Arrest the conservative way
GREEK law provides for two different types of arrest - conservative arrest and execution arrest. The purpose of the conservative arrest is to obtain security for an alleged claim. The purpose of the execution arrest is the sale of the vessel by auction, so that the claim can be satisfied from the proceeds of the auction. This article deals only with the conservative arrest of the vessel.
Requirements for arrest
Greek courts will order a conservative arrest if two major requirements can be satisfied. Firstly, the claimant has to prove the existence of its claim on a balance of probabilities. This does not mean that the claimant does not have to produce evidence before the court, in the form of either documents or witnesses. It only means that the court does not require conclusive evidence.
In other words, the court is satisfied with the production of documents, which may not comply with the formal requirements of the law when the case is heard by the court on the merits at an ordinary hearing. For example, the court will take into consideration an unofficial document, or a sworn affidavit, even if the other party has not been notified as is required in ordinary court proceedings.
Secondly, claimants have to prove, again on a balance of probabilities, that there is a danger that their claim may not be satisfied if they have to wait for the completion of the ordinary court proceedings regarding their lawsuit on the merits. As this can take a long time, it is generally held by most judgements that, as most ships are owned by ‘single-ship’ companies and can be easily transferred to third parties and are also subject to perils of the sea, there is automatically sufficient evidence to prove the possibility of a claim not being satisfied.
However, there are some judges who hold other views. In certain instances, the claimant must prove the existence of the risk of non-satisfaction by establishing the intention of the shipowner/debtor to transfer the vessel, thus offloading a substantial part of their assets.
However, when the court is satisfied that a valid claim exists, it is very rare that it will reject the application for a conservative arrest on the basis that the risk of non-satisfaction has not been established.
Arrest procedure
The first step in a conservative ship arrest is for the claimant’s lawyer to draft an application setting out the actual facts regarding the claim, the prospective danger and the request for the arrest. Even though Greek procedural law requires a brief description of the actual facts regarding the claim, it is recommended that a detailed description of the facts be made when time allows. This avoids vagueness and means that the judge can be more easily convinced of the validity of the claim.
The second step is to file the application with the court. Upon filing the application, the court fixes a date for the hearing, which, depending on the schedule of the court and the urgency of the case, may be anywhere between two and twenty days after filing.
The third step, which coincides with the second one, is for the applicant/claimant to make a request through their lawyer for a provisional order (injunction). This either prohibits the vessel from sailing, if it flies a non-Greek flag, or prohibits any change in its legal status, including transfer of ownership or mortgage, if it flies the Greek flag. This request should made at the same time as the application is filed.
A provisional injunction of this kind is of crucial importance as some time will elapse between the time of the filing of the application and the judgement, giving the shipowner/debtor ample time to instruct the vessel to sail so as to avoid arrest. Once a request for a provisional injunction has been submitted, the court summonses the shipowner/debtor by telephone to appear before the court within one or two hours in order to present their arguments.
After a brief hearing, usually lasting for between fifteen and thirty minutes, in which both sides present their cases, the court decides whether to grant the request for the provisional injunction. It must be emphasised that this is not the conclusion of the conservative arrest procedure. The court will have fixed a date on which a full hearing will take place. Only after the full hearing will the court issue a final judgment on the request for the conservative arrest.
The fourth step is for the lawyer of the applicant/claimant to serve the application on the shipowner, ordering it to appear before the court on the date of the hearing. If the court has issued a provisional injunction prohibiting the vessel from sailing or prohibiting the change of its legal status, then the applicant’s lawyer must also serve both the application and the provisional injunction on the relevant port authorities and/or ship registry.
The fifth step is the hearing of the application, which takes place between two and twenty days after the application is filed before a single judge. During this hearing a full examination of the case takes place, and each side has the right to produce one witness. Following the hearing, the court grants the parties a time limit, usually three days, for the submission of written pleadings together with any further evidence, such as documents or sworn affidavits. In these pleadings, the parties present their arguments on the actual facts, analyse the legal issues and evaluate the documentary evidence and the witnesses' affidavits.
After the filing of the pleadings and evidence, the judge will issue a judgement within a few weeks of the hearing, depending on volume of work. The judge will either grant the application and order the arrest of the vessel or reject the application.
If the court orders a conservative arrest, the sixth and final step of the arrest procedure is for the applicant’s lawyer to serve the judgement both on the relevant port authorities and on the shipowner/debtor. The legal consequences of the conservative arrest are that, irrespective of the vessel’s flag, the vessel cannot sail from the Greek port, and its legal status cannot be changed - that is, the vessel cannot be sold, mortgaged or reflagged.
Noteworthy points
It is worth bearing in mind the following:
- A shipowner whose vessel has been conservatively arrested has the right to release the vessel by depositing with the court a bank guarantee in the same amount as the one in respect of which the arrest was granted.
- The court has the discretion to order the applicant/claimant to deposit a counter guarantee when ordering a conservative arrest, but in practice this discretion is very rarely exercised.
- Following the enforcement of a conservative arrest, the port authorities may require the claimant to place a watchman aboard the vessel for security reasons.
- The claimant may apply for and commence the procedure of conservative arrest, without having filed a lawsuit on the merits against the shipowner/debtor. However, the court may oblige the claimant to file such a lawsuit within a certain time limit. In any case, the claimant is obliged to file his lawsuit within thirty days after service of the judgement ordering the arrest.
- A jurisdiction or arbitration clause whereby the parties have agreed to resolve any disputes between them before the courts of another country or an arbitration tribunal does not prejudice the jurisdiction of the Greek courts to order the vessel's arrest.