France: a ship arrest haven?

SHIPPING is a can-do industry. Setting up a company, for example, can now be a mere formality, with shipowners able to establish a different company for every single ship in their fleet, with no direct link between the claims against each of them.

But knowledge of the law and the regulations governing the arrest of ships in all jurisdictions has also grown substantially. This is perhaps not surprising, because each day that a ship is detained beyond its scheduled itinerary could cost thousands of dollars.

For better or worse, France has gained a reputation as a ship arrest haven, comparable to Spain, or even the Netherlands, South Africa or Gilbraltar. In truth, France actively participated in the shaping and fine-tuning of the 1952 International Convention on the Arrest of Sea-Going Ships, which it later ratified and implemented, in 1958. From then on, the provisions of the convention were mandatorily applicable by French judges to any ship flying the flag of another contracting state and calling at a French port.

Interpretation of the convention by French judges has been more or less in line with the jurisprudence of most of the other contracting states. This has particularly been the case in relation to the maritime nature of the underlying claim, despite occasional lapses where some courts of appeal and the Cour de Cassation have tended towards a more liberal interpretation of the type of claims involved. (See Cour de Cassation, May 10, 1989, the Tebessa).

Perhaps the image of France as a ship arrest haven stems from the growth of single-ship company structures. In response to what they saw as a “fraudulent” practice, and one against the spirit of the arrest convention, French judges controversially granted orders of arrest against any ship owned by “the same beneficial or associated owner”, thereby turning the concept of ‘sisterships’ into one of ‘cousinships”! (See Cour de Cassation, February 12, 1991, the Bravemother).

Things have changed, however, since the mid-90s. The French courts have back-pedalled to a more conservative position and now adopt a pragmatic approach to the facts in an effort to pierce the corporate veil and to expose where appropriate the fictitious nature of the shipowning companies (Cour de Cassation, November 15, 1994, the Osiris 1; and, more recently - November 23, 1999 - the Kareliya).

In the eyes of owners, operators and carriers of ships flying the flags of countries which are not signatories to the 1952 arrest convention, France may be considered a hazardous jurisdiction. Indeed, in accordance with the convention, such ships can be arrested for any claim where domestic legislation permits it.

In France, the law provides that a ship, like any other moveable asset, can be arrested for any claim of any type whatsoever that the arresting party may have against the owner of the ship, provided the claim is proven to be serious and grounded in principle. No emergency need be proven. The claim is presumed urgent since the vessel could sail away at any time, and the sole likelihood of a serious claim suffices. But it is still necessary - unlike in Spain and the Netherlands, for example - to support the claim with the necessary probative documents.

On the other hand, the scope of arrest in France is narrower than that in some other common law jurisdictions.

So far as ships flying the flags of contracting states are concerned, it is only recently - and after some hesitation - that French judges have agreed to apply the provisions of the 1952 convention concerning the action in rem. (Cour de Cassation, March 31, 11992, the Eal Saphir).

In France, unlike in some other countries, e.g., Belgium, the law does not impose on claimants the need to deposit a counter-security. Neither does it require claimants to institute legal proceedings on the merits before a competent court within one month of the arrest. Moreover, the arrest may be lifted immediately upon the provision of an acceptable bank or P&I guarantee covering the amount of the claim. (Cour de Cassation, January 9, 1992, the Vicky).

French judges can also authorise a ship to perform one or more voyages if the applicant provides adequate security and undertakes to return the vessel to the port of arrest within a specified period.

French courts cannot claim automatic authority to hear a ship arrest dispute on its merits for the sole reason that a ship may have been arrested within their jurisdiction. And French judges are reluctant to countenance a claim for compensatory damages for wrongful arrest unless the bad faith or malicious intent of the arresting party can be established.

Some foreign commentators have suggested that ship arrest in France does not provide true justice because the presidents of tribunals of commerce who are deemed competent to order arrest are businessmen rather than professional magistrates. But this argument ignores the fact that, in order to be eligible to stand as president of a tribunal of commerce, it is necessary to have practised as a judge for a period of at least six months. In addition, it might be argued that somebody with a business background will be very familiar with the technical and commercial aspects of a dispute involving the arrest of a ship.

So maybe it is unfair to say that France is a haven for ship arrest, particularly in respect of ships registered in countries which have ratified the 1952 arrest convention. Indeed, there seems to be a fair balance between the various interests involved.

The 1999 arrest convention was designed to address the deficiencies of the 1952 convention. But there must be a danger that, rather than harmonising international arrest laws, it will give rise to a new era of legislation which is likely to encourage the development of forum shopping.

France moves on pollution legislation

WHILE Brussels continues to formulate new legislation in the wake of the Erika casualty, developments in connection with oil pollution legislation have recently taken place in France, which was directly affected both by the Erika sinking and by the sinking of the chemical tanker Ievoli Sun.

On November 14, 2000, the French transport minister confirmed that France supported the 1996 HNS Convention on the responsibility and indemnification of damages caused by noxious and hazardous substances, which still requires seventeen signatures in order to enter into force.

Furthermore, a bill modifying Statute No 83-583 of July 1983, covering pollution from ships and significantly increasing the liability of implicated parties, has passed its first reading at the French senate and is currently under debate before the national assembly.

In France, liability for oil pollution is also tackled in another statute, No 2001-4, enacted on January 16, 2001, which harmonises domestic transport regulations with EC law.

The message seems to be that the French coast can not afford another pollution casualty.