Background
Facts
Decision
Comment
The interpretation of Article 3(4) of the Brussels Convention 1952 has given rise to much debate in the convention's contracting states. Courts and academics alike are divided between two positions. Some maintain that the "ship in respect of which the claim arose" can be arrested, as security for a claim against a person other than its registered owner, only when the claim relating to that ship is secured by a maritime lien recognised by the lex fori (ie, the law of the place where the matter is heard). In contrast, others maintain that a ship may be arrested in respect of a claim against the demise charterer or time charterer, even if such claim does not give rise to a maritime lien (ie, privilege) on the ship.
In recent years the latter opinion has prevailed in Italian jurisprudence and a number of arrests have been granted in respect of claims against a demise charterer or time charterer, even where the maritime claim was not secured by a maritime lien on the vessel.
As a consequence, another crucial question has arisen: following the arrest, may a claimant enforce its claim against the demise charterer or the time charterer through an enforced sale? The problem becomes yet more complicated when security has been provided - in the form of a bond or a cash deposit in court - by the owner of the arrested ship in order to obtain its release.
The Court of Genoa has recently taken an interesting position on the issue - albeit one which seems certain to provoke further discussion.
The Venezia D, which flew the Dutch flag and was owned by a company registered in the Netherlands, had previously been time chartered to an Italian company, which subsequently experienced financial difficulties. The charterer became unable to make regular payments to various suppliers, including bunker suppliers, and was later declared bankrupt.
One of the charterer's creditors had supplied bunkers to the Venezia D while the time charterparty had been in force, but had not been paid the agreed price. It applied for arrest of the vessel in Genoa, invoking Article 3(4) of the convention. At the time, the vessel was no longer time chartered to the Italian debtor.
On February 19 2010 the court granted the arrest. It applied Article 3(4) and expressly stated that the rule applies even if the vessel is no longer in the debtor's use at the time of the arrest.
In order to obtain release of the vessel, its owners provided security by depositing a passbook in court; under this arrangement the creditor could obtain payment only against an enforceable judgment.
The claimants commenced proceedings on the merits and the shipowners argued that the security deposited in court at the time of the arrest should not be released to the claimants until they had obtained enforceable title and the ordinary enforcement procedure for such title had taken place.
Ruling on the merits of the case, the court found in the claimants' favour. It confirmed that the judge, in the judgment granting the claim on the merits, also had the power to order that the security granted by the shipowners be released immediately in favour of the claimants in respect of their claim against the vessel's time charterer. Such a release is to take place automatically, not through an ordinary enforcement procedure.
According to the court's decision, the legal protection provided to maritime claimants under the convention not only allows such creditors to obtain the arrest of a vessel when the debtor is not the shipowner, but affords a "fast lane" to satisfy the maritime claim by obtaining release of the security automatically, as soon as the judgment on the merits is issued.
Comment
It is common ground that the convention regime was devised to provide special protection to certain categories of creditor by:
- simplifying the procedure for ship arrest;
- allowing for an arrest without the need to prove periculum in mora (ie, danger in delay);
- permitting the arrest of ships even if ready for sale; and
- allowing the arrest of a ship against innocent shipowners for the debts of a bareboat charter or time charterer.
Nonetheless, it is extremely doubtful that such protection goes so far as to allow the arrest of a vessel, with no time restriction, for the debts of previous bareboat or time charterers that no longer have use of the vessel at the time that arrest is sought.
There are no provisions in the convention that justify the draconian mechanism of releasing security in favour of the maritime claimant and depriving the owner of the arrested vessel of any defence, especially since the arrest convention contains no rules on procedure. All rules of procedure related to the arrest of the ship, as well as all matters of procedure that the arrest may entail, are governed not by the convention, but by the law of the contracting state in which the arrest was made or sought.
For further information on this topic please contact Maurizio Dardani or Luca Di Marco at Genoa Chambers by telephone (+39 010 576 1816), fax (+39 010 595 7705) or email ([email protected] or [email protected]).