Arrest of Vessel Procedures Explained

Maritime Liens
Procedure
Security

Under Icelandic law the arrest of vessels is regulated by Act no 31/1990 on the general arrest of properties. There are no special rules for the arrest of vessels and Iceland is not a party to any international arrest convention.

Maritime Liens

Only property that belongs to a debtor may be arrested in order to secure payment of a claim. However, if a claim is secured by a maritime lien under Article 197 of the Icelandic Maritime Act no 34/1985, the vessel may be arrested regardless of ownership. This kind of claim is similar to those stipulated in the 1967 Brussels Convention on Maritime Liens.

According to Article 197 the following claims constitute a maritime lien:

• wages or other payment due to the master, crew and other persons employed on board the vessel;
  
  
• claims for damages due to loss of life or personal injury, as long as the claim is directly related to the use of the vessel;
  
  
• claims for damages due to damaged properties in cases, as long as the claim (i) is directly related to the use of the vessel and (ii) is not based on contract;
  
  
• compensation for salvage or removal of wrecks; and
  
  
• ship charges (ie, claims for port, canal and waterway dues).

Procedure

An arrest may be instituted in Iceland if the vessel is situated in the country at the time. An arrest application must first be submitted to the relevant sheriff's office. This must include (i) all relevant information that will enable the sheriff to consider the matter and (ii) all documentation that is necessary to prove that the claim exists.

The sheriff then requires the claimant to be represented at a formal hearing of the arrest application. However, the claimant is not legally required to be represented by a lawyer. The hearing may take place at the sheriff's office or at another location decided by the sheriff.

The sherrif usually notifies the defendant of the arrest application and of the hearing. However, if the sheriff is satisfied that this might affect the arrest he may refrain from notification.

Once the arrest has been made the claimant must commence legal proceedings before the Icelandic district courts within one week to (i) confirm the arrest and (ii) initiate an action to secure the claim (if this has not already begun). Icelandic courts always have jurisdiction over the confirmation of the arrest.

If a foreign jurisdiction is also involved in the claim, the claimant must commence legal proceedings before (i) the Icelandic district courts, with respect to the confirmation of the arrest and (ii) the relevant foreign venue, with respect to the claim itself, within three weeks of the arrest. Otherwise the defendant may request the arrest to be set aside. Any district court decision may be appealed to the Supreme Court.

Security

The claimant must sometimes provide security for any damage or loss that may result from an unlawful arrest. The sheriff handling the arrest application determines:

• whether this security is necessary;
  
  
• the amount of the security; and
  
  
• the form the security must take.

The Icelandic Maritime Act provides that:

"when determining the amount of a guarantee the sherriff must mainly take into account to what an extent the arrest affects the functions of the defendant in terms of doing him harm, whether it is likely that the arrest or request for the arrest will harm his credit status or his business interests and whether he has a chance to make remarks about the validity of the claimant's claim and the arrest. The cost that the defendant might later have to endure through court procedures due to the arrest should also be taken into account."

The sheriff may arrest the vessel without security at the claimant's request if one of the following conditions is met:

• the arrest is demanded pursuant to a debenture, a draft or a cheque and the defendant does not contest the claim;
  
  
• the defendant waives his right for a security in front of the sherrif;
  
  
• the defendant acknowledges the claim's validity in front of the sherriff or the court and conditions for an arrest prevail;
  
  
• a judgment has been given regarding the claimant's claim but the enforcement period has not ended; or
  
  
• the sherrif considers both the claim and the arrest to be indisputably valid in the circumstances.

If a security is required it should be provided in cash or in in a similar form. A bank guarantee from an Icelandic bank is usually required.

For further information on this topic please contact Gunnar Sturluson at LOGOS by telephone (+354 540 0300) or by fax (+354 562 7186) or by e-mail ([email protected]).