Procedural uncertainty in Dubai courts

Letter of undertaking for damages against wrongful arrest

The Dubai courts have recently been requesting a letter of undertaking for damages from a third party other than the claimant. The purpose of this letter is to indemnify the owner of the vessel, or the party whose assets are being attached, against damage or loss should the attachment later be proved to be wrongful.

In the past few years, no LOU or guarantee has been required, but it is advisable now to have some form of LOU or guarantee to ensure that the judge hearing the application will allow the arrest application to proceed. Until two or three years ago, a LOU or guarantee for 20-25 per cent of the value of the claim should have been submitted to the court. Today, it is believed that this should be for 50 per cent of the value of the claim filed.

It should be noted that the amount of the LOU or guarantee relates to a percentage of the value of the claim filed rather than the actual potential to cause damage to the owner's vessel should the arrest later be proved to be wrongful.

This has created some uncertainty for the arresting party. The LOU or guarantee is requested at the discretion of the judge. As the Dubai courts employ a duty judge rota system, the applicant has no advance knowledge of which judge will hear the application. A plaintiff's advocate is therefore required to come to court prepared with a LOU or guarantee to ensure that the arrest application will be heard.

Discussion are also afoot on the subject of whether or not the arresting party's LOU or guarantee should include a provision for guarantee of payment for port charges.

Speed of arrest proceedings and fast track procedure

A fast track procedure has been created to hear claims where a vessel has been successfully arrested. An action on its merits relating to successful arrest proceedings should be heard in its entirety within thirty days of the date of arrest. This procedure is set out in Articles 120 and 121 of the UAE Maritime Code 1981.

While this may be a positive development, there is no fast track or summary judgement procedure in common law systems in the UAE, so exactly how this would take effect in procedural terms is still unclear as Articles 120 and 121 are not enough to govern procedural aspects of a claim without the application of the UAE Civil Procedure Code 1992.

Joint Arrest Application and statement of claim

A recent judgement of the Dubai Court of Cassation indicated that not only does a main-action substantive suit need to be filed within eight days of a successful arrest application, pursuant to the UAE Civil Procedure Code 1992, but it should be filed at the same time as the arrest application.

Confusion could be caused by this as it implies that an arresting party not only needs to file one arrest application and statement of claim, but court fees for both. This amounts to 3.75 per cent of the claim amount (maximum Dhs 15,000 in Dubai) for the arrest, and 7.5 per cent of the claim amount (maximum Dhs 30,000 in Dubai) for the main action in the Dubai Court of First Instance.

Plaintiffs therefore need to spend Dhs 45,000 in court fees on a large marine claim before they are even sure that they have managed to arrest the vessel.

The costs of using the Dubai judicial system have been significantly pushed up. There is no law setting out the changes, which are procedural. Uncertainty will no doubt persist while all parties await clarification of the new procedures.
(Al Tamimi & Company)

Why arrest a ship in Hong Kong?

HONG Kong has long enjoyed strategic importance in ship arrests for two reasons. The legal system is largely based on English law, making it an easy and straightforward procedure, and Hong Kong's geographical location means there is a high probability of ships entering its waters, making it a prime catchment area for ship arrest.
Under Hong Kong law, the arrest of a vessel is governed by the Supreme Court Ordinance (Cap 4). Those who have supplied a vessel, such as bunkerers, and seek to arrest the vessel to enforce a claim for payment, can rely upon paragraph 12A2 (1) which brings "any claim in respect of goods or materials supplied to a ship for her operation or maintenance" within the admiralty jurisdiction of the High Court of Hong Kong S A R.
The documents leading to arrest involve an im rem writ, which sets out the claim, a warrant for arrest supported by an affidavit verifying the claim and the fact that the owner of the vessel is the person bound to pay it, together with other ancillary documents of a formal nature. The documents are filed with the admiralty bailiff who presents them to the high court registrar for approval and issue of the warrant for arrest.
Thereafter, the admiralty bailiff serves the writ and warrant on the vessel and arranges for a security guard to be posted on board, to prevent the vessel from leaving Hong Kong waters. This is necessary because most vessels entering Hong Kong do not go alongside but remain in one of the anchorages.
(Stephenson Harwood)