Appeal court decision
As a result of the continuing economic downturn and its impact on the maritime sector, ship arrests are on the increase. However, ship arrest is not an exact science, and those seeking to attach assets must be aware that their chances of success will vary depending on the nature of their claim and the jurisdiction in which their dispute is heard.
Historically, the Netherlands has been regarded as a haven for those seeking to effect the arrest of a ship. This perception is backed up by extensive case law, but it may not always be possible to bring an argument within the ambit of the relevant legislation – witness the recent decision of the Leeuwarden Court of Appeal in The Caballo Genitor.
The underlying dispute had its origins in the time charter of the multi-purpose offshore support vessel Greatship Dhriti, owned by offshore service provider Greatship India, by Mexico's Oceanografía SA. The charter ran from October 2008 to October 2010. Each party had claims against the other, and these disputes were referred to arbitration in London.
As security for its claim, Greatship moved to attach the Caballo Genitor in the Netherlands. At the time when Greatship sought to effect the arrest, the Caballo Genitor was under construction at the Hoop Lobith International yard. Along with six other Oceanografía ships, the Caballo Genitor was heavily mortgaged to Rabobank and, in May 2010, when it was clear that Oceanografía was unable to meet its mortgage commitments, Rabobank initiated a restructuring whereby all seven vessels passed into the ownership of a newly incorporated company, CFA. The new company was effectively a subsidiary of Oceanografía, but the restructuring gave Rabobank greater control over the vessels.
When Greatship arrested the Caballo Genitor, Oceanografia, Rabobank and CFA sought to have the arrest lifted. On January 12 2012 the Leeuwarden court duly lifted the arrest on the grounds that Greatship's claim related to the time charter with Oceanografia, which did not own the Caballo Genitor. Greatship appealed the decision arguing, among other things, that the transfer of ownership of the vessel was fraudulent. Therefore, according to Greatship, the dispute should be considered to be a "dispute as to the title to or ownership of any vessel" pursuant to Article 1(o) of the 1952 International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships.
Greatship further argued that Articles 1(o), (p) and (q) of the convention did not apply in the Netherlands, and that therefore Dutch attachment law should apply. However, Rabobank and CFA maintained that the dispute did not fall within Article 1(o). They argued that Article 1(o) concerned only disputes involving ownership of the vessel between the attaching party, Greatship, and the attachee (Rabobank and CFA).
The Leeuwarden Court of Appeal held that the convention provides a uniform set of rules with regard to the arrest of ships. As the convention applies in many states, a literal interpretation of the wording of the convention was obvious. The court held that the wording of Article 1(o) connected the ownership dispute to the maritime claim in respect of which the ship was arrested. According to the court, there was no dispute between Greatship and Oceanografia or CFA arising out of the ownership of the vessel. It held that this was a typical dispute arising out of the performance of a charter party. Therefore, the convention applied and the arrest was lifted, since the asset that Greatship was seeking to arrest, the Caballo Genitor, was effectively the asset of a separate company (ie, CFA) and not Oceanografia.
Although the arrest was lifted, the judgment of the Leeuwarden Court of Appeal confirms the position of the Netherlands as a haven for those seeking to effect the arrest of a ship. Had the courts found that the convention did not apply, it is possible that the arrest would not have been lifted.
For further information on this topic please contact Robert Hoepel at AKD by telephone (+31 88 253 50 00), fax (+31 88 253 54 00) or email ([email protected]).