Malaysia’s Maritime Law: Key Amendments under the Merchant Shipping (Amendment) Act 2017 and its Impact on the Maritime Industry

This article examines the key changes introduced by the Merchant Shipping (Amendment) Act 2017 (“MSAA 2017”) and its comparison with the previous legal framework, and considers the practical implications for Malaysia’s maritime industry.

Chapter 1: Understanding the Merchant Shipping Ordinance 1952 (“MSO 1952”)

Ships are the backbone of international trade, carrying goods, energy and other resources across the world’s oceans. According to the United Nations Conference on Trade and Development (UNCTAD), maritime transport moves over 80% of goods traded worldwide by volume. Behind every vessel sailing under a particular flag lies a legal framework governing its registration, ownership and operation.

In Malaysia, much of this framework is built on the MSO 1952. Enacted more than seven decades ago, MSO 1952 remains one of the principal laws governing merchant shipping in Malaysia. The term “Merchant Shipping” refers broadly to the commercial use of ships, including the carriage of goods and passengers, while the term “Ordinance” reflects the form of legislation under which the law was originally enacted before Malaysia achieved independence in 1957. Despite its colonial origins, it continues to govern merchant shipping in Malaysia until today.

Since its introduction in 1952, MSO 1952 has been amended numerous times to reflect developments in Malaysia’s maritime industry and international shipping standards. The most recent substantive amendment, the MSAA 2017, was introduced to update the existing framework.

Chapter 2: Development of MSO 1952 up to 2016 Amendments

Before turning to the key changes introduced by the MSAA 2017, a brief overview of earlier amendments provides useful context on how MSO 1952 has evolved over time. Over the years, the MSO 1952 has been progressively amended to address changes in Malaysia’s maritime administration, shipping activities and international maritime obligations. Among other principal amendments introduced before 2017 are as outlined below:

Note: There have been several other amendments to MSO 1952 over the years. Further reference may be made to the Marine Department Malaysia’s website or the relevant legislation for a complete list.

Chapter 3: Legislative Journey of the MSAA 2017

From its passage and gazettement in 2017, the MSAA 2017 took almost nine years to come into force commencing only on 1 September 2026. The timeline below highlights the key milestones:

Chapter 4: Key Changes Introduced by the MSAA 2017

The 2017 amendments represent a broader restructuring of the MSO 1952. While the 2016 amendments substantially revised Part III (dealing with ship personnel and introduced detailed requirements relating to matters such as manning, certification, rest, leave and repatriation of seafarers), the 2017 amendments focus more broadly on ship registration, licensing, domestic shipping, maritime administration and the development of the shipping industry.

The 2017 amendments set out four main purposes:

• Encouraging registration under the Malaysia Ship Register and Malaysia International Ship Register;
• Introducing registration for ships on bareboat charter;
• Empowering the Director of Marine to license service and port undertakings; and
• Establishing the Malaysia Shipping Development Fund.

The amendments also strengthen provisions in respect of licensing of ships and domestic shipping.

4.1 Registration of Ships Framework:

(A) The Consolidation, Improvisation and Restructuring of Malaysia Ship Register (“MSR”) and Malaysia International Ship Register (“MISR”)

It is worth noting that the MSR and MISR are not new. The MISR has been in place since 2006, when Labuan was declared its official port of registry, governed under the then Part IIC of the MSO 1952. The 2017 amendments consolidate, improvise and restructure the existing ship registration framework. In particular, the 2017 amendments replace the existing Parts IIA, IIB and IIC with a new unified Part II on Registration and Licensing of Ships, covering sections 11 to 68, under which the Registrar is to maintain both MSR and MISR, as provided under Section 14(1) which states:

“The Registrar shall maintain a Malaysia Ship Register and a Malaysia International Ship Register.”

The amendment also modernizes the administration of the registers, introducing the ability to maintain the registers in physical or electronic form under Section 14(3) and Section 68H of MSAA 2017 (which will be explained in details under Subclause (e) below), and expanding the Registrar’s responsibilities over the registration system, including issuing and dealing with certificates and documents relating to registration.

Separately, the 2017 amendment also revises the qualifications for ownership. Under Section 19 of MSAA 2017, a Malaysian ship may be registered under the MSR by a Malaysian citizen, or, to the extent determined by the Minister, a body corporate incorporated in Malaysia. Meanwhile, for the MISR, eligibility extends further, whereby Section 19(b)(i) permits a Malaysian citizen or subject to Section 20(3), a non-Malaysian citizen. For foreign owners taking up this extended eligibility to facilitate the vessel’s registration, Section 20(3) requires the appointment of a representative person in Malaysia, either a Malaysian citizen with permanent residence in Malaysia, or a body corporate incorporated in Malaysia with its principal place of business here. This representative is responsible for regulatory and legal matters on behalf of the foreign owner, including filing documents and accepting service of process, distinct from the operational responsibilities of a ship manager under the earlier regime.

Taken together, this framework preserves the existing MSR and MISR structures while expanding the pool of owners eligible to register under the MISR and ensuring a Malaysian point of contact is maintained for regulatory and legal purposes.

(b) Flexibility in Ship Ownership Structure

Another practical change is the removal of the traditional fixed 64-share structure for ship ownership. Under the MSO 1952, the ownership in a ship had to be strictly divided into 64 share. Under the new Section 14(2)(b) of MSAA 2017, shares in a ship, “may be divided into any number of shares”, allowing greater flexibility for shipowners in structuring and allocating ownership interests in a Malaysian ship according to their commercial arrangements. This would be beneficial for corporate or commercial arrangements including joint ventures, corporate financing and fractured equity distributions.

The practical impact of eliminating the 64-share system under the MSAA 2017 is best demonstrated through modern maritime financing scenarios. The previous 64-ownership structure could have created significant mathematical friction for corporate joint ventures. For instance, a commercial agreement requiring a clean 60/40 equity split was impossible to register directly because 60% equates to an unregistrable fraction (38.4 shares), resulting in partners relying on the side agreements to reflect the equity properly. By allowing a ship’s ownership to be divided into infinite percentages or numbers of corporate shares, the MSAA 2017 finally aligns Malaysia’s ship registry with global commercial realities, simplifying project financing and resulting in it being substantially more competitive, agile and appealing to modern global financiers and corporate entities.

(c) Recognition of Bareboat Charter Registration

The recognition of a Bareboat Charter Registration has been long overdue, as other maritime-focused jurisdictions, such as Singapore and the United Kingdom, have implemented such systems for some time.

The amendment expressly recognises bareboat charter arrangements within the ship registration framework, covering two distinct scenarios:

• Charter-in. The inserted Section 19(c) allows a charterer, not the owner, of a ship under “bareboat charter terms” to register that ship under the MSR or MISR, provided the charterer has possession and control of the vessel, including the right to appoint the master and crew. This lets a foreign-owned vessel operate under the Malaysian flag for the duration of the charter, even though ownership remains with the foreign owner. The reason is the underlying title remains with the owner on its home (foreign) register, and therefore Malaysian registration here is operational only, not a register of ownership or security.
• Charter-out. Conversely, the inserted Section 38 allows a genuinely Malaysian-registered ship to be bareboat chartered-out and registered in another country for the charter period. It further provides that the Malaysian registration shall be suspended while the foreign registration remains in force and resumes once the charter period ends.

The registration of bareboat charter above shall be evidenced by a Certificate of Bareboat Charter Registry, as provided under Section 28(1) of MSAA 2017. Further and practically, the aforementioned dual mechanism gives operators a route to expand their fleets without the capital outlay of outright ownership (via charter-in) and gives Malaysian owners flexibility to place their vessels under a different flag for a period without losing their underlying Malaysian registration (via charter-out). Prior to these amendments, Malaysia had no dedicated legal basis for either arrangement. The amendment now provides that statutory basis.

The importance of this is that it provides massive commercial assistance to Malaysia by allowing maritime operators to expand their fleets with minimal capital outlay, circumvent strict domestic cabotage policy, and tap into competitive local tonnage taxes without the burden of buying ships outright. This dual-registry mechanism allows a foreign-owned vessel to temporarily fly the Malaysian flag and operate legally as a domestic ship, while the primary foreign registry retains exclusive jurisdiction over the underlying mortgage and legal title, a structure that gives international financiers security.

Another key highlight is that the updated framework explicitly states that a bareboat chartered-in ship cannot be mortgaged inside Malaysia as per Section 44(1) of MSAA 2017, keeping its legal and operational roots anchored to its foreign registry. This preserves a clear distinction between fully domestic vessels eligible for a standard Domestic Shipping License (“DSL”) and foreign vessels operating in Malaysia under bareboat arrangements.

(d) Modernization of Registration Administration

The newly-inserted Section 14 of MSAA 2017 provides that the Register may be maintained in either physical or electronic form:

“the Register may be maintained in physical or electronic form.”

The amendment introduced an electronic filing under Section 68H of MSAA 2017, allowing documents and applications to be submitted electronically where the prescribed requirements are satisfied. This reflects a move towards a more efficient and modern registration process to ease doing business in Malaysia, with practical benefits beyond convenience.

From a litigation perspective, if a dispute arises over ship ownership, shares, or a maritime mortgage, an electronically maintained register offers a clear, readily searchable record, which supports greater confidence for banks and ship financiers relying on a registered mortgage.as such interest is instantly secured and transparently searchable in a legally recognized electronic register.

(e) Ship Mortgages and Security

The amended framework also introduces a more comprehensive regime governing mortgages over registered ships. According to Sections 44 to 52 of MSAA 2017, these provisions address the creation and registration of ship mortgages, their priority, the mortgagee’s power of sale, assignment and transmission of mortgages, discharge, and protection of mortgages following termination of registration or the bankruptcy of the mortgagor.

Under the previous framework, a mortgagee’s statutory power of sale was heavily tied to a formal court foreclosure process or narrowly prescribed default parameters. Section 46 drastically improves lender’s position by granting a registered mortgagee the explicit power to sell the ship the moment the mortgage money (or any part of it) is due.

The priority of competing mortgages was recognized, and Section 46(2) provides absolute statutory protection for primary lenders, whereby a subsequent mortgagee cannot sell the vessel without the concurrence of every prior mortgagee, unless they obtain an order from the court.

The priority rule under Section 45 of MSAA 2017 provides that:

“the priority of the mortgagees between themselves shall be determined by the order in which the mortgages were registered and not by reference to any other matter.”

The amended framework therefore provides greater statutory certainty for financing transactions involving Malaysian-registered ships. It also recognises the mortgagee’s power to sell the ship where the mortgage money has become due, subject to the statutory requirements.

4.2 Reform of Ship Licensing Requirements:

(a) New Licensing Threshold

The amendment introduces a new framework for the licensing of smaller ships under the Section 54 of MSAA 2017 inserted. The provision applies, subject to the exemptions under Section 55, to ships “below fifteen net tonnage” operating in Malaysian waters for specified purposes, including trade or business, the transportation of persons, and sports, leisure or recreational activities. Section 54(1) further provides that such a ship “shall obtain a licence under this Part” the excerpt of which is reproduced below:

54. (1) Except for a ship exempted under section 55, any ship below fifteen net tonnage in any part of Malaysian waters for any of the following purposes:
(a) trade or business;
(b) the transportation of any person other than for trade or business; or
(c) sports, leisure or recreational activity,
shall obtain a licence under this Part

It is worth noting that the above amendments do not simply lower the previous numerical threshold. It changes the basis of measurement entirely. Under the previous framework ships below 500 gross tonnages required a licence for the relevant activities. The new Section 54 instead measures vessels by net tonnage, applying to ships below 15 net tonnages. in view that gross tonnage and net tonnage are different units of measurement altogether, the shift from “500 gross tonnage” to “15 net tonnage” should not be mistaken for a straightforward numerical reduction, as it reflects a change in the metric itself. Therefore, vessel owners and operators should assess their fleet against the new net tonnage threshold directly, rather than assuming continuity with their position under the previous gross tonnage regime.

(b) Expanded Scope of “Trade or Business”

The scope of “trade or business” is also expressly expanded in Section 54(3) to include activities such as “fishing”, “salvage operations”, “dredging”, “cable-laying”, “off-shore exploration”, “marine construction”, “oceanography”, “hydrography” and “port services.” This gives greater clarity as to the types of activities that may fall within the licensing framework.

At the same time, Section 55 excludes a number of ships from the licensing requirement under Section 54, including ships already registered under Malaysian written law, certain ships registered outside Malaysia, lifeboats and specified fishing vessels. Therefore, the new Section 54 should be read together with Section 55 when determining whether a particular vessel requires a licence.

4.3 The Domestic Shipping Licensing Framework:

The 2017 amendments introduce a new Part IIA which consists of Sections 68R to 68AK, dedicated to domestic shipping licensing, establishing clearer rules on which ships may engage in domestic shipping, the requirement to obtain a domestic shipping licence, the circumstances in which the Minister may permit other classes of ships to operate, and the enforcement mechanisms available to the authorities.

(a) Restriction on Non-Malaysian Ships

An improvement in the restriction on non-Malaysian ships engaging in domestic shipping can be seen under Section 68S of MSAA 2017 which provides that:

“No ship other than a registered Malaysian ship may engage in domestic shipping.”

Under the old law (the former Section 65KA of MSO 1952), it prohibited any ship other than a "Malaysian ship" from engaging in domestic shipping. The new Section 68S adds a critical keyword, where it must be a registered Malaysian ship.

This semantic shift prevents foreign-owned or loosely structured vessels from using legal technicalities or domestic bareboat proxy structures to operate locally. A vessel must be officially documented on the Malaysian Ship Register, fully binding it to local corporate ownership requirements (the 51% rule) to legally operate under a DSL.

The provision is intended to establish a general requirement that domestic shipping activities be carried out by registered Malaysian ships. A contravention by the master or owner constitutes an offence and may result in a fine of up to RM250,000, imprisonment for up to three years, or both.

Further to the above, under Section 68AB, the Director of Marine or any authorized maritime officer is given direct statutory power to physically detain any ship if they have reasonable cause to suspect that the vessel is violating Section 68S (operating without a valid registered Malaysian status or DSL). The ship can only be released if a steep financial security deposit is paid to the Marine Department.

(b) Mandatory Requirement for a Domestic Shipping Licence

In addition to the registration requirement, the amendment introduces a specific licensing requirement for ships engaging in domestic shipping. Under Section 68T states:

“No ship shall engage in domestic shipping without a licence issued under this Part.”

It is worth noting that the requirement for a DSL is not new, as it has existed since the Domestic Shipping Licensing Board and Part IIB were introduced into the MSO 1952 in 1977, with further amendments in 1984. The 2017 amendments now re-state and re-number this requirement under the new Part IIA, with Section 68T now providing that no ship shall engage in domestic shipping without a licence issued under this Part.

Accordingly, registration as a Malaysian ship alone does not remove the need to obtain the relevant DSL. Section 68T makes the possession of a valid DSL a blanket statutory necessity for any local voyage. The owner or master who operates a ship without the required licence commits an offence and may be liable to a fine of up to RM100,000, imprisonment for up to two years, or both.

(c) Exemption and Ministerial Permission

The amendment also provides limited flexibility within the domestic shipping regime. A Malaysian ship of less than 15 net tonnage is exempted from Part IIA:

“A Malaysian ship of less than fifteen net tonnage is exempted from the provisions of this Part.”

At the same time, according to Section 68V, it gives the Minister power to permit other classes of ships to engage in domestic shipping, subject to conditions and restrictions.

This mechanism is particularly relevant to specialized vessels. The explanatory statement notes that the provision is intended to address situations where Malaysian ships of the required specialization may not be available, including surveying vessels and dredgers, allowing suitable non-Malaysian specialized ships to operate in Malaysian waters.

4.4 Establishment of the Malaysia Shipping Development Fund (“MSDF”):

The amendment establishes the MSDF as a dedicated fund to support the development of Malaysia’s shipping industry. Under Section 65 of MSAA 2017, the MSDF is financed by the annual tonnage fees collected under Part II. The excerpt of Section 65(1) is as follows:

“A fund to be known as the ‘Malaysia Shipping Development Fund’ is established and shall be controlled and administered by the Committee.”

and be used for purposes including improving the shipping industry, providing awards, fellowships, scholarships and research grants, sponsoring research projects, and organizing seminars and other industry-related activities. Section 65(3) further provides:

(3) The Fund shall be expended for the following purposes:

(a) to improve the shipping industry;

(b) to provide awards, fellowships, scholarships and research grants relating to the shipping industry;

(c) to sponsor research projects undertaken by organizations, institutions of higher learning or individuals for the purpose of the shipping industry;

(d) to organize seminars, expositions and other similar activities relating to the shipping industry;

(e) to pay any other expenses properly incurred by the Committee in the execution of its functions under this Part.

The Fund is administered by the Malaysia Shipping Development Fund Committee, chaired by the Director of Marine and comprising representatives from the relevant ministries, the Marine Department, the Governments of Sabah and Sarawak, and persons with relevant shipping experience or knowledge.

Chapter 5: Practical Implication to the Maritime Industry in Malaysia

(a) Benefits to the Maritime Industry

The amendments have introduced several practical and convenient changes in line towards making Malaysia’s maritime framework more flexible and responsive to industry needs.

(b) More Flexibility for Shipowners

The amended registration framework gives shipowners greater flexibility in structuring ownership. The traditional 64-share structure is now replaced with a framework where shares “may be divided into any number of shares”, while the MISR also allows qualifying foreign individuals and foreign-incorporated companies to own Malaysian ships, subject to the applicable requirements.

(c) Opening the Door to International Arrangements

The recognition of bareboat charter registration provides a clearer legal framework for vessels operating under international charter arrangements. The amendment allows bareboat charterers to register their ships under the MSR or MISR.

(d) Greater Certainty for Ship Financing

The new provisions on ship mortgages set out a clearer framework for the registration, priority and enforcement of mortgages over ships. This may provide greater certainty to shipowners and financiers when vessels are used as security for financing.

(e) A More Structured Approach to Domestic Shipping

The introduction of Part IIA establishes clearer rules for domestic shipping, including licensing requirements and enforcement powers. At the same time, the Minister may permit specialized foreign vessels, such as surveying vessels and dredgers, where appropriate Malaysian vessels are not available.

(f) Moving Towards Digital and Industry Development

The amendment also highly supports digital administration by allowing electronic filing and electronic maintenance of registration and licensing records. In parallel, the establishment of the Malaysia Shipping Development Fund provides a statutory mechanism to support research, scholarships, training and other initiatives aimed at developing the shipping industry

Chapter 6: Final Conclusion

Overall, the Merchant Shipping (Amendment) Act 2017 brings Malaysia’s maritime framework closer to the needs of the modern shipping industry. The amendments introduce, among others, greater flexibility in ship registration and ownership, recognize bareboat charter arrangements, clarify licensing and domestic shipping requirements, and support digital administration and industry development.

For shipowners, charterers, financiers and other maritime stakeholders, these changes provide a clearer framework for carrying out shipping activities in Malaysia and structuring their commercial arrangements. With the Act now finally come into force, its practical impact will be seen in how the industry adapts to the updated registration, licensing and regulatory requirements.

Disclaimer

This article is intended for general information and discussion purposes only and does not constitute legal advice or a legal opinion. While every effort has been made to ensure that the information contained in this article is accurate as at the date of publication, no representation or warranty is made as to its accuracy, completeness or continued applicability. Readers should obtain specific legal advice before taking or refraining from any action based on the contents of this article.

The views expressed in this article are those of the author(s) and do not necessarily reflect the views of Ariff & Co. The firm accepts no responsibility for any loss or damage arising from reliance on the information contained herein.

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