Ship arrest

International conventions

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

Chile has not ratified any international convention regarding the arrest of ships. However, the fundamental regulations applicable to ship arrest that are found in Book III, Title VIII, paragraph 5 of the Commercial Code ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq) are loosely based on the principles set forth under the International Convention Relating to the Arrest of Seagoing Ships (Brussels, 10 May 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?

Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types, namely:

  • privileged credits as set forth by articles 844, 845 and 846 of the Chilean Commercial Code; or
  • credits other than those mentioned in the previous point.

 

Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest as per the special rules set forth by Book III, Title VIII, paragraph 5 of the Commercial Code, ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq). Articles 844, 845 and 846 of the Commercial Code establish and distinguish the following groups of privileged credits.

 Credits of article 844 of the Commercial Code
  • Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
  • the remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injuries of the surviving employees ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel;
  • the charges and rates of ports, channels and navigable waters, together with fiscal charges in respect of signalling and pilotage;
  • the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damages or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the fund of limitation of liability has not been constituted as established in Title IX of the Chilean Law of Navigation; and
  • the indemnities for damages or losses caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of the collision or other accidents during navigation, when the respective action is not susceptible to be founded upon a contract, and the damages in respect of bodily injury to the passengers and crew of these other vessels.
 Credits of article 845 of the Commercial Code

Mortgage credits on large vessels (ie, vessels over 50 GT) and secured credits on minor vessels (ie, vessels up to 50 GT).

 Credits of article 846 of the Commercial Code
  • Credits in respect of the sale price, construction, repair and equipping of the vessel;
  • credits in respect of supply of products or materials that are indispensable for the trading or conservation of the vessel;
  • credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
  • credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
  • credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.

 

The privileged credits of article 844 enjoy privilege over the vessel in the order enumerated in ‘Credits of article 844 of the Commercial Code’, above, with preference over mortgage credits and the privileged credits of article 846. Mortgage credits are preferred to those of article 846, which in turn follow the rank indicated under ‘Credits of article 846 of the Commercial Code’ above.

In this respect, it is worth noting that the privileged credits established by the aforementioned provisions have preference and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damages from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Commercial Code (‘About Privileges and Naval Mortgage’) in the specific matters to which they refer.

The lien on the ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also against a ship in the same ownership or a ship in the same administration or operated by the same person. In this respect, according to article 882 of the Chilean Commercial Code, the shipowner or armador is the ‘person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his name’. the same article defines the operator as ‘the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom’. However, as regards ship administration or management, these concepts are not expressly defined in the Commercial Code.

Under Chilean law, a bareboat charterer has the status of the shipowner with same rights and obligations. Accordingly, a bareboat-chartered vessel can be arrested for a claim against the bareboat charterer. As to whether a time-chartered vessel can be arrested for a claim against a time-charterer, there are no express provisions.

Maritime liens

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

Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types, namely:

  • privileged credits as set forth by articles 844, 845 and 846 of the Chilean Commercial Code; or
  • credits other than those mentioned in the first point above.

 

Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest as per the special rules set forth by Book III, Title VIII, paragraph 5 of the Commercial Code, ‘About the Procedure to Arrest Vessels and its Release’ (article 1,231 et seq). Articles 844, 845 and 846 of the Commercial Code establish and distinguish the following groups of privileged credits.

Credits of article 844 of the Commercial Code

  • Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield;
  • the remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injuries of the surviving employees ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel;
  • the charges and rates of ports, channels and navigable waters, together with fiscal charges in respect of signalling and pilotage;
  • the expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, to prevent or minimise pollution damages or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the fund of limitation of liability has not been constituted as established in Title IX of the Chilean Law of Navigation; and
  • the indemnities for damages or losses caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of the collision or other accidents during navigation, when the respective action is not susceptible to be founded upon a contract, and the damages in respect of bodily injury to the passengers and crew of these other vessels.

Credits of article 845 of the Commercial Code

  • Mortgage credits on large vessels (ie, vessels over 50 GT) and secured credits on minor vessels (ie, vessels up to 50 GT).

Credits of article 846 of the Commercial Code

  • Credits in respect of the sale price, construction, repair and equipping of the vessel;
  • credits in respect of supply of products or materials that are indispensable for the trading or conservation of the vessel;
  • credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances;
  • credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service; and
  • credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.

 

The privileged credits of article 844 enjoy privilege over the vessel in the order enumerated in ‘Credits of article 844 of the Commercial Code’, above, with preference over mortgage credits and the privileged credits of article 846. Mortgage credits are preferred to those of article 846, which in turn follow the rank indicated under ‘Credits of article 846 of the Commercial Code’ above.

In this respect, the privileged credits established by the aforementioned provisions have preference and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damages from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Commercial Code (‘About Privileges and Naval Mortgage’) in the specific matters to which they refer.

The lien on the ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also against a ship in the same ownership or a ship in the same administration or operated by the same person. In this respect, according to article 882 of the Chilean Commercial Code, the shipowner or armador is the ‘person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his name’. the same article defines the operator as ‘the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom’. However, as regards ship administration or management, these concepts are not expressly defined in the Commercial Code.

Under Chilean law, a bareboat charterer has the status of the shipowner with same rights and obligations. Accordingly, a bareboat-chartered vessel can be arrested for a claim against the bareboat charterer. As to whether a time-chartered vessel can be arrested for a claim against a time-charterer, there are no express provisions.

Wrongful arrest

What is the test for wrongful arrest?

First, under Chilean regulations, an arrest based on privileged credits is subject to the following conditions:

  • the arresting party must invoke one or more of certain privileged credits. In this respect, except for the regulations related to pollution or for avoiding damages from spills of hazardous substances, the maritime privileges preclude any other general or special privilege regulated by other laws in connection with the same goods. The maritime privileges also confer upon the creditor the right to pursue the vessel in whosoever’s possession she may be;
  • the arresting party must attach antecedents that constitute presumption of the right being claimed; and
  • if, in its discretion, the court considers that the antecedents attached are not sufficient or the petitioner states they are not yet available to him or her, the court may require that counter-security be provided for the eventual damages that may be caused if, subsequently, it is found that the petition lacked basis.

 

Second, when an arrest has been decreed as a prejudicial precautionary measure (ie, a measure to secure the outcome of a subsequent substantive action), the petitioner is obliged to file his or her complaint requesting that the decreed arrest remain in force within a time period that, in principle, is 10 days, but that may be extended for up to a total of 30 days, provided there is a sound basis to do so. The non-fulfilment of this obligation means the cancellation of the arrest and liability for the damages that may have been caused, on the irrefutable presumption that the proceedings for the arrest were fraudulent. In addition, if the arrest was wrongful, fraudulent or lacked basis, the defendant may claim damages in separate ordinary proceedings subject to the general rules set forth by the Code of Civil Procedure.

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?

Yes, an arrest can be made provided the claimant has a credit entitling him or her to do so. Such credit will be considered as a privileged credit in accordance with article 846(2) of the Commercial Code.

Security

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

If the court requires that security is provided, there are no specific rules for establishing its form or amount.

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 is usually established by the court based on the petition of the arresting party. Such amount cannot exceed the value of the arrested vessel and can be reviewed subsequently through incidental proceedings. Regarding the form of security, there are no specific rules and it will depend on the court’s resolution, but the guarantee usually requested and granted is a bank guarantee issued at the order of the court. As regards protection and indemnity insurance (P&I) club letters of undertaking, for a long time, P&I club letters of undertaking were accepted only if agreed by the arrest petitioner, mainly because the Chilean courts were not accustomed to them. However, in a recent arrest following a pollution case, the court hearing the arrest accepted a letter of undertaking with no prior approval from the arrest petitioner.

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?

Under Chilean law, the general rule is that either individuals or corporations are required to be represented by a counsel, which means granting a power of attorney (POA) with judicial faculties. The POA has to follow Chilean law and practice and the quickest way to produce it is via the ship agent assisting the vessel at the pertinent Chilean port (they are entitled to do so on behalf of the owner). Depending on the circumstances, a POA is not necessarily required at the first presentation but security may be need to be provided. If the POA is granted abroad, Chile is a signatory to the Apostille Convention.

Ship maintenance

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

There are no specific provisions as to this matter. However, the owner is in principle responsible for the associated costs, notwithstanding its right to claim damages if it appears that the arrest was wrongful.

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?

Chilean procedural regulations are silent on this matter. However, when an arrest is decreed as a prejudicial precautionary measure (ie, a measure to secure the outcome of a subsequent substantive action), it would be possible to arrest to obtain security and then pursue proceedings on the merits elsewhere. Note that the procedural obligations established must be met; namely, filing the petitioner’s complaint requesting that the decreed arrest remains in force for a period that, in principle, is 10 days but may be extended for up to a total of 30 days provided there is sound basis to do so.

However, this is an option that has to be further tested in Chilean courts.

Injunctions and other forms of attachment

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

An arrest requested by invoking a credit other than privileged ones, namely, a credit not covered under articles 844, 845 and 846 of the Chilean Commercial Code, is subject to the general rules set forth by the Chilean Code of Procedure (CCP) regarding pre-judicial and precautionary measures.

If the arrest is requested as a pre-judicial precautionary measure, in other words, a measure to secure the results of the exercise of the forthcoming action against the debtor, then the measure to be petitioned is the ‘prohibition from sailing’, which is subject to the following conditions:

  • existence of qualified and serious grounds for requesting the measure;
  • the value of the vessel upon which the precautionary measure falls must be determined; and
  • security deemed as satisfactory by the court to cover the damages that may come up or fines that may be levied must be granted.

 

The prohibition from sailing may be also requested as a precautionary measure, together with filing the principal action itself. In this case, to obtain the measure it is necessary that either the defendant’s wealth does not provide sufficient guarantee or that there are grounds to consider that he or she will try to conceal his or her assets. In addition, the claimant must provide supporting documentation to evidence at least a serious presumption of the right being claimed and counter-security if requested by the court. In this respect, when dealing with serious and urgent cases, the court may grant the measure without the required supporting documentation, for a term not longer than 10 days, until such documentation is submitted. In such a case, the court must necessarily require counter security.

Having said the above, under Chilean practice it is unusual to petition an arrest in accordance with the general rules of the CCP, as it faces more technicalities than an arrest based on the special system established by the Commercial Code for privileged credits.

Delivery up and preservation orders

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

In Chile, the closest concept is the use of precautionary prejudicial measures, which includes the following:

  • deposit in court of a specific asset at stake that has led to a dispute between the parties;
  • placing property under the authority of a court-appointed administrator;
  • prohibition on concluding acts or contracts over some specific asset or real estate (prohibition). This measure is aimed at preventing the sale or transference of the asset or real estate; and
  • sequestration of monies, assets or credits (sequestration).

 

In addition, in shipping matters there are special provisions contained in the Commercial Code for the verification of facts and the production of evidence before a trial.

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?

In Chile, bunkers can be subject to the general rules set forth by the CCP regarding pre-judicial and precautionary measures.

Law stated date

Correct on

Give the date on which the information above is accurate.

8 May 2020.