Arthur Nitsevych, Mehmet Dogu, Valerian Imnaishvili, Mladen Popov, Virgil Nita, Interlegal
In 2018 Interlegal lawyers, acting on the behalf of our clients, facilitated arrest of over 20 vessels – it is an absolute record among law firms in Black Sea Region (Ukraine, Turkey, Romania, Bulgaria, Russia, Georgia). Law development in the Black Sea countries simplified significantly the court practice and facilitated the more frequent debt recovery for our clients: agencies, bunkering and ship repair companies. Principal terms for ship arrest in various jurisdictions are set below briefly.
Ship arrest in Georgia
Georgia is not a signatory part of the International Convention for the Unification of Certain Rules relating to the Arrest of Sea-going Ships (Brussels 1952) and UN International Convention on Arrest of Ships (1999), but has implemented provisions of the Conventions into maritime legislation.
State arbitration has been abolished from the justice system of Georgia, and the system was generated in the form of general courts of three instances, administering justice through civil, administrative and criminal jurisprudence. As a result, a specific judicial form of ships arrest has been gradually formed.
In accordance with Article 831 of Maritime Code of Georgia ship’s arrest is implemented only for security maritime claim. Maritime claim comes from the ship’s ownership and from other property relations that arise in the construction, management, maintenance, commercial use, and mortgage or as a result of activities related to the salvage of the ship. In accordance with the general provision of Article 831 of Maritime Code of Georgia and Civil Procedure Code (CPC) the only competent authority, which is authorized to consider the issue of arrest and release of a vessel in Georgia is general court. And the procedure of arrest and release of a vessel is carried out in accordance with the CPC of Georgia. Taking into consideration the structure and provisions of the CPC we can clearly conclude that the arrest of the ship can be realized only as a form of security for the claim, which logically should be a maritime claim. In Georgia, as well as in Romano-Germanic legal systems, there is a standard regulation when a court considers a case involving a foreign element. In particular, the court shall:
• Determine a jurisdiction of the court to the claim (suit, petition) being considered;
• Determine the qualification and the nature of the claim being considered.
In such cases, as a rule, general competence is substantiated by the main legal instrument of the international maritime law – the UN Convention on Law of the Sea. Domestic regulations of competence of the courts in this part are stipulated for by the Law of Georgia «On maritime areas». In particular:
In accordance with Art. 26 legal enforcement measures with the purpose of civil claim security can be applied to a foreign vessel which left internal sea waters of Georgia and crossing its territorial sea, or is in the territorial sea of Georgia. The important regulations substantiating the competency are provided by the Law of Georgia «on international private law», which is – unlike Maritime Code or the Law on Maritime Areas one of the most common and used laws by the courts. According to the generalized provisions of this law in relation to the Georgian courts competence, the following can be concluded:
• General courts of Georgia have special international competency in the applications regarding legal enforcement if their implementation or claim for implementation or realization is carried out in Georgia.
• For claim security Georgian court is competent if interim and conservatory measures of relief are enforceable in the courts of Georgia or courts of Georgia have international jurisdiction.
Use of CPC of Georgia as procedural and legal substantiation of consideration and implementation of ship’s arrest, is imperatively provided by Article 831 of Maritime Code of Georgia. Carrying out the arrest of vessel as an interim and conservatory measure of relief Georgian law provides protection of the ship owner’s interests. In accordance with the Law of Georgia «On international private law» foreign citizens and legal entities, participating in the civil process under Georgia jurisdiction, enjoy the same legal safeguard as legal entities and physical persons – residents of Georgia.
In accordance with the laws as listed above three types of detention and arrest are applicable:
- Detention by Harbour Master. The time limit of such detention is 72 hrs., days off and public holidays are not included in this period. It is implemented on the base of an application of any physical person or legal entity, which has got grounds for claim for commercial damage compensation or claim regarding the cargo etc. In order to implement this, a physical person or legal entity should apply to the Harbour Master providing the copies of all the documents proving the fact of damage or claim. The application should be in the Georgian language. Such detention is applied for a short period in order the Parties could solve the issue peacefully or a competent court could make a decision regarding detention of the vessel for a certain period of time. In order to organize such detention, the preliminary 2 days’ notice is required.
- Ship’s arrest via the competent court decision – as a rule, preliminary court arrest is carried out for the period of 10 days for claiming on the merits to the appropriate authority (arbitrage or court), which has competency for consideration of the claim on the merits.
- Ship’s arrest on the basis legal decision of a foreign arbitrage or a court. Georgia is a part of New York
Convention on Enforcement of Arbitral Awards and therefore foreign arbitrage decision after the procedure of recognition and implementation by the Supreme Court of Georgia, is implemented as domestic judicial act. Recognition and implementation procedure takes 10 days from the date of acceptance the appropriate petition into processing.
Base for detention and the appropriate legal actions are the main three reasons. First reason is connected with Georgian law and regulations infringement. The second reason is connected with providing of safety of navigation. The third reason – application of any physical person or legal entity having base for claiming for commercial damage compensation, claim for cargo etc.
Detention can be carried out only in relation to the shipowner and in rare cases – in relation to the bareboat charter owner providing Bareboat ownership documentary proof. In the case of ships arrest the adequate form of security in order to release the vessel can be depositing the amount of claim to the court’s account by the defendant or some other forms of coercive measures can be applied, such as a bank security, P&I security or some other, including those not provided by the legislation of Georgia. In any case the court’s decision completely depends on the Party demanded the vessel’s arrest.
Georgia law and courts recognize maritime liens for the debtor’s property irrespective of damage claim base – breach of obligations (law or contract) or delict. In order to organize such detention, the preliminary 5 days’ notice is required. The following documents are necessary: apostilled original Power of Attorney to the lawyer (in Georgian and English, as a rule) Statement of claim, copies of all documents regarding this case.
Georgian courts require originals or notarized (or apostilled) copies of all important documents (contracts, bills of lading, charter-parties, correspondence between the parties) of the plaintiff as stated in the application. Translation of all the documents into Georgian is carried out by a certified translator. Documents translation takes time and the client should bear this time factor in mind. Other documents can be presented as copies, certified by a seal and signature of the plaintiff. The documents (apart from the LOA) can be presented in electronic copies.
Georgian court can accept a claim on the merit for consideration if its competency is in accordance with the Law of Georgia “On international private law”, irrespective where the vessel is, or of the Parties have agreed in written form for proceeding the case in Georgia, are presented by lawyers and have been familiarized with their right of objection in regards of the court’s competency.
Ship arrest in Turkey
Turkey has become a party to the International Convention on the Arrest of Ships and International Convention on Maritime Liens and Mortgage. However, the definitions of “Maritime Claims” and “Maritime Liens” were implemented into Turkish Commercial Code (TCC) as per 1999 and 1993 Geneva Conventions, before Turkish Parliament ratified these Conventions.
In this regard, Maritime Claims listed in Art. 1352 of TCC are as follows:
- loss or damage caused by the operation of the ship;
- loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the ship;
- salvage operations or any salvage agreement, including, if applicable, special compensation relating to salvage operations in respect of a ship which by itself or its cargo threatened damage to the environment;
- damage or threat of damage caused by the ship to the environment, coastline or related interests; measures taken to prevent, minimize, or remove such damage; compensation for such damage; costs of reasonable measures of reinstatement of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; and damage, costs, or loss of a similar nature to those identified in this subparagraph;
- costs or expenses relating to the raising, removal, recovery, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship, and costs or expenses relating to the preservation of an abandoned ship and maintenance of its crew;
- any agreement relating to the use or hire of the ship, whether contained in a charter party or otherwise,
- any agreement relating to the carriage of goods or passengers on board the ship, whether contained in a charter party or otherwise;
- loss of or damage to or in connection with goods (including luggage) carried on board the ship;
- general average;
- goods, materials, provisions, bunkers, equipment (including containers) supplied or services rendered to the ship for its operation, management, preservation or maintenance;
- construction, reconstruction, repair, converting or equipping of the ship;
- port, canal, dock, harbour and other waterway dues and charges;
- wages and other sums due to the master, officers and other members of the ship’s complement in respect of their employment on the ship, including costs of repatriation and social insurance contributions payable on their behalf;
- disbursements incurred on behalf of the ship or its owners including the loans obtained for the vessel;
- insurance premiums (including mutual insurance calls) in respect of the ship, payable by or on behalf of the shipowner or charterer;
- any commissions, brokerages or agency fees payable in respect of the ship by or on behalf of the shipowner or charterer;
- any dispute as to ownership or possession of the ship;
- any dispute between co-owners of the ship as to the employment or earnings of the ship;
- a mortgage or a „hypothèque“ or a charge of the same nature on the ship;
- any dispute arising out of a contract for the sale of the ship.
As for Maritime Liens listed in Art. 1320 of TCC are as follows:
- wages and other sums due to the crew members in respect of their employment on the vessel (including costs of repatriation and social security contributions payable on their behalf);
- loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel;
- port, canal, other waterway dues and pilotage dues;
- tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers’ effects carried on the vessel;
- general average contributions.
For obtaining an arrest order on a vessel in Turkey, the claim should fall under one of the Maritime Claims or Maritime Liens listed above and the amount of the claim should be supported with invoices, swifts, email exchanges, statements, letter/notice before action etc. Having said that, 10,000 SDR (Special Drawing Rights) in advance, irrespective of the claim amount is required to be deposited to the court account. In case of lacking one of the above mentioned conditions, the application to obtain an arrest order will be rejected automatically.
Furthermore, in Maritime Claims, the owner of the vessel must be the debtor of the claim. On the other hand, Maritime Liens follow the vessel.
Regarding the jurisdiction, arrest of the vessels can be requested from the court at vessel’s port of call or place of anchorage, berthing, mooring or drydocking. As for Turkish flagged vessels, the arrest can be requested also from the court at vessel’s place of registry.
However, in accordance with the Montreux Convention, merchant vessels have the right to enjoy complete freedom of transit and navigation in the Straits. Therefore, foreign flagged vessels which are in transit through the Turkish Straits cannot be arrested. It should be kept in mind that, transit passage would be interrupted after 168 hours. Once the transit passage is interrupted, the vessel can be arrested.
In case the Turkish courts are competent, the court can give an arrest order without service of the application to the opponents. In order to execute this arrest order, the application has to be made to the bailiff’s office within 3 working days from the date of arrest order. Failing which, the arrest will automatically become invalid.
The arrest order will be served to the either master, owner, charterer or any of their representatives by the bailiff office. Also, for the execution of the arrest order, the order will be notified to the Harbour Master, Coast Guard, Customs Authority. In addition to that, the arrest order will also be served to Ship Registry or Relevant Diplomatic Consulate depending on the flag of the vessel.
Once the arrest order has been executed, the vessel will not be allowed to sail. However, if the vessel sails after the execution of the arrest order, the coast guard will be entitled to follow and stop the vessel until she leaves Turkish Territorial Waters. Besides, if the vessel sails before the execution of the arrest order, whenever she re-enters the Turkish territorial waters, the arrest order will be executed automatically.
Further to the enforcement of the arrest order, a case on the merits has to be filed before the competent court within one month. Otherwise the arrest order will become null and void automatically.
In the absence of a jurisdiction agreement between the parties, the Turkish court granting the arrest order, shall hear the merits of the case. However, in case the arresting party lose the merits of the case, the opponents may apply to the court which the arrest order was granted to compensate the damages and losses arising from the wrongful arrest as per the TCC.
Ship arrest in Romania
Romania is one of the ratifying states of the International Convention Relating to the Arrest of Sea-Going Ships and of the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortages. Also, the Romanian Code of Civil Procedure provides specific rules in respect to the arrest of vessels which completes the provisions of the international conventions ratified by Romania.
Consequently, the arrest regime of ships in Romania has to be discussed and analyzed in the parameters as designated by those 3 regulations.
Returning to the Arrest Convention, this international regulation defines the meanings of the “maritime claims” that can raised in the arrest proceedings:
- damage caused by any ship either in collision or otherwise;
- loss of life or personal injury caused by any ship or occurring in connexion with the operation of any ship;
- agreement relating to the use or hire of any ship whether by charterparty or otherwise;
- agreement relating to the carriage of goods in any ship whether by charterparty or otherwise;
- loss of or damage to goods including baggage carried in any ship;
- general average;
- goods or materials wherever supplied to a ship for her operation or maintenance;
- construction, repair or equipment of any ship or dock charges and dues;
- wages of Masters, Officers, or crew;
- Master’s disbursements, including disbursements made by shippers, charterers or agent on behalf of a ship or her owner;
- disputes as to the title to or ownership of any ship;
- disputes between co-owners of any ship as to the ownership, possession, employment, or earnings of that ship;
- the mortgage or hypothecation of any ship.
Regarding the maritime liens and privileges that are of the nature to be recognised at this status in the Romanian jurisdiction, those are provided by the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortages (Brussels-10 April 1926) and are as follows:
- Law costs due to the State, and expenses incurred in the common interest of the creditors in order to preserve the vessel or to procure its sale and the distribution of the proceeds of sale; tonnage dues, light or harbor dues, and other public taxes and charges of the same character; pilotage dues, the cost of watching and preservation from the time of the entry of the vessel into the last port;
- Claims arising out of the contract of engagement of the master, crew, and other persons hired on board;
- Remuneration for assistance and salvage, and the contribution of the vessel in general average;
- Indemnities for collisions or other accident of navigation, as also for damage caused to works forming part of harbors, docks, and navigable ways; indemnities for personal injury to passengers or crew; indemnities for loss of or damage to cargo or baggage;
- Claims resulting from contracts entered into or acts done by the master, acting within the scope of his authority, away from the vessel’s home port, where such contracts or acts are necessary for the preservation of the vessel or the continuation of its voyage, whether the master is or is not at the same time owner of the vessel, and whether the claim is his own or that of ship-chandlers, repairers, lenders, or other contractual creditors.
It is essential for a claim that is raised in the Romanian jurisdiction against a vessel to be a “maritime claim” or a “maritime lien or privilege” as described by the above mentioned conventions.
If the vessel subject to arrest is sailing under a flag of a country that did not ratified the 1952 Brussels Arrest Convention, then the creditors are entitle to arrest the vessel for any of the maritime claims as mentioned by the Article 1 of Arrest Convention, or for any other claim for which the law of Romania permits arrest.
The procedure of arresting a vessel consist in a number of 3 steps that have to be completed:
- application for detention for 24 hours that will be filed with the Harbor Master; this administrative detention is valid for 24 hours from the moment when the vessel require her clearance;
- application for the arrest of vessel filed with the local court; the matter is usually decided by the Court in 10-12 days from the time of filing;
- application for the provisional detention of vessel until the merits of the arrest are settled by the court filed with the same Court that will decide on the merits of arrest. If the application is grounded, the decision of the Court can be issued within hours from the time when was filed.
Normally, the application for arrest must be filed together with the action on the merits of the case (main action), but in the matter of arrest of vessels, the arrest can be filed and granted even before the registration of main action, but under the condition that the main action to be filed within 20 days from the day when the written reasoned decision of arrest is served to the Claimants’ office or their attorneys.
For the last 10 years, the most common maritime claim and privileges raised in the arrest proceedings were those consisting in unpaid crew wages, unpaid bunker, towage litigations, unpaid repairs and disputes related to the charter parties.
If the arrest is granted by the Court, the Claimant is required to deposit a security in percentage of maximum 20% of the value of claim as raised by them.
Also, if the owners/managers/operators of vessel are willing to lift the arrest until the merits of the case will be settled, they can submit a guarantee in favour of the Court in amount of the total value of claim and additional amounts as possible legal fees and expenses incurred by the legal proceedings. The guarantee can be in the form of a cash deposit of a Letter of Guarantee issued by a bank accepted by the Claimants.
If the concerned parties will not reach an agreement in respect of the quantum of such guarantee, the Court will decide in this respect. The arrest of a vessel is enforced not by a Bailiff (as usual in other civil and commercial matters) but by the Harbor Master’s Office of the port where the vessel is berthed.
Regarding the potential counter claims for unlawful arrest, usually the Romanian courts are reluctant in accepting such counter claims; the only way is to have such claim accepted by the Court is to prove the bad faith of the Claimants in arresting the vessel and this task is enough difficult to be completed.
Ship arrest in Bulgaria
The Republic of Bulgaria is a State party to the International Convention on Arrest of Ships, adopted on March 12, 1999 at the United Nations/International Maritime Organization Diplomatic Conference on Arrest of Ships, held in Geneva.
The Republic of Bulgaria has signed the Convention on July 27, 2000 and ratified it in accordance with the constitutionally established procedure. In accordance with its Article 14 (1), the Convention went into force on September 14, 2011.
The merchant ship, which is located at a Bulgarian seaport, can be arrested only for securing a maritime claim for the purposes of Art.1, para.1 of The Convention. The Bulgarian Merchant Shipping Code envisages a specific procedure for the arrest of ships sailing in inland waterways, as a prejudgment security for future claims or already brought proceedings. The grounds for arrest of ships sailing in inland waterways are identical to those provided in the Convention. Arrest of a ship, according to the domestic law might be allowed: By the district court at the location of the ship (the respective port) in a procedure for securing of a claim, including a future claim, by imposing of a collateral measure “arrest of a ship” under the provisions of the Bulgarian Civil Procedure Code for a claim arisen in connection with the ship. In addition to the above, the Bulgarian Merchant Shipping Code provides for a specific procedure concerning the arrest of a ship and cargoes only for unpaid sums of customs, port and other fees, taxes and fines. The Executive Director of the Bulgarian Maritime Administration or the captain of a port may arrest Bulgarian or foreign ships for such claims, if the request is made on behalf of governmental and judicial authorities, by the State Enterprise “Port Infrastructure” or by a foreign maritime administration. The arrest shall continue until elimination of the grounds for it.
In order to start the arrest procedure one needs to file the application on arrest as preliminary measures to the local commercial court under the local commercial procedural code. Terms of considering the application is 2 working days, weekend excluded. Terms of the arrest: usually up to 30 days until the claim on the merits will be filed to the relevant court/arbitration. Counter-security: usually up to 20% of the claimed amount.
Ship arrest in Ukraine
Probably, the most essential recent innovations in the Ukrainian maritime law include amendments to laws of Ukraine on ship arrest under maritime claim. Recent reforms in the Ukrainian procedural legislation largely facilitated stabilization of ship arrest practice under maritime claims. New wording of the Commercial Procedural Code of Ukraine prescribes a special claim security measure – an institute of so-called paper arrest, i.e. when cases on ship arrest shall be considered by the court under location of the Ukrainian sea port where the vessel calls.
Ship arrest as adequate method of impact on unfair shipowner
Updated commercial procedural legislation of Ukraine prescribes the following terms for ship arrest as maritime claim security:
- Jurisdiction: under location of the Ukrainian sea port where the vessel calls or stays, or under the vessel registry port;
- Procedure of arrest: both before and after filing the claim;
- Term for filing the claim: thirty days from the date of making the Ruling on claim security;
- Counterclaim: an option for taking measures by the court against the applicant who claims for ship arrest, in order to secure shipowner’s interests which may be affected by unjustified arrest; it covers the amount of potential losses to be incurred by shipowner and may have a form of monetary deposit at the court’s account, bank guarantee, surety or other financial security;
- Validity term: 90 days from the date when the decision enters into force.
For which types of claims can you arrest a ship?
In Ukraine the ship, being the debtor’s property, can be arrested regardless whether claims are maritime or not. Nevertheless, according to the maritime law of Ukraine the vessel may be arrested only upon at least one of the following conditions:
- a claim referred to the category of privileged claims, particularly:
• claims arising out of labour relations, claims for recovering damage inflicted by injury, other impairment of health or death;
• claims arising out of nuclear damage and maritime environment pollution as well as elimination of said pollution consequences;
• claims regarding port and channel dues;
• claims regarding salvage and payment of general average contribution;
• claims for reimbursement of losses resulting from collision of vessels or from other sea casualty, or from damage to port facilities and other property located in the port as well as to navigational aids;
• claims for reimbursement of losses related to cargo or baggage;
- a claim based upon the vessel’s registered mortgage;
- claim referring to the rights of ownership or possession of a vessel;
- a claim not indicated hereinabove and referring to the person that is the vessel owner by the moment of origination of the said claim and is responsible for this claim by the moment of starting a procedure connected with vessel’s arrest;
- charterer of the vessel on bareboat charter is liable for the said claim and is the vessel’s bareboat charterer or her owner by the moment of starting a procedure connected with vessel’s arrest.
Peculiarities of ship arrest for bunker, agency or ship repair indebtedness
Specifications of ship arrest under maritime claim certainly depend on the debt nature. For instance, evidence of debt for ship repair includes the following: contracts, estimates, statements, acts of fault detection, Acts of work acceptance etc. The fact of debt for vessel agency is certified by maritime agency/vessel maintenance agreements, disbursement invoices etc. Bunker debt may be certified by bunker supply agreement, bunker request, invoice, waybill, reconciliation act etc. Certainly there are peculiarities of proving the maritime claim, depending on nature of such claim.
Terms, cost, counterclaim and other peculiarities of the Ukrainian legislation
Ship arrest requires for quick and active response. If the vessel called for loading or discharge, it stays at the sea port for a short time. According to the law, the court shall consider the application on ship arrest within 2 days from the moment of its submission. A lawsuit on maritime claim shall be filed within 30 days from the date of submitting such application. Court fee payment receipt shall be also attached to the application on claim security.
Counterclaim is also prescribed by the Commercial Procedural Code of Ukraine. Its provisions provide the following. Counterclaim amount shall be determined by the court with regards to case circumstances. Counterclaim security measures shall coincide with claim security measures taken by the court and with the amount of losses the Defendant may incur with regards to claim security.
The issue of counterclaim shall be settled by the court either in the Ruling on claim security or in the Ruling on counterclaim security. If the application on counterclaim has been submitted after the court took claim security measures, the issue of counterclaim shall be settled by the court within ten days after submission of such application.
Counterclaim term shall be determined by the court and shall not exceed ten days from the date of making either the Ruling on claim security or the Ruling on counterclaim security, unless otherwise provided by counterclaim security measures.
The Commercial Procedural Code of Ukraine prescribes also cancellation of counterclaim.