrimony of the co-ownership. Thus, when Mr. Y causes damage to the ship, that damage is suffered by each co-owner in proportion to their shares. The claim for compensation therefore arises directly in the patrimony of each co-owner, and not in that of the legal entity.

The Court also clarifies that the co-ownership cannot have a claim against a co-owner for damage caused to the ship, because it is not the owner. However, each co-owner can individually seek compensation for their personal loss. This reasoning is consistent with the nature of undivided ownership: each undivided owner holds a share of the property and can act to protect it.

This is a confirmation of case law rather than a reversal. The Supreme Court had already ruled in the same sense (Civ. 1re, 3 Nov. 2010, No. 09-15.412). But the 2018 judgment is particularly clear on the fate of claims and debts between co-owners. It puts an end to any confusion that may have existed in practice, where some courts treated maritime co-ownership as a legal entity with its own patrimony.

However, note: if the co-owners have formed a company (e.g., a co-ownership SARL), the ship may be contributed to that company and then become a corporate asset. But in the case of a simple maritime co-ownership without legal personality, the ship remains the undivided property of the co-owners.

What this changes for you — concretely

This decision has important practical implications, particularly for co-owners of pleasure or fishing boats in the Nice region. Here is what you need to know according to your profile:

• For undivided co-owners: if another co-owner damages the ship, you can take legal action in your own name to recover your share of the loss. You do not need to wait for the "co-ownership" to act. For example, if your share is 30%, you can claim 30% of the compensation.
• For the manager of the co-ownership: you must not confuse the funds of the co-ownership with the patrimony of the co-owners. Compensation received for damage must be distributed among the co-owners, and not kept in the account of the legal entity.
• For creditors: if you have a claim against a co-owner, you cannot seize the ship which belongs to the undivided ownership, unless you seize that co-owner's share. The decision clarifies that the ship is not an asset of the co-ownership, so it cannot be seized for its debts.

Take a concrete example: in Nice, three friends buy a sailboat for €150,000, each for one third. One of them, without agreement, damages the engine (repair cost: €9,000). Before this judgment, some courts might have said that the repair should be paid to the co-ownership. Now, each co-owner can directly claim €3,000 from the person who caused the damage. If that person does not pay, each co-owner can take legal action alone, without being represented by the manager.

If you are in this situation, you should:

• Have the damage assessed by an expert, with the agreement of all co-owners or, failing that, through a bailiff.
• Formally demand that the co-owner at fault make reparation, specifying that you are acting for your share.
• If unsuccessful, file a claim with the Judicial Court of Nice to obtain compensation corresponding to your share.

Four tips to avoid this type of dispute

• Draft a clear co-ownership agreement: from the outset, establish a written document specifying the shares, management rules, and how compensation will be distributed. Have it drafted by a lawyer specialising in maritime law. This will avoid conflicting interpretations.
• Insure the ship for the undivided ownership: take out a multi-risk insurance policy covering damage caused by a co-owner. The insurer will indemnify the undivided ownership, then seek recourse against the person who caused the damage. This avoids tensions between co-owners.
• Keep separate accounts for each co-owner: personal funds should not be mixed with those of the co-ownership. Open a bank account dedicated to the undivided ownership, and allocate each contribution and expense per co-owner.
• In case of dispute, consider mediation: before starting legal proceedings, try mediation. In Nice, there are maritime mediation centres. The cost is often lower than a trial, and it preserves relationships between co-owners.

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Further reading: related case law and developments

This judgment is part of a line of decisions clarifying the nature of maritime co-ownership. For example, a Supreme Court judgment of 3 November 2010 (No. 09-15.412) had already held that the ship is not an asset of the co-ownership. The 2018 decision goes further by applying this to a claim for compensation.

Conversely, earlier case law from some courts of appeal, such as that of Aix-en-Provence, had sometimes considered that maritime co-ownership had its own patrimony. The 2018 judgment puts an end to this divergence, reaffirming the principle of undivided ownership. Thus, courts must now apply this rule uniformly.

This clarification is important for the future, as it secures transactions and disputes in maritime co-ownership. It could also influence the legislator, who might be tempted to reform the 1967 law to create a true segregated patrimony, but for now, the current law is clear.

What you absolutely must remember

Here is a checklist of the essential points to remember:

1. The ship in maritime co-ownership belongs to the co-owners as undivided owners, not to a legal entity. Do not confuse co-ownership with a company.
2. Each co-owner can act alone to claim compensation for damage suffered by the ship, in proportion to their share. You do not need the agreement of the others to bring legal action.
3. The debts and claims of the co-ownership are in reality debts and claims of the co-owners. Compensation received must be distributed among them.
4. To secure your situation, have a co-ownership agreement drafted and keep clear accounts. In case of dispute, consult a specialised lawyer.

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