Marco Manzone Carolina Pinto February 24 2021 Exercise of maritime liens on cargo to secure credits for freight and demurrages Dardani Studio Legale | Shipping & Transport - Italy Marco Manzone, Carolina Pinto Shipping & Transport FactsDecisionCommentFactsA cargo of coal was transported from Colombia to Italy under a voyage charterparty. The coal was destined for the Italian cargo receiver, the bill of lading holder, in Civitavecchia.The charterparty provided that the charterer had to pay the owner the 10% freight balance within 30 days of completion of the discharge, and that any demurrages had to be paid within 30 days of the presentation of the final invoice, along with the timesheet and statement of facts.While discharging operations were underway, the charterer informed the owner that an application to open insolvency proceedings had been filed with the competent court.When the discharging operations were about to end, the owner applied to the Civitavecchia Tribunal, pursuant to Article 437 of the Code of Navigation, to exercise the maritime lien on a quantity of coal carried on board the carrying vessel to secure its credits for the freight balance, demurrages and expenses towards the charterer and, at the same time, obtain permission to deposit the cargo ashore under judicial authority. According to Italian law, a maritime lien can be exercised by the vessel owner only with the permission of the local court.The owner served the lien application to the cargo receiver and the charterer. Both the cargo receiver and the charterer opposed the claimant's demand.The charterer replied that:the owner's credit for the freight balance and demurrages had not yet arisen when it had filed the lien application because of the contractual provision deferring payment of such sums after a certain period from discharge;by agreeing to the deferred payment of the balance freight and demurrages, the owner had implicitly waived its right of lien;the lien clause invoked by the carrier could not be considered valid under Italian law as, under the Italian system, the only existing liens are those established by the law; andthe bill of lading contained no specific reference to the voyage charterparty. As such, the owner's credits arising from the voyage charter were not enforceable against the bill of lading holder.The claimant counterargued that, in any case, the credit for freight and demurrage had become immediately due as a consequence of the manifest insolvency of the charterer, as per Article 1186 of the Civil Code.DecisionThe tribunal granted the opponents' defences, thereby dismissing the lien application brought by the owner.Preliminarily, the judge observed that Italian law applied in accordance with the Italian rules of private international law, which state that actions relating to proprietary rights and rights in rem in movable and immovable property are regulated by the law where the goods are located (ie, lex rei sitae). Therefore, it excluded the application of English law as argued by the cargo receiver.Further, the court stated that the carrier was not entitled to claim a lien on cargo according to Article 437 of the Code of Navigation as security for its credits of freight and demurrages arising from the voyage charter when payment of such credits was contractually payable after the discharge of goods.According to Article 437, the prerequisite for filing an application with the local court requesting permission to discharge and deposit a sufficient quantity of carried goods to secure the carrier's credit for freight and demurrage is that such credit must be outstanding (ie, payment failure must be established). In the present case, the parties had agreed in the voyage charter that payment of outstanding freight and demurrages was due only after discharge. Therefore, the credit to be secured could not be deemed outstanding.Moreover, as per Article 564 of the Code of Navigation, the maritime lien set out under Article 561(4) of the code expires 15 days after discharge if the lien application is not presented beforehand. The court stated that the contractual provision according to which the balance freight and demurrage were payable 30 days after discharge amounted to an implied waiver of the abovementioned maritime lien and the right to place a lien on cargo for the carrier's credit.Further, the court rejected the owner's argument that the credit was deemed outstanding in light of Article 1186 of the Civil Code – specifically, that the credit for freight and demurrage was considered accelerated in light of the charterer's patent insolvency. The court stated that the charterer's insolvency had been known to the parties even before the carriage contract was agreed between the parties and could not amount to a supervening circumstance.As far as the existence of contractual lien was concerned, the court decided that the charterparty provision which set out a contractual lien was inconsistent with the provisions making the outstanding freight and demurrage payable 30 days after discharge.The court found that the right of lien set out under the charterparty could not be claimed against the cargo receiver. The bill of lading did not incorporate a full reference to the lien clause or the specific charterparty, as it simply contained a generic reference to "all the terms and conditions of the voyage charter", which could not incorporate the lien clause contained in the charterparty.In light of the above, the carrier's lien application was dismissed.CommentThis decision was based on two 1980 precedents of the Genoa Court and reinforces the principles that under Italian law, a lien on cargo can be placed under the authority of only the local courts which, before granting such lien, will strictly verify the existence of the legal requirements set out under Italian law. These can be briefly summarised as follows:A lien on cargo can be placed to secure claims listed under Article 561 of the Code of Navigation.The bill of lading must expressly incorporate the charterparty from which the claim for unpaid freight or demurrages arises.In light of Article 564 of the Code of Navigation, according to which a maritime lien expires 15 days after discharge, contractual provisions making freight and demurrage payable more than 15 days after discharge may amount to an implied waiver of the right of lien on cargo.For further information on this topic please contact Marco Manzone or Carolina Pinto at Dardani Studio Legale by telephone (+39 010 576 1816) or email ([email protected] or [email protected]). The Dardani Studio Legale website can be accessed at www.dardani.it.