JUNE 2016

LEGALBRIEFINGSharing the Club’s legal expertise and experience

A quick overview ofship arrest in somepopular jurisdictions

LEGAL BRIEFING

2 Legal Briefing June 2016

Sharing expertiseThis briefing is one of a continuing serieswhich aims to share the legal expertise withinthe Club with our Members.

A significant proportion of the expertise in theManagers’ offices around the world consistsof lawyers who can advise Members ongeneral P&I related legal, contractual anddocumentary issues.

These lawyers participate in a virtual team,writing on topical and relevant legal issuesunder the leadership of our Legal Director,Chao Wu.

If you have any enquiries regarding thisbriefing, please contact Lisa Clarke(lisa.clarke@thomasmiller.com or+44 20 7204 2607) and she will be pleasedto respond to your query.

The team also welcomes editorial suggestionsfrom Members on P&I related legal topics andproblems. Please conact Jacqueline Tan(jacqueline.tan@thomasmiller.com or+44 20 7204 2118) or Chao Wu(chao.wu@thomasmiller.com or+44 20 7204 2157)

Previous issuesCopies of previous briefings are available todownload as pdfs from our website. Visitwww.ukpandi.com/publications. �

THE AUTHOR

Lisa ClarkeClaims Executive

Lisa Clarke joinedThomas Miller in 2014from one of Africa’slargest law firmswhere she practisedlaw in the Durban

Shipping and Logistics department forthree years.

Direct +44 20 7204 2607lisa.clarke@thomasmiller.com

LEGAL BRIEFINGS TEAM

Jacqueline TanSenior Claims Executive

Jacqueline is aqualified barrister andsolicitor. She worksmainly with Members inJapan. Jacquelinespeaks Malay, French

and Hokkien. She is a member of theClub’s environmental team, whichinforms Members of the latest changesto legislation and their implications.

Direct +44 20 7204 2118jacqueline.tan@thomasmiller.com

Dr Chao WuLegal Director

Chao has a PHD in lawfrom Paris University(Sorbonne). She isresponsible for thelegal aspects of Clubdocumentation and

cover for Members’ contractualarrangements, the Club’s Rules andBye-Laws and general legal advice.Chao is a recognised authority oninternational marine pollution law andUS environmental law.

Direct +44 20 7204 2157chao.wu@thomasmiller.com

June 2016 Legal Briefing 3

SOUTH AFRICA

A quick overview of shiparrest in some popularjurisdictions

South Africa

Arguably one of the most well-knownarrest jurisdictions is South Africa; it hasnumerous procedures which make itfavourable for arrest.

South Africa has not acceded to anyarrest convention and ship arrest is dealtwith under the Admiralty Jurisdictionand Regulation Act 105 of 1983.Thereare effectively three ways to arrest orattach a ship in South Africa; i) an arrestin rem, ii) an arrest in personam, andiii) a security arrest.

An interesting feature of thisjurisdiction is that of associated shiparrests.This allows for the arrestingparty to take a step further than underthe traditional sister or surrogate shiparrest procedure.

To understand associated ship arrests itis important to distinguish this fromthat of sister ship arrests.A sister shiparrest is where two or more ships are, orare deemed to be, commonly owned.To execute a successful sister ship arrestthe ships have to have the same registeredownership.With the introduction ofseparate special purpose vehicleownership, where each ship is seen as adistinct company the usefulness ofarrest by sister ship procedure has beensomewhat thwarted.

South Africa’s associated ship arrestprovisions by comparison allow anarresting party to effectively pierce the

corporate veil.A vessel can be arrestedon an associated basis, where, forexample, the registered owner of thevessel in respect of which the claimarose was at the time the claim arosecontrolled, directly or indirectly, by thesame over fifty percent shareholdingthat controls the target vessel at thetime of the arrest. It is then possible tobring an action in rem, or a securityarrest by arresting the associated shipinstead of the ship in respect of whichthe maritime claim arose.The test fordetermining whether the ships areassociated has been established throughSouth African case law and in effect

looks at who the controllingshareholder is. One is also able to usethe associated ship provisions to arrest avessel associated with a charterer againstwhom a claim lies.

Aside from this associated ship procedure,there are various other favourableattributes to arresting in this jurisdiction,not least that arrest in this jurisdiction isproportionately cost effective.

A further procedure that is popular isthat of the security arrest.An arrestingparty can arrest property in SouthAfrica as security for a claim to proceed

The uncertain shipping market makes the issue of arrest a topical one. The keyquestions being; where are the most advantageous arrest jurisdictions? And whatmakes them so favourable? This article seeks to give a brief overview of somepopular arrest jurisdictions, and sets out why they are potentially advantageous.

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June 2016 Legal Briefing 5

AUSTRALIA, USA AND HONG KONG

in a different jurisdiction, thus thearresting party does not need to submitto South African jurisdiction for themerits of the claim in which thesecurity was sought. Importantly withrespect to security arrests, the arrestingparty will need to show evidence thatthere is a genuine and reasonable needfor security, which may be proved, forexample, by reports into the solvency ofthe party they are seeking to arrest.

Additionally, this jurisdiction recognisesthe provision of a P&I Club letter assufficient security to release a vessel.

Australia

The OW Bunker crisis recently castsAustralia into the limelight as an arrestjurisdiction with theWestern AustralianCourt decision on the SAM HAWK[2015] FCA 1005.

Australia is not a signatory to any arrestconvention. Ship arrest is governed bythe Admiralty Act 1988.To arrest inAustralia your claim would need to bea maritime lien, a proprietary maritimeclaim or a general maritime claim.

The maritime liens recognised by theact are claims in respect of salvage,damage done by a ship, wages of themaster and crew and masters’disbursements. In Australia, it has beenunclear before this decision whether aforeign maritime lien is enforceablethrough a ship arrest, when theunderlying claim would not give rise toa maritime lien under Australian law.TheWestern Australia Federal Courtmade a groundbreaking decision in theSAM HAWK [2015] FCA 1005allowing the vessel to be arrested for aclaim for unpaid bunkers, i.e. a foreignmaritime lien.

Proprietary maritime claims are claimsrelating to the possession, title,ownership or mortgage of a ship andalso encompass claims between co-owners of a ship relating to thepossession, ownership, operation orearnings of a ship.

General maritime claims are listed atsection 4(3) of the Admiralty Act andinclude for example, damage done by a

ship (whether by collision orotherwise), loss of life or for personalinjury, etc.

To arrest for a general maritime claimthe arresting party must establish that arelevant person was, when the cause ofaction arose, the owner or charterer of,or in possession or control of, the shipor property, and is, when theproceeding is commenced, the ownerof the ship or property.

There is also the option for sister shiparrest if the ownership (or bareboatcharterer) link can be establishedbetween the relevant person, thesubject vessel and the vessel to bearrested.The concept of associated shiparrest is not one recognised in Australia.

Arrest in Australia is relativelystraightforward and there is the addedadvantage of a dedicated Maritime court.

USA

The US is not a signatory to any arrestconvention. Under US law the twoprimary tools for arresting/attaching avessel are to be found under Rule Cand Rule B of the Federal Rules ofCivil Procedure’s Supplemental Rulesfor Certain Admiralty and MaritimeClaims.

Under Rule C, a Plaintiff can bring anin rem action against the vessel/property if a maritime lien exists or ifthe Plaintiff has certain statutory rightsagainst the vessel regardless of whetherthe defendant can be found in thedistrict.

Under Rule B, a plaintiff has a primafacie in personam maritime claim andmay attach the defendant’s vessel orproperty as security for his claim, givingthe plaintiff a quasi in rem jurisdiction

over the defendant, provided that thedefendant has property in the arrestjurisdiction, he is not “found” in thatjurisdiction and there is no statutory orother maritime law bar to theattachment. Unlike an arrest underRule C, an attachment under Rule Bdoes not require there to be a maritimelien on the vessel.

Procedurally, the two arrest proceduresare similar in that the plaintiff will berequired to file aVerified Complaintsetting out an admiralty/maritimeclaim, as well as an agreement ofIndemnity releasing the U.S.Marshalfrom any liabilities resulting from thearrest.The plaintiff will also need to paya deposit in respect of the maintenancecosts for the vessel when under arrest.

The main procedural difference betweena Rule C arrest and a Rule B attachmentis that a Rule B attachment must beaccompanied by an affidavit from theplaintiff ’s attorneys setting out that thedefendant cannot be “found”withinthe District in which the attachment issought, whereas with a Rule C arrest,the plaintiff will need to approach thecourt to obtain aWarrant for Arrest andthis needs to be accompanied by anaffidavit setting out the grounds uponwhich the arrest is based.

Unlike South Africa, the courts in theUSA will always have jurisdiction overthe substantive claim unless a forumselection clause requires that the claimbe bought in a different jurisdiction.

There is no associated or sister shiparrest available.

Hong Kong

Hong Kong is signatory to the 1952Brussels Arrest Convention and shiparrest in Hong Kong is based on theprinciples of English law.

Ship arrest is available to claimantspredominantly for possession orownership disputes, mortgages, damageto the ship, salvage etc. and also formaritime liens available under HongKong law including damage done byship, salvage, wages and masters’disbursements.

Arrest in Australia isrelatively straight-forward and there isthe added advantageof a dedicatedMaritime court.

A ship or a sister ship may be arrestedwhere; the arresting party’s cause ofaction allows for arrest in thisjurisdiction, a writ has been issued, theship is within Hong Kong’s jurisdictionand, very importantly, where no caveatagainst the arrest has been entered.

Interestingly, if a vessel is arrested in thisjurisdiction and security provided, thissecurity will remain in place – even ifthe claim is stayed for arbitration – andit then becomes security for the claimin the arbitration.The arrest of a ship toprovide security for a claim is a usefultool in jurisdictions where this is allowed.

Ships beneficially owned by, or demisechartered by, the person who would beliable on the admiralty claim may bearrested in an action in personam.

Sister ship arrests are generally availablein Hong Kong, but not for ‘proprietary’

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CONCLUSION

claims, e.g. mortgages and claims forpossession of a ship.

In summary, ship arrest in Hong Kongis predominantly based on principles ofEnglish law. It is both quick and cheapto arrange and does not require theprovision of counter-security.

Clubs letters will not be accepted assecurity unless agreed between the parties.

Conclusion

Whilst the jurisdictions set out above areby no means a closed list as to potentialarrest jurisdictions, they do provide someilluminating examples of the manner inwhich the remedy of arrest is availableto parties. In the current fluctuatingshipping markets it is important to keepsuch jurisdictions in mind.Whilst thisarticle seeks to highlight a few examplesof what makes these jurisdictionsunique it is always recommended toobtain an opinion from a lawyer in thejurisdiction before proceeding.

For more information or further advice onthis topic, please contact Lisa Clarke(lisa.clarke@thomasmiller.com or+44 20 7204 2607)

…ship arrest in HongKong is predominantlybased on principles ofEnglish law. It is bothquick and cheap toarrange, and does notrequire the provision ofcounter-security.

June 2016 Legal Briefing 7

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SHIP ARRESTS

New Jersey

Thomas Miller (Americas) IncT +1 201 557 7300F +1 201 946 0167

London

Thomas Miller P&I LtdT+44 20 7283 4646F +44 20 7283 5614

Piraeus

Thomas Miller (Hellas) LtdT +30 210 42 91 200F +30 210 42 91 207/8

Hong Kong

Thomas Miller (Hong Kong) LtdT + 852 2832 9301F + 852 2574 5025

www.ukpandi.com / www.ukdefence.com