Ship arrest

International conventions

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

Although Malaysia is not a party to either convention, the Malaysian High Court is vested with the same jurisdiction as the English High Court by virtue of section 24 of the Courts of Judicature Act 1964. Malaysia therefore applies the English Senior Courts Act 1981 (SCA 1981), which gives effect to the International Convention Relating to the Arrest of Sea-Going Ships 1952.

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?

A vessel can be arrested in Malaysian territorial waters for claims set out in section 20(2) of the SCA 1981, irrespective of the vessel’s flag or law governing the claim. The categories of claims where the vessel with which the claim arises can be arrested are as follows:

  • any claim to the possession or ownership of a ship or to the ownership of any share therein;
  • any question arising between the co-owners of a ship as to possession, employment or earnings of that ship;
  • any claim in respect of a mortgage of or charge on a ship or any share therein; and
  • any claim for the forfeiture or condemnation of a ship or of goods that are being or have been carried, or have been attempted to be carried, in a ship, or for the restoration of a ship or any such goods after seizure, or for droits of Admiralty.

The categories of claims where the vessel with which the claim arises, or a sister ship (Category B), can be arrested are as follows (section 20(2)(e)-(r), SCA 1981):

  • any claim for damage done by a ship;
  • any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or in consequence of the wrongful act, neglect or default of:
    • the owners, charterers or persons in possession or control of a ship; or
    • the master or crew of a ship, or any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible, being an act, neglect or default in the navigation or management of the ship, in the loading, carriage or discharge of goods on, in or from the ship, or in the embarkation, carriage or disembarkation of persons on, in or from the ship;
  • any claim for loss of or damage to goods carried in a ship;
  • any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;
  • any claim in the nature of salvage;
  • any claim in the nature of towage in respect of a ship or an aircraft;
  • any claim in the nature of pilotage in respect of a ship or an aircraft;
  • any claim in respect of goods or materials supplied to a ship for her operation or maintenance;
  • any claim in respect of the construction, repair or equipment of a ship or in respect of dock charges or dues;
  • any claim by a master or member of the crew of a ship for wages (including any sum allotted out of wages or adjudged by a superintendent to be due by way of wages);
  • any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship;
  • any claim arising out of an act that is or is claimed to be a general average act; and
  • any claim arising out of bottomry.

For claims under Category B, an arrest of the vessel or a sister ship is only permissible provided the following criteria in section 21(4) of the SCA 1981 are met:

  • the claim arises in connection with a ship;
  • the person who would be liable on the claim in an action in personam (‘the relevant person’) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship; and
  • at the time when the action is brought, the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a bareboat charter (for arrest of the vessel), or the relevant person is the beneficial owner as respects all the shares in a sister ship (for arrest of a sister ship).

A time-chartered ship cannot be arrested for claims against its time-charterer, but where a time-charterer owns other ships, any other ship owned by the time-charterer may be arrested in relation to a claim against the time-charterer, provided the claim falls within section 20(2)(e)-(r) of SCA 1981, and the requirements in section 21(4) of the SCA 1981 are met.

Arrests of associated ships are not permitted in Malaysia.

Maritime liens

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

Yes. Claims that give rise to maritime liens are claims for damage done by a ship, master’s disbursements, master and crew wages, bottomry and salvage.

Wrongful arrest

What is the test for wrongful arrest?

To claim damages for wrongful arrest, the aggrieved party must show mala fide or gross negligence which implies malice by the arresting party. An action for wrongful arrest has been successful where the vessel has been arrested for a completely unmeritorious claim.

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?

Generally, vessels may only be arrested pursuant to the admiralty jurisdiction of the High Court in Malaysia if the ownership requirement in section 21(4) of the Senior Courts Act 1981 are met (ie, that the person who would be liable in personam for the claim must be, at the time the action is brought, the beneficial owner or bareboat charterer of the vessel). Based on this, it would not be possible for a charterer to arrest a vessel for a claim for bunkers arising out of a contract between the charterer and the bunker supplier. However, if the charterer had the actual or apparent authority of the owner and the bunker supplier intended to contract with the owner, then the bunker supplier may be able to invoke the admiralty jurisdiction of the High Court.

Security

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

No, but an undertaking must be made to the court by the arresting party to pay on demand the fees and expenses incurred by the Admiralty Sheriff in relation to the arrest. A sum of 15,000.00 ringgit is also required to be deposited in court prior to arrest, although the arresting party may apply for leave to deposit the sum within five days of 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?

If the party wishes to provide security to secure the release of the vessel, the security may be provided in the form of bail, letters of undertaking or bank guarantees. Parties are free to negotiate the quantum of security, usually the value of the claim and expected interest and cost, which should not exceed the value of the vessel. If the sum requested by the arresting party is excessive, an application may be made to court to moderate the amount. The court will usually moderate the amount to the claim amount with interest and costs on the basis of the arresting party’s best arguable case.

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?

No document is required as proof of appointment when a lawyer appears in court and states that he is instructed. However, if this authority is challenged, the lawyer should furnish the court with a warrant to act or a board resolution appointing him to make the arrest application.

Ship maintenance

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

The sheriff. However, the arresting party will be responsible to first expend the amounts necessary for the maintenance and preservation of the vessel, which are eventually recoverable from the proceeds of sale of the vessel.

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?

A vessel cannot be arrested for the purpose of obtaining security for court proceedings outside Malaysia and the arresting party must pursue the claim on its merits in the Malaysian court. However, where the court stays or dismisses an action in rem on the ground that the dispute in question should be submitted to the determination of courts outside Malaysia, the court may order that any vessel that has been arrested be retained as security for the satisfaction of the foreign judgment. Arrests of vessels in Malaysia are permissible to secure the amount in dispute in respect of a foreign arbitration (section 11 of the Arbitration Act 2005). Further, where admiralty proceedings are mandatorily stayed in favour of a foreign arbitration, the court may order that the vessel that has been arrested be retained as security for the satisfaction of any award or order that the stay of those proceedings be conditional on the provision of equivalent security (section 10 of the Arbitration Act 2005).

Injunctions and other forms of attachment

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

A Mareva or freezing injunction, either domestic or worldwide, may be obtained where there is a real risk of dissipation of assets prior to judgment. Some of the other factors the court will consider in granting a freezing injunction is whether there is a good arguable case and whether the balance of convenience lies in favour of granting the freezing injunction to freeze assets up to the value of the claim.

Delivery up and preservation orders

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

Yes. The court has the discretion to grant an order:

  • for detention, custody or preservation, or inspection of any property in a party’s possession, which is the subject matter of the cause, or as to which any questions may arise; and
  • to authorise any samples of property be taken or any observation or experiment made on such property to obtain full evidence in any matter.

For inspection by assessors, any party or witness of a ship or other property to obtain full information or evidence on any issue.

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?

It is not possible to arrest bunkers under the Malaysian admiralty jurisdiction but freezing injunctions may be obtained in respect of bunkers.