Ship arrest for claim against a personal debtor other than the registered ship owner
October 25, 2022.
Ship arrest for claim against a personal debtor other than the registered ship owner
The Commercial Court of Montenegro issued the ship arrest warrant to secure the maritime claim against a personal debtor other than the registered owner of the ship, by direct application of Article 1021, paragraphs 2 and 3 of the Maritime and Inland Navigation Act (the “MINA”). In other words, the Court took the approach adopted in the International Convention Relating to the Arrest of Sea-Going Ships (Brussels, 1952) (the “Convention”) Article 3, paragraph 4, stipulating that in 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, the claimant may arrest such ship or any other ship in the ownership of the person liable.
Factual Background of the Case
The Claimants, i.e. Applicants in the arrest proceeding were voyage charterers who had a claim for loss profits under the voyage charterparty entered with the Opponents no. 2. At that moment, the Opponents no. 2 had been already chartering the ship pursuant to the time charter agreement with the registered bareboat charterer who were identified in the procedure as the Opponents no. 1. Since the bareboat charterparty was still valid, there was no need for the Applicants to designate the registered owners of the ship as the Opponents.
Upon entering voyage charterparty with the Opponents no.2, the Applicants concluded two fixtures with different sub charterers. However, due to failure of the Opponents no. 2 to deliver the ship in a timely manner, the Applicants were compelled to rescind the original charterparty and claim damages for lost profits due to cancellation of fixed sub charterparties.
Arrest procedure
Montenegro is a member-state of the Convention. However, the ship’s flag state (Equatorial Guinea) is not a member-state of the Convention and hence, the national legislation of Montenegro was to be applied i.e. MINA with subsidiary application of Law on Enforcement and Security (the “LES”).
The Applicants, represented by legal team of Abaco & LOM, applied for the arrest of ship based on Article 1021, paragraphs 2 and 3 of the MINA. Namely, the Application was directed against the Opponent no. 1 as the bareboat charterer (Article 1021, para. 2) and against the Opponent no. 2 as the ship operator / charterer (and not the ship owner) who was personally liable for maritime claim for which the arrest has been applied for (Article 1021, para. 3).
As evidence for probability of their claim, the Applicants delivered to the court the respective sub-charters as well as relevant correspondence with the Opponents no. 2.
The Court has found out that there was a prima facie validity of the maritime claim on the part of the Applicants. As for the second requirement - the imminent danger of substantial prejudice to creditor/claimant, the Court has ruled that such imminent danger is presupposed since the claim/receivables will have to be collected abroad. Hence, it suffices that only the prima facie validity of the claim needs to be proven.
Accordingly, the ship arrest order was issued, prohibiting the vessel to sail from the Port of Bar, Montenegro as well as the alienation and disposal of the ship until the duration of the arrest order. The Harbour Master’s office in Bar has been charged to implement the arrest order by confiscation all the ship’s documents.
By applying Article 1021, paragraphs 2 and 3 of the MINA, the Court confirmed that the ship in respect of which the maritime claim arose may be arrested even when bareboat charterer, charterer or operator of such ship are personally liable for maritime claim, pursuant to the applicable law governing their contractual relationship with the owner. It can be concluded that the Court de facto granted action in rem, i.e. allowed directing the claim against the ship as a debtor. Since action in rem is not applicable in civil law countries, such as Montenegro, where only action in personam (against personal debtor) is allowed, this case creates a significant court practice and once again confirms coexistence of two legal systems resulted from implementation of the Convention into national law.