Limiting Security
Non-Lien Claims
The International Convention Relating to the Arrest of Sea-Going Ships (Brussels, May 10 1952), which has been in force in Spain since 1954, allows the arrest of vessels for certain maritime claims listed in Article 1. According to the convention, it is possible to arrest both the 'offending ship' (ie, the particular ship in respect of which the maritime claim arose) and a 'sister ship' (ie, any other ship owned by the person who owned the offending ship when the maritime claim arose).
The arrest of a vessel is not an issue when the person who would be liable for the claim is also the owner of the vessel. This update explains the problems that may arise where a vessel is acquired by a genuine purchaser after the maritime claim arose but before the arrest is made. In these cases, where the title of the offending ship has been transferred to a third party, the key question is whether it is possible to arrest the ship for a maritime claim regardless of whether the underlying credit gives rise to a lien.
The maritime lien must have arisen by virtue of a treaty or an internal law. Therefore it seems logical to allow the arrest of the vessel, as a maritime lien remains attached to a vessel from owner to owner, regardless of resale. However, there are two collateral issues that are not so obvious. The first is what burden of proof, if any, is required of the arresting party. The second is whether, when placing security or bail, the shipowner who is not personally liable for the maritime claim may limit this security to cover only the liabilities that may exist against the vessel in rem (ie, against a thing - vessel, cargo freight or other fund).
With regard to the burden of proof required of the claimant, according to Law 2/67 the mere allegation of the existence of the maritime claim is sufficient for a court to grant the arrest - there is no need to support the allegation with evidence. Even when the dispute centres on a maritime lien arising under the previous ownership, it is the practice of many provincial courts (which are courts of second instance) to require nothing but the mere allegation of the lien's existence. However, case law from some provincial courts seems to suggest that it is not even necessary to allege the existence of a lien in order to arrest a ship. The mere allegation of a maritime claim suffices.
The majority of maritime commentators also seem to agree that the judge dealing with the arrest should not study the nature of the claim should it be challenged by the defendant, as this is clearly a question that needs to be decided by the judge competent to hear the main action. To hold otherwise could lead to contrary rulings from the arresting judge and the competent judge with regard to the nature of the claim. For example, the arresting judge might deem the lien non-existent and decide to lift the arrest, but the competent judge might subsequently recognize the lien. In this case, the creditor would have been unfairly deprived of his or her right to arrest.
There is no case law from the provincial courts to help answer the question of whether a shipowner whose vessel has been arrested for a prior maritime claim can limit the security or bail to cover only the liens that may exist against the vessel. However, the first instance courts - which generally deal with such matters - normally (although not always) agree that according to Spanish law a person cannot be obliged to provide security in order to guarantee another person's liabilities.
A separate issue arises when the shipowner is not personally liable for the maritime claim and this underlying claim does not give rise to a lien. From a logical point of view, if the courts allowed the arrest of a ship whose owner is not personally liable for the maritime claim and there is no action in rem against the vessel, this would create the anomalous situation of allowing the immobilization of an asset against which it will not be possible to enforce any future judgment. The arrest would then become a mere coercive measure that would only affect someone who is a stranger to the maritime claim. In principle, this would be inadmissible under Spanish law, as the arrest of a ship is considered a security measure designed only to guarantee the result of a judicial claim. In other words, an arrest guarantees that there will be assets against which it will be possible to enforce a future favourable judgment, and if it is clear from the outset that the arrest is not going to fulfil that purpose then it should not be granted.
On the other hand, to allow the arrest of a ship for a maritime claim not secured by a lien when the vessel is no longer owned by the person who would be liable for the claim would go against the spirit of Article 9 of the 1952 convention. This states that the convention creates no maritime liens that did not already exist under the International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages (1926) or a relevant national law. Further, it would go against the intention of the drafters of the convention, who never intended to allow for the arrest of a vessel when it has been sold to a third party before the arrest.
However, according to Article 3 of Law 2/67, once the arrest has been granted the opposition will be based exclusively on non-compliance with Articles 1 and 3 of the 1952 convention. This has led some courts to conclude that it is unnecessary to allege the existence of a lien in order for a court to grant the arrest, as the Spanish version of Article 3 makes no reference to the need for the maritime claim to be a lien. Several first instance courts have reached this conclusion and have allowed the arrest of a vessel regardless of whether the alleged claim is a lien or not, based on Article 3.4(2) of the convention. The courts interpreted this article as allowing for the arrest of the offending ship in any event, even if the shipowner is in no respect liable for the claim, and not as a mere limitation to the possibility of arresting the sister ship.
For further information on this topic please contact Pedro Maura or Veronica Meana at Fernando Meana Green & Co Abogados by telephone (+34 91 432 3875) or by fax (+34 91 432 3876) or by email ([email protected]).
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