Suing the ship

UNTIL recently, the issue of whether a creditor could sue a vessel in rem for debts incurred by the bareboat charterer was undecided in Malta. The issue has not been an easy one to resolve given that there is no law or statute regulating it. In a number of other jurisdictions the matter is regulated by specific statute. For instance, in England, the problem is to a great extent solved by the formula presented by Section 21 (4) the Supreme Court Act of 1981.

In Malta, admiralty law is still heavily influenced by British Admiralty Statute Law which was in force prior to independence in 1964. As a result, today, the grounds upon which the commercial court can exercise jurisdiction in rem over a vessel are still regulated by the 1840 and 1860 Admiralty Court Act.

The right to arrest a vessel in Malta also depends on whether the court has jurisdiction in rem over the merits. Therefore the grounds upon which it is possible to arrest are directly linked to those grounds upon which the court exercises jurisdiction. Malta is not a signatory to either the 1954 or the 1999 arrest convention, and therefore the end result is that arrest is only possible in rather limited scenarios.

However, that is as far as Malta's statute law goes. While it provides a list of circumstances under which the court can exercise jurisdiction in rem, it does not establish criteria regarding whether or not it is possible to arrest the vessel in rem in the first place if the actual debt has been incurred by the bareboat charterer.

Prior to June, 2001, all the cases which had been before the courts regarding the matter did not go to judgement and were settled out of court. During June, however, Mr Justice Scicluna handed down judgment on the vessel Poker in the case of Granges Metalock Gmbh v Poker. The Poker was owned by Sea Containers Ltd and bareboat-chartered to Marinzulich Cap Claudio Armatore & Co. During this time repairs were required to one of the vessel's engines, and Marinzulich contracted with Granges Metalock Gmbh for the repairs to be carried out. Granges was fully aware of the fact that Marinzulich was the bareboat charterer and liased with it throughout.

Granges Metalock subsequently sent its invoice to Marinzulich, which remained unpaid. In the meantime, the charterers failed to pay their hire under the bareboat charter and the owners repossessed the vessel. The vessel left Marina di Carrara and came to Malta. As soon as the vessel arrived in Malta, Granges Metalock arrested it and started an action in rem against the Poker.

The plaintiff's main argument revolved around the fact that, if the court had jurisdiction over the matter and it could be established that the repairs were actually carried out, then it followed that the vessel should be held liable. The plaintiffs also confirmed that they had been aware at the time that the vessel was bareboat-chartered to Marinzulich and that repairs were ordered by Marinzulich.

The owners, Sea Containers, pleaded that the fact that the court had jurisdiction over the matter (given that repair was one of the grounds that gave the courts jurisdiction in rem ) did not automatically mean that, in the particular circumstances of the case, the plaintiffs had the right to bring an action in rem in the first place. The plaintiffs then argued that it was essential for the court to investigate whether in a scenario where the creditors took orders from the bareboat charterers, where the debtors under the contractual agreement with Granges Metalock were the charterers, it was correct for the repairers to bring an action in rem against the vessel.

The plaintiffs substantiated their arguments by stating that, if the courts were to agree that the plaintiffs had the right to bring an action in rem for the debts of the bareboat charterers, the court would be sanctioning a situation whereby the only person who would be seriously prejudiced in the case of a judgement against the vessel would be the owners. The owners, however, had absolutely nothing to do with the debt, given that it had not been incurred by the owners or any of their representatives.

The court accepted the defendant's argument and held that, in such a case, it was the bareboat charterers who were the correct defendants and the action against the ship in rem should be struck out.