Arrest in France

Lars Lewis, managing partner of Richards Butler, Paris, examines the ship arrest procedure under the French commercial legal system.

WHEN an arresting party finds itself with few suitable jurisdictions, France often appears to be a place where it is possible to arrest a range of vessels for a multitude of claims with little or no risk of adverse consequences. One French practitioner even described arresting vessels as the French national sport.

One of the most striking features of France as a place to arrest vessels is the possibility of so-called ‘associated’ arrests. The high risks involved in shipping have given rise to the holding of fleets of vessels through a series of one-ship-owning companies, often grouped together under a common manager. Quite often the identity of the physical person enjoying the benefits of the vessels in the fleet is the same. This structure can be an effective shield in the defence of many types of claims, especially if the claim can only legally be brought against the company which owns the vessels; that company has no other assets apart from the vessel, and the physical persons involved are protected by the concept of corporate identity to prevent the claim being made against them.

It is sometimes difficult or even impossible to arrest the vessel belonging to the defendant. In such circumstances, the claimant will often wish to consider whether it is possible to avoid the legal abstraction of the limited company to attach or immobilise assets ‘belonging’ strictly to a different party, to ‘get at’ assets which might be more readily available for attachment to obtain security.

A convenient expression has been employed to describe the process of establishing the identity of persons and assets behind the company (‘lifting the corporate veil’) and the process of enforcing claims against those persons (‘piercing the corporate veil’). The French approach is more an exercise in describing to the judge the outward appearance of the various corporate veils to persuade him that they are simply legal abstractions designed to mask the common beneficial interests.

There are two legislative regimes which determine the types of claim which can be secured by arresting a vessel in France – the Arrest Convention, and internal law. Unlike the position in England, France has many decentralised commercial courts. The application to arrest the vessel would normally be made to the commercial court in whose jurisdiction the vessel is to be found. The parties may represent themselves or be represented by any person of their choice, although representatives who are not ‘avocats’ must haven written authority.

There are also many regional courts of appeal. The right to appeal from a commercial court decision is available both on issues of fact and law - it is not necessary to obtain leave/permission. Appeals to the supreme court (cour de cassation) are on questions of law only, and the cases are determined on written submissions. If the supreme court overturns the decision of the court of appeal, the case would normally be referred back to a different court of appeal for further determination.

Commercial court judges are usually not lawyers. They are often local businessmen who have been elected to office on a part-time and voluntary basis. They may have varying degrees of knowledge of shipping matters. They have discretion to determine the case as they see fit. They are not bound by previous decisions, other commercial courts or other higher courts, although as a matter of reputation they do not generally like to be criticised by the higher courts. To this extent, other decisions, particularly of the cour de cassation, may be considered to be persuasive. Commercial court judgements are usually very short and will often contain little reasoning.

The application for the arrest order is made ex-parte by a ‘requête’ or summons. This document would normally contain brief details of the claim alleged and attach documents sufficient to allege a claim and/or to demonstrate there is a claim which appears to be well-founded, depending on the application regime. There is no duty of disclosure and it is therefore not necessary to outline any documents or defences that may be available to the opponents. No affidavit is required in support of the application, and no security is generally necessary.

The hearing of the application is unlikely to last more than 15-20 minutes. Under these circumstances it is not surprising that whatever the finer points of the merits of the claim and the connections between the ‘associated’ entities, the arrest order is often granted.

A challenge to the arrest order should be made to the same judge who issued it. In theory, it is possible to obtain a hearing almost immediately, but sometimes it may be difficult effectively to challenge the order, e.g., the judge is not available. It may, moreover, be difficult to persuade the court that its original order was incorrect. If the judge following a challenge maintains the arrest order, the owner of the vessel is obliged to appeal to the regional court of appeal. It may take several weeks to obtain a hearing, although it has been done in ten days, and in the meantime the vessel would remain under arrest.

A further element of uncertainty is the lack of extensive legal reporting of the decisions rendered. The leading periodicals are those such as the Droit Maritime Français (DMF) and the Bulletin des Transports. The periodicals rely heavily on disclosure of interesting judgements by the lawyers involved in the cases. There are many decisions of relevant courts which are not reported. There may therefore be an element of surprise which could work in a party’s favour if its opponent is not fully informed, although, conversely, there is a risk of unwelcome surprises if the opponent has in its possession a judgement from a case in which it is involved which has not been disclosed or reported.

When the arrest order is obtained, it usually provides for the release of the vessel against a guarantee issued by a first class French bank, although theoretically the owner of the vessel arrested has the option of making a cash deposit. There are of course sometimes practical problems in providing bank guarantees, especially over weekends and during holiday periods, etc. It is often possible to obtain the release of the vessel against a letter of undertaking from a P&I club which is a member of the International Group.

As with other matters, the amount of security is entirely within the discretion of the judge, who is likely to take a ‘common sense’ view of the position. There will usually be little difficulty in obtaining security for the principal amount of the claim. It may be possible to obtain an increased amount for interest and costs, although French judges are generally reluctant to accord the level of costs which may be awarded in English proceedings – costs awards in France rarely exceed $4,000.

It is unwise, therefore, to claim unrealistic amounts because the judge may then disregard the amount set out in the application and order security in an amount much lower than the amount realistically required.

This article is an edited version of the speech given by Lars Lewis at the 10th Annual Ship Arrest Conference in London in November 2004.