French associated arrests

FRANCE has a reputation for being a jurisdiction where conservatory arrests of vessels not legally 'owned' by the debtor but in associated ownership are granted routinely by the lower courts with little risk. According to the trends in recent case law, this appears to be changing.

Previously, a claimant may have relied on an 'appearance of a community of interest'. Now it seems to be necessary to consider whether the entities involved are 'legal fictions'.

An indication of the new trend was given by the Cour de Cassation or Supreme Court in the case of the Alexander III. The claimant alleged a claim against the Panamanian company Klides, the owner of the vessel Lides, and to secure that claim arrested the Alexander III, which belonged to a different Panamanian company, Lemphy. The companies had a common manager, Pan Nautic, based in Switzerland.

The Court of Appeal of Aix-en-Provence, upholding the arrest, considered to be relevant the impossibility of identifying the shareholders. One of the directors of Pan Nautic was also the president of Lemphy, and there was a settlement concluded by Klides as a result of the arrest of the Alexander III.

The Cour de Cassation held that the Court of Appeal had not legally justified its decision in taking into account the various factors which were inadequate to establish the so-called 'fictivity' of Lemphy. This position has been affirmed by the Cour de Cassation in other subsequent cases.

Conversely, in the recent decision of the Court of Appeal of Rouen in the Osiris 1, the company which owned the arrested vessel was held liable for a claim against the principal debtor on the basis of 'fictivity'. The facts found by the court to be the most relevant were the extent of the power concentrated in the hands of one person, his extensive shareholdings in a number of one-ship-owning companies, the economic links between the debtor and the company which owned the vessel arrested and, perhaps unusually, the same person's affirmation that he was the sole shareholder of the latter. It is clear that, in France, associated arrests are becoming more difficult, but the case law is not unified.

New international convention on arrest of ships

A DIPLOMATIC conference of the United Nations and the International Maritime Organisation has adopted a new International Convention on the Arrest of Ships.

Senior representatives of almost a hundred nations, and nearly twenty interested organisations and professional associations, participated in a two-week conference, held under the auspices of UNCTAD. The conference was chaired by Zhu Zengjie, senior adviser to the China Ocean Shipping (Group) Company.

Some critical issues had to be dealt with by the conference to reach agreement on a new convention. Among them was the definition of a "maritime claim". Views differed on whether or not the convention should adopt a closed list of maritime claims giving rise to a right of arrest. After a protracted debate, the conference reached a compromise whereby a closed list of claims is to be maintained, with some flexibility in certain categories, for example, in relation to loss or damage covering environmental claims.

The question of sistership arrest gave rise to an extensive debate. Some delegations argued that the proliferation of single-ship companies since 1952 had often meant that, in practice, there was no possibility of arresting a sistership. A radical proposal was therefore made to adopt provisions for the arrest of 'associated' ships using the concept of control as the criterion for establishing an association. The conference considered, however, that the problem could not be solved in the context of this convention as it had implications for other areas of law such as corporate law and contract law.

One advance in the new convention is that it clearly sets out the cases in which a ship may be re-arrested, or another ship arrested for the same claim, for instance, if the nature or amount of the security provided is inadequate, or when the provider of the security is unlikely to be able to fulfill its obligations.

Another development is that, unlike the 1952 convention, the new instrument generally grants jurisdiction to the courts of the state in which an arrest has been made or security has been provided to obtain release from arrest.

The new international rules on arrest apply to all ships, whether or not they are seagoing and whether or not they are flying the flag of a state party, although state parties can enter a reservation on this point when acceding to the convention.

The convention will be deposited with the secretary-general of the United Nations and will be open for signature by any state at the United Nations headquarters, New York, from September I, 1999 to August 31, 2000. It will enter into force six months after the date on which ten states have expressed their consent to be bound by it.In the last-mentioned instance, the charterer alone shall be liable for the maritime debt connected therewith, and consequently another vessel owned by the charterer at the time the debt arose may be arrested, but not another vessel owned by the owner of the chartered vessel.