Q&A: ship arrest in Brazil

Ship arrest

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

Brazil has not ratified any international convention regarding the arrest of ships. Neither the International Convention to the Arrest of Seagoing Ships 1952 nor the International Convention on Arrest of Ships 1999 have been ratified.

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?

If the arrest is in rem, the creditor shall have the privileged credit properly constituted. If the arrest is filed in personam, the claimant shall demonstrate the likelihood of success on the merits of the case through the presentation of a clear and indisputable debt (a prima facie claim), while the danger in delay may be shown by providing evidence that the debtor might leave Brazilian territorial waters without having other assets in the country; that the debtor might dispose of its assets; or any other mean to justify an immediate court injunction, rather than awaiting the developments on the proceedings until a decision is rendered on the merits.

There are no provisions dealing with the arrest of sister ships in Brazilian law. If the claim is exclusively based on privileged credits with effects in rem on the vessel, the claimant would be unlikely to obtain the arrest of another vessel of the debtor’s fleet. However, if the arrest is in personam, it may be possible to file a precautionary lawsuit against the shipowner to detain a sister ship and request security, even if the obligations are not directly related to such vessel.

In respect to a bareboat or time-chartered vessel, considering that the arrest order is normally rendered ex parte, it is possible for a Brazilian judge to be convinced to order the arrest of the vessel as a means of guarantee for a substantive claim, although the head owner can eventually intervene in the proceedings in the capacity of a third party harmed by the arrest measure, and to try to lift the arrest of its vessel.

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

Maritime liens in Brazil are governed by the Commercial Code and the 1926 Brussels Convention on Maritime Liens and Mortgages. Under the code and the convention, the claims that give rise to maritime liens and the priority of same under Brazilian jurisdiction are as follows:

• federal taxes;
• legal costs and expenses;
• claims resulting from the employment of master, crew and ship personnel;
• indemnities due for salvage;
• general average contributions;
• obligations undertaken by the master outside the port of registry for actual maintenance needs or continuation of the voyage;
• indemnities due as a result of collisions, or any other maritime accident;
• ship mortgages;
• port dues, other than taxes;
• outstanding payments due for depositaries, storage and warehouse rentals and ship equipment;
• expenditure for the upkeep of the ship and her appurtenances, maintenance expenses at the port of sale;
• short delivery and cargo losses;
• debts arising out of the construction of the vessel;
• expenses incurred for repairs of the vessel and her appurtenances; and
• the outstanding price of the vessel.

What is the test for wrongful arrest?

The arrest is granted by means of an injunction that precedes the discussion of the merits of the claim. If an arrest is granted and, afterwards, the injunction is overturned or the claim is dismissed, the Civil Procedural Code allows the defendant to seek an indemnity for the losses suffered due to the wrongful arrest. This indemnity can be assessed and liquidated in the same legal proceedings.

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?

Under Brazilian Law, credits arising out of ship suppliers out of the port of registry, included bunkers, are considered privileged. Therefore, based on the nature of such credits, they have in rem effects and follow the vessel, not the debtor, being possible to arrest the vessel if the bunker supply contract was entered with the charterer and not with the owner. 

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

A guarantee may be required by the court from claimants that present an arrest request, to compensate eventual losses sustained by the vessel’s interests in the case of a ‘wrongful arrest’. However, this will be at the judge’s discretion, in the light of the evidence of the credit and the legal grounds of the claim presented by the plaintiff.

Other guarantees will be requested in the form of a pro expensis for foreign claimants having no assets within the Brazilian territory. In this case, the judge may demand security of between 10 and 20 per cent to guarantee the legal costs and opponent lawyer’s fees.

Normally, the guarantee is granted by means of a judicial deposit in cash or a letter of credit issued by a first-line bank headquartered in Brazil. P&I club letters of undertaking are not recognised by the Brazilian courts but may be admitted by the judge if it is accepted by the opposing party and translated into Portuguese.

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?

In substitution for the arrest of the vessel, the court may allow the arrested party to provide a security, which is normally established in accordance with the amount of the claim indicated by the plaintiff or at an amount the judge understands reasonable. Since it is at the court’s discretion, the amount of this security can eventually exceed the value of the ship, although it is not usual nor reasonable. This security can be reviewed subsequently.

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?

The appointment of a lawyer to represent a party in an arrest claim must be made through a power of attorney, issued by a representative of the company, duly empowered as per the by-laws or certificates. Such documents must be signed, notarised or certified with an apostille by the competent authorities at the place of Issuance, to be presented to the courts in Brazil. In the case of urgent measures, such as an arrest, the Brazilian Code of Civil Procedures allows the party 15 days to present the power of attorney to the records, following the presentation of the claim. This deadline can be extended for an additional 15 days.

Preparing an arrest application should not take longer than one business day, including the draft of the claim and the payment of the court costs. However, the challenge is to gather all the supporting documents and meet the formal requirements for the presentation of those at court, which, depending on the number of documents, may take some additional days.

Foreign documents that support the claim will have to be translated into Portuguese by a sworn translator. In the case of insufficient time to comply with such formality before the filing of the arrest application, it is possible to set the arrest procedure in motion and request the judge to grant an extension for the presentation of these documents. However, should the judge understand that these supporting documents were necessary for the analysis of the arrest request, he or she may postpone the decision on the matter until all documents are properly translated.

Some Brazilian courts are fully operational with electronic proceedings, thus accepting electronically filed documents. This means that, in principle, scanned copies may be sufficient and originals are not necessarily needed unless requested by the court.

Finally, Brazil is a signatory to the Apostille Convention, which helps to avoid time and costs with legalisation and consularisation procedures.

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

Usually, the debtor or owner of the arrested vessel will be responsible for keeping the vessel duly crewed, maintained and in class. The court may appoint a local representative or agent of the owner to act as a faithful custodian while the arrest is in place.

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?

Brazil has not ratified the International Arrest Convention, thus preventing a party from seeking security in Brazil for a claim or arbitration to be submitted to a foreign jurisdiction.

This means that the arresting party will have to evidence the jurisdiction of the Brazilian courts not only for the arrest but also for judging the merits of the claim. Arbitration clauses are exceptions, where the party may seek a preventive arrest before the Brazilian courts as a preparatory measure for a future arbitration to be initiated.

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

Yes. The Brazilian Civil Procedural Code establishes other forms of measures and injunctions sought to obtain security, either by attachment of values or seizure of assets and values.

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

Yes. The Brazilian Civil Procedural Code provides for the possibility of precautionary measures and injunctions to allow, among other things, the urgent production of evidence, disclosure of documents and preservation of evidence or assets.

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

Although it is possible, the arrest of bunkers is not a common practice in Brazil and there is no specific domestic provision dealing with such measure.

The arrest of bunkers, therefore, should follow the general rules of the Brazilian Procedural Code.

Under these rules, a party is entitled to request the arrest of assets or security in general if that party is able to demonstrate both the liquidity of its credits (unpaid bills or a promissory note) and a risk that the debtor and its assets may disappear in the near future (in the instance of an insolvency or similar situations).

The other important aspect is the jurisdiction of the Brazilian judge to rule the merits of the dispute.

The arrest of bunkers may involve logistic and costs difficulties for the arresting party as the claimant will be obliged to nominate a fiduciary agent to be responsible for the bunker and arrange a licensed facility to unload and receive the bunker eventually arrested.

Law stated date

Give the date on which the information above is accurate.

13 April 2020.