Introduction

Maritime trade has always been influenced by numerous market factors, political issues and random events, which might lead to emergence of maritime claims against a ship-owner. In practice, due to existing contractual obligations, it oftentimes comes to various financial conflicts between ship-owners and other entities. Each party of a potential dispute is at risk of suffering quantifiable financial consequences, arising out of such conflicts. In order to minimize their financial hazard, creditors seek to secure maritime claims on debtors’ assets. A vessel, due to its high value - often amounting to millions of dollars, is a very attractive asset, which may be used to protect claims of a creditor against a debtor. Such form of security may be obtained with a so-called arrest of vessel, which shall be understood as detention of vessel by way of  maritime claims protection.

Arrest of vessel – legal aspects

Arrest of vessel, as a form of maritime claims protection, has not been regulated in the Polish Maritime Code. This issue is, however, laid down in the International Convention on the Arrest of Sea-Going Ships signed in Brussels on 10 May 1952 (hereinafter referred to as the Convention). It should be pointed out that the Republic of Poland is bound by the aforementioned Convention since 1976 (Dz. U. 23 December 1976). Apart from the provisions of the Convention, rules of the Civil Procedure Code shall also apply in this respect. Analyzing the issue of the arrest of vessel under the Convention, it must be kept in mind that this institution has civil nature and is not identical to arrest of vessel regulated in other acts, which de facto also come down to confiscating a vessel. The latter may be for instance              a temporary administrative seizure pursuant to a decision of a harbour master or seizure by a competent authority in order to carry out a vessel inspection.

Maritime claims

First of all, consideration should be given to the content of article 1 of the abovementioned Convention. This provision defines the term of a maritime claim, which is substantial and should be construed as a claim ensuing certain events related to current operation of a vessel. Maritime claims are listed in the Convention (article 1, point 1, letter a) to q). Due to this provision, claims justifying arrest of vessel are those, which have arisen out of one or more of the following causes:
a) damage caused by any ship either in collision or otherwise;
b) loss of life or personal injury caused by any ship or occurring in connection with the operation of any ship;
c) salvage;
d) agreement relating to the use or hire of any ship whether by charterparty or otherwise;
e) agreement relating to the carriage of goods in any ship whether by charterparty or otherwise;
f) loss of or damage to goods including baggage carried in any ship;
g) general average;
h) bottomry;
i) towage;
j) pilotage;
k) goods or materials wherever supplied to a ship for her operation or maintenance;
1) construction, repair or equipment of any ship or dock charges and dues;
m) wages of masters, officers, or crew;
n) master\'s disbursements, including disbursements made by shippers, charterers or agent on behalf of a ship or her owner;
o) disputes as to the title to or ownership of any ship;
p) disputes between co-owners of any ship as to the ownership, possession, employment, or earnings of that ship;
q) the mortgage or hypothecation of any ship.

Arrest of vessel – subject and proceedings

A vessel may not only be arrested if claims defined in the Convention derive directly from its operation, but also when claims arise out of operation of a different vessel owned by the same entity/person. It is of crucial importance that arrest of vessel may only occur under the authority of a Court or of the appropriate judicial authority of the contracting State in which the arrest is made (article 4 of the Convention). The procedure of vessel arrest commences upon a notion of a creditor, who shall at least substantiate the necessity to secure a claim. Subsequently, the court of a relevant country shall consider the case. Whether a decision concerning the arrest of vessel is taken promptly, is obviously dependent on the legal system governing this issue. It usually varies, however, from dozen or so hours to a week.
In accordance with the literal wording of article 5 of the Convention “The Court or other appropriate judicial authority within whose jurisdiction the ship has been arrested shall permit the release of the ship upon sufficient bail or other security being furnished, save in cases in which a ship has been arrested in respect of any of the maritime claims enumerated in article 1, (o) and (p). In such cases the Court or other appropriate judicial authority may permit the person in possession of the ship to continue trading the ship, upon such person furnishing sufficient bail or other security, or may otherwise deal with the operation of the ship during the period of the arrest.
In default of agreement between the parties as to the sufficiency of the bail or other security, the Court or other appropriate judicial authority shall determine the nature and amount thereof. The request to release the ship against such security shall not be construed as an acknowledgment of liability or as a waiver of the benefit of the legal limitations of liability of the owner of the ship.”
Taking into consideration the quoted provision, arrest of vessel has significant consequences for a debtor, mostly due to its financial aspects. An arrested vessel cannot be operated, which results in inhibition of economic activities as well as, at times, inability to meet current financial obligations. In practice, debtors seeking optimal solutions often decide to pay a specific sum of money in order to release a vessel from the arrest. Moreover, in such situation, a debtor, who is under pressure, pays an amount of money against a toll debt.

Damages ensuing arrest of vessel – liability of a creditor

In accordance with article 6 of the Convention “All questions whether in any case the claimant is liable in damages for the arrest of a ship or for the costs of the bail or other security furnished to release or prevent the arrest of a ship, shall be determined by the law of the Contracting State in whose jurisdiction the arrest was made or applied for. The rules of procedure relating to the arrest of a ship, to the application for obtaining the authority referred to in Article 4, and to all matters of procedure which the arrest may entail, shall be governed by the law of the Contracting State in which the arrest was made or applied for." In the light of the above, any disputes under the provisions of the Convention shall be considered with respect to relevant rules of a Member State wherein the ship was halted.
It should be pointed out that rules of the Convention apply to all vessels flying the flag of any of the Contracting States within their jurisdiction. Moreover, it must also be noted that a vessel flying the flag of Non-Contracting State may be seized within the jurisdiction of any Contracting Stated due to the maritime claim referred to in the article 1, or due to any other claim in respect of which the law of a Contracting State permits detention of a vessel.
Moreover, misapplication of relevant Contracting State’s procedure in terms of arrest of vessel, may potentially result in liability for damages, which tends to be rather substantial. In addition, a creditor might bear such liability in case of resigning from the arrest of the ship subsequent to applying therefor.

Conclusions

In summary, it should be stated that a vessel may arrested, if:
1) a claim subjected to potential security may be considered by court and, most of all, is referred to in article 1 of the Convention;
2) a claim is reliable;
3) in the event that non-securing a claim would endanger its satisfaction;
4) securing a claim is required to ensure enforceability of judgment in a particular case.
The institution of the arrest of vessel, governed by the Convention signed in Brussels on 10 May 1952, constitutes special means of protection of maritime claims ensuing current operation of a vessel. It should be underlined that arrest of vessel specified in the Convention is not the same as other means of vessel detention defined under different regulations, as the latter serve various legal purposes each time. It is worth emphasizing that only the maritime claims listed in the Convention (all 17 kinds of them), may constitute legitimate grounds for an arrest of vessel.
Arrest of vessel stipulated in the Convention has thus far been a very convenient and solid legal instrument, used for effective and prompt maritime claims protection. Due to the fact that it prevents a ship-owner and an operational entity from navigation of a vessel, it should be considered as very severe in terms of both financial and legal consequences.

Radca Prawny Mateusz Romowicz

Aplikant Radcowski Łukasz Pawłuszyński

For more information: kancelaria-gdynia.eu , prawo-korporacyjne.pl
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