Arresting attractions

GIBRALTAR is a good place to arrest a ship. The documents and undertakings required mirror those in England, and no power of attorney is required. Provided full instructions are received with the supporting documents, enabling the lawyer to prepare a general endorsement on the claim form together with an affidavit in support of the arrest setting out the basis of the claim, an arrest may be carried out within hours of receiving instructions.

The admiralty marshal or substitute is on call 24 hours a day, 365 days a year and, therefore, in urgent cases a ship may be arrested at any time. Likewise, should the claim be satisfied, or where the shipowner offers to post adequate security, an arrest may be lifted almost immediately.

Although the practice and procedure in Gibraltar results in vessels being arrested - and, if necessary sold - quickly and efficiently, care should be exercised when instructing lawyers in Gibraltar to undertake admiralty work.

In this respect, the provision of a letter of undertaking from the ship's P&I club, or a guarantee from a first-class bank, will suffice. However, if no formal security is provided, the arresting party can apply for judgement in default and for an order for appraisement and sale of the ship. An order for a sale before judgement is also possible and can be made when the security is diminishing for one reason or another.

It should be noted that admiralty matters have traditionally been given priority and, therefore, applications for judgement and sale of the vessel will usually be heard within weeks of the vessel being arrested. If judgement is given for the claimant, it is normal for the vessel in question to be appraised and sold. This would usually be done through a London broker, the sale being advertised in Lloyds List. Traditionally, the admiralty marshal appoints J E Hyde & Co as its broker.

Legislation has recently been changed in Gibraltar as a result of which the one per cent poundage, which was charged by the admiralty marshal on judicial sales of vessels, has been reduced to 0.8 per cent for fleets with a total value of under $30m, and 0.5 per cent for fleets with a total value of $30m or more. This, in effect, means that creditors with claims against the vessel will receive more money than previously.

Private treaty sales provide an alternative to sale by public auction. These are judicial sales approved by the court but which can take place without the need to market the vessel for a period of time, as is the case with auctions. They can, therefore, result in an arrested ship being sold within weeks, and sometimes days, of the arrest, resulting in a substantial reduction in costs.

Obviously, the party applying for the sale of the vessel by private treaty would have to satisfy the court that the price being offered for the vessel is a fair market price. This is normally achieved by including two desktop valuations from reputable brokers when making the application to court. It is important to note that, both in sales by public auction and by private treaty, the admiralty marshal will give the purchaser a clean bill of sale which, in effect, will extinguish all claims against the vessel, including maritime liens.

Creditors are still protected as the court will usually require a period of 60 to 90 days between the proceeds of sale being paid into court and then being paid out. This ensures that claimants have sufficient time to bring their claims against these monies, and for priorities, if necessary, to be determined.

Although the practice and procedure in Gibraltar results in vessels being arrested - and, if necessary, sold - quickly and efficiently, care should be exercised when instructing lawyers in Gibraltar to undertake admiralty work. The number of experienced admiralty practitioners is relatively small. In order to avoid any nasty surprises, those seeking to arrest vessels in Gibraltar should ensure that the lawyers they are instructing are leaders in their field.

The last nine months have been particularly busy for Gibraltar as an arrest jurisdiction. As many will have read in the press, two large fleets were sent to Gibraltar for the sole purpose of being arrested. In August 2001, seven of the Abu Dhabi tankers were arrested in Gibraltar, while in October 2001, seven Renaissance Cruise Line vessels were also arrested there.

The choice of Gibraltar as the arresting port amounted to recognition, particularly by the banks who had instigated the arrest, of the advantages Gibraltar has to offer, not only in terms of having a proven legal system but also the necessary infrastructure to service a vessel's every need whilst under arrest. It is well known locally, and within certain international circles, that Gibraltar's present admiralty marshal, Katie Dawson, is highly regarded for her helpfulness and efficiency in dealing with any problems that vessels or their crews might encounter whilst under arrest.

The vessel is insured by the admiralty marshal once arrested. It is also normal for a survey of the bunkers to be carried out at the time of the arrest. This is of particular importance for bunker suppliers as, in cases where they have a title retention clause and have supplied the vessel shortly before the arrest, they may be able to recoup most of these bunkers. The bunkers are paid for separately at the time a vessel is sold and, therefore, bunker suppliers can get paid from the bunker fund without having to fight priority cases over the proceeds of sale of the vessel.

A large number of ships pass the straits of Gibraltar every year. Many of them call into Gibraltar, primarily to take on bunkers. Gibraltar's importance as a bunker call port is increasing every year, due mainly to the deep sheltered waters of the bay, its competitiveness (there are three major oil suppliers in Gibraltar) and the good availability of bunkers due to the proximity of an oil refinery.

It is not unusual for ships calling at Gibraltar to also effect crew changes there, given that Gibraltar has an airport, thereby making it easy to fly crew members in quickly and cheaply. It is during these calls, which tend to be short in duration, that many of the arrests effected in Gibraltar take place.