1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.2 2.3 3 3.1 3.2
INTRODUCTION Securing of maritime claims – a burning issue of maritime industry Intentions Limitations Legal sources Structure GENERAL ON ARREST OF SHIPS The notion of arrest of ship Nature of a maritime claim Relation between maritime claims, maritime liens and ship mortgages ARREST OF SHIPS IN NORWAY General on arrest of ships in Norway General arrest rules
Arrest and arrest ground Jurisdiction Procedural aspects of decreeing arrest. Security Legal effects of arrest
1 1 3 4 4 5 6 6 7 8 10 10 12
12 13 14 15
3.2.1 3.2.2 3.2.3 3.2.4
Arrest of ships based on a legal regime of Brussels convention and NMC
When can a ship be arrested based on the Brussels convention regime? Which ships can be arrested. Arrest of sister ships and personal liability
Jurisdiction. Procedural issues Legal effects of arrest of ship
3.4 4 4.1 4.2 4.3 4.4 4.5 5 5.1 5.2 5.3
Arrest of ships in accordance with general rules on arrest in NCPA ARREST OF SHIPS IN UKRAINE Generally on arrest of ships in Ukraine Jurisdiction Which ships can be arrested. Arrest of sister ships Procedural aspects of decreeing arrest Problematic issues RULE B ATTACHMENT Legislative basis and essence of Rule B Attachment Conditions of applying Rule B Attachment What property can be attached
General Attachment of Electronic Funds Transfers
23 25 25 28 32 32 35 38 38 38 43
Procedural issues Attachment of “after-acquired property” and practical issues of effecting Rule B
Attachment of EFTs 5.6 5.7 5.8 Effects of Rule B Attachment The defendant’s options Avoidance
49 51 51 52
6 6.1 6.2 6.3
CONCLUSIONS Arrest of ships in Norway Arrest of ships in Ukraine Rule B attachment
54 54 55 58 60
REFERENCES ANNEX I. INTERNATIONAL CONVENTION RELATING TO THE ARREST OF SEAGOING SHIPS (BRUSSELS 1952)
ANNEX II. FEDERAL RULES OF CIVIL PROCEDURE SUPPLEMENTAL RULES FOR ADMIRALTY OR MARITIME CLAIMS AND ASSET FORFEITURE ACTIONS (EXTRACTS) J
Introduction Securing of maritime claims – a burning issue of maritime industry
Shipping is a complicated industry which may give rise to a number of claims – monetary and non-monetary, arising on contractual or non-contractual basis. The focus of this thesis will be on monetary claims – arising on any basis – and the protection of the creditor’s interests. Why do claims have to be secured? If debtor does not voluntarily satisfy a claim, creditor must seek for involuntary satisfaction (enforcement of a claim), which can be performed only after obtaining legal basis for enforcement (like a court decision or an arbitral award). Due to the usual timeframes of court or arbitral proceedings and other factors, it can often take a long time, before the basis for enforcement is obtained. During this time the assets of the debtor can simply disappear, they can be sold or disposed of by any other way and at the moment of enforcement of a claim the debtor can be without any assets or they can be hardly reachable. This can put a creditor into quite risky situation of possible incapability of satisfying his claims. Therefore such risk, if it exists, has to be secured, in order to create a guarantee for a claimant, that he will get a satisfaction of his claim, as soon as a ground for enforcement is obtained. As a starting point, security for the claim can be obtained from the debtor on a voluntary basis in a form of, for example, a bank guarantee, bond or in any other legal way. The problem arises, when voluntary security is not obtained and there is a risk of disposal of debtor’s property. In such situations, special actions on securing of a claim must be taken. In the civil law countries the central way of obtaining security is arrest of property of the debtor, which is an action, which limits rights of debtor (defendant) to dispose of/use the arrested assets (i.e. assets, which can be a material basis for satisfaction of a creditor’s (claimant’s) enforceable claim), to the detriment of the claimant’s rights.
Securing of maritime claims1, which are claims, arising out of maritime activity, involving ships, due to their specific nature has always been a burning issue of maritime industry. In majority of commercial contracts involving two or more parties, it is usually not difficult to find out, who is the debtor, where is he situated, which assets does he own and it is possible to plan in advance (and it is usually done so) how this debtor can be forced to pay the debts or duly perform the obligations. In shipping situation is different.
Firstly, usage of ships in different types of commercial contracts, like bareboat charters, time-charters, voyage charters etc. usually creates complicated chains of legal relationships, involving companies and entrepreneurs from different countries. In charter party relations sometimes it is not obvious from the beginning, who is actually the debtor, liable for a specific type of claim. Thus, it can take some time first to find out, who the actual debtor is, which assets does he own and where they are situated, than which procedural rules will apply to filing a claim against the debtor etc. It can often appear that the debtor does not have any assets in the country of creditor and can have them practically in any country of the world, which makes it harder for a creditor to arrest them.
Secondly, maritime claims very often arise on non-contractual basis, like claim for damages caused by collision or claims for personal injury caused in connection with the operation of the ship. In such situations all the abovementioned difficulties become even more challenging.
Thirdly, nowadays, when “one-ship companies”, which practically do not own any other assets than a ship, are extensively used, arrest of other property can be impossible because such property simply does not exist or is insufficient to satisfy the claim.
Due to the abovementioned factors, a need for specific procedures to secure a maritime claim, which will grant a creditor additional protection, arose. Traditionally, such specific procedure has been arrest of ships, which is the most popular way to secure a maritime
For broader definition of maritime claim see below in 2.2
claim nowadays. It is relatively simple to get the ship arrested, as the creditor is often aware, in which port it is situated and if not, it is usually not difficult to find out which port the ship will be calling next. Moreover, existence of International Convention Relating to the Arrest of Sea-Going Ships (Brussels, May 10, 1952) (hereinafter – Brussels convention), which unifies the rules for arrest of ships in many maritime jurisdictions in the world (convention is ratified by more than 80 countries including Norway, but not Ukraine) makes arrest of the ship even more attractive option. It must be mentioned, that some maritime claims are secured by maritime liens2, which can provide additional advantages for the creditor when arresting a ship.
Besides, during last years a great popularity gained an alternative way of securing a maritime claim – attachment of Electronic Fund Transfers (EFTs) in US dollars coming from the debtor, according to the procedure named “Rule B attachment”, stipulated by Rule B of the Supplemental Rules for Admiralty and Maritime Claims of the Federal Rules of Civil Procedure of the USA. It became popular, as it can be applied to secure a maritime claim, litigated practically anywhere and the claimant and defendant can be from any countries.
In this thesis I have an intention to give an overview of specific possibilities to secure a maritime claim available to claimants from all over the world, based on the legal regimes of arrest of ships in Norway and Ukraine, as well as on Rule B attachment. Due to the fact, that the Brussels convention was ratified by Norway, and not ratified by Ukraine, such analysis, I hope, will give to the reader an overview of possible complications, which can arise, when arrest of a ship is sought in a country party to Brussels convention and in a country, which is not. With respect to Norway specific attention will be paid to the issues of arrest of a ship, not owned by a debtor, as well as to the specific requirements of “arrest
See below in 2.3
ground”. Regarding Ukraine, which has very unclear rules regarding arrest of ships, I intend to focus on specific problems, which the claimant can face and come with specific proposals regarding amendments to Ukrainian legislation in order to bring arrest rules in compliance with internationally recognized practice. Moreover, a brief legal analysis of Rule B attachment of EFTs will be made with a view to its advantages and disadvantages comparing to ship arrest, in order to provide the reader with a broader view on specific remedies, which are used to secure maritime claims nowadays.
The thesis intends to have a practical character; therefore analysis of historical developments in the sphere of securing maritime claims, as well as pure theoretical researches will not be made. The analysis will be limited to arrest only of privately-owned ships and Rule B attachment for securing a maritime claim. Arrest of state-owned ships, as well as arrest of ships by state bodies or port authorities will not be analyzed. Other possibilities of securing maritime claims, like arrest of cargo, bunkers etc. will not be analyzed.
Within the scope of the thesis domestic legislation and case law of Norway and Ukraine, as well as relevant international conventions will be analyzed. Specific attention with a view of arrest of ships will be paid to the provisions of the Brussels convention. Particularly, the notions of arrest of ship and maritime claim will be explained on the basis of its provisions, as it, in my opinion, reflects international understanding of the mentioned terms. International Convention on the...