An arresting development

An arresting development
Mike Lax, partner at Lawrence Graham, reviews the International Convention on Arrest of Ships 1999

IN March this year, when most of the western world was looking forward to the Easter holidays, an important meeting was taking place at the Palais des Nations, Geneva. Representatives from 93 states were in attendance, along with a number of "observers" from other states. Virtually all the major powers were represented, including China, the Russian Federation, Europe (including the United Kingdom), South America and the USA. The purpose of the conference was to debate and approve the final version of the International Convention on Arrest of Ships 1999.

The conference was a success, with the majority, including all the major powers, signing the "Final Act", although that doesn't mean the convention takes immediate effect in those countries. The introduction to the 1999 arrest convention recognises "the desirability of facilitating the harmonious and orderly development of world seaborne trade" and records the conviction of the delegates "of the necessity for a legal instrument establishing international uniformity in the field of arrest of ships...".

The significance of the 1999 convention cannot be over-emphasised. Once it comes into effect, during the course of 2000, it will establish a uniform set of rules for arresting ships which will be applicable virtually the whole world over.

Entry into force

By Article 14, the convention enters into force "six months following the date on which ten states have expressed their consent to be bound by it". Perhaps somewhat curiously, the mere fact that many states signed the "Final Act" in Geneva does not constitute an expression of consent for the purpose of Article 14. What constitutes an expression of consent is covered by Article 12. That article records the fact that the convention shall be open for signature at the HQ of the United Nations, New York, from September 1, 1999 to August 31, 2000, and shall thereafter remain open for accession. States may "express their consent" (Article 12.2) by, inter alia, signing the convention.

The convention is likely to enter into force, in those countries which have signed up to it, in March 2000. For states which express their consent thereafter, that consent will take effect three months after the consent was expressed (Article 14.2).

General principles

The convention broadly follows the scheme of the UK system currently enacted in the Supreme Court Act 1981, with some important additions. The 1981 Supreme Court Act largely follows the 1952 Brussels Convention, with one significant exception.

The UK system

At present, a party wishing to arrest a ship in the UK has to overcome two hurdles.

(a) It has to satisfy the court that its claim falls within one or more of the categories set out in Section 20 of the 1981 Supreme Court Act. These are claims which have something to do with ships (or aircraft) and, for the sake of convenience, are often referred to by practitioners as "maritime claims". (This convenient shorthand expression does not in fact appear in the SCA 1981 - perhaps because aircraft are included - but it does appear in the 1952 Brussels Convention and indeed in the 1999 Arrest Convention. The term "maritime claim" is not to be confused with a "maritime lien").

(b) The claimant must also satisfy the court that the ship to be arrested has a sufficient connection with the claim. The term "sufficient connection" does not appear in the SCA 1981 - or indeed in either the 1952 or 1999 arrest conventions. But, again, it is a convenient shorthand expression. In the UK, whether there is a "sufficient connection" between the claim and the ship to be arrested is determined by Section 21 of the SCA 1981. For certain types of claim, including "maritime liens", the ship in connection with which the claim arose can be arrested, irrespective of who owns the ship at the time of the arrest.

Maritime liens
There are four types of "maritime lien" in English law - the last of which is practically obsolete.

1. Damage done by a ship.
2. Salvage.
3. Seaman's wages.
4. Bottomry or respondentia.

If a crewman who served on a ship is owed wages, he can arrest that ship even if, by the time he arrests, the ship has already been sold to new buyers. The new buyers would have to pay the wages even if they had never employed the crewman in question and would have to chase up the old owners for reimbursement.

For most other types of maritime claims not involving a maritime lien, an arrest is only possible if, at the time of the arrest, the vessel to be arrested is owned, or demise-chartered, by the person, referred to as "the relevant person", who would be liable in personam on the claim. The claim need not have arisen in respect of the vessel being arrested. If it arose in connection with another vessel, the "relevant person" need only have been the owner or charterer or in possession or control of the ship in connection with which the claim arose. But the ship to be arrested must be owned or demise-chartered by the "relevant person".

The 1952 Brussels Convention

The 1952 Brussels Convention also had this two-stage process. Is the claim a "maritime claim" and, if so, does the ship to be arrested have a sufficient connection with the claim?

But the major difference between the English approach and the 1952 Brussels Convention, adopted by most countries in Europe, was that the wording of the latter entitles a ship to be arrested even if, at the time of the arrest, it was not owned by the party who would be liable for the claim, even in cases not involving a maritime lien.

By Article 3 of the 1952 arrest convention, the particular ship in respect of which the claim arose can be arrested irrespective of whether the owner was personally liable on the claim.

To rub salt into a shipowner's wounds, any sistership can also be arrested. For example, if a time charterer stemmed, but failed to pay for, bunkers which were then consumed by the vessel, the shipowner might find its vessel arrested by the bunker supplier long after the time charter had ended and the time charterer disappeared. This could occur even though the shipowner had no contract with the bunker supplier and did not benefit from the use of the bunkers. The time charterer would have to pay hire for the ship whether or not bunkers were supplied. Furthermore, if that shipowner also owned other vessels, those other vessels might be arrested.

Under the 1952 Brussels Convention, this was the position that applied for nearly all types of maritime claim and not merely to the much more limited category of maritime liens.

Changes introduced by the 1999 arrest convention

The 1999 arrest convention maintains the two-stage process for arresting ships.

1. The claim has to be a "maritime claim", and
2. There has to be a sufficient connection with the vessel to be arrested.

It is in respect of this second area that the 1999 convention has effected a change which is likely to result in most countries moving away from the 1952 Brussels concept and towards the system which has been in force in the United Kingdom for many years. By Article 3 of the 1999 arrest convention, the concept of personal liability of the shipowner or demise charterer whose vessel is to be arrested is introduced, leaving only a very limited category of claims, including maritime liens, where an arrest is possible, even if the shipowner or demise charterer is not personally liable.

Other changes introduced by the convention
Extension/clarification of "Maritime Claims"

(a) The categories of "maritime claim" have been extended or clarified. For example, international recognition of environmental concerns has led to the introduction of a new category of "damage or threat of damage caused by the ship to the environment, coastline or related interests..." (Article 1(d)).

Similarly, wreck removal claims have been introduced (Article 1(e)). Article 1(l) extends goods or materials supplied to a vessel so as to include, inter alia, containers, with the proviso that they must be supplied to the particular ship, which mirrors the position under English law. Under English law, containers supplied under a container leasing agreement to a shipowner as opposed to a particular ship will not give rise to a right to arrest (The River Rima [1988] 2 Lloyd's Rep. 193).

A new and important addition is also the claim for insurance premiums in respect of the particular ship, payable by or on behalf of a shipowner or demise charterer. P&I club calls are specifically included, so a P&I club will be able to arrest one of its own entered ships for unpaid calls (Article 1(q)). There was some doubt whether "disbursements ... on account of a ship" (section 20(2)(p) of the Supreme Court Act 1981), included fees charged by agents for their own account. Agency fees were not explicitly included as a maritime claim either in the SCA1981 or the 1952 convention. The 1999 convention clarifies this and includes a class of claims for commissions, brokerages and agency fees (Article 1(r)).

Security limited to value of vessel (Article 4)

(b) Up until now it has been a condition for the release of a ship from arrest that sufficient security is put up (Article 5, 1952 convention). Although the 1999 convention has retained this condition, it has qualified what "sufficient security" means by limiting it to the value of the arrested ship, (Article 4.2). However, if the value of the vessel is insufficient to cover the claim, sisterships can be arrested in order to make up the difference (The "BANCO" [1971] 1 Lloyd's Rep 49 and The "KOMMUNAR" (No 2) [1997] 1 Lloyd's Rep 8 and S21(8) of SCA 1981).

Counter-security from arresting party (Article 6)

(c) Coupled with these clearer and more detailed provisions on the right to seek security is the provision, which for the first time has been explicitly set out in the convention, that the court may require the claimant, as a condition of the arrest, to provide counter-security (Article 6). It is unclear under what circumstances a court will order the counter-security to be paid to the shipowner, but it would appear that it will be easier for a shipowner to claim than under the present law in the UK where claims for wrongful arrest only lie in cases of gross negligence or bad faith. By contrast, Article 6 refers to claims of wrongful or "unjustified" arrest, and to "excessive security" being demanded and provided.

Time for substantive claim (Article 7)

(d) By Article 7, the arresting court can impose a time limit for the substantive proceedings to be brought. This would appear to be the case even where the substantive proceedings are to be in another jurisdiction. The penalty for non-compliance is presumably the release of the vessel if still under arrest.