OP-ED: The Arrest of Other Ships
Written by Daphne Smaling, Attorney-at-law
The International Convention Relating to the Arrest of Sea-Going Ships, Brussels 1952 (hereinafter referred to as “the Convention”) deals with the arrest of ships under the jurisdiction of a state, based on a maritime claim. This Convention has been widely ratified and is still applicable in the Netherlands.
In order to be able to arrest a ship, there has to be one of the maritime claims mentioned in the Convention. The main rule under the Convention is that the ship can be arrested on which the maritime claim is based or any other ship which is owned by the owner of the ship on which the maritime claim is based (a so called sistership). However, there are situations in which the owner of the ship on which the maritime claim is based, is not liable for the maritime claim. A clear example is the case in which there is a charter by demise. The charterer of the ship will then most probably be liable for the maritime claim, not the owner of the ship. Of course there are other examples of situations in which another person than the owner of the ship is liable for the maritime claim. The question is whether the Convention foresees in situations like these.
The Convention does explicitly foresee in the situation as mentioned above, where the charterer by demise is liable in respect of the maritime claim relating to that ship and not the owner of the ship. In such a case the claimant may, next to the ship on which the maritime claim is based, arrest any ship in the ownership of the charterer by demise. The claimant may not arrest any sistership of the ship on which the maritime claim is based. However, what if another person, not being a charterer by demise, is liable for the maritime claim?
To the above mentioned rule, where the claimant may arrest a ship in the ownership of the charterer by demise in case he is liable for a maritime claim, an extra sentence has been added. This added sentence states that this rule shall also apply “to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship.” There has been lots of discussion about this added sentence. Some say it has to be interpreted restrictively in the sense that it only sees on cases comparable to the case of the charter by demise, thus cases in which the person liable had any authority or physical control of the ship. Others say that it has to be interpreted broadly, that it is applicable to all cases in which another person than the owner of the ship is liable for the maritime claim.
Recently the Dutch Supreme Court decided upon this particular question. The case was between a contractor and a purchaser for the construction and purchase of a ship already under construction, the “Stromboli M”, under retention of title. The purchaser did not pay the contract price (with the exception of the down payment). The purchaser is the owner of some other ships, including the “Constanza M”. The contractor decided to arrest the Constanza M. According to the purchaser the Convention does not allow such an arrest.
Based upon this Convention ships may only be arrested for maritime claims. A claim arising out of the construction of a ship is a maritime claim according to the Convention. Whether a claim for the contract price of a ship is a maritime claim is not decided upon in this case, this needs to be decided by the Court of Appeal to which the Supreme Court refers the case. According to the main rule the contractor was not allowed to arrest the Constanza M because the maritime claim concerned the Stromboli M, which was owned by the contractor and not by the purchaser.
The Dutch Supreme Court analyzed the sentence and the ‘travaux préparatoires’ and decided that the sentence must be broadly interpreted. Thus, in any case in which another person than the registered owner of the ship on which the maritime claim is based is liable for the maritime claim, the claimant may arrest the ship on which the maritime claim is based or any other ship in the ownership of the person liable for the maritime claim. The Dutch Supreme Court further decided that the arrest of ships is only possible in case recourse from or surrender of the ship continuing the arrest is possible according to the applicable law. The aim of the Convention is to secure a maritime claim, if the arrest cannot be enforced the maritime claim is not assured.
This ruling enables creditors to arrest a ship of the debtor, not being the owner of the ship on which the maritime claim is based. Bear in mind that this ruling of the Dutch Supreme Court may inspire courts of other Member States to the Convention. Depending on their legal system, this ruling may be followed in other countries.
If you would like more information or if you need advice concerning the arrest of ships BANNING can assist you. You can contact Daphne Smaling at BANNING advocaten (firstname.lastname@example.org).