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Trends and developments

Trends and developments

Are there any notable trends or recent legal developments in your jurisdiction’s shipping industry?

The Maritime Law (Federal Law 26/1981) is under review at present and a new law is expected to come into force in late 2017 or 2018.

The United Arab Emirates recently established the Emirates Maritime Arbitration Centre (EMAC), an arbitration body with rules based on the United Nations Commission on International Trade Law Model Law amended to fit industry requirements. The EMAC’s seat is the Dubai International Financial Centre (DIFC) and, as such, it is subject to the common law-based DIFC law and complemented by English law. The EMAC’s curial courts are the DIFC courts. The EMAC is the United Arab Emirates’ third arbitration body after the Dubai International Arbitration Centre and the DIFC-LCIA (a joint venture between the DIFC and the London Court of International Arbitration).

Registration

Eligibility

Which ships are eligible for registration in the national shipping register(s) and which parties may register ships?

Generally, only vessels above 10 gross tonnage must be registered. The natural or legal person owning such a vessel must be a UAE national. If the vessel is jointly owned, all owners must be UAE nationals. If the vessel is owned by a UAE limited liability company, 51% of the capital most be owned by UAE nationals and all directors must be UAE nationals. However, pleasure boats may be owned by foreign nationals resident in the United Arab Emirates, provided that they are not used for commercial purposes.

Procedure

What are the procedural and documentary requirements for registration?

The Federal Transport Authority – Land and Maritime administers UAE flag registration. Commercial vessels and leisure boats chartered for commercial purposes can be registered with the Federal Transport Authority.

The requirements for vessel registration depend on the type of vessel. The documentary requirements to register a commercial vessel include:

  • an application form containing:
    • the vessel’s name;
    • the vessel’s former names and last port of registration;
    • the vessel’s date and place of construction, including the name and address of the factory or dock;
    • the vessel’s type, tonnage and dimensions;
    • the mortgage, if any, with the date thereof; and
    • the name, surname, occupation, nationality and place of residence of the mortgagee creditor;
  • an original deletion certificate if the boat was previously registered under another flag. This should also be attested by the relevant UAE embassy and the Ministry of Foreign Affairs;
  • a copy of the company’s trade licence. Over 51% of the company should be locally owned and it should conduct marine activity (ie, be a ship operator or manager); and
  • a copy of the power of attorney of the company’s signatory.

Grounds for refusal

On what grounds may a registration application be refused?

Registration can be refused due to age restrictions. For example, oil and gas tankers cannot be over 10 years’ old at the time of registration, unless specially approved by the registration authority.

Advantages

Are there any particular advantages of flying your jurisdiction’s flag?

Unless they fly the UAE flag, vessels cannot engage in:

  • coastal navigation between state ports;
  • towage and piloting in state ports; or
  • fishing or cruising in UAE territorial waters.

Further, foreign vessels are allowed in UAE territorial waters only for 21 days, which can be extended on application to the Federal Transport Authority.

Liens and mortgages

Registration

How are encumbrances such as maritime liens and mortgages registered in your jurisdiction and what are the effects of registration?

Maritime Liens (referred to as priority rights under UAE law) do not need to be registered. Their status as priority rights is not linked to any formal act.

Mortgages are registered with the competent department by submitting:

  • an application form;
  • a letter from the creditor requesting the registration of the mortgage, along with evidence of the signatory’s authority;
  • the notarised (or if executed abroad, legalised) mortgage agreement; and
  • the original registration certificate.

Securable claims and priority

What claims can be secured by maritime liens and what is the order of priority?

The following claims are secured by liens in order of listing:

  • judicial costs, port charges, pilotage fees and compensation for damages caused to port structures;
  • crew wages;
  • salvage and general average claims;
  • claims arising from collisions;
  • masters’ disbursements;
  • mortgages;
  • charterers’ claims for loss or damage; and
  • insurance premiums.

While the above constitute priority rights on the vessel, it can also be arrested for so-called ‘maritime debts’.

Extinguishment

Under what circumstances are maritime liens extinguished?

Maritime liens (referred to as priority rights under UAE law) extinguish on:

  • the judicial sale of the vessel; or
  • the voluntary sale of the vessel if the purchaser complies with the following formal requirements: 
  • registration of the contract with the vessel’s register;
  • publication of the sale’s details on the registration bureau’s notice board; and
  • publication of the sale for eight days in a widely circulated local newspaper.

Further, the priority attached to maritime liens expires after one year, save for claims for disbursements made by the master, the priority for which expires after six months. These periods can be extended for up to three years where it is temporarily impossible to arrest the vessel in UAE waters.

Foreign liens

Are foreign liens recognised in your jurisdiction?

The UAE courts are reluctant to apply foreign law even if expressly agreed between the parties. Thus, for a lien to be recognised by the UAE courts, it must be recognised under UAE law.

Transfer and assignment

Which rules govern the transfer and assignment of liens, mortgages and other encumbrances?

The assignment of liens and mortgages is not expressly regulated under UAE law and is thus subject to custom and practice. However, rules exist that govern the transfer of rights in general.

Article 2 of the Commercial Transaction Law states that in the absence of a specific agreement, commercial customs and practices will apply to all matters not provided for in the law or any other law governing commercial matters. Special or local customs will take precedence over general customs and, in the absence of a commercial custom, the provisions governing civil matters will apply to the extent that they are not inconsistent with the general principles of a commercial activity.

The transfer of liens is regulated by Articles 1106 to 1132 of the Civil Transactions Law. The transfer is an assignment of debt and of the claim from the transferor to the transferee. The transfer is a binding contract, unless one of its parties has reserved the option to revoke it.

Arrest

Grounds for arrest

Under what circumstances can a ship be arrested in order to secure a claim against it?

The grounds for arresting a vessel are set out in Article 115 of the Commercial Maritime Law. A vessel can be arrested only on the basis of a maritime debt, which includes claims relating to:

  • damages caused by a vessel via a collision or otherwise;
  • loss of life or personal injuries caused by the vessel or arising out of the use thereof;
  • assistance and salvage;
  • contracts relating to the use or exploitation of the vessel under a charter contract or otherwise;
  • e-contracts relating to the carriage of goods under a charter contract, bill of lading or other documents;
  • the loss or damage of goods or belongings carried on board the vessel;
  • the general average;
  • the towage or piloting of the vessel;
  • the supply of products or equipment necessary for the use or maintenance of the vessel, in any supply location;
  • the construction, repair or fitting of the vessel and arising costs;
  • the sums spent by the master, shippers, charterers or agents on account of the vessel or on account of the owner;
  • the wages of the master, officers and crew and other persons working on board the vessel under a contract of maritime employment;
  • a dispute regarding the vessel’s ownership;
  • a dispute pertaining to the common ownership of the vessel, the possession or use thereof or to the right to the profits arising from the use thereof; and
  • a maritime mortgage.

The term ‘agent’ refers to the vessel’s registered agent in each port. Parties that are agents by virtue of any other agency agreement are not included under this term.

The arrest of vessels for the supply of bunkers is possible under the supply of products or equipment necessary for the use or maintenance of the vessel.

Can a ship be arrested to secure a non-maritime claim?

Article 115(1) of the Commercial Maritime Law states that “a sequestration may be levied against a vessel by an order of the competent civil court. Such shall be made only for the satisfaction of a maritime debt”. The courts interpret this to mean that ships cannot be arrested through the same channels that apply to arrest other property (ie, the Civil Procedure Law).

According to Articles 123 to 134 of the Maritime Code, which regulates the arrest of vessels based on a final judgment, UAE jurists consider that a debt does not need to be a maritime debt in order to arrest the vessel based on a final judgment against the owner (or against the operator if arresting the vessel to which the debt relates).

This has no bearing on judgment creditors seeking to attach any vessel owned by a judgment debtor, which is subject to the rules of the Civil Procedure Law.

Can a ship be arrested to secure a claim against a sister ship?

Yes, for maritime debts that not covered by the last three bullets above regarding Article 115 of the Commercial Maritime Law. The sister ship must have the same owner (same group ownership is insufficient) at the time of the debt’s occurrence.

If a claim is against the charterer responsible for the nautical management of a vessel, the arrest may also be levied against ships owned by the charterer.

Procedure

What are the procedural and documentary requirements for seeking arrest of a ship?

A lawyer for the arresting party must present an arrest application and a legalised and translated power of attorney to court. An original power of attorney must be presented and a foreign power of attorney must be further legalised via the UAE consulate in the issuing country, as the United Arab Emirates is not party to the Apostille Convention.

As all court submissions must be in Arabic, all supporting documents need to be translated by a court-certified legal translator.

The arrest applicant is generally required to provide all documents needed to prove its claim, including evidence that:

  • the outstanding amount has been demanded;
  • the vessel is owned by the defendant; and
  • the vessel is located in UAE waters.

Security

What security must the arresting party put up in order to secure arrest of a ship and how is this security calculated?

The security required is at the discretion of the competent court and may depend on the emirate in which the vessel is arrested. The size of such security is also at the discretion of the court. However, generally speaking, the courts require the arresting party to cover the maintenance costs of the vessel during the arrest period and the costs for any damage or pollution caused. Only in some cases is the arresting party required to provide security in the form of cash or a bank guarantee.

What security can the arrested party provide for release of an arrested ship?

The courts will release the vessel only against cash deposited with the court in the claim amount or a bank guarantee issued by a bank licensed in the United Arab Emirates.

Judicial sale of ships

Procedure

What is the legal procedure for the judicial sale of ships in your jurisdiction?

Arrested ships can be sold only through judicial sale, as UAE courts do not approve private sales.

If the vessel is ordered to be sold, the court will fix the starting price and the conditions and date of the auction. The sale is announced publicly at least 15 days before the auction begins. If the minimum price established by the court is not met at the first auction, the court will order up to three rounds of bidding held at intervals of seven days. The highest bid made at the first session is the basic minimum price at the second session and likewise for the third session.

Foreign sales

Under what circumstances are foreign sales recognised?

Article 110 of the Commercial Maritime Law provides that a vessel’s judicial sale has the effect of transferring the creditors’ rights to the proceeds of the sale. However, the law makes no reference to sales by foreign courts or foreign private sales. As interpretation of the law rests with the courts and precedents are not binding, the recognition of foreign sales is subject to a case-by-case review.

Limitation of liability

Eligibility

What parties may limit liability for maritime claims?

Through Federal Decree 118/1997, the United Arab Emirates acceded to the Convention on the Limitation of Liability for Maritime Claims 1976. However, there is still debate regarding whether the federal decree correctly identifies the date on which the convention became part of UAE domestic law. Articles 138 to 142 of the Commercial Maritime Law include rules governing the rights of shipowners to limit their liability, which are based on the Convention Relating to the Limitation of Liability of Owners of Seagoing Ships 1957, as is the vast majority of the maritime law of Gulf Cooperation Council states.

The conflict between the two regimes has not been conclusively resolved. According to Article 8 of the Commercial Maritime Law, its provisions must not violate the international agreements ratified by the state. Nonetheless, doubts remain as to which regime a court will apply. Some commentators have argued that these doubts are based on the traditional aversion by the UAE courts regarding the limitation of liability, as it is contrary to religious, moral and legal customs that require damage to be compensated in full. Conversely, other commentators have argued that no mechanisms for the establishment of limitation funds have been established and that in the relevant Arabic version of the Convention on the Limitation of Liability for Maritime Claims 1976, the owner’s right to limit its liability is described in discretionary, rather than mandatory terms.

In 2008 the Dubai Court of Cassation tried to resolve these doubts by confirming that the Convention on the Limitation of Liability for Maritime Claims 1976 has force of law in the United Arab Emirates and further acknowledged a defendant's right to limit liability (subject to a claimant advancing evidence to defeat that right). However, in the absence of a system of precedents (and until Articles 138 to 142 of the Commercial Maritime Law are repealed) the issue remains unresolved. 

Where contracts of carriage are concerned, carriers are further entitled to limit their liability for cargo claims under Article 276 of the Commercial Maritime Law.

For what claims can liability be limited? Are any claims explicitly exempt from the limitation of liability?

According to Article 140 of the Commercial Maritime Law, owners cannot limit their liability for:

  • personal faults;
  • contributions to salvage and general average;
  • rights of the master and crew; and
  • claims for nuclear damage if the vessel in question is a nuclear vessel.

Article 276 of the Commercial Maritime Law limits the liability of the carrier for loss or damage to the cargo. If the shipper declares the value of the goods in advance, the carrier cannot limit its liability.

The carrier is not responsible for losses of or damages to goods where the shipper deliberately provided false data regarding the nature or value of the goods.

According to Article 278 of the Commercial Maritime Law, conditions containing an assignment to the carrier of rights arising from the insurance of the goods (and any other similar conditions) are deemed an exemption from liability.

Limits

What limits are set for eligible claims?

The Commercial Maritime Law limits owner liability to:

  • Dh250 per tonne of the affected vessel for material (physical) damage;
  • Dh500 for physical damages (injury); and
  • Dh750 if the incident leads to material and physical damage.

However, uncertainty remains regarding the application of the Limitation of Liability for Maritime Claims 1976 and its respective limits.

Carriers’ liability is limited to Dh10,000 per package or unit or Dh30 per kilo, whichever is higher.

If packages or units are packed in a container and declared on the bill of lading, they are regarded as individual packages. If the container is not owned or provided by the carrier, or should it be lost or destroyed, it is deemed an independent package or unit.

However, if the value of the goods has been declared to the carrier before loading, it cannot avail of the abovementioned limits.

Limitation funds

What rules and procedures govern the establishment of limitation funds?

 There is no precedent of limitation funds being established in the United Arab Emirates.

How are liability funds distributed?

As above.

Carriage of goods

International conventions

Is your jurisdiction party to any international conventions on the carriage of goods by sea? If so, does the relevant domestic implementing law contain any notable modifications (eg, extensions to the scope of application)?

The United Arab Emirates is not party to the Hague Rules 1924, the Hague-Visby Rules or the Hamburg Rules 1978. However, it has adopted laws similar to the Hague Rules and the Hague-Visby Rules in its legislation.

Carrier’s responsibility

What is the official extent of the carrier’s responsibility for goods?

 The carrier is responsible for the goods from their receipt at the loading port until their delivery to the entitled party at the discharge port.

Contractual limitation of liability

May parties contract out of any legal provisions governing cargo liability?

The UAE courts are generally hesitant to accept exclusions or limitations of liability.

Title to sue

Who has title to sue on a bill of lading?

The rightful holder of the bill of lading has title to sue. This can be:

  • the consignee named in the bill of lading;
  • the last endorsee if the bill of lading is made to order; or
  • the holder of the bill if the bill of lading is in favour of the holder.

Time bar

What is the time bar for cargo claims?

The time bar for parties to bring claims under maritime transport contracts is one year from the delivery of the goods or from when the goods should have been delivered.

Definition of ‘carrier’ and ‘goods’

How are ‘carrier’ and ‘goods’ defined in respect of cargo claims? Is there any especially pertinent case law on this issue?

There is no legal definition of ‘carrier’ or ‘goods’ under UAE law. As per Article 256 of the Commercial Maritime Law, the ‘carrier’ is the party that undertakes to carry goods from one port to another in consideration of a freight. Article 257 requires that the name and address of the carrier be identified in the bill of lading.

Defences available to carrier

Under what circumstances may the carrier rely on the perils of the sea defence? What other defences are available to the carrier?

The carrier’s liability is subject to exceptions similar to those listed in the Hague Rules.

Third parties

What legal protections and defences against cargo claims are available to agents of the carrier and other third parties (eg, Himalaya clauses)?

There are no provisions in the Maritime Law (Federal Law 26/1981) regarding the liability of agents of carriers or third parties. However, agents and third parties will generally be held liable only for their negligence.

Deviation from route

Under what circumstances is deviation from the agreed route allowed?

The carrier may deviate to rescue persons or property at sea or for any other reasonable cause.

Claims against shipper

What claims can the carrier pursue in respect of the shipper’s failure to meet its obligations?

The shipper is liable to the carrier for any inaccuracies in the data that it provides in the bill of lading concerning the goods. If the shipper loads hazardous, flammable or explosive goods, the carrier may remove or destroy them. Further, if the shipper loads the goods without declaring them, it is responsible for the damages and expenses caused.

Multimodal carriage of goods

How is multimodal carriage regulated in your jurisdiction?

At present, there is no legal regime for multimodal transport. Since 1991, the UAE courts have issued several judgments on multimodal transport which can be summarised as follows:

  • If the goods were carried by multimodal carriage (ie, sea, air or road carriage), the court considered the carriage to be of the highest value and longest distance and applied the UAE law that covered this kind of carriage.
  • If the goods were carried by two or more sea carriers, the original carrier that issued the bill of lading was generally liable before the shipper and consignee according to contractual liability and the last carrier was liable only based on the tort for potential negligence during the voyage.

Marine accidents

Collision and pollution

What rules and procedures (under both domestic and international law) apply to the prevention of, liability for and remedy of:

(a) Collision?

Collisions are regulated by Articles 318 to 326 of the Commercial Maritime Law. The rules are similar to those of the Collision Convention 1910.  The United Arab Emirates has also acceded to the International Regulations for Preventing Collisions at Sea 1972.

(b) Oil pollution?

In 1997 the United Arab Emirates ratified the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage 1969 and the 1992 Protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971.

(c) Other environmental damage caused by a ship?

The marine environment is protected by the Federal Law on the Protection and Development of the Environment (24/1999). All vessels entering UAE marine zones must have a valid International Oil Pollution Prevention Certificate and must maintain a statement mentioning the date and location where sludge has been unloaded. Whoever damages the marine environment negligently or wilfully in breach of Law 24/1999 is responsible for the costs of treatment or removal of the damages and any resulting consequences. A breach of Law 24/1999 may result in fines up to Dh500,000 and up to five years’ imprisonment. 

The United Arab Emirates is also party to Annexes I to V of the International Convention for the Prevention of Pollution from Ships.   

Salvage

What is the legal regime governing salvage and general average?

The United Arab Emirates ratified the International Convention on Salvage 1989 in 1993. Salvage is also regulated by Articles 327 to 339 of the Commercial Maritime Law. Under Article 8 of the Commercial Maritime Law, the International Convention on Salvage 1989 prevails where the two regimes conflict. The right to remuneration for a successful salvage is not subject to a contractual agreement. No remuneration is payable for usual towage or pilotage or saving persons. Further, there is no entitlement to remuneration if the saved vessel prohibited assistance with reasonable cause. The amount of remuneration is determined by the competent court, if not agreed by the parties.

Wreck removal

What rules and procedures apply to the removal of wrecks in your jurisdiction?

The United Arab Emirates is not party to the Nairobi Wreck Removal Convention 2007 and the removal of wrecks is not expressly regulated by UAE law.

Under what circumstances can the authorities order removal of wreckage?

There is no regulation in place for the removal of wrecks, but the authorities will likely be granted wide-reaching powers to order the removal of wrecks.

Insurance

Mandatory coverage

What maritime risks must be covered under the law and what is the mandatory level of coverage?

In order to be accepted in the major UAE ports, a vessel must have hull and machinery and protection and indemnity insurance cover. The level of coverage is not mandated and is subject to the ports’ discretion.

Insurable risks and ships

What other risks are typically covered by marine insurance contracts concluded in your jurisdiction and what ships are insurable?

      Freight, demurrage and defence insurance is also available.

Subrogation rights

What is the legal regime governing marine insurers’ subrogation rights?

The subrogation of claims is regulated by Article 1030 of the Civil Transactions Law. The insurer may be subrogated into the insured’s rights to the extent that the insurer has paid compensation to the insured, unless the person responsible for the damage is an ascendant or descendant, a spouse, living with the insured under one roof or a person for whom the insured is responsible.

Jurisdiction and dispute resolution

Competent courts

What courts are empowered to hear maritime cases in your jurisdiction?

The United Arab Emirates has no specialised admiralty court or admiralty bench. All cases must be filed before the competent first-instance court.

Exclusive jurisdiction and arbitration clauses

Under what conditions will exclusive jurisdiction and arbitration clauses in shipping contracts be held as valid?

The UAE courts are generally reluctant to apply foreign laws and dispute resolution clauses providing for foreign jurisdiction are occasionally not upheld. Arbitration clauses are more likely to be upheld, but it is recommended that they are drafted unambiguously with regard to the agreed arbitration body. Further, as the Civil Procedure Law requires a special authorisation to bind a company to an arbitration agreement, it is recommended that the signatory to contracts containing arbitration agreements obtains such corporate authority before signing. General managers named on trade licences have apparent authority to bind companies to arbitration agreements. While some UAE courts have recently expanded the concept of apparent authority to other employees as long as the relevant agreement is also stamped by the company, these judgments should be treated with caution as precedent is not binding in the United Arab Emirates.

Maritime arbitration

What is the general state and prevalence of maritime arbitration in your jurisdiction?

The United Arab Emirates is home to three arbitration bodies:

  • the Dubai International Arbitration Centre (DIAC);
  • the DIFC-LCIA (a joint venture between the Dubai International Financial Centre and the London Court of International Arbitration); and
  • the Emirates Maritime Arbitration Centre (EMAC).

While the DIAC is subject to the jurisdiction of the Dubai courts, the DIFC-LCIA and the EMAC are by default based in the DIFC, a free zone and common law jurisdiction. The DIFC courts, as the curial courts, apply common law-based DIFC law by default and English law, where required.

The EMAC was established in 2016 and is geared towards the maritime industry. Its rules feature a fast track arbitration and the provision of emergency arbitrators.

Recognition and enforcement

What regimes govern the recognition and enforcement of foreign judgments and arbitral awards?

The United Arab Emirates became a signatory to the New York Convention in 1997. As such, international arbitration awards can be enforced through the UAE courts. The first international arbitration award was enforced in the United Arab Emirates in 2006. However, due to certain features of UAE law, enforcement of awards is not always straightforward. For example, award debtors have often successfully raised the public policy defence.

Further, foreign awards (and certain foreign judgments) may also be enforced through the DIFC courts or through the Abu Dhabi Global Market courts. Parties are strongly recommended to seek competent legal advice when considering subjecting their contracts with UAE counterparts to arbitration or on how to best enforce an arbitral award in the United Arab Emirates.