Newbuilding contracts

Transfer of title

When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

In Croatian law, the transfer of ownership of ships and yachts requires a document of title and registration in the Croatian Ship Register, Yacht Register, or Register of Ships or Yachts Under Construction. Unregistered transfer deeds have some significance and they create certain legal effects, but full transfer of title happens only at the time when the title is registered with the Ship or Yacht Register.

The parties are free to choose the time the title will pass from the shipbuilder to the shipowner. The document of title is usually handed to the shipowner at the delivery of the vessel. In some cases, usually in order to accommodate some financing problems, the title in the newbuilding passes from the shipbuilder to the shipowner while the ship is still under construction.

When a newbuilding is ordered by a foreign company, the parties to the shipbuilding contract usually choose English law to govern the contract, and therefore the provisions of Croatian law are of only secondary importance. Nevertheless, if the newbuilding is registered in the Croatian Register of Ships under Construction, Croatian law will govern the real-right aspects of the case.

Refund guarantee

What formalities need to be complied with for the refund guarantee to be valid?

According to Croatian law, all guarantees, including a refund guarantee, must be made in written form. No other formalities are required. If the case of state guarantees, in order for the Ministry of Finance to issue such a guarantee, it should be approved by the government.

Court-ordered delivery

Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

This depends on the precise set of circumstances in which this happens, as well as the dispute resolution mechanisms envisaged in the shipbuilding contract (which is often governed by English law). Provided that the shipowner’s right to demand delivery of the ship has been duly determined by the competent body (be it a court or arbitral body), the shipowner may request that this right be judicially enforced in accordance with the rules of judicial enforcement of non-pecuniary claims.

Defects

Where the vessel is defective and damage results, would a claim lie in contract or under product liability against the shipbuilder at the suit of the shipowner; a purchaser from the original shipowner; or a third party that has sustained damage?

The special rules on liability for a defective product as part of the sale-and-purchase contract apply only between the shipowner and the buyer.

Croatian product liability law is mostly concerned with personal products. According to the general rules on liability in tort, a claim would lie at the suit of any party suffering damage.

Ship registration and mortgages

Eligibility for registration

What vessels are eligible for registration under the flag of your country? Is it possible to register vessels under construction under the flag of your country?

Seagoing ships, defined as vessels intended for seagoing navigation, exceeding 15 metres in length or authorised to carry more than 12 passengers, may be registered in one of the following registers:

  • the Register of Merchant Ships;
  • the Register of Fishing Ships;
  • the Register of Ships in Public Service; and
  • the Register of Ships Under Construction.

The following ships qualify for registration in the Croatian Register of Ships:

  • a ship wholly or partially owned by a Croatian citizen or a legal entity with its headquarters in Croatia;
  • a ship wholly or partially owned by an EU citizen or a legal entity with its headquarters in the EU, if the ship is managed or operated by a Croatian company, and provided the owners approve the registration;
  • a ship wholly or partially owned by an EU citizen or a legal entity with its headquarters in the EU, provided that the ship is managed from a branch office in Croatia;
  • a ship owned by a foreign citizen residing outside Croatia or the EU, if the ship is managed or operated by a Croatian company, and provided that the owner approves the registration;
  • a ship owned by a foreign company with its headquarters outside Croatia or the EU, if the ship is managed or operated by a company headquartered in an EU country, and having a branch office in Croatia, and provided the owners approve the registration; and
  • a ship owned by a foreign company with its headquarters outside Croatia, the EU and the European Economic Area, if such foreign company depends on a company with its headquarters in Croatia subject to tonnage tax, provided the owners approve the registration.

It is possible to register vessels under construction. As mentioned above, there are separate registers used only for ships under construction. Croatia is party to the International Convention Relating to the registration of Rights in Respect of Vessels under Construction, 1967. Registration in the Croatian Register of Ships under Construction is compulsory with regard to each ship under construction wholly owned by a Croatian citizen domiciled in Croatia or a Croatian legal person. On the other hand, registration is optional for a ship owned by a foreign physical or legal person that is under construction in a Croatian shipyard.

Yachts, defined as vessels intended for sport and leisure, used for private purposes or business activity, of more than 15 metres in length, intended for longer stays at sea and authorised to carry no more than 12 passengers (in addition to the crew), may be registered in the Register of Yachts or, as the case may be, in the Register of Yachts under Construction.

The following yachts qualify for registration in the Croatian Register of Yachts:

  • a yacht wholly or partially owned by a Croatian citizen or a legal entity with its headquarters in Croatia; and
  • a yacht owned by a foreign citizen or a foreign company, if it spends most of the time in Croatia.

Who may apply to register a ship in your jurisdiction?

Although there are no specific rules as to who may apply to register a ship, the answer to this question follows from the criteria providing which ships qualify for registration, because those criteria are connected to the identity (nationality) of the owner, manager or operator (see question 5). The identity of the person formally submitting an application is irrelevant as long as they can prove that they have a legitimate interest in seeking a particular inscription in the register.

Documentary requirements

What are the documentary requirements for registration?

The documents required for permanent registration of a vessel are as follows:

  • proof of ownership of the ship (bill of sale);
  • documents proving fulfilment of the nationality requirements;
  • decision on the ship’s name and home port, issued by the Ministry of Maritime Affairs;
  • technical specification certificate issued by an approved organisation, with the confirmation that the ship is technically eligible for registration in the Croatian Register of Shipping;
  • call sign certificate;
  • documents detailing other particulars of the ship;
  • deletion certificate issued by a foreign register (where applicable); and
  • the owner’s written statement assigning the responsibility for the ship’s management to the relevant company in the sense of the ISM Code.
Dual registration

Is dual registration and flagging out possible and what is the procedure?

Dual registration and flagging out are not allowed.

Mortgage register

Who maintains the register of mortgages and what information does it contain?

All records concerning a ship (including encumbrances) are kept in one place, the Register of Ships, maintained by the Harbour Master’s Office. ‘Section C’ or ‘sheet C’ of the main book of the Register of Ships contains entries regarding real rights encumbering a ship (such as a mortgage), demise charter, time charter, the right of pre-emption or any restrictions to the ownership.

Limitation of liability

Regime

What limitation regime applies? What claims can be limited? Which parties can limit their liability?

Croatia is party to the 1976 Limitation Convention (as further amended, as well as its 1996 Protocol, which applies by way of a tacit acceptance procedure. The new limits already took effect and the Croatian Maritime Code was amended in this respect. The text of the convention is reproduced almost verbatim in the Croatian Maritime Code, with slight deviations. The persons entitled to limit their liability as well as the claims subject to the limitation are the same as the ones listed in the 1976 Limitation Convention.

Special limitation regimes also apply in the fields of carriage of goods by sea (Croatia is party to the Hague-Visby Rules), carriage of passengers (Croatia is party to the 1974 Athens Convention with its 1976, 1990 and 2002 Protocols), civil liability for the pollution by hydrocarbons carried as cargo (Croatia is party to the CLC 1992 and Fund Convention 1992/2003) and civil liability of the operators of nuclear ships (Croatia has not ratified the 1971 Nuclear Convention but the Maritime Code contains similar provisions).

Procedure

What is the procedure for establishing limitation?

The Croatian Maritime Code expressly provides that a person wishing to limit their liability should set up a fund. It then continues to regulate the situations in which limitation is invoked but the fund has not been set up, which is somewhat confusing. The prevailing view in the jurisprudence is that the setting-up of the fund is compulsory.

The limitation fund may be set up by lodging a cash deposit or a guarantee. The calculation of the limitation amount is as per the 1996 Limitation Convention Protocol.

The limitation of liability procedure is administered by the commercial courts. The application to limit liability may be submitted by any person entitled by law to limit their liability. The application must include a description of the occurrence with regard to which limitation is sought, a list of known claimants and their respective claims, as well as a declaration of whether the applicant wishes to constitute a limitation fund and how.

A shipowner or other entitled person can apply to constitute a limitation fund before legal proceedings have been initiated and before it has been required to respond to a claim that has already been commenced. If that is done, the claimants will not be able to commence enforcement or arrest proceedings in order to enforce or secure the claims with regard to which the fund has been constituted.

Break of limitation

In what circumstances can the limit be broken? Has limitation been broken in your jurisdiction?

Pursuant to the Croatian Maritime Code, a person shall not be entitled to limit his or her liability ‘if it is proved that the loss resulted from his act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that the loss would probably result’. The cited provision differs from the corresponding provision of the 1976 Limitation Convention (article 4) in that it omits the word ‘personal’ in front of the words ‘act or omission’. According to the authors’ best knowledge, this standard has not been broken in Croatia. The Maritime Code is silent on what happens with the fund that has been established if limitation is broken. It is assumed that the court will return the fund to the shipowner, while the claimants will again be free to pursue their claims against any assets belonging to the shipowner.

Passenger and luggage claims

What limitation regime applies in your jurisdiction in respect of passenger and luggage claims?

The limitation regime that applies to passenger and luggage claims is provided in the Athens Convention, as amended by the protocols of 1976, 1990 and 2002.

Port state control

Authorities

Which body is the port state control agency? Under what authority does it operate?

The port state control agency in Croatia is the Harbour Master’s Office, which is supervised by the Ministry of Maritime Affairs, Transport and Infrastructure. Croatia is party to the Paris Memorandum of Understanding on Port State Control.

Sanctions

What sanctions may the port state control inspector impose?

The inspector may impose various sanctions, including order the detention of the vessel, discontinuation of the cargo operations, or both, and may impose fines. In addition, if the shipowner has not removed the deficiencies as ordered by the inspector and the vessel poses a threat to the ports, or the navigable routes, or the environment, the harbour master shall order that the vessel be removed from her present location, or shall directly arrange for her removal at the owner’s risk and expense. In any event, the inspector may pursue misdemeanour proceedings.

Appeal

What is the appeal process against detention orders or fines?

The party against whom a fine or detention has been imposed may lodge an appeal to the Appeal Commission of the Ministry of Maritime Affairs, Transport and Infrastructure. The appeal shall not withhold execution of the first instance decision. In the case of dissatisfaction with the decision of the ministry, the affected party may challenge it before the Administrative Court.

Classification societies

Approved classification societies

Which are the approved classification societies?

The only approved classification society is the Croatian Register of Shipping.

Liability

In what circumstances can a classification society be held liable, if at all?

Croatian law does not contain any specific provisions on liability of classification societies. In principle, a classification society may be held liable for the damage suffered as the consequence of an intentional or negligent act or omission in the performance of the society’s duties, just as any other legal entity. There are no court cases reported on this issue.

Collision, salvage, wreck removal and pollution

Wreck removal orders

Can the state or local authority order wreck removal?

As a matter of principle, any damaged, stranded or sunken vessel obstructing or endangering navigation or presenting a danger of pollution shall, by order of the Ministry of Maritime Affairs, Transport and Infrastructure (its organisational unit), be removed from the navigable waterway at the owner’s cost.

It is to be noted that, as of 1 June 2009, a registered owner of a Croatian-flagged ship engaged in international trade and of 300 GT or greater, is required to maintain insurance or other financial security, such as the guarantee of a bank or similar financial institution, to cover the costs of locating, marking and removing of wrecks.

International conventions

Which international conventions or protocols are in force in relation to collision, wreck removal, salvage and pollution?

Croatia is party to a number of international treaties dealing directly or indirectly with collision, salvage and prevention of marine pollution. These are:

  • the 1910 Collision Convention;
  • the 1952 International Convention for the Unification of Certain Rules concerning Civil Jurisdiction in Matters of Collision;
  • the 1952 International Convention for the Unification of Certain Rules relating to Penal Jurisdiction in Matters of Collision and Other Incidents of Navigation;
  • the 1974 SOLAS Convention;
  • the 1989 Salvage Convention;
  • the 1969/73 Intervention Convention;
  • the 1973/78 MARPOL Convention;
  • the 1992 CLC, the 1992/2003 Fund Convention;
  • the 2001 Bunker Convention;
  • the 1972 London Dumping Convention;
  • the 1976/95 Barcelona Convention, including the 1976/95 Dumping Protocol;
  • the 2002 Cooperation Protocol;
  • the 1980 Land-Based Sources Pollution Protocol and the 2001 Special Areas Protocol;
  • the 1982 UNCLOS Convention;
  • the 1990 OPRC Convention;
  • the 1992 Rio de Janeiro Convention; and
  • the Nairobi International Convention on the Removal of Wrecks 2007.
Salvage

Is there a mandatory local form of salvage agreement or is Lloyd’s standard form of salvage agreement acceptable? Who may carry out salvage operations?

There is no mandatory local form of salvage agreement. Lloyd’s standard form of salvage agreement is acceptable. There are no restrictions as to who may carry out salvage operations.

Ship arrest

International conventions

Which international convention regarding the arrest of ships is in force in your jurisdiction?

The 1952 Arrest Convention is in force in Croatia.

Claims

In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested? Can a bareboat (demise) chartered vessel be arrested for a claim against the bareboat charterer? Can a time-chartered vessel be arrested for a claim against a time-charterer?

The list of maritime claims in the Croatian Maritime Code is very similar, although not completely identical, to the list of maritime claims of the 1952 Arrest Convention. It does not contain bottomry and the claims relating to disputes concerning ownership and between co-owners. On the other hand, the crew’s claim (article 1, paragraph 1, subparagraph (m) of the Convention) covers not only the wages but also all other rights arising out of the crew’s employment. In addition, the list of claims in the Maritime Code includes claims relating to commissions, brokerages and agency fees.

A ship flying the flag of a member state to the 1952 Arrest Convention can only be arrested if the claim falls within the list of maritime claims provided in the convention. Croatia exercised a reservation not to apply the convention to the arrest of a ship for claims in connection with title or ownership of a ship, but to apply domestic law instead.

If the ship’s flag state is not party to the 1952 Arrest Convention, the Croatian court should examine the reciprocity between Croatia and the country of the ship’s flag. If reciprocity exists, the right to arrest shall be limited to claims listed in the Croatian Maritime Code. If there is no reciprocity, the vessel may be arrested for any type of claim. Croatian courts are not inclined to examine the existence of reciprocity (partially because the urgent nature of arrest matters does not allow extensive research) and therefore, in cases involving ships flying flags of non-member states, the courts usually allow arrest for any type of claim.

In addition to any of the ‘maritime claims’ as defined in the 1952 Arrest Convention and the Maritime Code (depending on the vessel’s flag), a vessel can be arrested to enforce a ship mortgage or a maritime lien over the vessel.

Where arrest of a Croatian-flagged vessel is sought within Croatian jurisdiction by a person who has his or her habitual residence or principal place of business in Croatia, the provisions of the Croatian Maritime Code shall apply.

The court usually does not engage in identifying the law applicable to the merits and the motion will usually be considered in the light of Croatian law.

The concept of sister-ship arrest applies. The applicant may arrest any ship owned by the person against whom the claim is directed. Nevertheless, no ship other than the particular ship in respect of which the claim arose may be arrested in respect of claims regarding the ownership, lien or mortgage of a ship.

A bareboat chartered vessel cannot be arrested for a claim against the bareboat charterer. A time-chartered vessel cannot be arrested for a claim against a time-charterer.

Maritime liens

Does your country recognise the concept of maritime liens and, if so, what claims give rise to maritime liens?

Croatia recognises the concept of maritime liens. The claims giving rise to maritime liens are:

  • claims for wages and other sums due to the master, officers and other members of the crew in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
  • claims in respect of loss of life or personal injury occurring whether on land or on water, in direct connection with the operation of the vessel;
  • claims for reward for the salvage of the vessel;
  • claims for port dues in the public ports and special-purpose ports, canal and other waterway dues Including those relating to navigation safety facilities, and pilotage dues;
  • claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than the loss of damage to cargo, containers and passengers’ effects carried on the vessel.
Wrongful arrest

What is the test for wrongful arrest?

Should it occur (on appeal) that the arrest was unjustified, or should the applicant fail to commence proceedings on the merits within the given time following the arrest, the respondent will have the right to claim compensation for any damage suffered as the consequence of such arrest.

Bunker suppliers

Can a bunker supplier arrest a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, rather than with the owner, of that vessel?

This should not be possible because the arrest can be sought only if the ship is owned by the person liable for the claim.

Nevertheless, the Croatian courts have, from time to time, accepted arrest motions for claims related to the bunker supply although the supply had been ordered by charterers. The basis for such arrest was found in the fact that the receipt of the bunker on board was confirmed by the vessel’s official and stamped with the vessel’s stamp, which led the courts to the conclusion that the claim was against the owner of the vessel.

Another possibility is where the claim relating to bunker supply is secured by a maritime lien in the law of the vessel’s flag state and the Croatian court decides to apply that law.

Security

Will the arresting party have to provide security and in what form and amount?

If the circumstances are justified, the respondent may seek that the applicant for the arrest motion be ordered to lodge security for any damage that may be caused by the arrest. This is a very rare occurrence. The amount of security depends on the court’s discretion and on the circumstances of the case. The amount will be calculated taking into account the types and extent of the damage that the respondent may suffer as a consequence of the arrest.

How is the amount of security the court will order the arrested party to provide calculated and can this amount be reviewed subsequently? In what form must the security be provided? Can the amount of security exceed the value of the ship?

The amount of security should be equal to the amount for which the arrest has been ordered. The value of the ship is of no relevance in this respect. Providing a security in a lower amount would be possible only upon agreement with the arresting party. The security must be provided by way of a cash deposit in the court account or in the form of a bank guarantee. Protection and indemnity (P&I) club letters of undertaking, as well as any other forms of security, are accepted only if those are accepted by the arresting party.

Formalities

What formalities are required for the appointment of a lawyer to make the arrest application? Must a power of attorney or other documents be provided to the court? If so, what formalities must be followed with regard to these documents?

For a lawyer to be able to make the arrest application, he or she needs to be provided with a power of attorney, duly signed and stamped. Apart from the power of attorney having to be submitted in original, no other formalities are required in this respect. Alternatively, when it comes to the supporting documents, scanned copies shall suffice as long as the translation, made by a court sworn interpreter, is provided in original.

Croatia is a state party to the Apostille Convention. However, when it comes to the arrest procedure, there is no need for legalisation, notarisation, etc.

In urgent cases, it usually takes one day to prepare the arrest application. For the time being, it may not be filed electronically.

Ship maintenance

Who is responsible for the maintenance of the vessel while under arrest?

The shipowner or ship operator remains responsible for maintenance of the vessel and her crew while under arrest. Nevertheless, if the owner’s resources prove insufficient to maintain the crew, the court shall order the applicant to advance the necessary funds.

Proceedings on the merits

Must the arresting party pursue the claim on its merits in the courts of your country or is it possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere?

It is possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere. At the same time, the fact that the vessel has been arrested in Croatia will regularly give the claimant a possibility to pursue the proceedings on the merits in Croatia.

Injunctions and other forms of attachment

Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

Under the general rules on civil procedure (contained in the Forced Execution Act, which applies in the shipping matters to the extent that certain issues have not been regulated in the Maritime Code), parties may seek various interlocutory measures aimed at securing future satisfaction of their claims. There is an open-ended list of those measures, which includes:

  • prohibition on the respondent from selling or disposing of its assets;
  • prohibition on the respondent’s debtor from voluntarily fulfilling its obligation to the respondent; and
  • prohibition on the respondent’s financial institution from effecting payments from the respondent’s account.
Delivery up and preservation orders

Are orders for delivery up or preservation of evidence or property available?

The court may order a party to deliver a document relied on by the opposing party. The court may also order a third person to deliver a document relied on by any party, if the third party is compelled by law to produce such a document.

Upon proving a risk that any piece of evidence will be impossible or very difficult to obtain at a later stage, an interested party may apply to the court to carry out the securing of evidence. This measure can be sought before or after commencement of the litigation procedure.

Bunker arrest and attachment

Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

There is a theoretical possibility to do so, but in practice it occurs very rarely. The applicant has to prove that the bunkers are owned by the respondent, which is usually difficult to do.

Judicial sale of vessels

Eligible applicants

Who can apply for judicial sale of an arrested vessel?

Whoever has an ‘enforceable document’. This term includes documents such as:

  • final judgment of the Croatian court;
  • award of a Croatian arbitration or final judgment of a foreign court or a foreign arbitral award, which has been recognised by the Croatian court; or
  • a court settlement or special agreement concluded before a notary public, containing the debtor’s express agreement that in the case of default the creditor may settle its claim directly by way of forced execution.
Procedure

What is the procedure for initiating and conducting judicial sale of a vessel? How long on average does it take for the judicial sale to be concluded following an application for sale? What are the court costs associated with the judicial sale? How are these costs calculated?

Judicial sales of ships in Croatia are administered by the commercial courts and observe the following general pattern:

  • issuance of a ‘writ of execution’ (the sale order);
  • evaluation of the ship and determination of the conditions of sale;
  • sale by way of public auction or direct deal; and
  • distribution of the proceeds of sale.

Auction is not the only method of judicial sale of vessels. As an alternative, a vessel may be sold by way of a ‘direct bargain’. This is possible only if the parties to the judicial sale (ie, the creditor as applicant and the shipowner as the respondent), mortgages, liens and beneficiaries of personal servitudes that expire upon the sale of a ship agree prior to the sale of the ship by way of public auction that the ship will be sold by direct deal through an authorised ship broker, court official, notary public or by other means. In such case, a ship sale and purchase agreement will be entered into between the person authorised by the court to sell the ship (the broker, etc) and the buyer. The said method of sale is still under the control of the court and retains the status of a judicial sale.

The duration of the judicial sale proceedings depends on various factors, such as the procedural position taken by the shipowner (appealing against various court decisions will significantly extend the proceedings) and the market situation (if the ship is not sold at the first auction, the next one can only be summoned some time later). The procedure is not structured so as to guarantee swift completion.

The court costs consist of various items, such as court fees (calculated on the basis of the value of the underlying claim, but not exceeding 10,000 kune); evaluation costs (charged differently by various evaluators, but usually not exceeding 10,000 kune); and advertisement costs (the amount of which depends on where the advertisement is published).

Claim priority

What is the order of priority of claims against the proceeds of sale?

The system of priorities under Croatian law is a distinctive combination of procedural and substantive provisions. On the one hand, the priority among different categories of claims, and the non-proprietary rights, is a question of procedure, and is governed by the lex fori. On the other hand, the priority of proprietary rights on the vessel (ie, maritime liens and mortgages) is considered a matter of substance and governed by the law of the vessel’s flag state (which, for Croatian-flagged vessels, is governed by the relevant provisions of the Maritime Code dealing with maritime liens and mortgages). The Maritime Code’s general order of priority may be summarised as follows:

  • costs associated with the sale;
  • claims of the Republic of Croatia related to removal of substandard vessels, locating, marking and removal of wrecks and sunken objects;
  • maritime liens;
  • possessory liens;
  • ship mortgages;
  • other claims; and
  • the residue of the proceeds, if any, is paid to the owner.

Claims belonging to one category are given access to the proceeds of sale only after all claims from the preceding category have been paid in full. If the proceeds of sale are insufficient to fully satisfy all the claims in the same category, the priority among them is determined by special rules that vary according to the category in question.

Legal effects

What are the legal effects or consequences of judicial sale of a vessel?

Judicial sale is a valid legal basis to acquire ownership in a vessel. It will extinguish the previous ownership and grant the purchaser a clean title over the vessel. On the basis of a special order issued by the court after the adjudication decree has become final and the purchaser has paid the full price, the purchaser will be registered in the Ship Register as the owner of the vessel.

Judicial sale will extinguish all mortgages, liens, charges or encumbrances attached to the ship before the sale, except those that the purchaser agreed to assume with the consent of their holders.

Foreign sales

Will judicial sale of a vessel in a foreign jurisdiction be recognised?

Judicial sale of a vessel in a foreign jurisdiction will not be recognised without the completion of the recognition procedure. Croatia is not party to the 1971 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. On the other hand, Croatia is bound by the Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I). Outside the scope of Brussels I, the Croatian national rules provide a number of formal requirements and substantial (mostly negative) criteria for the recognition of foreign court decisions. The most significant negative criteria are:

  • if the defendant has been prevented from participation in the foreign proceedings due to procedural error;
  • if the case falls within the exclusive jurisdiction of the Croatian courts;
  • if the Croatian court has already rendered a final decision in the same matter;
  • if recognition would be against public policy; or
  • if there is no reciprocity.

If the document produced by the foreign court is not a court decision but a certificate or notice or some similar official form issued by the court clerk, such document would be considered a ‘foreign public document’, and would have to be legalised in Croatia. Croatia is party to the 1961 Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents. If the foreign public document originates from a state that is party to the Convention, an apostille would eliminate the need for legalisation.

International conventions

Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

Croatia is not party to this Convention.

Carriage of goods by sea and bills of lading

International conventions

Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some variation in force and have they been ratified or implemented without ratification? Has your state ratified, accepted, approved or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea? When does carriage at sea begin and end for the purpose of application of such rules?

The Hague Rules 1924, as amended by two protocols (the Visby Protocol 1968 and the SDR Protocol 1979), are part of Croatian maritime law: all three documents have been ratified in Croatia and its provisions have also been reproduced in the text of the Croatian Maritime Code.

The Rotterdam Rules are still under consideration in Croatia and no position has yet been taken.

The transport period begins at the moment of receipt of cargo and ends on its delivery. The relevant moments (receipt and delivery) may be freely stipulated by the parties. Nevertheless, unless the contract or the customs of the port provide otherwise, the carrier is considered to have taken over the cargo from the shipper and delivered the cargo to the receiver under ship’s tackle.

Multimodal carriage

Are there Conventions or domestic laws in force in respect of road, rail or air transport that apply to stages of the transport other than by sea under a combined transport or multimodal bill of lading?

Croatia is not party to the UN Multimodal Convention. There are special laws applying to each mode of transport, and they would apply to the relevant stages of transportation. In 2009, Croatia passed the Combined Transport Act in conformity with the requirements of the Council Directive 92/106/EEC of 7 December 1992 on the establishment of common rules for certain types of combined transport of goods between EU member states. The Combined Transport Act contains provisions defining basic terminology, distances in combined transport, measures to stimulate combined transport, combined transport documents and collecting of statistical data. It does not deal with private law issues.

Title to sue

Who has title to sue on a bill of lading?

The title to sue belongs to a lawful holder of a bill of lading (the indicated consignee in the ‘straight’ bill of lading; the party holding a bearer bill of lading; the endorsee of an order bill of lading). In addition, title to sue belongs to a party subrogated into the rights of such lawful holder of a bill of lading.

Charter parties

To what extent can the terms in a charter party be incorporated into the bill of lading? Is a jurisdiction or arbitration clause in a charter party, the terms of which are incorporated in the bill, binding on a third-party holder or endorsee of the bill?

The written terms of the charter party and general terms and conditions of the carrier are binding on the lawful holder of the bill of lading (who is not a consignee or a shipper) only if the bill of lading contains an explicit reference to such charter party or general terms and conditions.

Oral covenants of the charter party that are not entered in the bill of lading are not binding on the lawful holder of the bill of lading (who is not a consignee or a shipper) even if the bill of lading contains an explicit reference to such oral covenants.

If the bill of lading contains only a general reference to the charter party and general terms and conditions of the carrier, the lawful holder of the bill of lading shall not be bound by the provisions of the charter party or general terms and conditions which are more onerous than the terms usually used for this kind of transport.

The arbitration agreement is valid if the bill of lading contains an explicit reference to the arbitration clause contained in the charter party. Such clause would be binding on an endorsee.

Demise and identity of carrier clauses

Is the ‘demise’ clause or identity of carrier clause recognised and binding?

The ‘demise’ clause or identity of carrier clause would not be recognised or considered binding.

Shipowner liability and defences

Are shipowners liable for cargo damage where they are not the contractual carrier and what defences can they raise against such liability? In particular, can they rely on the terms of the bill of lading even though they are not contractual carriers?

If the shipowner is not the contractual carrier, he or she will not face contractual liability for cargo damage. The shipowner may be sued in tort by the party affected by cargo damage, provided that the prerequisites of tortious behaviour have been fulfilled. The shipowner who is not the contractual carrier may rely on the terms of the bill of lading only in the sense of proving that he or she did not act as contractual carrier.

Deviation from route

What is the effect of deviation from a vessel’s route on contractual defences?

In the case of deviation, the carrier’s liability for the claims arising therefrom and the extent thereof will be determined by the Hague-Visby Rules, if applicable. In cases falling outside the scope of the Hague-Visby Rules and subject to Croatian national law, the carrier shall not be liable for cargo damage if he or she proves that the said damage was a consequence of a reasonable deviation (including, without limitation, saving or attempting to save life or property at sea). In spite of the carrier’s proof of such an exculpatory reason, he or she shall be held liable if the consignee proves that the damage was caused by the personal fault of the carrier or the fault of his or her agents or servants, not relating to navigation.

Liens

What liens can be exercised?

The Croatian Maritime Code has adopted a civil law approach towards maritime liens. According to that approach, a maritime lien is a substantive right over maritime property that entitles the claimant to subject that property to a judicial sale, and have the claim satisfied out of the proceeds in priority to non-lien creditors. Maritime liens are considered substantive rights, as opposed to mere procedural remedies.

The list of claims giving rise to maritime liens on the vessel, contained in the Maritime Code, reproduces almost verbatim the text of article 4 of the 1993 Convention on Maritime Liens and Mortgages (although Croatia is not a member state).

In addition, a shipbuilder or a ship-repairer holding a ship in the shipyard or repair yard may detain the ship until their claims relating to the shipbuilding or ship-repair contract are paid. This is not a maritime lien, but a ‘right of retention’ (similar to possessory lien in common law).

The Maritime Code also provides for maritime liens on cargo. The claims giving rise to a lien on cargo are those relating to:

  • the legal costs associated with the storage or judicial sale of the cargo, or both;
  • salvage and general average; and
  • the contract of carriage.
Delivery without bill of lading

What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

If the carrier has acted as per the charterer’s instructions although all counterparts of the bill of lading have not been returned, the carrier shall compensate the lawful holder of the bill of lading for the damage suffered as the consequence. The limit of such compensation shall not exceed the amount payable by the carrier if there is total loss of the cargo. This is about the closest that the Maritime Code comes to the situation of cargo delivery without production of the bill of lading.

Shipper responsibilities and liabilities

What are the responsibilities and liabilities of the shipper?

The shipper is responsible for:

  • identifying the place of loading in the loading port;
  • obeying the master’s instructions on safe stowage of the cargo;
  • issuing instructions on manipulation with special cargo;
  • notifying the master on the dangerous nature of the cargo and required measures; and
  • the timely handing of customs and other cargo documents to the master.

The shipper shall be liable for damages owing to the loading of cargo without the carrier’s knowledge. The charterer is liable for damages owing to defective packing; the nature and condition of the cargo if unknown to the carrier; inaccurate information on the cargo; and carriage of clandestine cargo if unknown to the carrier.

Shipping emissions

Emission control areas

Is there an emission control area (ECA) in force in your domestic territorial waters?

No.

Sulphur cap

What is the cap on the sulphur content of fuel oil used in your domestic territorial waters? How do the authorities enforce the regulatory requirements relating to low-sulphur fuel? What sanctions are available for non-compliance?

The cap on sulphur content of fuel oil is 1.5 per cent m/m. Each shipment of fuel oil should be accompanied by a declaration of compliance. If in doubt whether the fuel oil does comply with the regulatory requirements, the inspectors are authorised to order sampling and a new chemical analysis, as provided in greater detail in the Commission Implementing Decision (EU) 2015/253 of 16 February 2015, laying down the rules concerning the sampling and reporting under Council Directive 1999/32/EC as regards the sulphur content of marine fuels (Official Journal of the European Union, L41, 17 February 2015.). If the fuel oil does exceed the maximum sulphur content, the safety inspectors (Harbour Master’s Offices) will prohibit further use of such fuel oil.

Ship recycling

Regulation and facilities

What domestic or international ship recycling regulations apply in your jurisdiction? Are there any ship recycling facilities in your jurisdiction?

Croatia is not party to the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships. On the other hand, as a member of the EU, Croatia is directly bound by a number of relevant EU laws, including notably Regulation (EU) No. 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling and the amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC.

To our knowledge, there are no ship recycling facilities in Croatia.

Jurisdiction and dispute resolution

Competent courts

Which courts exercise jurisdiction over maritime disputes?

Maritime disputes are heard in the first instance by commercial courts (except disputes relating to contracts for the carriage of passengers which are heard by the municipal courts). The High Commercial Court of the Republic of Croatia acts as the court of appeal. A third-stage appeal to the Supreme Court of the Republic of Croatia is permitted only exceptionally.

Service of proceedings

In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

Service of court proceedings is made pursuant to the 1965 Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, when applicable. Croatia is also party to Regulation (EC) No. 1393/2007 of the European Parliament and of the Council on the service in the member states of judicial and extra­judicial documents in civil or commercial matters (service of documents).

In cases falling outside the scope of the 1965 Convention or the regulation, service of court proceedings is made through diplomatic channels. The procedure is rather slow and sometimes also quite expensive because all the documents need to be translated into the language of the recipient.

Arbitration

Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

There is one well-established arbitration institution in Croatia, the Permanent Arbitration Court at the Croatian Chamber of Economy (with its seat in Croatia’s capital, Zagreb), which resolves both domestic and international disputes. There is no special panel of arbitrators specialising in maritime matters, but the list of arbitrators contains a number of persons who are known experts in maritime matters. While the Permanent Arbitration Court does hear a number of shipping and shipbuilding disputes, this is not its prime field of expertise.

Foreign judgments and arbitral awards

What rules govern recognition and enforcement of foreign judgments and arbitral awards?

Croatia is bound by Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (Brussels I bis). Croatia is also party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Otherwise, the provisions of Croatian procedural law will apply. They are based on similar principles to Brussels I bis and the 1958 New York Convention.

Asymmetric agreements

Are asymmetric jurisdiction and arbitration agreements valid and enforceable in your jurisdiction?

Brussels I bis seems to allow asymmetric jurisdiction agreements, so those should be valid and enforceable in Croatia. Also, we have identified no obstacles in the Croatian Arbitration Act to making asymmetric arbitration agreements. Nevertheless, we are not aware of any Croatian court or arbitral decisions to that effect.

Breach of jurisdiction clause

What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

The Croatian courts cannot intervene in a foreign forum and anti-suit injunctions are alien to Croatian law. It remains for the court before which the proceedings have been started to decide on its jurisdiction.

What remedies are there for the defendant to stop domestic proceedings that breach a clause providing for a foreign court or arbitral tribunal to have jurisdiction?

The defendant may request the court or tribunal to dismiss the case due to lack of jurisdiction. In spite of that, it is the court’s duty to examine whether it has international jurisdiction. If, however, the action has been brought in the domestic court in breach of an arbitration agreement, the court shall not dismiss the proceedings without the defendant’s express objection, to be submitted at the first hearing.

Limitation periods for liability

Time limits

What time limits apply to claims? Is it possible to extend the time limit by agreement?

The specific limitation periods provided in the Maritime Code are as follows:

  • carriage of goods: one year;
  • general average: one year;
  • carriage of passengers and luggage: two years;
  • collisions: two years;
  • salvage: two years;
  • CLC claims: three years;
  • nuclear ship operator liability: three years; and
  • marine insurance: five years.

In other cases, general rules would apply, as contained in the Obligations Act. The general time limitation period applicable to commercial contracts is three years. The limitation period for claims in tort is three years from the time the damage and the person liable to restore it becomes known, but in any event, it is five years from the occurrence of damage.

Extension is not allowed (by agreement or otherwise) unless specifically provided for by the law (eg, the Hague-Visby Rules and provisions of Maritime Code reproducing the Hague-Visby Rules).

Court-ordered extension

May courts or arbitral tribunals extend the time limits?

See question 61.

Miscellaneous

Maritime Labour Convention

How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

Croatia is party to the Maritime Labour Convention (MLC). Croatia applies the convention to all the vessels in Croatian territorial waters and to Croatian vessels abroad. The provisions of the MLC have been incorporated in various pieces of Croatian legislation, from the Maritime Code through to the rules on watchkeeping and on medical examination of seafarers, as well as the collective agreements supported by the Croatian Seafarers’ Union.

Relief from contractual obligations

Is it possible to seek relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract where economic conditions have made contractual obligations more onerous to perform?

Pursuant to the concept of rebus sic stantibus, a contractual party may seek that the contract be amended or terminated if, due to extraordinary and unforeseeable circumstances that have occurred after the parties have entered into a contract, the performance of the contract has become overly onerous or would cause too high a loss. No such relief can be sought if the party affected should have considered such circumstances at the time of entering into the contract. When deciding on this point, the court will be guided by the principles of fairness, taking into account the purpose of the contract, the distribution of risk ensuing from the contract or the law, the duration of the changed circumstances, and the interests of both parties.

Consequently, the changed economic conditions will lead to such a relief only if the court finds that the actual nature or extent of such a change in the economic conditions could not have been foreseen at the time of entering into the contract.

Other noteworthy points

Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

The Croatian government has recently accepted the bill of a new Ship and Port Facility Security Act, creating a framework for the direct implementation of Regulation (EC) No. 725/2004 of the European Parliament and the Council, and causing Directive 2005/65/EC on enhancing port security to be introduced into Croatian legislation.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics that may affect shipping law and regulation in your jurisdiction in the foreseeable future?

Emerging trends66 Are there any emerging trends or hot topics that may affect shipping law and regulation in your jurisdiction in the foreseeable future?

In March 2019, Croatia introduced a new set of amendments to its Maritime Code. The amendments are the broadest and most comprehensive since the enactment of the Maritime Code in 2004, encompassing most of the chapters within the Code. Notable novelties include: more elaborated provisions on maritime accident investigation, as well as search and rescue activities; introduction of a centralised electronic register of vessels, with the modernised rules on vessel registration procedure; further elaboration of the provisions dealing with wreck removal in order to harmonise them with the 2007 Nairobi Convention; introducing express priority of the Maritime Code provisions dealing with judicial sale of vessels over the respective provisions of the Bankruptcy Act if the vessel is encumbered by maritime liens or ship mortgages or special legislative rights.

Special attention has been awarded by the legislator to introducing a whole package of provisions dealing with the contracts in the nautical tourism (such as berthing contracts and yacht charter contracts). Amendments have also been introduced in various order parts of the Maritime Code to better serve the purposes of the Croatian marinas and provide support to the development of Croatian yachting. This includes: a revised definition of maritime liens; a revised definition of the vessel-repair contract and a revised scope of application of the provisions dealing with that contract; a revised list of ’maritime claims’ subject to vessel arrest; application of the provisions dealing with wreck removal being extended to areas on shore, with the possibility for a marina operator to perform voluntary removal and acquire the ownership over the wreck; introduction of a ’large passenger yacht’; introduction of the tonnage tax in respect of yachts in international trade.