Table of Contents

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Getting the Deal Through - Shipping 2015

Brazil

Chile

China

Colombia

Croatia

Cyprus

Denmark

England & Wales

Estonia

France

Germany

Indonesia

Ireland

Italy

Japan

Korea

Latvia

Malta

Mozambique

Netherlands

Nigeria

Norway

Panama

Poland

Russia

Singapore

South Africa

Spain

Switzerland

Thailand

Tunisia

Turkey

Ukraine

United States

Vietnam

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Shipping 2015

Contributing editor:

Kevin Cooper

Ince & Co LLP

Getting the Deal Through is delighted to publish the seventh edition of Getting the Deal Through: Shipping, which is available in print, as an e-book, via the GTDT iPad app, and online at www.gettingthedealthrough.com.

Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.

Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the 35 jurisdictions featured. Our coverage this year includes Italy, Korea, Mozambique, Poland, Tunisia and Turkey.

Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough.com.

Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers.

Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to Kevin Cooper of Ince & Co LLP, the contributing editor, for his continued assistance with this volume.

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Published by

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© Law Business Research Ltd 2014

No photocopying: copyright licences do not apply.

First published 2008

Seventh edition

ISSN 1759-0744

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2014, be advised that this is a developing area.

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Brazil

Godofredo Mendes Vianna, Camila Mendes Vianna Cardoso and Lucas Leite Marques

Kincaid – Mendes Vianna Advogados Associados

Newbuilding contracts

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

Pursuant to Law No. 7,652/1998, a Brazilian vessel may be acquired through newbuilding, private or public sale or any other way permitted by law. However, title will only be consolidated and effective once it is registered with the Admiralty Court, Maritime Court Registry Office, or the competent port captaincy in the case of vessels not subject to registry with the Admiralty Court.

However, the parties may agree at which stage of construction the title will be transferred to owners. Once the agreement between builder and owner regarding the transfer of the vessel or hull under construction is registered before the Admiralty Court, title will be considered transferred. In fact, it is very common that the preliminary registration of a hull under construction is effected in the name of the shipowner and not the shipbuilder.

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

There are no legal requirements for refund guarantees, which depend on the negotiations between the parties. However, usually the shipowner requests that the vessel be certified by a first-class classification society, approved on all the equipment tests, and pass all ocean navigation trials required by the manufacturer of the equipment and the Brazilian maritime authorities.

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

If there is a default or an unlawful refusal to deliver the vessel by the shipyard, and the shipowner is capable of evidencing that they are in compliance with their contractual obligations and have acquired ownership of the vessel or hull under construction, it is possible to pursue an in limine decision before the competent civil court, in order to obtain the immediate possession of the vessel and move it out of the shipyard. The Brazilian Procedural Code, section 798, allows the offended party to request a precautionary measure if the plaintiff can demonstrate the periculum in mora (imminent risks of delay) and the fumus boni iuris (the legal grounds of the request and its reasonableness).

4 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 contractual relationship between the shipyard and the shipowner is regulated by the general provisions of the builders’ obligations under the Brazilian Civil Code for piecework contracts and, as per article 618, the builder remains responsible for the integrity and safety of the works for five years. However, any claim that may arise from defects or inherent faults of the design must be filed within 180 days from the date of the discovery of such defects. Some scholars argue that the provisions of the Brazilian Consumer Act also apply to such contracts under a service-and-suppliers relationship, and the time-bar period in this case is also five years. A potential third-party claim – by a purchaser from the original shipowner against the shipyard – would be barred by the absence of direct relationship and would fail under the res inter alios acta principle.

Ship registration and mortgages

5 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?

Brazil has two vessel registration systems for Brazilian-flagged vessels: the Brazilian Vessel Ownership Registry and the Brazilian Special Registry.

The Brazilian Vessel Ownership Registry is an obligatory registry for all Brazilian vessels of over 20 GT, for seagoing vessels, and of over 50 GT, when employed in any kind of inland waterway. For this purpose, Brazilian vessels are considered to be those owned by Brazilian citizens or Brazilian companies.

This registry is to be effected with the Brazilian Admiralty Court, the purpose of which is to establish the nationality, validity, and to make public their ownership of the vessels. The title to a hull or a vessel under construction under the Brazilian flag may be registered with the Brazilian Special Registry.

The Brazilian Special Registry is an optional registry for Brazilian vessels operated by Brazilian shipping companies, and foreign-flag vessels under bareboat charter to Brazilian shipping companies, with temporary suspension of the foreign flag.

The Brazilian Special Registry is a Brazilian government initiative, which grants several tax and operational benefits for the shipowner and, more precisely, an initiative of the Ministry of Transport and the Naval Ministry to increase the competitiveness of Brazilian shipping companies in relation to foreign shipowners operating their vessels at reduced costs under flags of convenience.

During the construction of a vessel, the shipowner can apply for a registration of its hull with the Brazilian Special Registry, in order to receive legal and tax benefits, especially for the incorporation of imported equipment. The registration of the hull is called ‘pre-REB’ while the definitive registration with the Brazilian Special Registry (REB) will be issued after the hull becomes a complete vessel, delivered to the owner and in possession of the proper classification certificates.

6 Who may apply to register a ship in your jurisdiction?

Individuals resident in the country or Brazilian companies may apply to register a ship in Brazil.

7 What are the documentary requirements for registration?

The documentary requirements are as follows:

• filing of an application (Form of the Directory of Ports and Coasts 2003);

• application to the Port Captaincy requesting the vessel’s registration, duly acknowledged by a notary (model provided by the Port Captaincy);

• the bulletin detailing updates to the vessel;

• copy of the shipowner’s Certificate;

• authorisation from the Ministry of Agriculture, Livestock and Supply (for fishing boats);

• copy of vessel’s safety certificate;

• copy of tonnage certificate or tonnage records;

• copy of freeboard certificate;

• copy of shipbuilding licence or permit;

• record of technical activities or the responsible engineer’s log;

• the vessel’s specifications;

• general plans;

• half-breadth plan;

• hydrostatic curves and cross curves or tables;

• safety plan;

• arrangement plan of the navigation lights;

• capacity plan;

• sheer plan;

• heeling test report;

• trim and definitive stability;

• proof of owner’s nationality:

• if an individual: copy of ID card, individual taxpayer’s ID, and marriage certificate, birth certificate, or military service status certificate, or passport (in case of foreigners); and

• for a legal entity: Finance Ministry/corporate taxpayer’s ID, articles of incorporation or association, Board of Trade registration, or company by-laws;

• proof of vessel’s acquisition and full and general release;

• engine – copy of invoice or receipt of release or private instrument containing engine details, price, buyer, seller, and with seller’s and buyer’s signatures duly certified and acknowledged by a notary;

• hull – copy of the invoice and receipt of release, or private instrument, containing the vessel’s details, the purchase price and the details of the seller and buyer with their respective signatures duly acknowledged and certified by a notary;

• proof of residence;

• 15x21cm photo of the vessel, coloured, dated and taken abeam;

• copy of the compulsory insurance certificate (must be provided only after the availability of the vessel’s intended name has been confirmed with the Port Captaincy);

• payment voucher paid at the bank (original counterpart);

• proof of compliance with all tax obligations;

• Admiralty Court costs payment voucher; and

• the shipowner, owner or their legal representative’s e-mail address.

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

Brazilian law does not contemplate the suspension of the Brazilian flag. Therefore, the dual registration and flagging out of Brazilian vessels are not processed by the Admiralty Court and Register. On previous occasions the Superior Court of Justice has understood the impossibility of suspension of the Brazilian flag in view of the lack of legal provision and also due to a violation of the public interest.

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

The Admiralty Court maintains the register of mortgages on Brazilian vessels.

To be considered valid and in effect under Brazilian law, all maritime mortgages must be constituted through a public deed and registered with the Admiralty Court. To create a mortgage on a Brazilian-registered vessel, a public deed is required. The deed must contain the following requirements:

• the amount of credit – an estimate or maximum amount thereof;

• the term established for repayment;

• the rate of interest, if any;

• the vessel’s specifications, such as gross tonnage, deadweight tonnage and other identifying data; and

• the certificate of insurance of the vessel.

Limitation of liability

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

Brazilian law provides for administrative, civil and criminal liability. The Brazilian Civil Code does not provide for a limitation of civil liability and establishes that anyone who causes damage to the other party must fully compensate the damages caused.

Brazilian law also provides for some eventualities of strict civil liability, where the liability for the damage is regardless of fault, such as the liability of the parent for his children, the employer for acts of his employee and liability resulting from the activity carried out by the individual or company. Strict civil liability can only be excluded if it is proved that the damages were due to force majeure or exclusively due to the victim’s actions.

Regarding the amounts of indemnity, it is important to point out that Brazilian law does not provide for punitive damages; therefore indemnity is limited to the direct damages suffered, including the actual losses and reasonable loss of earnings. However, indirect damages or consequential losses are expressly excluded, unless otherwise agreed by the parties. It is also important to advise that direct damages include both material and moral damages.

Besides being a party to the 1924 Brussels Convention (1924 International Convention For The Unification Of Certain Rules Relating To The Limitation Of The Liability Of Owners Of Seagoing Vessels) and the CLC-69 (International Convention on Civil Liability for Oil Pollution Damage), Brazil is not a signatory of some relevant international conventions that exclude or minimise shipowners’ liability, including:

• the Hague Rules;

• the Hague-Visby Rules;

• the Hamburg Rules;

• the International Convention for the Limitation of Liabilities on Maritime Claims, London, 1976; and

• the Convention on Civil Liability for Oil Pollution Damage resulting from Exploration for and Exploitation of Seabed Mineral Resources, London, 1977.

Nevertheless, it is possible under Brazilian law for the parties to limit their liability towards each other under a contract.

11 What is the procedure for establishing limitation?

Unfortunately, there is no established procedure for obtaining limitation in Brazil. Parties can limit their liabilities towards each other under a contract. Nevertheless, if the contract is considered an adhesion contract (eg, a standard bill of lading imposed by the carrier), the clauses that exclude or limit liability of one of the parties, might be considered null and void by Brazilian courts.

12 In what circumstances can the limit be broken?

Not applicable (see question 11).

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Brazil is not a signatory to the Athens Convention or its protocols.

Brazilian and foreign passengers, while being transported or on cruise trips, have their rights supported by the Brazilian Civil Code and the Consumers Act, which establish the right to full reparation of the passenger or consumer.

Port state control

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

All foreign vessels entering Brazilian ports are subject to port state control. Port state control in Brazil is performed by qualified naval inspectors accredited by the Department of Ports and Coasts (DPC), as per regulations set forth in the NORMAN-04 Ordinance (the Ordinance). The DPC has, inter alia, the authority to contribute to:

• the guidance and control of the merchant marine and related activities in the interests of national defence;

• the safety of waterway traffic;

• the prevention of pollution by vessels, platforms and the support stations thereof;

• the formulation and enforcement of national policies relating to the sea;

• the implementation and inspection of laws and regulations at sea and in inland waterways; and

• the qualification and certification of personnel for the merchant marine and related activities.

According to article 3 of the Ordinance, for the attainment of its purposes the DPC may:

• prepare guidelines for:

• the qualification and registration of professional and amateur seamen;

• traffic and stay of vessels in waters under national jurisdiction, and the entry and exit thereof to and from ports, anchorages, and marinas;

• naval inspections and surveys;

• gross tonnage, establishment of freeboard, capacity, identification and classification of vessels;

• vessel registry and inspection of the registry of ownership thereof;

• ceremonial protocol and use of uniforms on board Brazilian vessels;

• registry and certification of helipads on vessels and platforms for homologation by the competent agency;

• execution of works, dredging, research and exploration of minerals under or on the shores of waters under Brazilian jurisdiction to ensure the maintenance of the waterway spaces and safety of navigation, without prejudice of obligations before other competent agencies;

• registry and functioning of marinas, clubs and nautical sports entities, in respect of the safeguarding of human life and navigational safety in the open sea and in inland waterways;

• registry of shipping companies, experts and class societies; and

• application of penalties by the master;

• regulate pilotage services, establish pilotage zones where the use of that service is obligatory and specify the vessels exempted from the service;

• establish the safety crew of vessels, assuring the interested parties the right to appeal when in disagreement with the established complement;

• establish the equipment and accessories that must be homologated for use aboard vessels and platforms and establish the requirements for homologation;

• establish the minimum requirements for safety equipment and accessories for vessels and platforms;

• establish the limits of interior navigation;

• establish the requirements referent to safety and for pollution prevention of vessels, platform or support installations thereof;

• define maritime and interior areas for the construction of temporary refuges where vessels can anchor or beach for performance of repairs;

• execute surveys either directly or through delegation to specialised entities;

• support the Admiralty Court and the Special Navy Prosecutor’s Office regarding inquiries into navigational accidents or facts;

• manage the Maritime Professional Education Development Fund;

• organise and maintain the Maritime Professional Education System;

• exercise the functional supervision of the port captaincies, river captaincies and their respective offices and agencies; and

• maintain exchanges with public or private similar entities, both domestic and foreign, and represent the navy at gatherings related to matters under its responsibility.

In situations of conflict, crisis, state of siege, state of defence, federal intervention and special regimes, it is incumbent upon the DPC to undertake the tasks involving mobilisation and demobilisation attributed to it by the norms and guidelines related to maritime mobilisation and those issued by the director-general of navigation.

15 What sanctions may the port state control inspector impose?

The port state control may impede vessels from sailing if there are any technical deficiencies affecting the safety of or exposing any risk to navigation, human life and the environment within Brazilian territorial waters, or if approval of statutory certificates relating to the vessel is pending. Local port captaincies may impose penalties and fines related to oil pollution and violation of the Brazilian Maritime Regulations.

16 What is the appeal process against detention orders or fines?

Detention orders and fines can be challenged by an administrative defence to be filed with the port captaincy. Furthermore, if the detention is groundless or unlawful, the shipowner or operator may resort to the federal courts and file a writ of mandamus against the maritime authority in order to revoke the detention or fine.

Classification societies

17 Which are the approved classification societies?

The classification societies authorised to issue valid certifications of conformity with the applicable law and regulations regarding the safety of navigation, human life and avoidance of environmental pollution on behalf of the Brazilian government are:

• the American Bureau of Shipping;

• Bureau Veritas Sociedade Classificadora e Certificadora Ltda;

• Bureau Colombo Ltda;

• Det Norske Veritas Ltd;

• Germanischer Lloyd do Brasil Ltda;

• Lloyd’s Register do Brasil;

• Nippon Kaiji Kinkai do Brasil;

• Registro Italiano Navale;

• Registro Brasileiro de Navios e Aeronaves;

• Record Certificação Naval Ltda;

• Autoship Prestação de Serviços de Entidade Certificadora de Embarcações Ltda; and

• ABS Group Services do Brasil.

Each classification society is authorised to perform one or more certifications, and it is important to verify whether the chosen classification society is authorised to issue the required certification.

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

The activities and duties of the classification societies are regulated by DPC under the NORMAN-6 Ordinance.

Classification societies, in general, do not undertake any liability in respect of the vessels certified by them and there is no specific law regulating their responsibility to third parties and to the government. However, if an affected party is able to evidence gross negligence or an unlawful act by a classification society, it is possible to file a claim under section 189 of the Brazilian Civil Code.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes. The wreck removal procedural rules are regulated by Law No. 7,542/1986, which grants the Brazilian maritime authorities, or any other authority with delegated powers, the power to order wreck removal by the responsible party, if it is deemed to be a danger or an obstacle to navigation or a threat of damage to third parties or to the environment.

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

Brazil has signed the following international conventions regarding the liability of shipowners and carriers, in relation to collisions, salvage and pollution:

• the International Convention of Private Law (Bustamante Code), executed 1928;

• the Convention for the Unification of Certain Rules of Law relating to Assistance and Salvage at Sea (Brussels, 1910);

• the Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages (Brussels, 1928);

• the Convention for the Unification of Certain Rules relating to Immunity of State-owned Vessels (Brussels, 1928);

• the Convention for the Unification of Certain Rules related to Limitation of Liability of Owners of Seagoing Vessels (Brussels, 1924);

• the International Convention for the Safety of Life at Sea (SOLAS 74);

• the SOLAS Protocol of 1978;

• the International Convention on Load Lines (London, 1966);

• the International Convention on Tonnage, 1969;

• the International Convention on Regulation for Preventing Collisions at Sea, 1983;

• the International Regulations for Preventing Collisions at Sea;

• the International Convention on Civil Liability due to damages caused by Oil Pollution, 1969;

• the Convention on Facilitation of International Maritime Traffic;

• the International Convention on Maritime Search and Rescue;

• the International Convention on prevention of pollution caused by ships – MARPOL (73-78), OMI, 1973;

• the United Nations Convention on Law of the Sea, 1982;

• the Agreement to implement the United Nations Convention on Law of the Sea; and

• the International Convention on Salvage, 1989.

Brazil is not a signatory of the following conventions:

• the Hague Rules;

• the Hague-Visby Rules;

• the Hamburg Rules;

• the International Convention for the Limitation of Liabilities on Maritime Claims (London, 1976);

• the Convention on Civil Liability due to Oil Pollution resulting from exploration and exploitation of subsea mineral resources (London, 1977);

• the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund Convention), 1971;

• the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996;

• the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunker Convention), 2001; and

• the Nairobi International Convention on the Removal of Wrecks, 2007.

21 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?

According to Brazilian law, all vessels are obliged to assist others in distress, in accordance with the International Convention on Salvage, 1989. The traditional international salvage companies are usually engaged in such operations. The Lloyd’s standard form of salvage agreement is acceptable. Brazilian law accepts the ‘no cure, no pay’ clause. However, Brazilian law provides that all the expenses resulting from the incident, if damage to third parties and the environment was avoided, shall be reimbursed by the owner.

Ship arrest

22 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 has been ratified.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

If the arrest is in rem, the creditor shall have the privileged credit properly constituted, according to article 1 of the 1926 Brussels Convention. If the arrest is filed in personam, the claimant shall demonstrate the fumus boni iuris by the presentation of a clear and undisputable debt, while the periculum in mora may be proved by evidence that the debtor might leave Brazilian territorial waters without having other assets in the country, or that the debtor might dispose of its assets.

In other words, for the judge to issue an preventive measure there must be a potential exposure of the claimant to losses that would be difficult to repair due to the normal time frame of an ordinary lawsuit and the final decision on merit.

There are no provisions dealing with arrest of sister ships in Brazilian law. If the claim is based on privileged creditors 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, in order to detain a sister ship and request security, even if the obligations are not directly related to such vessel.

24 What is the test for wrongful arrest?

A precautionary arrest demands a main lawsuit, which must be filed within 30 days of enforcement of the in limine decision. This suit will discuss if the debt really exists and its value. If it is judged that the debt does not exist, then there was a wrongful arrest. Thus, as a consequence of a decision on merit considering the main lawsuit groundless, the party that requested the arrest may be held liable for wrongful arrest and ordered to pay all losses sustained by the defendants if a counterclaim is also filed, including lawyers’ fees of up to 20 per cent of the amount claimed.

25 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 the Brazilian Commercial Code and the 1926 Brussels Convention (international convention for the unification of certain rules of law relating to maritime liens and mortgages), 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.

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

A guarantee may be required from claimants that present their arrest as a precautionary measure (Code of Civil Procedure, articles 804 and 816, item II). The court may also require a counter-guarantee in order to compensate eventual losses sustained by a vessel’s interests in 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 (Code of Civil Procedure, article 825). In this case, the judge may demand security of between 10 per cent and 20 per cent in order 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 accepted by the judge if it is accepted by the opposing party and translated into Portuguese.

27 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?

Instead of arrest, the court may order the arrested party to provide a security which is normally established in accordance with the amount of the losses indicated by the claimant or at an amount the judge understands to be reasonable. This security can be reviewed subsequently and it can be presented in the same form as described in question 26.

28 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.

29 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 impeding the security in Brazil of a judicial claim or arbitration to be submitted to the jurisdiction of another country.

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. After the enforcement of an arrest order over a vessel, the arresting party is bound to file a main lawsuit within 30 days before the Brazilian courts. If the main lawsuit is not filed within this period, available penalties include the release of the vessel, payment of court costs and fees and liability for wrongful arrest (see question 24).

Therefore, the arrest of a vessel in Brazil will depend on the merits of the case (namely, the main lawsuit) being judged in Brazil or being ratified by the Superior Court of Justice, in the case of a foreign decision or award.

30 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 precautionary measures and injunctions sought to obtain security, either by attachment of values or seizure of assets.

31 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, inter alia, the urgent production of evidence, disclosure of documents and preservation of evidence or assets.

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

The arrest of bunkers is not a common practice within the Brazilian jurisdiction 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 facility to unload and receive the bunker eventually arrested.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Mortgages on ships are enforced through judicial actions and a forced sale at public auction.

The creditor or arresting party may apply for the judicial sale of an arrested vessel if the debt is not paid.

34 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?

The judicial sale of vessels follows the same general rules as asset bidding. Court bidding procedures are conducted by the public auctioneer, who charges between 2 and 5 per cent of the value of the sale. The minimum initial bid is set by the judge based on the accounting report. The vessel cannot be sold at the first auction for an amount below its official appraisal. However, at the second auction (10 to 20 days after the first auction), the vessel may be sold at any price that the court considers proper (within a limit of 40 per cent of the appraised value). The highest bidder deposits 20 per cent of the bid in cash or by certified cheque immediately after the auction, with the balance to be paid within a certain deadline. If the residual amount is not paid, the auction may be aborted and the vessel offered to the next bidder.

Once the sale has been duly performed, the judge will release an order of sale and the bidder will register ownership with the Admiralty Court.

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

When distinct privileged creditors claim the product of the judicial sale, the release of the amount deposited by the winning bidder will obey the order of priority and the chronology of each judicial attachment.

The order of priority, based on the harmonious application of the rules of the Brazilian Commercial Code and the Brussels Convention of 1926 is the following, from highest to lowest:

• 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.

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

The judicial sale extinguishes any claims on the vessel that existed on the date of sale under section 477 of the Commercial Code. The acquisition of an asset at a judicial auction is equivalent to the initial acquisition of the asset: all prior burdens, liens and encumbrances are extinguished and thus are not transferred to the new owner of the asset. The cancellation of burdens on the vessel must be requested before the Admiralty Court through the appropriate procedures.

Once the vessel has been acquired at public auction, the purchaser must initiate proceedings before the court for the cancellation of the mortgage. Foreign buyers must initiate export procedures for the transfer of ownership of the vessel within 15 days of the effective acquisition.

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

First, all foreign decisions and awards must be previously ratified by the Superior Court of Justice in order to become valid and effective in Brazil.

Further to the above, the title over a vessel is only consolidated and effective in Brazil once that title is registered with the Admiralty Court, maritime court registry office, or the competent port captaincy in the case of vessels not subject to registry with the Admiralty Court. This registry has the purpose of establishing the nationality, validity, and making public the ownership of the vessels

Therefore, if these requirements are met, a judicial sale of a vessel in a foreign jurisdiction can be recognised in Brazil.

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

Brazil is not a signatory to the International Convention on Maritime Liens and Mortgages of 1993.

Carriage of goods by sea and bills of lading

39 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?

As mentioned in question 20, Brazil is not a signatory of the main international conventions that exclude or minimise the responsibility of carriers, including the Hague Rules, the Hague-Visby Rules or the Hamburg Rules.

Brazil has followed the discussions concerning the Rotterdam Rules with formal representation at the UN, but has not yet signed the Rules. The concept adopted by the Rotterdam Rules is already in force under the Brazilian domestic law and under the multimodal law (Law No. 9,611/98) the responsibility of the carrier begins when cargo is received and only ends with final delivery to the consignee.

40 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?

Law No. 9,611/98 regulates the multimodal transport of cargo in Brazil and sets out the rules for issuance of the multimodal bill of lading and rights and obligations of the multimodal transport operator.

41 Who has title to sue on a bill of lading?

All parties to the contract of carriage represented by the respective bill of lading have title to sue. The consignee, the shipper or the carrier are entitled to file a claim in the case of a breach of the respective contractual obligations. The endorsee of the bill of lading also has title to sue and the subrogated underwriters of the cargo are also entitled to a recovery action against the carrier under the bill of lading.

42 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?

According to Brazilian law, the bill of lading has three characteristics: receipt of the cargo shipped and delivered; it evidences the contract of carriage; and it represents a title of credit and ownership of the goods by its holder.

The bill of lading as an evidence of the contract of carriage includes some of the terms and conditions of the charter party. According to the Brazilian Commercial Code, the following information must be necessarily included in the bill of lading:

• name of the issuer;

• number of the bill of lading;

• name and head offices of the carrier of the cargo;

• name and flag of the vessel;

• port of shipment and delivery port;

• name and head offices of the receiver of the cargo;

• description of the cargo;

• conditions and status of the cargo;

• value of freight and form of payment; and

• name and signature of the master.

Notwithstanding the above, because of the speed of the negotiations, often some of these requirements are not fulfilled. However, the absence of some of the requirements does not result in the annulment or invalidity of the bill of lading.

The reverse of the bill of lading must contain the general terms and conditions of the transportation agreement and can include as much information, terms, and conditions of the charter party as agreed by the parties. In this sense it is important to include a clause specifying which document (charter party or bill of lading) will prevail in case of conflict, as the general rule is that in case of conflict the bill of lading will prevail.

However, the shipowners usually have standard bills of lading, it being rather difficult in practical terms to include the terms of each specific charter party in the related bill of lading.

A bill of lading may be considered an adhesion contract under Brazilian law, as the issuer (shipowner) establishes its clauses with or without minimum negotiation with the owner of the cargo. The jurisdiction or arbitration clauses are valid and binding in adhesion contracts if the contracting parties expressly agree on this specific clause, stating that same is accepted. This requirement being observed, the arbitration clause shall be binding on any third party holding the bill of lading.

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

Under Brazilian law, the bill of lading may be considered an adhesion contract; in this sense the clauses to exclude or transfer liability from issuer or carrier to any third party, including the owner, are considered not written, that is, null and void.

44 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?

The carrier bears strict liability for the due delivery of the cargo. This strict liability can only be excluded due to force majeure, an inherent defect of the goods, or exclusive fault of the importer or exporter (for example, due to bad packaging of the cargo by the shipper) or a third party.

When the carrier is not the owner, the carrier is liable for the cargo damage. However, as mentioned above, the vessel itself may respond for such damages. In this sense, it is reasonable to state that the owner may respond for such damage, reserving the right of redress action against carrier.

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

Under Brazilian law, deviation from the vessel’s route can result in claims for late delivery of the goods if parties with an interest in the cargo can demonstrate that the normal period of the sea voyage was affected and if losses are proven by consignees. The contractual terms will prevail if the deviation clause is not considered abusive and in this case the fixture conditions and previous negotiations between carrier and cargo interests will have an important function if a dispute is brought to Brazilian courts.

46 What liens can be exercised?

Under Brazilian law, contractually a vessel and its equipment are subject to mortgage, and the hire related to its operation can be subject to pledge.

The liens that can be exercised against the vessel are as set out in question 35.

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

As mentioned above, the bill of lading is the receipt of the cargo received and also names the consignee. In this sense, if the carrier delivers the cargo without the related bill of lading, the carrier will be subject to liability for not delivering the cargo to the consignee (if the cargo is delivered to the wrong person) and also for delivering damaged cargo, if the bill of lading does not expressly state the condition of the cargo shipped.

The carrier will be liable for all direct material and moral damages, including the value of the cargo, without limitation, unless otherwise provided in the bill of lading or in an agreement between the carrier and owner of the cargo.

48 What are the responsibilities and liabilities of the shipper?

As per the Brazilian Civil Code, the shipper is obliged to provide an accurate description of the cargo embarked, indicating its nature, value, weight and quantity, with the correct particulars of the consignee. The cargo must be adequately packaged. The shipper is responsible before the carrier for damaged or packaged goods and also for error on the cargo or consignee particulars or information.

Shipping emissions

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

There are no emission control areas in force in Brazilian territorial waters.

50 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 the sulphur content of fuel oil in Brazilian waters is 3.5 per cent m/m, as per provided by the National Oil, Natural Gas and Biofuels Agency (ANP), ABNT Technical Norms and Annex VI of Marpol.

The producers and importers of fuel oil must analyse a sample of the product being put up for sale and issue a certificate of quality, to be numbered and signed by a chemical expert and to be kept available to the ANP for a minimum of 12 months. Invoices for the fuel oil must indicate the product description and the certificate number, followed by a copy of the same. At any time ANP may hold technical inspections to investigate whether the legal requirements are met. In case of non-compliance, in addition to administrative sanctions (fines from 5,000 reais to 5 million reais depending on the infraction; seizure of goods, suspension of activities and others), civil and criminal penalties may be applied.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Brazilian legal system provides for a state court system. In this sense, each state organises its courts as best suits their needs. Generally, maritime disputes are subject to the state’s civil courts, except in Rio de Janeiro, which has specialised courts for corporate and commercial issues and such courts are competent to rule on maritime disputes. When a state-owned or naval vessel is involved, the federal courts have jurisdiction. Nevertheless, it is also important to point out that Brazil has an Admiralty Court with jurisdiction to rule on maritime accidents and facts and to resolve the culpability of shipowners, officers and seaman, imposing fines and penalties. The Admiralty Court is an administrative tribunal subordinate to the Ministry of Defence and, although considered relevant technical evidence by judicial courts, its decisions are challengeable by the state or federal courts.

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

In the event of a defendant being domiciled abroad and with no branch office, agency, or any legal representative in Brazil, summons on said defendant must be served by a letter rogatory issued by the Brazilian court and addressed to the foreign judicial authority through diplomatic channels after having been translated into the language of the country where the summons are to be served.

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

Yes, there are domestic arbitral institutions with arbitrators specialised in maritime matters. One of the most respected panels is the Mediation and Arbitration Chamber of the Getúlio Vargas Foundation, based in Rio de Janeiro. However, this method of conflict resolution is not yet widely practised in Brazil, despite the existence of an arbitration law (Law No. 9,307/96).

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

Brazil has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 10 June 1958). The enforcement of foreign judgments and awards in Brazil depends on an exequatur to be obtained through a procedure regulated by the internal procedural rules of the Superior Court of Justice. The exequatur is the authorisation granted by the Superior Court of Justice for all procedures requested by a foreign judicial authority to be validly executed in the jurisdiction of the competent Brazilian judge.

The exequatur being granted, the foreign judgments and awards will be forwarded to the federal judge of the state in which the foreign award will be enforced and complied with.

The Brazilian Supreme Court and the Superior Court of Justice recognise foreign judgments and awards and their enforceability, provided they are not contrary to the Brazilian legal order, public order, national sovereignty and good moral conduct.

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

The defendant, within the period granted for reply, may file an exceptio fori motion alleging the lack of jurisdiction of the court due to the existence of a jurisdiction clause. In the event of a foreign jurisdiction having being elected, the lawsuit filed in Brazil will be extinguished should the mentioned clause be considered valid. If the selected jurisdiction is in Brazil, the records of the proceedings will be forwarded to the competent court.

56 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?

It is for the defendant to present the exceptio fori motion alleging that the foreign court or arbitral tribunal election clause should be observed (see question 55). This procedural incident suspends the course of the proceedings until the validity thereof is decided.

If the judicial lawsuit is filed in breach of an arbitration clause, the case should be extinguished in accordance with the Brazilian Procedural Code.

It is also notable that this type of clause, when inserted in contracts that can be construed as being contracts of adhesion, that is contracts with very little room for negotiating by the contracting party, can be rejected by the Brazilian courts on the understanding that the will of the contracting party was not freely expressed. In other words, the commitment clause or the election of a foreign jurisdiction will only be effective if the adhering party expressly accepts it.

Limitation periods for liability

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

In general, in relation to indemnity and civil lawsuits related to unlawful acts, the Brazilian Civil Code provides three years for filing the judicial lawsuit. Specifically for cargo claims resulting from ocean carriage, the Federal Decree No. 116/1967 provides a one-year time bar as of the date of discharge. However, when the Consumers Act applies, the time bar is five years.

It is not possible to extend the time limit by an agreement between the parties, as this is a question of public policy that cannot be changed by the will of the parties. What is admitted is time-bar interruption through court proceedings notification. Once interrupted, the time bar is renewed for an equal period. The interruption can only occur once.

58 May courts or arbitral tribunals extend the time limits?

No. The time limit can be interrupted by the party in a single opportunity. This must be made before a Brazilian court and will renew the time limit for an additional equal period. Agreements between the parties in respect to time limits are not valid in Brazil. The time limit is a question of public policy that cannot be changed and cannot be extended by the parties, not even by the courts or arbitral tribunals.

Miscellaneous

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

Brazil has not ratified the Maritime Labour Convention.

60 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?

Yes. One of the instruments that may be used in contract renegotiations in case of an excessive burden is the ‘unpredictability theory’, which is provided for in the Civil Code, articles 478 to 480, under the title ‘Dissolution for Excessive Onerousness’.

Those articles establish that in contracts with continuing or deferred performance, if the obligation of one of the parties becomes excessively onerous, with extreme advantage to the other by virtue of extraordinary or unforeseeable events, the debtor may apply for dissolution of the contract. The effects of the judgment that declares dissolution shall be retroactive to the date of notification.

Dissolution may be avoided, if the defendant offers to modify the conditions of the contracts on an equitable basis.

However, this theory may only be applied in very specific cases, where supervening, extraordinary, irresistible and unforeseen acts alter the balance of the original financial and economic equation of the contract.

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

As per Law No. 9,432/97, Brazil has a closed market for cabotage, port support and maritime support navigation, which are restricted to Brazilian shipping companies duly authorised by the government authority ANTAQ. Brazil is also closed to the import or export of certain goods on foreign-flagged vessels.

In this sense, foreign-flagged vessels can only operate in cabotage, port support and maritime support navigation when chartered by a Brazilian shipping company, and provided that there are no Brazilian-flagged vessels available, or if it is a matter of public interest, or the foreign vessel is being chartered as a substitute of a vessel owned by the Brazilian shipping company under construction at a Brazilian shipyard. Another possibility for a foreign vessel to operate in Brazil is if she is bareboat-chartered by the Brazilian shipping company and flies the Brazilian flag in place of her original flag.

Update and trends

A new project of law that aims to establish a new Brazilian Commercial Code has been in progress before the Brazilian National Congress since 2011.

The Brazilian Commercial Code currently in force dates back to 1850, when the country was still under an imperial regime. It has been partially revoked by the Brazilian Civil Code of 2002, but a considerable part of the old Commercial Code still remains in effect, including some provisions pertaining to maritime law.

The project for the new Commercial Code intends to update and concentrate, in one single codified law, provisions related to commercial law which are currently regulated either by the old Commercial Code, the Civil Code or sparse legislation.

In summary, the project contains provisions related to the different types of companies, corporations, commercial relationships and obligations, titles of credit and bankruptcy aspects. It also contains certain brief provisions pertaining to the carriage of goods and charter of vessels.

While the project will still be subject to the necessary legislative process before the National Congress, associations and professionals of the maritime industry are looking for an opportunity to amend the original draft of the project to insert new and updated provisions related to maritime law.

This could be an opportunity to establish internal regulations in Brazil that are similar to the provisions instituted by the most important international conventions that were not ratified by the country.

Godofredo Mendes Vianna

godofredo@kincaid.com.br

Camila Mendes Vianna Cardoso

camila@kincaid.com.br

Lucas Leite Marques

lucas@kincaid.com.br

Avenida Rio Branco, No. 25

1st, 2nd and 15th floors

Centro, Rio de Janeiro

CEP 20090-003

Brazil

Tel: +55 21 2276 6200

Fax: +55 21 2253 4259

www.kincaid.com.br

Chile

Ricardo Rozas and Max Morgan

Jorquiera & Rozas Abogados

Newbuilding contracts

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

Under Chilean maritime law, there are no specific regulations or compulsory requirements. Accordingly, title in the ship will pass subject to the parties’ stipulations. Otherwise, this is a matter to be analysed under the general sales of goods rules contained in both the Chilean Civil and Commercial Codes.

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

As noted in question 1, under Chilean maritime law there are no specific regulations or compulsory requirements. Accordingly, such formalities would mostly depend on what the parties have agreed.

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

Generally speaking, the owner may sue the yard to compel delivery of the vessel or claim damages based on the general rules applicable to all contracts contained in the Chilean Civil Code and the general obligation relating to sellers for delivering at the agreed place and time.

4 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?

Generally speaking, under the Chilean rules relating to the sale of goods, once a contract is consummated the buyer must bear the risk of loss or wear and tear unless otherwise agreed, or if such loss or impairment is caused by the seller’s fraud or negligence or by inherent vice. A third party that has sustained damage may consider suing in tort.

Ship registration and mortgages

5 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?

In Chile any type of vessel, whether constructed or under construction, and naval devices can be registered at the following registries kept by the General Administration of the Maritime Territory and Merchant Marine (the Maritime Authority):

• the Large Vessels Registry;

• the Minor Vessels Registry;

• the Vessels in Construction Registry;

• the Naval Devices Registry; and

• the Mortgage, Liens and Prohibitions Registry.

The rules relevant to the organisation and operation of the registries as well as the procedures, formalities and requirements of registration are contained in the respective regulations. In this respect, it is important to note that the practice of registering vessels chartered on a bareboat basis does not occur in Chile.

In accordance with article 15 of the Navigation Law, all large vessels (ie, those over 50 GT), must be registered in the Large Vessels Registry, which is kept by the Maritime Authority. Minor vessels (ie, those of 50 GT or less), are registered in the Minor Vessels Registries that are kept by the harbour masters.

In addition, the Navigation Law distinguishes between merchant and special vessels. The former are defined as those that are used for carriage purposes, whether on a local or international basis. Unless there is a cargo reservation in place, foreign merchant vessels have no restrictions on performing international carriage of goods by sea. However, cabotage is restricted – in principle – to Chilean merchant vessels. On the other hand, special vessels are those used for specific purposes and with particular features relating to their functions (eg, tugs, fishing vessels, dredgers) and may therefore be subject to further regulations.

Regarding vessels under construction, the proprietor must submit to the Maritime Authority the titles that justify his or her rights over the vessel, the technical specifications and other requirements established by the respective regulations.

6 Who may apply to register a ship in your jurisdiction?

Regarding merchant vessels, they can be registered by Chilean nationals or citizens. If the owner is a corporation, it must meet the following requirements to be deemed Chilean:

• having its registered offices and true and effective headquarters in Chile;

• having a Chilean president, manager and majority of directors or administrators, as the case may be; and

• the majority of the equity capital is owned by Chilean individuals or bodies corporate.

Regarding special vessels, they can be registered in Chile by foreign natural persons as long as they are domiciled in the country and their main place of business is located locally (this rule does not apply to fishing vessels).

7 What are the documentary requirements for registration?

The registration of a merchant vessel in Chile involves aspects of domicile and nationality of her owners (see question 6). To this must be added the Chilean nationality of the crew when the vessel, if already Chilean, wishes to fly the Chilean flag.

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

Although not regulated in depth, according to the Chilean Navigation Law dual registration of national merchant vessels would be acceptable when, for reasons of obvious convenience to domestic interests, the president of Chile authorises the bareboat charter of national vessels for a certain period. In such cases, the vessel must fly a foreign flag although her Chilean registration will continue in effect.

Regarding flagging out, the owner is free to do so. In such a case, the corresponding vessel or naval devices acquired or constructed abroad for registry in Chile and those that are built in Chile for sale abroad or registry in the country may navigate under the national flag without any document other than a ‘safe conduct’, namely, a document that, in the case of Chile, corresponds to the credentials issued by the consul of Chile or the Chilean Maritime Authority, as the case may be, that legitimises the journey of the vessel to or from a Chilean port (temporary document).

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

See question 5.

Limitation of liability

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

The Chilean regulations that refer to tonnage limitation matters (ie, articles 889 to 904 of the Commercial Code) are inspired by both the international conventions signed in Brussels in 1957 (the 1957 Convention) and in London in 1976 (the 1976 Convention). With respect to the tonnage limitation figures, the Commercial Code follows the lines of the 1976 Convention. In addition, it is important to note that the Commercial Code establishes a specific set of procedural provisions in connection to the constitution and distribution of the corresponding limitation fund (see question 11).

The claims subject to limitation are as follows:

(i) death or personal injury and damage to property on board;

(ii) death or personal injuries caused by any person for whom the owner is responsible, whether onboard or ashore (in the latter case, his or her acts must be related to the ship operation or to the loading, discharging or carriage of the relevant goods);

(iii) loss of or damage to other goods, including the cargo, caused by the same person or people, grounds, places and circumstances given in (ii) above; and

(iv) resulting liability related to the damage caused by a vessel to harbour works, dry docks, basins and waterways.

The people entitled to limit under this regime are as follows:

(i) the shipowner as defined by Chilean regulations;

(ii) the shipowner’s staff;

(iii) liability insurers;

(iv) the operator, carrier, charterer and the ship’s proprietor, if a different person or entity than (i) above; and

(v) individual employees of (iv) above, including the master and members of the crew, if sued.

Limitation in connection to civil liability for the damage derived from the spillage of hydrocarbons and other hazardous substances:

• spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo, which is subject to the CLC 1992; and

• spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances, which is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law (among others, it extends the limitation benefit to the owner, proprietor and operator).

Regarding limitation in connection to contracts of carriage of goods by sea, Chilean law draws a distinction between lost or damaged goods and delayed goods. In the former case, the carrier’s liability is limited to an amount equal to 835 special drawing rights (SDR) per package or other shipping unit, or 2.5 SDR per kilogram of gross weight, if the latter is higher. In the case of delayed goods the carrier’s liability is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed, but not exceeding the total sum of the freight payable under the respective contract of carriage by sea. It is worth noting that the above rules do not comprise either the interests arising from the value of the damaged goods or the judicial costs.

11 What is the procedure for establishing limitation?

The procedure for establishing a limitation fund is regulated in the Commercial Code (article 1,210 et seq). Its main features are as follows:

Persons entitled to commence limitation proceedings

Any of the persons listed in question 10 who consider themselves entitled to limit liability may come before any of the courts mentioned below and ask that a procedure be initiated aimed at constituting the fund, verifying and settling credits and distribution in accordance with the priorities provided by law.

Competent courts

It will be up to an appropriate court to investigate all of the matters referred to in the previous subheading and any that are an accessory or of consequence to them:

(i) when the limitation of liability refers to a vessel registered in Chile, it will be the civil court that lies within the jurisdiction of the port of registration of the vessel;

(ii) if dealing with a foreign vessel, the appropriate Chilean civil court of the port where the accident occurred or the first Chilean port of call after the accident or, failing either of these, whatever court has jurisdiction in the place where the vessel was first retained or where a guarantee for the vessel had first been granted; and

(iii) when such a procedure has still not been brought in any of the courts mentioned previously and the limitation of liability is filed in a plea, the same court before which it is being pleaded will be able to hear the case on limitation so long as it is an ordinary one. If dealing with a court of arbitration, copies of the pertinent background information will be sent to the court that is able to hear the case in accordance with the preceding points so that, before this court, the action aimed at constituting and distributing the limitation of liability fund, can be brought.

In these cases, the plea for limitation of liability by constituting the fund may only be made when answering the lawsuit action.

Term for exercising limitation of liability by constituting a fund

Except in the case of (iii) above, limitation of liability by constituting a fund may be exercised up to the moment in which the deadline expires for filing defences within foreclosure proceedings or within the deadline of the summons referred to in article 233 of the Civil Procedure Code in court-ordered enforcement proceedings.

Resolution declaring commencement of proceedings

The court, after examining whether the applicant’s calculations of the amount of the fund fall into line with the pertinent provisions, will issue a rule in which it will declare that proceedings have begun. At the same time, it will rule on the options offered for the constitution of the fund, ordering them to be complied with, if it approves them. In the same resolution it will mention the sum that the petitioner shall place at the disposal of the court to cover all costs of proceedings and it will appoint a receiver plus a deputy to conduct and carry out all of the acts and operations that he or she is entrusted with in this section. These appointments shall fall upon persons who are on the list of receivers mentioned in the Chilean Bankruptcy Law and it will not be necessary for their appointment to be ratified at a later date by the board of creditors.

Rules regarding cash and guarantees

When money is handed over for the constitution of the fund, the court will deposit it in a bank, with the knowledge of the receiver and the interested parties. Any readjustments and interest obtained therefrom will be added to the fund to the benefit of the creditors. If the fund has been constituted by means of a guarantee, its amount will accrue current interest wherever the court sits and it will be left on record in the document establishing the guarantee.

12 In what circumstances can the limit be broken?

Tonnage limitation

Under Chilean law, there is no single express test for breaking limitation, such as that contained in article 4 of the 1976 Convention, and the alternatives have to concluded from different provisions contained in the Commercial Code, which are explained below.

First, according to article 885 of the Commercial Code, the liability of the owner for his or her personal acts is subject to the general liability rules contained in the Chilean Civil Code.

Second, article 891 of the Commercial Code establishes that:

the limitation of liability of the shipowner may be petitioned by his or her staff in such cases and for the causes contemplated by law, unless it is proved that the loss resulted from their act or omission, [1] committed with the intent to cause such loss, or [2] recklessly and with knowledge that such loss would probably result.

In addition, article 903 of the Commercial Code (based on article 6.3 of the 1957 Convention) states that:

When actions are brought against the master or against members of the crew such persons may limit their liability even if the occurrence which gives rise to the claims resulted from their own fault, unless it is proved that the loss resulted from their act or omission, [1] committed with the intent to cause such loss, or [2] recklessly and with knowledge that such loss would probably result. If, however, the master or member of the crew is at the same time the proprietor, co-proprietor, carrier, owner or operator of the ship, the limitation shall only apply to him or her where his or her fault is committed in his or her capacity as master or as member of the crew of the ship.

Note, however, that in connection to the general test for breaking limitation, we are of the view that the general test would be the test contained in article 891.

Limitation of civil liability for damage from spillage of hydrocarbons and other hazardous substances

Spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo

Limitation of liability in this scenario follows the test set forth under the CLC 1992.

Spillage of hydrocarbons from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances

The benefit is lost if the casualty has been caused by fault or neglect on the part of the proprietor, owner or operator of the vessel.

Limitation in connection to contracts of carriage of goods by sea

The carrier forfeits his or her right to limit liability if it is proven that the loss, damage or delay in delivery arose from:

• intentional damage by the carrier (act or omission), his or her staff or agents; or

• an action or failure of the carrier, his or her servants or agents, done recklessly and with knowledge that such loss, damage or delay would probably occur.

The right to limit liability is also forfeited if the goods have been carried on deck in breach of an agreement to carry them below deck.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Chile has not ratified the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. However, the fundamental regulations applicable to passenger and luggage claims are found in Book III, Title V, paragraph 5 of the Chilean Commercial Code ‘About passage contracts’ (article 1044 et seq) are loosely based on the principles set forth under the Athens Convention.

Port state control

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

Such responsibility falls on the Maritime Authority in accordance with the Navigation Law and complementary regulations as well as applicable international conventions.

15 What sanctions may the port state control inspector impose?

As a general rule, a vessel cannot sail unless otherwise authorised by the Maritime Authority. If a foreign vessel sails without the authorisation of the corresponding port state control officer appointed by the Maritime Authority, her captain, owner or ship agent may be jointly and severally liable for up to 1 million Chilean pesos.

16 What is the appeal process against detention orders or fines?

Depending on the specific officer that granted the detention order or fine, the appeal process is to the next most senior officer, up to the head of the Maritime Authority.

Classification societies

17 Which are the approved classification societies?

According to resolution 12600/150 issued by the Maritime Authority, the current approved classification societies are as follows:

• American Bureau of Shipping;

• Bureau Veritas;

• DNV GL;

• Lloyd’s Register of Shipping; and

• Nippon Kaiji Kyokai.

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

The main source of the obligation of a classification society is found in its contract with the shipowner or shipbuilder, as the case may be. If such contract is subject to Chilean law, failure to comply with the corresponding obligations will imply liability.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes. The associated costs are to be borne by the vessel’s owner, proprietor or operator, as the case may be.

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

Collision

Article 1116 et seq of the Commercial Code set out the main regulations applicable to collisions. The Chilean Navigation Law and the Collision Rules (1972) also apply.

Salvage

Salvage is regulated by Book 3, Title 6, paragraph 5 of the Commercial Code, denominated ‘Services rendered to a vessel or other property in damage’ (article 1128 et seq of the Code). These rules are based on the Comité Maritime International’s draft International Convention (Montreal 1981) and the London International Convention on Salvage 1989.

Pollution

Spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is regulated by CLC 1992.

Spillage of hydrocarbons from vessels not carrying oil in bulk as cargo and spillage of other hazardous substances is subject to the terms of the CLC 1969 and supplementary norms set forth by the Chilean Navigation Law.

21 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?

First, the Chilean salvage regulations pointed out in question 20 apply to all salvage operations unless the relevant contract expressly or implicitly stipulates otherwise. There are two exceptions: aid rendered to warships or other public vessels that are being used, at the time of salvage operations, exclusively in official non-commercial trade; and the removal of shipwrecked remains. The regulations also apply if the assisted vessel and the salvager belong to the same owner or are subject to the same administration.

However, there is no mandatory form of salvage agreement and these are subject to the principle of freedom of contract.

As to who may carry out salvage operations, there are no specific restrictions. In this respect, the salvor must: perform salvage operations with due care, making best efforts to salvage the vessel and property contained thereon and to impede or reduce damage to the environment; and if reasonably required by circumstances, request the aid of other available salvors and accept the intervention of other salvors when requested to do so by the owner or master. However, in such an event, the salvor’s payment is not affected if it is shown that such intervention was unnecessary.

Ship arrest

22 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).

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

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, onboard 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, in order 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 to 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 on a ship in the same ownership or a ship in the same administration or operated by the same person.

24 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 the privileged credits enumerated in question 23. In this respect it is important to note that, 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.

Secondly, 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.

25 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 to do so (see question 23). Such credit will be considered as a privileged credit in accordance with article 846(2) of the Commercial Code.

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

If the court requires that security is provided as per question 24, there are no specific rules for establishing its form or amount.

27 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?

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. P&I club letters of undertaking are normally accepted only if agreed by the arresting party.

28 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.

29 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 (see question 24).

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

30 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 (see question 23), 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 upcoming 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 provides 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 it is worthy to note that, 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 to 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.

31 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.

32 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, which are summarised in question 30.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

In the context of a ship arrest, the petitioner that requested it.

34 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?

According to the Commercial Code, the judicial sale of a vessel, whether voluntary or forced, must observe the rules and formalities set forth by the Code of Civil Procedure for the judicial sale of real estate. The procedure may take from a couple of months up to one or two years, subject to the debtor’s behaviour towards the proceedings. Court costs are usually minor but other costs might be generated, such as those relating to the administration of the attached property (incumbent on a depositary who has to render an account of his or her administration before the pertinent court).

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

It will depend on the ranking of the lawful and recognised privileged creditors (see question 23).

In respect of mortgage creditors, if a mortgage creditor of a lower grade seeks a mortgaged vessel against the personal debtor who owns it, the creditors of a preferred grade are entitled to either require the payment of their credits over the price of the auction according to their respective grades or keep their mortgages over the auctioned vessel, provided their credits are not due. Saying nothing, during the challenge term, shall be understood as opting in favour of being paid at the price of the auction.

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

Privileged credits are extinguished either by the judicial sale registration at the pertinent registry or after 30 consecutive days, counted from the auction’s date, whichever is the shortest period.

As to mortgage credits, the mortgage is extinguished if the auction is done with acknowledgement of the preferred mortgage creditors, if applicable.

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

Yes, but only as far as the sale concerns a foreign flag vessel.

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

No.

Carriage of goods by sea and bills of lading

39 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?

In 1982, Chile ratified the United Nations Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules), which were in force internationally as of 1 November 1992. Additionally, the Chilean legislature included them in the Commercial Code in 1988 (Book III, Title V, paragraph 3), with minimal changes (the Chilean Rules).

Chile has not considered the ratification, acceptance or approval of the Rotterdam Rules. As explained above, Chile ratified the Hamburg Rules in 1982 and any departure from these Rules is very unlikely for the time being.

40 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?

The main rules regarding multimodal transport can be found in article 1041 et seq of the Chilean Commercial Code. Thus, article 1041 defines the main concepts applicable to multimodal transport: multimodal transport, contract of multimodal transport and operator of multimodal transport.

Furthermore, article 1043 sets out the regime of liability applicable in multimodal transport. The relevance of this article is that under Chilean law the liability of all those involved in any part or parts of the multimodal transport is joint.

Likewise the Hamburg Rules must be taken into consideration when dealing with multimodal transport, especially in connection with the limitation of responsibility set out by the Hamburg Rules, of which Chile is a signatory country.

41 Who has title to sue on a bill of lading?

The shipper, consignee or third-party holder or endorsee, as the case may be.

42 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?

Under the Chilean Rules, any party may be subject to the provisions of our rules regarding carriage of goods by sea, which are applicable if:

• the port of loading or discharge as provided for in the contract of carriage by sea is located in Chile;

• the bill of lading or other document evidencing the contract of carriage by sea (such as the sea waybill, through bill of lading, short form bill of lading, etc) stipulates that the contract will be governed by Chilean law (such as through a clause paramount); or

• one of the optional ports of discharge provided for in the contract of carriage by sea is the actual port of discharge and such port is located in Chile.

Chilean regulations are compulsorily applicable regardless of the nationality of the ship, carrier, actual carrier, shipper, consignee or any other interested person. In this respect it is important to note that clauses paramount have been held as unwritten by the Chilean Supreme Court (AJ Broom v Exportadora, Supreme Court of Chile, Case No. 683-98) as they would be contrary to public policy.

The Chilean Rules are applicable to all contracts of carriage by sea and it is not a condition that they are necessarily evidenced in a bill of lading or other documents of title such as a sea waybills or short-sea notes. In respect to combined transport bills or through bills of lading, the Rules are applicable only to the corresponding sea leg carriage. The Rules do not apply to charter parties. Nonetheless, a bill of lading issued in compliance with a charter party is under the Rules if it governs the relation between the carrier and the holder of the bill of lading other than the charterer.

In the case of contracts providing for future carriage of goods in a series of shipments during an agreed period (eg, tonnage or volume contracts used for cargo projects) the Rules apply to each shipment. However, where a shipment is made under a charter party, the Rules do not operate, with the exception explained in the preceding paragraph.

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

Chilean law recognises a basic distinction between the ‘carrier’ (also known as the ‘contractual carrier’) and the ‘actual carrier’. The former is defined as ‘any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper’ (article 975, No. 1 of the Commercial Code) and the latter as ‘any person to whom the performance of the carriage of the goods, or part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted’ (article 975, No. 2 of the Commercial Code).

The above distinction has very much simplified the identity of the carrier problem, as anyone who issues a bill of lading as a principal may be treated as a contractual carrier. This applies even to freight forwarders if they issue their own ‘house’ bill of lading and, as a matter of Chilean practice, many cargo claims are normally based on these documents alone. In this regard, it is important to note that under Chilean practice ‘demise’ or identity of carrier clauses have no effect.

In this respect, where the performance of the carriage or part thereof has been entrusted to an actual carrier, the carrier nevertheless remains responsible for the entire carriage. The carrier is jointly and severally responsible, in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his or her staff and agents acting within the scope of their employment. Additionally, all the provisions governing the responsibility of the carrier also apply to the responsibility of the actual carrier for the carriage performed by him or her.

44 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?

Under the Chilean Rules the main principle is that the liability of the carrier is based on presumed fault or neglect. Accordingly, the carrier is liable for loss resulting from loss or damage to the goods, as well as from delay in delivery, if the occurrence that caused the loss, damage or delay took place while the goods were in the carrier’s charge. If the shipowner is deemed as an actual carrier (as opposed to the ‘carrier’ definition explained in question 43) and damage occurs during his or her custody period, such shipowner would be liable. However, in Chile a carrier may avoid liability if he or she discharges the burden of proving that he, his or her staff or his or her agents adopted all measures that could reasonably be required to avoid the cause of loss or damage, and consequences thereof.

The above is notwithstanding the carrier’s right to limit liability as per the regimes explained in question 10, if applicable.

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

Under the Chilean Rules, there are no specific provisions dealing with deviation. If he or she is the cause of the loss or damage, the carrier is subject to the general test of proving that he or she took all measures that could reasonably be required to avoid the cause of loss or damage, and consequences thereof. However, the carrier is not liable, except in general average, where loss, damage or delay in delivery resulted from measures to save life or from reasonable measures to save property at sea.

46 What liens can be exercised?

According to Chilean law, privileges on a vessel are attached to credits arising from the following cases:

• legal cost 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 servants who survive ashore, onboard or in the water, and always provided that they stem from accidents related directly with 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, in order 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.

There is also a privilege attached to mortgage credit over major and minor vessels, however the credits mentioned above will prefer any mortgage.

Lastly, privileges on a vessel are attached to the following credits, which will be preferred over the credits mentioned in the paragraphs above, namely:

• credits in respect of the sale price, construction, repair and equipping of the vessel;

• credits in respect of supply of products or materials, which 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 to 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.

Likewise, privileges on cargo are attached to credits arising from the following cases:

• legal and other disbursements caused by a lawsuit aimed at the preservation of the goods or the forced alienation and distribution of the yield, which is in the common interest of the creditors of the owner of the goods;

• reimbursement of expenditure and remuneration related to salvage operations and to which cargo interests contribute, as well as general average contributions;

• removal of shipwrecked goods; and

• freight and accessory charges, including loading, discharging and warehousing costs when applicable.

In this respect, in Chile shipowners or carriers are not entitled to retain cargo on board at the port of discharge in order to secure the freight payment. Instead, they may file an application before the competent judge at the port of discharge to deposit the goods with a third party in order to sell them at auction. This application is normally handled quickly. Charterers or consignees are able to release the goods if they provide enough security for the outstanding payment – the judge decides whether the security offered is adequate.

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

The main regulations applicable to cargo delivery procedures are the Hamburg Rules, which have been incorporated without major changes into the Commercial Code (article 974 et seq) (see question 39). In addition, the Customs Ordinance, the Compendium of Customs Regulations, the Coastal Shipping Regulations and Customs resolutions regarding free trade zones are also applicable.

Although article 977 of the Commercial Code defines a ‘bill of lading’ as a document that obliges the carrier to deliver the goods upon presentation of the bill of lading to the carrier, under old customs regulations in place until 2005, this verification often could not take place. Customs Resolution No. 2250/05 overcame the problem of cargo delivery at Chilean ports without surrender of the original bill of lading – the problem arises due to the conflict between local shipping regulations and customs regulations. The resolution was issued after lengthy negotiations with the Customs Authority in the context of its internet systems integration project for the development of customs operations. As a result of the resolution, ocean carriers in Chile are now directly involved in cargo delivery procedures, both in practice and from a legal point of view, for the first time. Accordingly, under the new regulations, if carriers proceed to deliver cargo without production of the bill of lading, they can face both contractual and tort liability.

Regarding limitation, it would operate exclusively under the circumstances explained in question 10.

48 What are the responsibilities and liabilities of the shipper?

The shipper is subject to a general rule that he or she is not liable for loss sustained by the carrier or the actual carrier, or for damage sustained by the ship, unless such loss or damage was caused by the fault or neglect of the shipper, his or her staff or agents. Nor is any servant or agent of the shipper liable for such loss or damage unless the loss or damage was caused by fault or neglect on his or her part. In addition, the shipper is subject to further special rules on dangerous goods.

Shipping emissions

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

No.

50 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 the sulphur content of fuel oil used in our domestic territorial waters is that established in the MARPOL Convention. The enforcement of these requirements is carried out by the local representative of the vessel’s flag state authority and the sulphur content is verified according to the bunker delivery note certificates for the bunker’s supply.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Article 1203 of the Commercial Code establishes the general principle that the resolution of any maritime dispute, including those relating to marine insurance, is subject to mandatory arbitration. In short, all maritime disputes must be resolved by an arbitrator. However, in certain cases set forth by the same article, the ordinary civil courts may hear maritime disputes, including if the parties mutually agree to this and in the instance of claims relating to oil pollution regulated by the Navigation Law.

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

A party who wants to sue a foreign entity from Chile must do so by way of a letter rogatory (ie, a formal request from a local court to a foreign court). The party must submit the complaint to the relevant foreign civil or criminal court, and request that the court notify the respondent through the appropriate channels. The foreign court will forward the complaint to the Chilean Supreme Court. Once the Chilean Supreme Court reviews the complaint and finds it appropriate for service, it will transfer the complaint to the Ministry of Foreign Relations. The Ministry will proceed to fulfil the request in accordance with the relevant mutual legal assistance treaty. The Ministry may also be guided by a specific bilateral treaty, or in the event that there is no formal bilateral arrangement, it may work directly with the foreign ministry of the country where the entity is legally domiciled.

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

Chile has a couple of well-known arbitration centres with a panel of maritime arbitrators specialising in maritime arbitration, namely the Santiago Arbitration and Mediation Centre of the Santiago Chamber of Commerce, and the Arbitration and Mediation Centre of Valparaiso of the Fifth Region Chamber of Commerce and Production.

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

Foreign judgments and arbitral awards are enforced through exequatur. This process is contemplated in the Civil Procedure Code under which judgments issued in a foreign country shall have in Chile the force granted to them in existing treaties; for their enforcement, the procedures set out by Chilean law shall be followed unless they have been modified by such treaties. If there are no treaties related to this matter, Chile shall grant to the judgment the same force granted to Chilean judgments by the jurisdiction originating the judgment. If the judgment comes from a jurisdiction that does not enforce Chilean judgments, it shall not be enforced in Chile. If none of the previous rules may be applied, foreign judgments shall be enforced in Chile provided that:

• they contain nothing contrary to the laws of the republic, except that procedural rules to which the case would have been subject to in Chile shall not be considered;

• they are not contrary to national jurisdiction;

• the party against whom enforcement is sought was duly served with process, except that such party may still be able to allege that for other reasons it was prevented from making a defence; and

• they are not subject to appeals or further review in the country of origin.

A duly legalised copy of the judgment – officially translated into Spanish, if necessary – must be presented to the Chilean Supreme Court in order to begin the exequatur process. In the case of arbitral awards, its authenticity must also be certified by attestation of a high court of the originating jurisdiction.

Notice of the enforcement request must be served on the party against whom it is sought. Such party shall have a period of 15 days, extended depending on where it is domiciled, to respond. An opinion from an independent court official is also requested by the Supreme Court.

The Supreme Court entertains the matter in a hearing at which the parties may make oral statements.

After enforcement is allowed, the judgment must be presented to the competent civil court to commence an executive proceeding (under which the defendant’s assets can be foreclosed, if applicable).

In respect of foreign arbitral awards, a law on international commercial arbitration – based entirely on the UNCITRAL Model Law – was recently passed. Article 35 of that law regulates the recognition and enforcement of foreign arbitral awards. Article 36 lists the defences that can be asserted against enforcement and regulates orders of stay. Chile is also a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In this respect, Chilean courts have enforced all foreign arbitral awards that comply with the rules set out in the law for enforcement.

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

In Chile, there are no remedies available for bringing the case back to the country but the defendant, notwithstanding the remedies he or she may have abroad, may contest the enforcement of the foreign judgment or award in Chile in accordance with the rules explained in question 54.

56 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?

Except for cases of compulsory jurisdiction, such as those relating to contracts of carriage of goods by sea, as explained in question 42, the defendant has a formal defence based on lack of competence.

Limitation periods for liability

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

Under Chilean maritime law the general principle is that any action relating to maritime disputes is time-barred after two years. Actions relating to passage contracts, freight, general average and contributions are time-barred within six months. In addition, in case of collision actions, the two-year period is extended to three years if the responsible vessel was not arrested or detained while in Chilean jurisdictional waters, provided that the vessel abandoned them without calling at a Chilean port after the collision.

As to time extensions, under Chilean maritime law the running of the corresponding limitation period can be interrupted by a declaration in writing to the claimant by the person to whom the limitation period applies. This can be done successively but the corresponding period shall run again as of the date of the last declaration.

58 May courts or arbitral tribunals extend the time limits?

Not unless otherwise agreed by the parties.

Miscellaneous

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

Chile has not ratified the Maritime Labour Convention.

60 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?

Generally speaking, Chile applies the principle of the immutability of the contracts (mainly based on article 1545 of the Chilean Civil Code). In this respect, there are no express regulations that allow modification of the terms of a shipping contract where economic conditions have made contractual obligations more onerous to perform. Nevertheless, and although not within the shipping industry, in recent years there have been a few cases accepting this criterion, which is based on the ‘unforeseen event’ theory supported by some local scholars.

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

See ‘Update and trends’.

Update and trends

In early 2012 the Chilean National Congress proposed a bill to replace the provisions on general and non-marine insurance contained in the Code of Commerce, which were enacted almost 140 years ago, so that Chilean insurance law could be updated in line with current trends and market practice. On 9 May 2013 this bill was approved and become law (Law No. 20,667). Its enforcement became valid as of December 2013.

The law contains a number of amendments to the existing marine insurance provisions, all of which have been in force since 1988. Some of the main features of the law that affect the shipping industry are as follows.

In addition to relating directly to ships, marine insurance will apply to facilities and machinery used for loading, unloading and stevedoring operations, and will cover other goods or assets that the parties consider to be exposed to marine risks (new article 1160).

The new law expressly provides that a marine insurance contract is consensual. Its existence and terms can be evidenced by all legal means of proof, provided that a principle of written evidence is contained in a document, whether digital or electronic (new article 1173, in conjunction with article 515).

The obligation of utmost good faith has been reinforced (new articles 1176 and 1177).

The concept of total loss now includes assimilated total loss when the insured object is reasonably and finally abandoned. This may happen either because the effective total loss cannot be avoided or because the costs involved in avoiding such loss are greater than the insured value of the object (new article 1189).

The new law removes the current obligation for the insured first to pay compensation for damages to a third party in order to obtain compensation and reimbursement of expenses incurred (new article 1200).

Ricardo Rozas

rrozas@jjr.cl

Max Morgan

mmorgan@jjr.cl

Isidora Goyenechea 3250

4th Floor, Las Condes – 755 0083

Santiago

Chile

Tel: +56 2 580 9300

Fax: +56 2 580 9311

www.jjr.cl

China

James Hu, Mervyn Chen and Lawrence Chen

Wintell & Co

Newbuilding contracts

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

Pursuant to article 23 of the Real Rights Law, in principle, the title in the ship passes from the shipbuilder to the shipowner upon delivery of the ship. If the shipbuilder and the shipowner have agreed to the time of transfer of title, however, the title in the ship passes from the shipbuilder to the shipowner at the agreed time.

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

No formalities need to be complied with for the refund guarantee under a shipbuilding contract to be valid, except where a refund guarantee is issued by a commercial bank or other legal person in China that benefits or is for a foreign legal person, in which case the refund guarantee shall be subject to the approval of the State Administration of Foreign Exchange, unless previous approval has been obtained by the guarantor. Without such approval, the refund guarantee shall be void under Chinese law. Where a refund guarantee becomes void, the statutory provisions governing the consequences of a void contract shall apply.

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

When the yard refuses to deliver the vessel, the shipowner is entitled to apply to the maritime court with the jurisdiction to issue a maritime compulsory order in accordance with the Special Maritime Procedure Law, by which the yard will be compelled to deliver the vessel.

4 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?

Where the vessel is defective and damage results, a claim would lie in 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, in accordance with the Product Quality Law. Only the party who concluded the contract with the shipbuilder, namely, the shipowner, can file a claim lying in contract against the shipbuilder. However, where the shipbuilding contract concluded between the shipbuilder and the shipowner contains provisions regarding the shipbuilder’s liability for the defect in the ship, such provisions shall prevail as between the two parties to the contract.

Ship registration and mortgages

5 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?

As required by the Regulations on the Registration of Ships of 1994, the following vessels are eligible for registration under the flag of China:

• vessels owned by Chinese citizens who have residence or their principal place of business in China;

• vessels owned by corporate legal persons that have been established in accordance with Chinese law and have principal place of business in China, provided, however, that where the registered capital of the legal person has foreign investment, the share of investment of the Chinese investor shall not be less than 50 per cent;

• vessels for the public services of China; and

• other vessels that the China Maritime Safety Administration (MSA) deems should be registered. The registration of military vessels, fishing vessels and sport vessels in China is governed by other regulations.

A vessel under construction may be registered under the flag of China and will obtain a certificate of temporary Chinese nationality under registration. In practice, a vessel under construction is registered under the flag of China only for the purpose of her sea trial.

6 Who may apply to register a ship in your jurisdiction?

Pursuant to the Regulations on the Registration of Ships of 1994, the following citizens or companies may apply to register a ship in China:

• citizens of China whose residences or principal places of business are located within the territory of China;

• enterprises or companies with legal-person status established under the laws of China and whose principal places of business are located within the territory of China, provided that, where foreign investment is involved, the proportion of registered capital contributed to by a Chinese investor or investors shall not be less than 50 per cent; and

• governmental institutions of China whose ships are to be engaged in public services or institutions with legal-person status that are the shipowners.

Where the Maritime Safety Administration (MSA) determines other ships that are subject to registration in China, the shipowners may apply to register their ships. The registration of military ships, fishing vessels and sporting vessels is governed by other regulations.

7 What are the documentary requirements for registration?

Pursuant to the Regulations on the Registration of Ships of 1994, a shipowner applying for registration of the ownership of a ship shall provide the ship registry, namely, the Maritime Safety Administration at the port of registry, with documents evidencing its legal status and submit originals or copies of the documents evidencing its ownership over the ship and the technical information thereof. In particular, the following documents shall be submitted:

For the registration of ownership of a purchased ship, the following documents shall be submitted:

• a bill of sale or the sales contract, and the document of delivery and acceptance of the ship;

• a document issued by the ship registry at her original port of registry certifying the deletion of the registration of ownership; and

• a document evidencing that the ship is not under mortgage or that the mortgagees have agreed to the transfer of the mortgaged ship to other person.

For the registration of ownership of a newly built ship, the shipbuilding contract and the document of delivery and acceptance of ship shall be submitted. However, for the registration of ownership of a ship under construction, only the shipbuilding contract is to be submitted. For the registration of ownership of a ship built by oneself for one’s own use, a document evidencing the procurement of ownership shall be submitted.

For the registration of ownership of a ship procured through inheritance, presentation, auction under legal process or court judgment, a document with appropriate legal effect evidencing the ship’s ownership shall be submitted.

A shipowner applying for the registration of Chinese nationality of a ship shall, in addition to the certificate of registration of ship’s ownership, submit the following documents according to the ship’s navigation zone:

• for a ship engaged in international trade, the valid technical documents of the ship issued by an authorised organisation for the survey of ships in accordance with the type of the ship:

• international tonnage measurement certificate;

• international loadline certificate;

• cargo ship safety construction certificate;

• cargo ship safety equipment certificate;

• passenger quota certificate;

• passenger ship safety certificate;

• cargo ship safety radiotelegraphy certificate;

• international oil pollution prevention certificate;

• ship safety navigation certificate; and

• other relevant technical certificates; and

• for a ship engaged in domestic trade, the book of ship survey certificates issued by an authorised organisation for survey of ships and other valid technical certificates in accordance with the type of ship.

A shipowner applying for the registration of Chinese nationality of a ship with foreign nationality and purchased abroad shall additionally submit a certificate issued by the original ship registry at the former port of registry to the effect that the former nationality has been deleted or will be immediately deleted at such time as the new registration is effected.

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

Under the current Chinese law, a ship cannot have dual nationality. A ship registered in another jurisdiction shall not be granted Chinese nationality unless its previous registration of nationality has already been suspended or deleted or will be immediately suspended or deleted at such time as the new registration is effected.

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

The MSA is the competent authority for ship registration, including registration of ship mortgages but excluding registration for military vessels, fishing vessels and sporting vessels. The division of the MSA at each port is the authority that performs the registration of ships. The MSA records the following information on registration of ship mortgage:

• the name and address of the mortgagee and the mortgagor of a ship;

• the name and nationality of the mortgaged ship and the authority that issued the certificate of ownership and the certificate number thereof; and

• the amount of debt secured, the interest rate and the period for repayment of the debt.

Limitation of liability

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

Pursuant to the Maritime Code and the related regulations for the implementation of the Code, the limitation of liability regime in China can be summarised as follows:

(1) Limitation of liability of the carrier in international carriage of goods

The carrier’s liability for the loss of or damage to the goods is the same as that provided for in the Hague-Visby Rules as amended by their 1979 SDR Protocol and shall be limited to an amount equivalent to 666.67 special drawing rights (SDR) per package or other shipping unit, or 2 SDR per kilogram of the gross weight of the goods lost or damaged, whichever is the higher. The liability of the carrier for the economic losses resulting from delay in delivery of the goods when the carrier fails to deliver the goods within the timeframe expressly agreed between the carrier and the shipper shall be limited to an amount equivalent to the freight payable for the goods so delayed. A higher limit of liability may be agreed upon between the carrier and the shipper in writing. The servants or agents of the carrier, the actual carrier, or the servants or agents of the actual carrier may avail themselves of the limitation of liability of the carrier.

(2) Limitation of liability of the carrier in international carriage of passengers by sea

The carrier’s liability is the same as that provided for in the Athens Convention of 1974 as amended by its 1976 SDR Protocol and shall be limited to the following:

• for the death or personal injury of the passenger, 46,666 SDR per passenger per carriage;

• for loss or damage to the passengers’ cabin luggage, 833 SDR per passenger per carriage;

• for loss or damage to the passengers’ vehicles including the luggage carried therein, 3,333 SDR per vehicle; and

• for loss or damage to other luggage, 1,200 SDR per passenger per carriage.

A higher limit of liability may be agreed upon between the carrier and the passenger in writing. The servants or agents of the carrier, the actual carrier, or the servants or agents of the actual carrier may avail themselves of the limitation of liability of the carrier.

The total amount of limitation of liability of the shipowner for loss of life or personal injury to passengers shall be an amount of 46,666 SDR multiplied by the number of passengers the ship is authorised to carry according to the ship’s relevant certificate, but the maximum amount of compensation shall not exceed 25 million SDR.

(3) Limitation of liability of the carrier in carriage of passengers by sea between the ports of China

The carrier’s liability shall be limited to the following:

• for death or personal injury to the passenger, 40,000 renminbi per passenger per carriage;

• for loss or damage to the passengers’ cabin luggage, 800 renminbi per passenger per carriage;

• for loss or damage to the passengers’ vehicles, including the luggage carried therein, 3,200 renminbi per vehicle; and

• for loss or damage to the passengers’ other luggage, 20 renminbi per kilogram of the luggage.

A higher limit of liability may be agreed upon between the carrier and the passenger in writing. The servants or agents of the carrier, the actual carrier, or the servants or agents of the actual carrier may avail themselves of the limitation of liability of the carrier.

The total amount of limitation of liability of the shipowner for loss of life or personal injury to passengers shall be 40,000 renminbi multiplied by the number of passengers that the ship is authorised to carry according to the ship’s relevant certificate, but the maximum amount of compensation shall not exceed 21 million renminbi.

(4) Limitation of liability for maritime claims for ships with a gross tonnage in excess of 300 tons engaging in international trade

Persons who may limit their liability are the shipowner (including the charterer and the operator of a ship) and salvor, the servants or agents of the shipowner or salvor, and the insurer of liability of the shipowner or salvor.

As in the LLMC Convention of 1976, the following maritime claims are subject to limitation of liability:

(i) claims in respect of loss of life or personal injury, or loss or damage to property, including damage to harbour works, basins and waterways, and aids to navigation occurring on board or in direct connection with the operation of the ship or with salvage operations, as well as consequential damages resulting therefrom;

(ii) claims in respect of loss resulting from delay in delivery in the carriage of goods by sea or from delay in the arrival of passengers or their luggage;

(iii) claims in respect of other loss resulting from infringement of rights other than contractual rights occurring in direct connection with the operation of the ship or salvage operations; and

(iv) claims of a person other than the person liable in respect of measures taken to avert or minimise loss for which the person liable may limit his or her liability, and further loss caused by such measures.

However, with respect to the remuneration set out in (iv) for which a person liable pays as agreed upon in the contract, the person liable cannot limit liability in relation to the obligation for payment.

As in the LLMC Convention of 1976, the amount of limitation of liability for maritime claims of a vessel engaged in international trade with a gross tonnage in excess of 300 tons shall be calculated as follows:

In respect of claims for loss of life or personal injury:

(i) an amount of 333,000 SDR for a ship of between 300 and 500 GT; and

(ii) for a ship in excess of 500 GT, the limitation under (i) shall be applicable to the first 500 GT and the following amounts in addition to that set out under (i) shall be applicable to the gross tonnage in excess of 500 GT:

• for each ton from 501 to 3,000 GT: 500 SDR;

• for each ton from 3,001 to 30,000 GT: 333 SDR;

• for each ton from 30,001 to 70,000 GT: 250 SDR; and

• for each ton in excess of 70,000 GT: 167 SDR.

In respect of claims other than those for loss of life or personal injury:

(i) an amount of 167,000 SDR for a ship with a gross tonnage ranging from 300 to 500; and

(ii) for a ship with a gross tonnage in excess of 500, the limitation under (i) shall be applicable to the first 500 GT, and the following amounts in addition to that under (i) shall be applicable to the part in excess of 500 GT:

• for each ton from 501 to 30,000 GT: 167 SDR;

• for each ton from 30,001 to 70,000 GT: 125 SDR; and

• for each ton in excess of 70,000 GT: 83 SDR.

Limitation of liability of any salvor not operating from any ship or operating solely on the ship to, or in respect of which, he or she is rendering salvage services, shall be calculated according to a gross tonnage of 1,500 tons.

(5) Limitation of liability for maritime claims for ships with a gross tonnage not exceeding 300 and those engaging in coastal transport services as well as those for other coastal operations

Limitation of liability for maritime claims for ships with a gross tonnage not exceeding 300 and engaged in international transport is as follows.

In respect of claims for loss of life or personal injury:

• an amount of 54,000 SDR for a ship with a gross tonnage in excess of 20 and less than 21; and

• for a ship with a gross tonnage in excess of 21, 1,000 SDR shall be added for each gross ton in excess of 21 GT.

In respect of claims other than those for loss of life or personal injury:

• an amount of 27,500 SDR for a ship with a gross tonnage in excess of 20 and less than 21; and

• for a ship with a gross tonnage in excess of 21, 500 SDR shall be added for each gross ton in excess of 21 GT.

Limitation of liability for maritime claims for ships engaging in transport service between ports of China or coastal operations in China shall be calculated on the basis of 50 per cent of the limitation of liability provided for ships engaging in international trade.

(6) Limitation of liability for oil pollution damage

Limitation of liability for oil pollution damage within the scope of application of the International Convention on Civil Liability for Oil Pollution Damage of 1992 (CLC 1992) shall be determined in accordance with the Convention. Limitation of liability for oil pollution damage outside the scope of application of the CLC 1992 shall be determined in accordance with (4) or (5) above together with other claims other than those for loss of life or personal injury arising from a distinct occasion.

11 What is the procedure for establishing limitation?

Pursuant to the Maritime Code and the Special Maritime Procedure Law, establishing a limitation fund is not a condition for invoking limitation of liability, except for limitation of liability for oil pollution damage by ships. A limitation fund may be established either by cash deposit or by a security acceptable to the maritime court to which establishment of a limitation fund is applied.

The procedures for establishing a limitation fund are provided for in the Special Maritime Procedure Law. After a maritime accident, the shipowner or other person who is entitled to limit liability may apply to a maritime court with jurisdiction for establishment of a limitation fund for maritime claims subject to limitation. Establishment of a limitation fund may be applied for either before an action is brought or during the legal proceedings. The procedures are as follows:

• The applicant files an application with a maritime court for establishment of a limitation fund for maritime claims and pays the application fee.

• The maritime court shall, within seven days of the acceptance of an application for establishment of a limitation fund for maritime claims, notify all the interested persons already known, and issue an announcement of the same in the newspapers or other news media for three consecutive days (the announcement fee shall be paid by the applicant in advance). The announcement period shall be 60 days as of the day after the announcement is made. The creditors shall, within the time limit announced, apply for registration of their claims. Creditors who fail to register their claims before expiry of the said time limit shall be deemed to have abandoned their rights.

• Any interested party who objects to the application filed by the applicant for establishment of a limitation fund for maritime claims shall file an objection in writing with the maritime court within seven days from the date of receipt of the notice, or within 30 days from the date of the announcement if no notice is received.

• The maritime court, having received the written objection filed by an interested party, shall summon the applicant and the objector to have a hearing and make a first instance award within 15 days to either allow or reject the application to establish a limitation fund for maritime claims. The party who is dissatisfied with such an order may file an appeal within seven days from the date of receipt thereof. The people’s court of second instance, (ie, the high people’s court of the province), municipality directly under the State Council or autonomous region shall make an order within 15 days from the date of receipt of the appeal.

• Within three days after the award to allow the applicant to establish a limitation fund for maritime claims becomes effective, the applicant shall establish the fund with the maritime court.

The limitation fund for maritime claims shall be established in renminbi, and shall be calculated according to the conversion rate of renminbi against SDR of the day when the award issued by the maritime court for establishment of a limitation fund becomes effective. Where the fund is established in cash deposit, the amount shall cover the principal amount of the fund in renminbi and any interest arising thereon from the day when the accident occurred to the day when the limitation fund is established. The interest shall be calculated in accordance with the one-year loan rate for financial institutions over the same period published by the People’s Bank of China. Where the limitation fund is established by way of a letter of security, the amount of the security shall cover the principal amount of the fund and any interest arising thereon from the day when the accident occurred to the day when the limitation fund is established as well as during the period of such establishment, and the interest shall be calculated in accordance with the one-year loan rate for financial institutions over the same period published by the People’s Bank of China.

12 In what circumstances can the limit be broken?

Pursuant to article 209 of the Maritime Code, a person liable shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her actions or inactions, performed with the intent to cause such loss, or recklessly and knowing that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

China is a party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea of 1974 as amended by its 1976 SDR Protocol. Chapter V (Contract of Carriage of Passengers by Sea) of the Maritime Code contains the same provisions as the Athens Convention, except for the limits of liability of carriers in the carriage of passengers between Chinese ports.

In accordance with the Provisions on Limitation of Liability in the Carriage of Passengers between the Ports of the People’s Republic of China promulgated by the Ministry of Communications and approved by the State Council in 1993, carriers’ liability in the carriage of passengers between Chinese ports shall be limited to the following:

• for death or personal injury to a passenger, 40,000 renminbi per passenger per carriage;

• for loss or damage to the passengers’ cabin luggage, 800 renminbi per passenger per carriage;

• for loss or damage to the passengers’ vehicles, including the luggage carried therein, 3,200 renminbi per vehicle; and

• for loss or damage to the passengers’ other luggage, 20 renminbi per kilogram of luggage.

A higher limit of liability may be agreed upon between the carrier and the passenger in writing.

Port state control

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

The MSA is the port state control agency in China.

Pursuant to the provisions of the Ship Safety Inspection Rules of 2009, the ship safety inspectors are entitled to embark and inspect a foreign vessel navigating, berthing or operating in Chinese ports, inland waters and territorial waters; to conduct a comprehensive inspection and control over the vessel’s technical condition, manning, competency and pollution prevention; to restrict or limit the activity of a vessel or to detain a vessel that harms the port security, pollution prevention or public security.

15 What sanctions may the port state control inspector impose?

An inspector may put forward one or some of the following proposals of disposal if a vessel is determined to have a defect or defects found during a safety inspection:

• correction of defects before the vessel sails;

• correction of defects within a certain time limit after the vessel sails;

• detention of the vessel;

• prohibition on the vessel from entering a port;

• restriction of operation of the vessel;

• ordering the vessel to sail to a designated zone;

• deporting the vessel from a port; and

• other measures provided for in law, administrative regulations or international treaties.

Where a vessel that violates the law refuses to allow a safety inspection or obstructs the inspector conducting a safety inspection, or where a vessel does not correct her defect or defects, the MSA shall have the right to impose a fine on the vessel, owner, operator or manager of the vessel.

16 What is the appeal process against detention orders or fines?

In accordance with the Ship Safety Inspection Rules of 2009, the owner of a vessel shall have the right to make a statement and contention of the defect or defects and proposal of disposal made by the MSA at the time of a safety inspection.

Pursuant to the Administrative Review Law, the owner or operator of a detained vessel may file an application for reviewing the order of detention with the superior MSA institution. Pursuant to the Administrative Procedure Law and the Law on State Compensation, the owner or operator of a detained vessel shall have the right to file a claim against the MSA for damages with a people’s court if its legal rights and interests are infringed by illegal detention or fines imposed by the MSA.

Classification societies

17 Which are the approved classification societies?

So far, the classification society approved by the Chinese government to conduct statutory surveys of vessels flying or planning to fly the Chinese flag is the China Classification Society.

Foreign classification societies are allowed to conduct non-statutory surveys of vessels flying the Chinese flag in China or statutory surveys of foreign vessels in China. However, they shall observe the provisions of Chinese law, conduct activities within the limits set by law and accept the supervision of the MSA. The following ship survey companies are established in China by foreign classification societies:

• Lloyd’s Register Classification Society (China);

• Bureau Veritas Marine China;

• DNV GL (China);

• Nippon Kaiji Kyokai (China);

• Korean Register of Shipping (China);

• Registro Italiano Navale (China);

• Dalian Jack Maritime Technology Consultants;

• Isthmus Bureau of Shipping Dalian;

• Panama Maritime Documentation Services (Beijing);

• Russian Maritime Register of Shipping (Tianjin);

• Indian Register of Shipping (Qingdao);

• ABS Greater China (Headquarters Shanghai);

• Union Bureau of Shipping (Dalian); and

• Universal Maritime Bureau (Yantai).

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

Chinese law does not stipulate in what circumstances a classification society may be held liable. According to the provisions on the Measures for Investigation of the Faults of Ship Survey Organisations and Surveyors, a classification society or its surveyor shall assume administrative responsibility for fault in a statutory inspection. A surveyor whose act violates criminal law and thus constitutes a crime shall be prosecuted for his or her criminal liability.

Several cases of disputes over the liability of a classification society tried by the Chinese courts show that the courts are cautious and have not yet found that a classification society shall assume civil responsibility. Theoretically, a classification society may bear civil liability for breach of contract between the classification society and its client under the Contract Law, and a classification society may bear tort liability to a third party if the interest of the third party is affected by the fault of the classification society or its surveyors under the Tort Law.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The Maritime Traffic Safety Law of 1983 authorises the MSA to take necessary and compulsory measures where a vessel is involved in an accident that jeopardises or may jeopardise traffic safety. Article 40 of the Law provides that, with respect to a sunken or drifting vessel or other object that affects the safety of navigation, the dredging of waterways or constitutes a threat of explosion, the owner or operator shall raise or remove such a ship or object within a deadline set by the MSA; otherwise, the MSA may take compulsory measures to raise or remove the ship or object at the expense of the owner or operator.

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

The following international conventions and protocols are in force in China:

• Convention on the International Regulations for Preventing Collisions at Sea, 1972 and its protocols;

• International Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels, 1910;

• International Convention on Maritime Search and Rescue, 1979;

• International Convention on Salvage, 1989;

• International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 and other protocols;

• Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matters, 1972;

• International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties, 1969;

• Protocol relating to Intervention on the High Seas in Cases of Pollution by Substances other than Oil, 1973;

• International Convention on Oil Pollution Preparedness, Response and Cooperation, 1990;

• International Convention on Civil Liability for Oil Pollution Damage, 1992;

• International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001; and

• International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992 (applicable in Hong Kong Special Administrative Region only).

21 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?

The local form of salvage agreement is the Standard Form of Salvage Contract Form of 1994, adopted by the China Maritime Arbitration Commission (see question 52), but it is not mandatory. Lloyd’s standard form of salvage agreement is acceptable in China.

There are some companies licensed to carry out salvage operations in China. The main companies are the Yantai Salvage Bureau of the Ministry of Transport, the Shanghai Salvage Bureau of the Ministry of Transport and the Guangzhou Salvage Bureau of the Ministry of Transport.

Ship arrest

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

China is a party to the International Convention Relating to the Arrest of Seagoing Ships, 1952, but this Convention is applicable only in Hong Kong. China is not a party to the International Convention on the Arrest of Ships, 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Article 21 of the Special Maritime Procedure Law provides that an application may be made for the arrest of a vessel with respect to the following maritime claims:

• loss of or damage to property caused by vessel operation;

• loss of life or personal injury in direct connection with vessel operation;

• salvage at sea;

• damage or threat of damage caused by a vessel to environment, coast or relevant interested persons; measures taken to prevent, diminish or eliminate such damage; compensation paid for such damage; costs for reasonable measures taken or to be taken for reinstatement of the environment; losses caused or likely to be caused by such damage to a third party; and damage, costs, or losses of a similar nature;

• expenses related to the refloating, removal, reclamation or destruction of a sunken vessel, wreck, run-aground vessel or abandoned vessel, or expenses related to making them harmless, including those relating to refloating, removal, reclamation or destruction of the things that have remained or no longer remain on board the vessel, or to making them harmless, and expenses related to the maintenance of an abandoned vessel and her crew;

• any agreement in respect of the employment or charting of a vessel;

• any agreement in respect of the carriage of goods or passengers;

• loss of or damage to, or in connection with, goods carried on board a vessel (including luggage);

• general average;

• towage;

• pilotage;

• goods supplied or services rendered to a vessel for its operation, management, maintenance or repair;

• construction, reconstruction, repair, refurbishment or equipment of a vessel;

• dues and charges of port, canal, dock, harbour and other waterways;

• crew’s wages and other monies, including the costs of repatriation and social insurance contributions payable for the crew;

• expenses paid for a vessel or a shipowner;

• insurance premiums (including mutual insurance calls) for a vessel, payable by or paid for a shipowner or bareboat charterer;

• any commissions, brokerages or agency fees in respect of a vessel, payable by or paid for a shipowner or bareboat charterer;

• any dispute over ownership or possession of a vessel;

• any dispute between joint owners of a vessel over the employment or earnings of the vessel;

• a ship mortgage or rights of a similar nature; and

• any dispute arising out of a contract of sale of vessel.

Arrest of vessel cannot be applied for based upon claims other than the above-listed maritime claims, unless for the enforcement of a court judgment, arbitration award or other legal document.

Arrest of a vessel is not subject to the flag the vessel flies or the law governing a maritime claim.

The maritime court may arrest another vessel or vessels which, when the arrest is effected, is or are owned by the shipowner, bareboat charterer, time charterer or voyage charterer who is liable for the maritime claim, except for claims with respect to ownership or possession of a vessel.

24 What is the test for wrongful arrest?

Chinese law does not provide the test for wrongful arrest. In judicial practice, if a vessel arrested is not owned or bareboat-chartered by the person against whom the claim is made, is otherwise not subject to arrest, or the applicant’s claim is not a maritime claim that can give rise to arrest, it shall be deemed a wrongful arrest. It is an objective test. Bad faith or the ultimate failure of the claim shall not be regarded as a test of wrongful arrest.

25 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?

Pursuant to articles 21 and 23 of the Special Maritime Procedure Law, if the charterer was the bareboat charterer of a vessel at the time of bunkering, the bunker supplier may arrest the vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, provided that the charterer remains the bareboat charterer or has become the owner of the vessel at the time of arrest.

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

Pursuant to article 16 of the Special Maritime Procedure Law, the maritime court may enjoin the arresting party to provide counter-security if the arrest is applied for during litigation. The application shall be rejected if the maritime claimant fails to provide counter-security as required by the maritime court. If the arrest is applied for before litigation, provision of counter-security is normally a must. If the arrest is for the purpose of enforcement of a court judgment or award, no counter-security is required.

The counter-security to be provided by the arresting party may take the form of cash deposit or other security acceptable to the maritime court, such as a letter of security issued by a Chinese commercial bank or insurance company or China Shipowners Mutual Assurance Association (China P&I Club). A letter of security issued by a foreign commercial bank or insurance company or other company is normally not acceptable to a maritime court.

In respect of the amount of counter-security, article 76 of the Special Maritime Procedure Law provides that it shall be equal to the amount of loss that may be suffered by the arrested party as a result of the arrest and its specific amount shall be decided by the maritime court that will effect the arrest. In practice, however, there is no uniform test in respect of the amount of counter-security. Sometimes the amount of counter-security is required to be equal to the amount of the claim; sometimes it may require one-third of the claim amount; and sometimes it shall be equivalent to the estimated amount of loss of use of the vessel to be arrested for a period of 30 days.

27 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?

In respect of the calculation of the amount of security to be provided by the arrested party as ordered by the court, according to article 76 of the Special Maritime Procedure Law, the amount of security shall be equal to the amount of the claim, but shall not exceed the value of the vessel arrested. According to article 77 of the Law, the arrested party or other person who has provided the security may apply to the maritime court for reduction, alteration or withdrawal of the security, if he or she has justifiable reasons to do so.

As with the case of counter-security mentioned above (question 25), the security to be provided by the arrested party or other person on its behalf may take the form of cash deposit or other security acceptable to the maritime court, such as a letter of security issued by a Chinese commercial bank or insurance company or the China P&I Club). A letter of security issued by a foreign commercial bank or insurance company or other company is normally not acceptable to the maritime court, unless agreed to by the arresting party.

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

Chinese law does not contain provisions in this respect. In judicial practice, the maritime court will require the shipowner or other person against whom the claim is made to take responsibility for the safety and maintenance of the vessel under arrest.

29 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?

Pursuant to article 19 of the Special Maritime Procedure Law and the judicial interpretation of the Law promulgated by the Supreme People’s Court, the arresting party shall pursue the claim on its merits by bringing an action with the maritime court that effected the arrest of the vessel within 30 days of the day of the arrest of the vessel, unless an action has been brought or arbitration has been applied for elsewhere. If a jurisdiction or arbitration agreement has been reached between the parties and no action has been brought or no arbitration has been applied for pursuant to the jurisdiction or arbitration agreement, the arresting party shall bring an action or apply for arbitration in accordance with such an agreement within 30 days of the day of arrest of the vessel. If the arresting party fails to bring an action or apply for arbitration within the above-mentioned time limit, the maritime court will order the release of the vessel under arrest or return the security that has been provided to release the vessel.

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

Articles 100, 101, 102 and 103 of the Civil Procedure Code of China contain provisions of property preservation. Arrest of vessel as provided for in the Special Maritime Procedure Law is one kind of property preservation that is applicable to vessels. Other kinds of property preservation shall also be applicable to maritime cases, provided that the property is within the scope of claim or relates to the case. These kinds of property preservation mainly include attachment on property other than a vessel owned by the responsible party and freezing the deposit in the bank account of the responsible party.

In addition, a vessel may be placed under ‘living arrest’. According to article 27 of the Special Maritime Procedure Law, after a court order for arrest of the vessel is issued, the vessel may be still allowed to be engaged in trading upon the agreement of the maritime claimant, provided that the disposal of the vessel or mortgage on the vessel shall be restricted or prohibited. This living arrest is applicable to Chinese vessels only.

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

Orders for delivery up are deemed to be one form of maritime compulsory order as provided for in Chapter IV ‘Maritime Compulsory Order’ of the Special Maritime Procedure Law.

According to article 56 of the Special Maritime Procedure Law, under the following conditions a maritime compulsory order will be issued by a maritime court upon application:

• the claimant has a specific maritime claim;

• a breach of legal provisions or contractual provisions by the person against whom a claim is made needs to be redressed; and

• in a situation of emergency, losses will be caused or will become worse if a maritime compulsory order is not granted forthwith.

The maritime court may enjoin the maritime claimant to provide security before granting a maritime compulsory order. Where the maritime claimant fails to do so, the application shall be rejected.

Both preservation of evidence and preservation of property are available to a maritime claimant.

Preservation of maritime evidence is governed by Chapter V ‘Preservation of Maritime Evidence’ of the Special Maritime Procedure Law. Preservation of evidence shall be initiated on the application of a maritime claimant. The applicant may be ordered by the maritime court to provide a security.

The following conditions shall be met before preservation of maritime evidence is granted:

• the applicant is a party to a maritime claim;

• the evidence, preservation of which is requested, substantiates the maritime claim;

• the person against whom the application is made is a party relevant to the evidence, preservation of which is requested; and

• in a situation of emergency, the evidence relevant to the maritime claim may be lost or hard to obtain, if the evidence is not immediately preserved.

Preservation of property in a maritime case mainly includes arrest of vessels, attachment on cargo carried by vessels, vessels’ bunkers or stores owned by the responsible party as provided for in the Special Maritime Procedure Law, attachment on other properties owned by the responsible party and freezing of deposit in the bank account of a responsible party as provided for in the Civil Procedure Code.

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

Pursuant to article 50 of the Special Maritime Procedure Law, the vessel’s bunkers or stores are subject to attachment in China in a case of maritime claim. However, the vessel’s bunkers or stores that are subject to attachment shall be only those owned by the party against whom the claim is made. The procedures for attachment on the vessel’s bunkers or stores shall be as those for attachment on cargo carried by a vessel as provided for in the Special Maritime Procedure Law.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Pursuant to article 16 of the Special Maritime Procedure Law, the party who applied for the arrest may apply for judicial sale of the vessel under arrest if no security is provided to release the vessel within a period of 30 days. If the arresting party does not apply for judicial sale of the vessel under arrest within a period of 30 days, the person against whom the claim is made, namely, the owner or bareboat charterer of the vessel, may apply to the maritime court for judicial sale of the vessel.

A person who applies for the enforcement of an effective judgment, arbitration award or other legal document may apply to the maritime court for judicial sale of a vessel.

34 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?

Pursuant to the Special Maritime Procedure Law and the Interpretation of the Application of the Special Maritime Procedure Law promulgated by the Supreme People’s Court, the procedures for judicial sale are as follows:

• The arresting party files an application for judicial sale of the vessel under arrest. If the arresting party does not file an application, the person against whom the claim is made may file an application for judicial sale of the vessel under arrest.

• The maritime court shall, after receipt of an application for judicial sale, examine the application and make an order to allow or disallow judicial sale. Any party who is dissatisfied with such an order may, within five days after receipt thereof, apply for review not more than once. The maritime court shall, within five days after receipt of the application, give the result of the review. During the period of review, execution of the order shall be suspended.

• The maritime court that orders judicial sale of a vessel shall issue an announcement in newspapers or other news media. In the case of judicial sale of a foreign vessel, such announcement shall be issued in the newspapers or other news media of overseas distribution. The period of announcement shall be not less than 30 days.

• After the maritime court issues an announcement for judicial sale, the creditors shall within the period indicated in the announcement apply in writing for the registration of their respective rights with relevant evidence. The maritime court shall, after receipt of an application for registration of the creditor’s right, examine the application and make an order to accept or reject the registration.

• 30 days before judicial sale of the vessel, the maritime court shall send notices to the vessel’s registry, the claimants whose claims are secured by maritime lien, the mortgagee and the owner of the vessel who are known to the maritime court.

• A committee of judicial sale shall be organised, composed of three or five persons including a person from the maritime court in charge of execution who is designated by the maritime court, an auctioneer and a vessel surveyor whom the maritime court invites. The committee shall arrange for the assessment and evaluation of the vessel.

• Bidders shall register with the committee of judicial sale within a prescribed time limit and pay a certain amount of bidding deposit for purchase of the vessel.

• The committee of judicial sale shall, before the judicial sale of the vessel, display the vessel for judicial sale, make the vessel available for inspection and provide information about the vessel.

• The judicial sale shall be made in public.

• Having signed the confirmation of sale, the purchaser shall pay forthwith not less than 20 per cent of the purchase price, and the balance shall be paid within seven days after the date of the purchase, unless the committee of judicial sale has agreed otherwise with the purchaser. The proceeds of the judicial sale shall be paid into the escrow account of the maritime court.

• When the purchaser has paid the purchase price in full, the previous shipowner shall, within the prescribed time limit, deliver the vessel to the purchaser as is at the berthing place. The committee of judicial sale shall arrange for and supervise the delivery of vessel and sign the letter of confirmation of delivery and acceptance with the purchaser. After delivery of the vessel, the maritime court shall make an order to release the vessel.

• After the vessel is delivered, the maritime court shall issue an announcement in newspapers or other news media stating that the vessel has been sold in a judicial sale and delivered to the purchaser.

In judicial practice, the full procedure for a judicial sale of a vessel normally takes two to three months following an application for a judicial sale.

The maritime court charges a certain amount of court costs, covering inspection, evaluation of the vessel, announcement of judicial sale, distribution of the proceeds of sale, other expenses for the common benefits of the creditors and other court fees in relation to the judicial sale.

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

The creditors may reach an agreement of distribution of the proceeds of sale, which shall be legally binding after the maritime court has made an order to confirm it. Where the creditors fail to reach such an agreement, the maritime court shall decide the order of priority of claims against the proceeds of sale according to the order of priority established by the Maritime Code as follows:

• First, litigation fees to be borne by the person liable, the expenses incurred for preservation and sale of the vessel, distribution of the proceeds of sale, and other expenses for the common benefits of the creditors.

• Second, the following maritime claims that are secured by maritime lien:

(i) claims for wages, other remuneration, crew repatriation and social insurance costs made by the master, crew members and other members of the complement in accordance with the relevant labour law, administrative rules and regulations, or labour contracts;

(ii) claims in respect of loss of life or personal injury occurring in the operation of the vessel;

(iii) payment claims for the vessel’s tonnage dues, pilotage dues, harbour dues and other port charges;

(iv) claims for salvage payment; and

(v) claims for loss of or damage to property resulting from tortious acts in the course of the operation of the vessel.

Claims for oil pollution damage caused by a vessel carrying more than 2,000 tons of oil in bulk as cargo that has a valid certificate attesting that the vessel has oil pollution liability insurance coverage or other appropriate financial security are not within the scope of (v) above. It has not yet been decided whether or not claims for other oil pollution damage (eg, bunker oil pollution damage for which there exists oil pollution liability insurance coverage or other appropriate financial security) shall fall within the scope of (v) above. Theoretically, the same rule shall apply in such a case.

The maritime claims set out in (i) to (v) shall be satisfied in the order in which they are listed. Any of the maritime claims set out in (iv) arising later than those under (i) to (iii), however, shall have priority over those under (i) to (iii). Where there are more than two maritime claims under (i), (ii), (iii) or (iv), they shall be satisfied at the same time, regardless of their respective occurrences; where they cannot be paid in full, they shall be paid in proportion. Should there be more than two maritime claims under (iv), those arising later shall be satisfied first.

• Third, creditor’s rights arising out of shipbuilding or ship repairing, which are secured by possessory lien on a vessel.

• Fourth, creditor’s rights which are secured by ship mortgage.

• Finally, the ordinary creditor’s rights.

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

The purchaser will obtain a clean title to the vessel after a judicial sale thereof. The judicial sale will serve to extinguish all prior liens and encumbrances on the vessel, including any maritime liens, mortgage of the vessel and possessory lien on the vessel.

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

Chinese law does not contain any specific provision regarding recognition of a judicial sale of a vessel in a foreign jurisdiction. Therefore, the provisions of the Chinese law regarding recognition of a judgment or ruling rendered by a foreign court shall apply with respect to recognition of a judicial sale of a vessel in a foreign jurisdiction.

In this regard, article 282 of the Civil Procedure Code provides that, after a people’s court of China reviews an application for the recognition and enforcement of a legally effective judgment or ruling rendered by a foreign court according to an international treaty concluded or acceded to by China, a bilateral treaty concluded by China, or based on the principle of reciprocity, the court may render a ruling to recognise its force, if the court considers that such a judgment or ruling does not contradict the basic principles of the law of China or violate the national, social, and public interest of China. If a legally effective judgment or ruling rendered by a foreign court contradicts the basic principles of the law of China or the national, social, and public interest of China, the people’s court shall reject the application of recognition and enforcement. Where there is no such international or bilateral treaty, or where the principle of reciprocity is not applicable, the party who seeks recognition of the judicial sale of a vessel in a foreign jurisdiction shall file a lawsuit with the maritime court with jurisdiction.

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

China is a signatory to the International Convention on Maritime Liens and Mortgages, 1993, but has not ratified this Convention.

Carriage of goods by sea and bills of lading

39 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?

China has not ratified or acceded to the Hague Rules, Hague-Visby Rules or Hamburg Rules. The provisions of the Hague-Visby Rules regarding the carrier’s responsibilities, exemptions and limitation of liability, and those of the Hamburg Rules regarding, inter alia, the shipper’s responsibilities and actual carrier and transport documents, are basically embodied in the Maritime Code.

China has not ratified or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules).

Under the Maritime Code, the responsibilities of the carrier with regard to the goods carried in containers starts from the time the carrier takes over the goods at the port of loading and ends when the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerised goods starts from the time of loading the goods onto the ship and ends when the goods are disembarked. In the case of non-containerised goods, however, the carrier and the shipper are free to reach agreement on the responsibility and liability of the carrier for the goods before loading and after discharge.

40 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?

With respect to road transport, China is not a party to the Convention on the Contract for the International Carriage of Goods by Road. Road transport is subject to the Contract Law. With respect to rail transport, China is a party to the Agreement Concerning International Carriage of Goods by Rail, but is not a party to the Convention Concerning International Carriage by Rail. Rail transport is also subject to the Railroad Law of China. With respect to air transport, China is a party to the Unification of Certain Rules for the International Air Transport Convention and the Hague Protocol. Air transport is also subject to the Civil Aviation Law of China. In the case of repugnancy between an international treaty and domestic law, the international treaty shall prevail.

Pursuant to the Maritime Code and the Contract Law, the network liability system is adopted. Under a combined transport or multimodal bill of lading, the multimodal transport operator shall be responsible for the performance of the multimodal transport contract or the procurement of the performance. In other words, the multimodal transport operator may enter into separate contracts with the carriers of the different modes, but shall remain responsible for the entire transport. If loss of or damage to the goods has occurred in an ascertained stage of transport, the provisions of the relevant applicable international treaty or law governing that specific stage of the multimodal transport shall be applicable to matters concerning the liability of the multimodal transport operator and the limitation thereof. If the stage of transport in which the loss of or damage to the goods occurred could not be ascertained, the multimodal transport operator shall be liable for compensation in accordance with the stipulations regarding the carrier’s liability and the limitation thereof in the international carriage of goods by sea. Where a claim for loss of or damage to goods is made against the carrier of the stage of multimodal transport in which the loss of or damage to the goods occurred, the provisions of the relevant applicable international treaty or law governing that specific stage shall be applied.

41 Who has title to sue on a bill of lading?

The consignee who is entitled to take delivery of goods under a bill of lading and holds the bill of lading has title to sue against the carrier based on the bill of lading. If a bill of lading has not been transferred, but is in the hands of the shipper, or the bill of lading is returned to the shipper after its transfer, the shipper has title to sue against the carrier based on the bill of lading, whether it is a named bill of lading, an order bill of lading or a bearer bill of lading.

42 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?

Where a bill of lading issued under a voyage charter party contains an incorporation clause and clearly indicates the date of the charter party, the contents of the charter party pertaining to the carriage of goods (ie, loading and discharging, payment of freight, laytime, despatch and demurrage, lien on goods, etc) can be incorporated into the bill of lading and shall be binding on the holder or endorsee of the bill of lading other than the charterer. The contents that are incorporated into the bill of lading shall not, however, be in contradiction with the explicit terms of the bill of lading or the Maritime Code.

A jurisdiction or arbitration clause in a charter party cannot be incorporated in the bill and be binding on a third-party holder or endorsee of the bill of lading, unless an incorporation clause clearly indicates such a clause and the third-party holder or endorsee of the bill of lading has expressly accepted the jurisdiction or arbitration clause.

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

The Maritime Code defines the carrier and the actual carrier in the same manner as in the Hamburg Rules. The demise or identity of carrier clause contradicts the definitions of the carrier and therefore shall be null and void, as it derogates from the Maritime Code by virtue of article 44 thereof. Additionally, a demise clause creates an ‘agency relationship’ that does not exist and shall be null and void, for it goes against the principle of the agency provided for in the General Principles of Civil Law.

44 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?

Pursuant to article 61 of the Maritime Code, where the shipowners are not the contractual carrier but the actual carrier (ie, the person to whom the performance of carriage of goods, or of part of the carriage, has been entrusted by the carrier, including any other person to whom such performance has been entrusted under a subcontract), the shipowners shall bear the responsibility and liability of the carrier for the loss of or damage to the cargo occurring during the carriage performed by them, and shall be entitled to the exemptions, limitation of liability and other defences available to the carrier, as provided for in Chapter IV of the Maritime Code.

The actual carrier’s responsibility, liability, exemptions, limitation of liability and other defences are statutory. Therefore, the shipowners cannot rely on the terms of the bill of lading where they are not the contractual carrier.

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

Pursuant to article 49 of the Maritime Code, deviation from a vessel’s route means that the carrier fails to carry the goods to the port of discharge on the agreed or customary or geographically direct route.

In the case of deviation for saving or attempting to save life or property at sea, or any reasonable deviation, the deviation shall not be deemed illegal.

The Maritime Code does not contain any provision regarding the effect of an unreasonable deviation. Consequently, the general law of contract shall apply. Such an effect shall depend on the consequence of the unreasonable deviation on the performance of the contract of carriage and shall be mainly determined pursuant to the Contract Law. Where an unreasonable deviation does not affect the achievement of the purpose of the contract, the shipper or consignee is not entitled to terminate the contract, but can only claim for loss of or damage to the goods or delay in delivery of the goods caused by the unreasonable deviation. In such a case the carrier or actual carrier can still invoke the limitation of liability, unless the unreasonable deviation constitutes an act or omission of the carrier or actual carrier performed with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result. The carrier or actual carrier can also invoke the defence of time-bar provided for in the Maritime Code. Where an unreasonable deviation affects the achievement of the purpose of the contract, the shipper or consignee is entitled to terminate the contract pursuant to the Contract Law and also to claim for loss of or damage to the goods or delay in delivery of the goods caused by the unreasonable deviation. However, in such a case the carrier or actual carrier can still invoke the limitation of liability, unless the limitation of liability is broken as mentioned above, and the defence of time-bar provided for in the Maritime Code. Thus, unreasonable deviation is treated as a carrier’s ordinary breach of contract of carriage of goods by sea.

46 What liens can be exercised?

Under the Maritime Code, liens include maritime lien on a vessel and possessory lien on a vessel or cargo. Both maritime lien on a vessel and possessory lien are statutory.

As mentioned in question 35, the following maritime claims are secured by maritime lien as provided for in the Maritime Code:

(i) claims for wages, other remuneration, crew repatriation and social insurance costs made by the master, crewmembers and other members of the complement in accordance with the relevant labour law, administrative rules and regulations, or labour contracts;

(ii) claims in respect of loss of life or personal injury occurring in the operation of the vessel;

(iii) payment claims for the vessel’s tonnage dues, pilotage dues, harbour dues and other port charges;

(iv) claims for salvage payment; and

(v) claims for loss of or damage to property resulting from tortious acts in the course of the operation of the vessel.

Claims for oil pollution damage caused by a vessel carrying more than 2,000 tons of oil in bulk as cargo that has a valid certificate attesting that the vessel has oil pollution liability insurance coverage or other appropriate financial security are not within the scope of (v) above. It has not yet been decided whether or not claims for other oil pollution damage (eg, bunker oil pollution damage for which there exists oil pollution liability insurance coverage or other appropriate financial security) shall fall within the scope of (v) above. Theoretically, the same rule shall apply in such a case.

The following possessory liens are provided for in the Maritime Code:

• under a contract of international carriage of goods by sea, if the freight, contribution in general average, demurrage to be paid to the carrier by the shipper or the consignee and other necessary charges paid by the carrier on behalf of the owner of the goods, as well as other charges to be paid to the carrier have not been paid in full, nor has appropriate security been given, the carrier may have a lien, to a reasonable extent, on the goods belonging to the debtor;

• under a time charter party, if the charterer fails to pay the hire or other sums of money as agreed upon in the charter, the owner shall have a lien on the charterer’s goods or other property on board or the earnings from the sub-charter;

• under a towage contract, where the towed party fails to pay the towage price or other reasonable expenses as agreed, the tug owner shall have a lien on the object towed; and

• under a shipbuilding or ship repair contract, the shipbuilder or ship repairer shall have a lien on the vessel constructed or repaired where the other party fails to pay the shipbuilding or repair price.

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

The Provisions on Several Issues Concerning the Application of Law during the Trial of Cases about Delivery of Goods without Original Bill of Lading promulgated by the Supreme People’s Court clearly provide that the carrier shall assume liability for delivery of goods without the original bill of lading, unless the carrier delivered the goods to the customs or port authority as required by the law in the port of discharge stated in the bill of lading, the goods have been disposed of by the customs authority at the port of discharge because no one declared the goods within the time limit provided for in law, or the carrier exercised lien on the goods and the goods have been sold by auction pursuant to an award issued by a court of law. Where a carrier delivers goods without the original bill of lading, the holder of the original bill of lading may require the carrier to bear contractual or tort liability for the loss suffered by the holder of bill of lading as a result of such delivery of goods.

The amount of compensation for loss suffered by the holder of the bill of lading as a result of delivery of goods without the original bill of lading shall be calculated on the basis of the value of the goods at the time of shipment plus freight and insurance. The carrier cannot invoke limitation of liability for such loss.

48 What are the responsibilities and liabilities of the shipper?

Pursuant to the Maritime Code, the responsibilities and liabilities of the shipper are as follows:

• the shipper shall have the goods properly packed and shall guarantee the accuracy of the description, mark, number of packages or pieces, and weight or quantity of the goods at the time of shipment, and shall indemnify the carrier against any loss resulting from the inadequacy of packing or inaccuracies in the above-mentioned information;

• the shipper shall perform all necessary procedures at the port, customs, quarantine, inspection or other competent authorities with respect to the shipment of the goods and shall furnish to the carrier all relevant documents concerning the procedures the shipper has gone through. The shipper shall be liable for any damage to the interest of the carrier resulting from the inadequacy, inaccuracy or delay in delivery of such documents;

• at the time of shipment of dangerous goods, the shipper shall, in compliance with the regulations governing the carriage of such goods, have them properly packed, and distinctly marked and labelled, and shall notify the carrier in writing of their proper description, nature and the precautions to be taken. Where the shipper fails to notify the carrier or notified him or her inaccurately, the shipper shall be liable to the carrier for any loss, damage or expense resulting from such shipment;

• except in the above cases, the shipper shall not be liable for the loss sustained by the carrier or the actual carrier, or for the damage sustained by the ship, unless such loss or damage was caused by the fault of the shipper, his or her servant or agent; and

• the shipper shall pay the freight to the carrier as agreed, unless the shipper and the carrier have reached an agreement that the freight shall be paid by the consignee and such an agreement has been noted in the transport documents.

Shipping emissions

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

There is no designated ECA in force in Chinese waters as yet.

50 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?

According to amended Annex VI of MARPOL 73/78, which China has ratified, the sulphur content of fuel oil used on board ships in China shall in any event not exceed 3.5 per cent m/m. China does not enforce the regulatory requirements relating to low-sulphur fuel by means of domestic regulations.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There are 10 maritime courts in China, located in Dalian, Tianjin, Qingdao, Wuhan, Shanghai, Ningbo, Xiamen, Guangzhou, Haikou and Beihai. Each maritime court has its geographical jurisdiction. The maritime courts exercise jurisdiction over maritime disputes for the first instance. The High People’s Court in the province or municipality directly under the state council or autonomous region where a maritime court is located exercises jurisdiction over maritime disputes for the second instance. The second instance is the final instance except for special situations in which an application for retrial may be made to the Supreme People’s Court.

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

Pursuant to article 267 of the Civil Procedure Code, which came into force as of 1 January 2013, and article 80 of the Special Maritime Procedure Law, the ways of service of court proceedings on a defendant located outside of China include:

• direct service on the defendant or its legal representative located within the territory of China;

• service through the defendant’s representative agency or branch or business agent located within the territory of China that is empowered to receive service;

• service through an agent ad litem who is empowered to receive the service;

• service by the method specified in the Convention on the Service abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention) or other treaties concluded or acceded to by both China and the country where the defendant resides;

• service through diplomatic channels;

• service by post if the law of the country where the defendant resides so permits;

• service by public notice in public newspapers if the above-mentioned ways of service cannot be adopted;

• service by fax or e-mail etc, which the defendant can be confirmed to be serviced, or

• other appropriate ways that can confirm the receipt of document by the defendant.

The legal documents concerning the arrest of the ship may also be served on the master of the arrested ship.

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

The China Maritime Arbitration Commission, which is located in Beijing and has a branch in Shanghai, is an arbitral institution specialising in maritime arbitration. The Shanghai Arbitration Court of International Shipping is subordinate to the Shanghai Arbitration Commission and is also an arbitral institution specialising in maritime arbitration. Other local arbitration commissions are also qualified for maritime arbitration.

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

Foreign judgments within the scope of application of an international or bilateral treaty to which China is a party and which contains provision of recognition and enforcement of foreign judgments shall be recognised and enforced in China pursuant to such an international or bilateral treaty. So far, the International Convention on Civil Liability for Oil Pollution Damage, 1992 and the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, to which China is a party, contain provisions of recognition and enforcement of foreign judgments. China has concluded a bilateral treaty with Russia and a few other countries by which judgments shall be mutually recognised and enforced. In other situations, a foreign judgment shall be recognised and enforced by a court in China that has jurisdiction over the case upon a party’s application based on the principle of reciprocity.

Pursuant to article 282 of the Civil Procedure Code of China, a people’s court may recognise a foreign ruling or judgment provided it meets the conditions set out in question 37. If a legally effective judgment or ruling rendered by a foreign court contradicts the basic principles of the law of China or the national, social, and public interest of China, the people’s court shall reject the application of recognition and enforcement.

A foreign arbitration award shall be recognised and enforced in China pursuant to the New York Convention on Recognition and Enforcement of Foreign Arbitration Awards, 1958, to which China is a party, or on the principle of reciprocity as provided for in article 283 of the Civil Procedure Code of China.

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

If a claimant issues proceedings in a Chinese court in breach of a valid jurisdiction clause or agreement by which the case of disputes shall be subject to the jurisdiction of another specified Chinese court, the defendant can raise an objection to the jurisdiction of the court entertaining the case. The court that has entertained the case shall transfer the case to the Chinese court specified in the jurisdiction clause or agreement. However, a jurisdiction clause or agreement cannot be in contradiction with the provision of exclusive jurisdiction provided for in Chinese law.

If the claimant issued the proceeding or arbitration out of China in breach of a jurisdiction clause by which a Chinese court has jurisdiction over the case and the claimant seeks recognition and enforcement of the foreign judgment or arbitration award in China afterwards, the defendant can apply to the Chinese court for not recognising the foreign judgment or arbitration award.

56 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?

If the claimant issues the proceedings in a Chinese court in breach of a valid jurisdiction or arbitration clause or agreement by which the disputes shall be subject to the jurisdiction of a foreign court or be referred to arbitration in a foreign arbitration institution, the defendant can raise an objection to the jurisdiction of the Chinese court. The Chinese court may dismiss the case upon the defendant’s application pursuant to Chinese law, provided that the jurisdiction clause is not in contradiction with the provision of exclusive jurisdiction provided for in Chinese law.

Limitation periods for liability

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

Pursuant to the Maritime Code, the international maritime conventions to which China is a party and the related judicial interpretations issued by the Supreme People’s Court, the time limits applicable to maritime claims are as follows:

• With respect to a contract of international carriage of goods by sea, the time limit for a claim against the carrier is one year, counting from the day on which the goods were delivered or should have been delivered by the carrier. Within this time limit or after the expiration thereof, if the person allegedly liable has brought up a claim of recourse against a third person, that claim is time-barred at the expiration of 90 days, counting from the day on which the person claiming for the recourse settled the claim, or was served with a copy of the process by the court handling the claim against him or her. The time limit applicable to the carrier’s claim against the shipper, consignee or bill-of-lading holder is one year, counting from the day on which the carrier knew or should have known that his or her right had been infringed.

• With respect to a claim arising from a voyage charter party, time charter party or bareboat charter party, the time limit is two years, counting from the day on which the claimant knew or should have known that his or her right had been infringed.

• With respect to a claim against the carrier in the carriage of passengers by sea, the time limit is two years, counting from:

• the day on which the passenger disembarked or should have disembarked, in a claim for personal injury;

• the day on which the passenger should have disembarked, in a claim for death of passengers that occurred during the period of carriage. The time limit for claims for the death of passengers whose death occurred after disembarkation but resulted from an injury during the period of carriage by sea is two years, counting from the day of the death of the passenger concerned, provided that this period does not exceed three years from the time of disembarkation;

• a claim for loss of or damage to the luggage, counting from the day of disembarkation or the day on which the passenger should have disembarked.

• With respect to a claim arising from sea towage, the time limit is one year, counting from the day on which the claimant knew or should have known that his or her right had been infringed.

• With respect to a claim arising from collision of ships, the time limit is two years, counting from the day on which the collision occurred, whereas the time limit for a claim regarding the right of recourse for compensation for loss of life or personal injury is one year, counting from the day on which the parties concerned jointly and severally paid the amount of compensation for the damage that occurred.

• With respect to a claim arising from salvage at sea, the time limit is two years, counting from the day on which the salvage operation was completed.

• With respect to a claim arising from contribution in general average, the time limit is one year, counting from the day on which the adjustment of general average was finished.

• With respect to a claim arising from a contract of marine insurance, the time limit is two years, counting from the day on which the danger that was insured against occurred.

• With respect to a claim for compensation for oil pollution damage from a ship, the time limit is three years, counting from the day on which the pollution damage occurred. In no case, however, shall the limitation period exceed six years, counting from the day on which the accident causing the pollution occurred.

The time limits applicable to maritime claims are statutory and cannot be extended by agreement of the parties concerned. That is, any such agreement is invalid in China, unless such extension of time limit is allowed in an international treaty to which China is a party.

The time limits are subject to suspension or discontinuation. Within the last six months of the time limit, if, on account of force majeure or other causes, the claims are prevented from being made, the time limit shall be suspended and shall be resumed when the cause of suspension no longer exists. The time limit shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfil obligations by the person against whom the claim was brought. The time limit shall not be discontinued, however, if the claimant withdraws his or her action or submission for arbitration, or his or her action has been rejected by a decision of the court. Where the claimant applies for the arrest of a ship, the time limit shall be discontinued from the day on which the application is filed. The time limit shall be counted anew from the time of discontinuance.

58 May courts or arbitral tribunals extend the time limits?

Courts of law or arbitral tribunals in China cannot extend the time limits. Article 137 of the General Principles of Civil Law provides, however, that the people’s courts may extend the time limits under special circumstances, but it is not made clear what those special circumstances are.

Miscellaneous

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

The Maritime Labour Convention takes effect on 20 August 2013. However, China has not ratified the Convention until now. Nevertheless, the competent authorities in China (mainly the MSA) have made great efforts to achieve the aims of the Convention, namely, making domestic regulations, carrying out various training regarding the requirements and satisfaction of the Convention, preparation of internal procedure documents, authorising the China Classification Society to issue declarations of maritime labour compliance for vessels flying the Chinese flag and engaged in international trade, providing step-by-step guidance to shipping companies on how to satisfy the requirements, and providing guidance on, for example, how to carry out inspection, certification and preparation of a declaration of maritime labour compliance.

Though China has not ratified the Convention, vessels flying the Chinese flag of 500 GT or over and engaged in international trade shall carry and maintain a maritime labour certificate and declaration of maritime labour compliance, because these ships are subject to inspection for the purpose of reviewing compliance with the requirements of this Convention by an authority of a state party to this Convention when a Chinese ship calls at its port. Failure to comply with the requirements of this Convention may cause a ship to be detained.

60 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?

According to the Chinese law, the parties to a contract shall fully fulfil their obligations under a contract. Thus, it is impossible 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. However, where the economic conditions constitute force majeure resulting in the impossibility of fulfilling the purpose of the contract, a party to the contract may terminate the contract by virtue of article 94 of the Contract Law and both parties shall be relieved from further performance of the contract after termination thereof.

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

No.

Update and trends

The Maritime Traffic Safety Law is being revised and will hopefully be adopted towards the end of 2014.

Mervyn Chen

mervyn.chen@wintell.cn / shanghai@wintell.cn

Rm 1901-1905

Chamtime International Financial Center

No 1589 Century Avenue

Pudong

200122 Shanghai

China

Tel: +86 21 6854 4599

Fax: +86 21 6854 5667

info@wintell.cn

www.wintell.cn

Colombia

José Vicente Guzmán

Guzmán Escobar & Asociados

Newbuilding contracts

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

Part 2 of article 1438 of the Colombian Commercial Code (CCC) states that shipbuilding contracts will be ruled by the Civil Code (CC) provisions. However, according to article 1427, any contract that deals with property rights over vessels with a tonnage of more than 25 NRT must be executed by public deed. Such deed must be registered with the harbour master of the port of registry and the title will pass along with the inscription in the register and the physical delivery of the vessel to the buyer. Article 1445 CCC further confirms this. Parties will not be able to change this rule since it is considered a rule of public policy.

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

Since there is no requirement in the law for this purpose, this is a matter that will be dealt with according to what the parties have agreed in the particular contract.

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

There are no specific provisions regulating the shipbuilding contract in Colombia apart from some very general provisions included in the CCC and in Decree 1423 of 1989. However, since the shipbuilding contract would be deemed to be a ‘sale’ contract when governed by domestic law, general remedies available to the buyer to compel delivery would also be available in this case. Thus, under article 1882 CC, if delivery of the ship is delayed by the seller’s act or neglect, the buyer will have the possibility to either preserve or put aside the contract, at his or her discretion, in any case with the right to claim damages.

4 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?

If the vessel is defective, the buyer (shipowner) would have the right to make use of two actions depending upon the seriousness of the defect of the vessel:

• an action for rescission would be available to the buyer to put aside the contract or to obtain a substantial reduction in price (and in some cases also to claim damages) if, apart from other requirements established in article 1915 CC, the vessel would not be useful for her natural purpose or only imperfectly; or

• an actio quanti minoris would be available to the buyer if the defects are not so serious. In that case, the buyer would have the right to obtain a reduction in price and to claim damages.

Regarding the possibility of bringing a claim in product liability, the answer could depend on whether the vessel is to be involved in commercial operations or not. If so, such a claim would not be valid in Colombia since the ‘good’ to be produced, namely the vessel, would not be built for ‘personal use’ and thus, this situation would not form the ‘consumption relation’ required to make a valid claim on that basis (given the definition of ‘consumer’ in No. 3 article 5 of Law 1480 of 2011 – Consumer Regulations).

Ship registration and mortgages

5 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?

According to article 1434 CCC, all vessels registered in Colombia are of Colombian nationality. Both new vessels and vessels previously belonging to another flag can be registered in Colombia. In the latter case, however, a certificate of cancellation of the previous flag will be required. Floating constructions lacking the means of self-propulsion (marine artefacts) are subject to the same rule.

As from 2012, Law 730 of 2001 has applied to registration of all vessels and marine artefacts, whether they are involved in transport or fishing operations or not. Law 730 of 2001 was originally restricted to the registry of vessels and marine artefacts devoted to transport and fishing operations; now, by virtue of Decree 19 of 2012, the vessel registration regime has been unified for all types of vessels and marine artefacts, with the only exception being naval vessels. According to article 13 of said statute, vessels under construction shall be registered under the Colombian flag.

Law 730 has two different types of registers for vessels and marine artefacts under the Colombian flag. Articles 17 and 18 establish the Provisional Register and articles 20 and 21 regulate the Definitive Register. Requirements for the Provisional Register are purported to be less stringent than those provided for in the Definitive Register in Law 730. The original basic difference was that it was possible to ask for provisional registration without having a certificate provided by the Colombian authorities regarding anti-narcotic practices (which was not the case for definitive registration). However, article 101 of Decree 19 of 2012 also modified the requirements for entry into the Provisional Register. In fact, it is no longer required to obtain a formal authorisation from the Colombian government to use the electromagnetic spectrum in maritime-assigned frequencies (which was previously required). It is possible to carry out provisional registration with just a certificate confirming that a request for said electromagnetic spectrum authorisation has been made to the Ministry of Information Technology and Communications. Currently, this authorisation – which in any case will be required for entry into the Definitive Register, will also be provided by the Colombian Maritime Authority (DIMAR) (and not by the Ministry of Information Technology and Communications) due to Resolution 115 of 31 January 2013 of the Ministry of Information Technology and Communications, which appointed DIMAR as the authority that will provide authorisation for the use of the electromagnetic spectrum in maritime-assigned frequencies.

6 Who may apply to register a ship in your jurisdiction?

There is no specific requirement in this regard in Colombian law. Originally, article 1458 CCC provided that only Colombian nationals could be registered as owners of vessels entered into Colombian flag. However, said provision has been considered to be inapplicable by the High Administrative Court).

7 What are the documentary requirements for registration?

In order to obtain the ‘provisional registration’ of a vessel under the Colombian flag, the following documents should be submitted according to article 18 of Law 730 of 2001:

• certificate of seaworthiness and safety provided by an international classification society recognised by the national maritime authority, or failing that, certificates issued by DIMAR, if applicable;

• certificate of cancellation of previous flag or registry, if the vessel is not a new build;

• receipt of payment of rights to carry out provisional registration;

• copy of purchase deed or protocol deed as evidence of the purchase, if applicable;

• proof of physical delivery of the vessel if it is not covered by the instrument of purchase;

• guarantee covering pollution events in favour of the Colombian nation in the amount and nature established by DIMAR and the Ministry of National Defence, and having regard to the function of the vessel;

• certificate of ‘initiation of procedure’ provided by Colombian authorities regarding lack of records for anti-narcotic practices; and

• certificate of ‘initiation of procedure’ for the issuance of the licence to access the frequency bands allocated to the maritime mobile service and the assignment of call signs, issued by the Ministry of Communications.

Furthermore, to obtain ‘definitive registry’ originals of the following documents should be submitted according to article 20 of Law 730 of 2001:

• one copy of the deed of purchase, for registration in the local harbour master’s office or DIMAR, if applicable;

• proof of physical delivery of the vessel if it is not covered by the instrument of purchase;

• certificate of cancellation of previous of flag or registration, if the vessel is not a new build;

• guarantee covering pollution events in favour of the Colombian nation in the amount and nature established by DIMAR and the Ministry of National Defence, and having regard to the function of the vessel;

• receipt of payment of rights to carry out provisional or definitive registration;

• three colour photographs of the vessel (in profile) of 4x6cm, which clearly display the name of the vessel;

• three photographs of the vessel (bow, stern and side) of 15x16 inches;

• if the applicant is a legal entity, a certificate of its incorporation or existence and legal representation issued by the Chamber of Commerce of its registered office. This must be no more than three months old;

• certificate of seaworthiness and safety provided by an international classification society recognised by the national maritime authority, or failing that, certificates issued by DIMAR;

• licence to access the frequency bands allocated to the maritime mobile service and the assignment of call signs, issued by the Ministry of Communications; and

• certificate provided by Colombian authorities regarding lack of records for anti-narcotic practices.

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

Under Colombian law it is not possible to carry out dual registration since, in order to register a vessel previously belonging to another flag, a certificate of cancellation from the previous register will be required.

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

The register of ship mortgages in Colombia is kept by the harbour master’s office in each port. According to article 1441 CCC, each harbour master’s office must have a book for registry of ships in which any situation affecting property rights as well as legal procedures involving registered ships will be recorded. The mortgage registry will also contain the name and date of the respective public deed and the particulars of the relevant public notary’s office.

Limitation of liability

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

Colombia is not a party to either the Convention on the Limitation of the Liability of Owners of Seagoing Vessels of 1924, nor to the Convention relating to the Limitation of the Liability of Owners of Seagoing Ships, and Protocol of Signature of 1957. However, article 1481 CCC states that the shipowner will be able to limit his or her liability up to the value of the vessel along with the value of her ‘accessories’ and the freight, in front of the following claims:

• any compensation due to third parties for damages or losses caused during navigation or in port arising out of the fault of the captain, crew, pilot or any other person in the service of the ship;

• any compensation due for damage to cargo delivered to the master for transportation or goods onboard;

• any other obligations emerging from bills of lading or a charter party;

• any compensation due arising out of nautical fault in the execution of a contract, without prejudice to the provisions of paragraph 1, article 1609 (applicable to the bill of lading contract);

• the obligation to remove the remains of a shipwreck and the obligations associated with it;

• salvage and assistance rewards;

• contribution corresponding to the vessel in an act of general average; and

• obligations entered into by the maritime agent or master outside the port of registry, exercising their legal powers to meet the needs of the ship or the continuation of the journey, provided that those obligations do not emerge from inadequate or defective equipment or supply of the ship at the beginning of the voyage.

11 What is the procedure for establishing limitation?

There is no requirement in domestic law to set up a fund or to initiate another separate procedure for limitation purposes. Thus, limitation can be invoked by the shipowner directly as a defence in the procedures against the ship.

12 In what circumstances can the limit be broken?

There are no provisions in Colombian law as to how the shipowner’s limitation of liability can be broken. However, according to article 1482 CCC, there are some specific cases where the limitation of liability shall not apply, namely:

• obligations arising out of the personal acts or fault of the shipowner;

• obligations entered into on behalf and under the name of the shipowner, maritime agent of the owner, or the captain when the owner has authorised or ratified them; and

• obligations arising out of labour contracts of the captain, crew, or other persons in the service of the ship.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Colombia has not ratified the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. However, domestic law applies to passenger and luggage claims. Claims for loss of or damage to luggage are subject to a limitation of liability equivalent to 10 grams of gold per kilogram (article 1596 of the CCC). There is no limitation of liability established in law for damages arising out of death or personal injury of passengers during carriage by sea. Carriage of passengers by sea would probably be deemed a consumer relationship; thus, by application of Law No. 1480 of 2011 (Consumer Regulations), any stipulation about limitation of liability for the carriage of passengers by sea would be deemed null and void.

Port state control

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

The domestic port state control agency is the DIMAR, which exercises this function through an officer appointed as port state control inspector in the Colombian ports of Buenaventura, Santa Marta, Barranquilla and Cartagena. Thus, each port state control inspector carries out inspections within the respective port, pursuant to Decree 2324 of 1984, and to the Latin American Agreement on the Control of Ships by Port States, to which Colombia is a party. The international instruments taken into account for the purposes of the Agreement are: the International Convention on Load Lines 1966, SOLAS 1974/1988, MARPOL 1973/78, STCW 1978, the Convention on the International Regulations for Preventing Collisions at Sea (1972), the International Convention on Tonnage Measurement of Ships 1969 and CLC 1969/1992.

15 What sanctions may the port state control inspector impose?

There are no ‘sanctions’ in the strict sense that a port state control inspector could impose. However, the port state control inspector appointed by DIMAR could:

• provide a warning to the ship;

• suspend her permission to set sail until the defects noted during the inspection are properly repaired; or

• allow the ship to set sail subject to carrying out said repair in the next port of destination.

Apart from that, if the defect found also implies a violation of a maritime regulation, the harbour master could also impose a sanction consisting in either a warning, suspension of the permits enacted by DIMAR, permanent cancellation of said permits or the imposition of a fine.

16 What is the appeal process against detention orders or fines?

Decisions adopted by harbour masters regarding infringement of maritime regulations within its jurisdiction (ie, fines) could be appealed to DIMAR.

Classification societies

17 Which are the approved classification societies?

Lloyd’s Register Central and South America Limited, Germanischer Lloyd Colombia Limited, Bureau Veritas Colombia Limited, American Bureau of Shipping, and Sociedad Andina de Certificación SAS are the classification societies approved by DIMAR.

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

According to article 6 of Regulation 03/1993, DIMAR may impose a sanction on a classification society whenever is found that certificates were granted without regard to the real condition of a given ship. The sanction could consist of a warning, suspension of the permits approving the classification society or permanent cancellation of said permits. However, there is no case law regarding the liability of a classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

In accordance with Resolution 071 of 1997 of the Harbours and Transport Superintendency, the local authority could order a wreck removal if the owner, the master or the ship’s agent has not removed the wreck (under Colombian law, the ship’s agent is joint and severally liable with the shipowner). In that case, any expense so incurred will be recoverable from them plus any fine that could also be imposed. This is in accordance with article 33 of Decision 487/2000 of the Commission of the Andean Community, which makes clear that if a judicial sale of a sunken ship takes place, costs of removal will be payable in the first place.

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

Neither the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910 nor the International Convention on Salvage 1989 are in force in Colombia. However, the Convention on the International Regulations for Preventing Collisions at Sea 1972, the 1992 CLC Protocol, as well as the 1992 Fund Protocol are in force in the country.

21 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 agreements. However, Lloyd’s standard form is usually acceptable. Domestic tug companies are the companies usually involved in salvage operations and to perform such salvage operations the company has to be in possession of a commercial exploitation licence, granted by DIMAR.

Ship arrest

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

Neither the International Convention Relating to the Arrest of Seagoing Ships 1952 nor the International Convention on the Arrest of Ships 1999 are in force in Colombia. However, there is a regional instrument that deals with the ship arrest issue within the Andean countries, namely Decision 487/2000 of the Commission of the Andean Community. This instrument took some very substantial provisions from the International Convention on the Arrest of Ships 1999. It must be added that certain domestic provisions from the Civil Procedure Code/General Procedure Code and from the CCC could be applicable in certain cases provided there is no contradiction between those and the Andean Decision 487/2000 (article 40).

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

According to article 37 of Decision 487/2000, a vessel can be arrested whenever there is a pending ‘maritime claim’ over it. The concept of ‘maritime claim’ is specifically dealt with in article 1 of the Decision, and includes any claim that has as its ‘cause’ any damage or loss sustained with the exploitation of the ship, death or injury arising out of the exploitation of the ship, salvage, damage to the environment, any contract for the carriage of goods by the ship or any mortgage over the ship, inter alia.

24 What is the test for wrongful arrest?

There is no specific test for wrongful arrest since Colombian courts have not yet dealt with this issue. However, article 51 of Decision 487/2000 establishes that the tribunals of the country in which the arrest has been carried out would also be able to deal with the liability of the claimant if the arrest was illegal or unjustified; or the requested and obtained guarantee was excessive. It must be borne in mind that due to the changes made by Decision 487/2000 to local law (article 40), civil judges in Colombia apply parameters of the domestic Civil Procedure Code/General Procedure Code to establish the amount of the guarantee if there is no agreement between the parties. By doing so, they could require a guarantee in an amount equal to double the alleged claim, without the interest or judicial expenses, and without exceeding the value of the ship, her accessories and the freight (article 1451 CCC).

25 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?

According to article 41 of Decision 487/2000 a ship can only be arrested if the maritime claim (ie, the price of bunkers supplied to the ship) amounts to a personal obligation binding either the registered owner or the bareboat charterer of said ship. Therefore, if bunkers were supplied to a voyage charterer or a time charterer the ship can not be arrested.

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

According to article 50 of Decision 487/2000 the arresting party could be asked by the tribunal to provide security of the type and amount that the tribunal so requests, in order to provide the arrest order, or once this has been provided, to keep it in force.

27 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?

An arrest order will be lifted once the arrested party provides ‘enough guaranty in a satisfactory form’ (article 44 of Decision 487/2000). If there is no agreement between the parties in this regard, the tribunal will decide the nature and quantity of the guarantee to be provided by the arrested party, which may not exceed the value of the ship (article 45). A petition could be filed before the tribunal at any time to reduce, modify or cancel the security so provided (article 51).

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

There is no specific provision on this issue within the Decision 487/2000. However, Colombian procedural law has a provision dealing with this specific situation. In fact, according to article 1452 CCC, once the vessel has been arrested, she would be delivered to a third party, which could be the captain of the vessel, to act as an administrator of the ship while the vessel is under arrest.

29 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?

Articles 38 and 52 of Decision 487/2000 clarify that proceedings on the merits could be carried out in a different jurisdictions by a different judge, court, or arbitral tribunal, as the case may be, even if security is to be obtained – through the arrest proceedings – within the Andean territory.

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

The traditional method of obtaining security in maritime-related incidents is through a ship arrest. Once an arrest order has been provided by a civil judge, said decision would be enforced by the harbour master of the place where the vessel is physically located.

Although there is no domestic case law supporting this view so far, it seems feasible that two other options could be available under Colombian law to obtain security, as follows:

• article 590.c of the General Procedure Code (which entered into force on 1 October 2012) provides that in any ‘declarative’ procedure a judge could adopt any provisional measure that he or she might find ‘reasonable’ to protect the right in dispute, or to avoid its infraction or its consequences, or to prevent damages or to stop those that have been caused, or to secure the effectiveness of the claimant’s pleading; and

• via article 32 of Law 1563 of 2012 (national and international arbitration law), which provides that provisional measures could be adopted to preserve evidence by any authority exercising jurisdictional powers. These measures (ie, to prevent a ship from leaving a given port) could be adopted in any type of legal proceedings (whether arbitral or not).

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

It seems feasible that article 32 of Law 1563 of 2012 could be used as a means to obtain a measure to preserve evidence (ie, on a ship). In fact, said piece of legislation provides that provisional measures to preserve evidence could be adopted by any authority exercising jurisdictional powers within Colombian territory (see question 30). Said measures could be adopted in any type of legal proceedings (whether arbitral or not).

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

According to Decision 487 a ship could be arrested whenever there is a ‘maritime claim’ and article 1.12 of Decision 487 specifically mentions that bunkers provided to the ship and other provisions are maritime claims. Thus, the provision of bunkers could be the cause of the arrest. However, there is nothing in the Decision that suggests that bunkers themselves could be arrested.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

According to Decision 487/2000, mortgage creditors (article 10) could ask for the judicial sale of the vessel even if the vessel is now the property of a third party. The mortgage creditor could then initiate judicial sale procedures if there is a breach of the secured obligation in the way expressed by the parties in the contract, or, if there is none, according to the regulations of the relevant country (ie, Colombia).

Theoretically, apart from that specific instance provided for in Decision 487/2000, any person with a maritime claim could apply for a judicial sale of the vessel whenever no security has been provided to obtain release of the vessel (and thus the vessel remains under arrest) and the decision of the proceedings on the merits so allow.

Thus, it seems feasible that in Colombia the maritime claimant could initiate proceedings according to the Colombian Civil Procedure Code/General Procedure Code (article 1454 CCC) to obtain the judicial sale of the ship.

34 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?

Article 1454 CCC establishes that the judicial sale of a vessel would follow the general parameters set out by the Civil Procedure Code/General Procedure Code. Thus, in the application of domestic civil procedure law, civil judges would carry out the procedure for a judicial sale of a ship whenever, for instance, there is a decision on the merits by a competent court or tribunal and the debtor refuses to pay. In that case, the creditor could initiate proceedings under the ‘executive proceedings’ process (ie, faster proceedings) to obtain the judicial sale of the vessel in court to pay the value of the claim. The costs associated with such a sale would be those regularly incurred in a judicial sale.

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

According to article 32 of Decision 487/2000, costs caused by the arrest proceedings or in the judicial sale will be payable in first place. Those costs will include the cost incurred to preserve the ship as well as the cost incurred regarding the crew (wages, etc).

Once this has been done, according to article 24 of Decision 487/2000, ‘maritime privileged claims’ (maritime liens) will have priority over mortgages on the ship and over any other maritime claim. The order in which maritime privileged claims will be paid is as follows:

• maritime privileges that guarantee claims for the salvage reward will have priority over those maritime privileges that could be present before the salvage operation; and

• unpaid crew wages, death or injury compensations arising directly out of the exploitation of the ship; port or seaways charges and claims in tort arising out of the exploitation of the ship (apart from loss of cargo, containers, personal luggage and effects), which will be payable pro rata. Maritime privileges that guarantee claims for the salvage reward will have priority among them by the inverse order of the date in which those claims have emerged. Then, any other maritime claim would be payable according to the general rules of order of precedence.

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

According to article 31 of Decision 487/2000, all mortgages, maritime privileges and other claims on the ship, will cease to have effect as a direct consequence of the judicial sale whenever, at the moment of the judicial sale taking place, the ship is within the jurisdiction of the tribunal of the member country, and the judicial sale is carried out according to the parameters set out in Decision 487/2000.

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

As in the case of any other judicial decision from a judge in a foreign country, exequatur proceedings would be required domestically to enforce the decision in Colombia.

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

Colombia has not signed the International Convention on Maritime Liens and Mortgages 1993. However, it could be said that several provisions of Decision 487/2000 of the Commission of the Andean Community were inspired by the Convention. In fact, Decision 487/2000 clarifies in its preamble that the Convention serves as ‘the basis’ of Decision 487/2000, along with other conventions.

Carriage of goods by sea and bills of lading

39 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 Republic of Colombia has not formally ratified either convention. However, articles 1597 to 1651 CCC incorporate a set of rules that purport to adapt the Hague-Visby Rules scheme to domestic law (with some differences).

40 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?

Decisions 331/1993 and 393/1996 of the Commission of the Andean Community deals with multimodal carriage to and from the Andean Region. There are some specific provisions dealing with multimodal contracts, multimodal documents and multimodal transport operators (MTO). The main feature of the regime brought by the aforementioned decisions is that only one person, namely the multimodal carrier or MTO, would be responsible for the complete operation of the cargo (from receipt to delivery). It should be noted that those regulations were initially inspired by the UNCTAD/ICC Rules of 1992, but that those exceptions usually present in maritime regimes, namely, nautical fault, fire onboard, and the possibility of being exempted from liability for damages alleged to be caused by unseaworthiness of the ship by showing due diligence, were features removed in Decision 393 and thus are no longer available to the MTO in the current regime.

41 Who has title to sue on a bill of lading?

The bill of lading in Colombia is a negotiable document of title and a negotiable instrument (article 767 CCC) and thus any person who has lawfully entered into possession of the title (in accordance with its law of circulation), acting in good faith, could claim the rights so incorporated. However, it must be clarified that – according to domestic law – even if the bill of lading does not fulfil the requirements to be considered a negotiable instrument, the consignee will still be permitted to claim delivery of the cargo from the carrier in accordance with the contract for the carriage of goods incorporated or evidenced therein.

42 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?

Although there are some provisions mainly addressed to time charter parties in articles 1666 to 1677 CCC, it can be said, as in many other jurisdictions, that there is no specific mandatory regime for charter party contracts in Colombia. In fact there is nothing in domestic law establishing to what extent terms in a charter party can be incorporated into the bill of lading. On the other hand, it is uncertain whether a jurisdiction or arbitration clause (in general) will be considered valid if it is pointing to another jurisdiction whenever the contract (or part of it) must be fulfilled in Colombia. In fact, article 869 CCC states that execution of contracts entered into abroad that must be fulfilled in the country will be ruled by domestic law. There is an ongoing debate between domestic academics and practitioners as to whether this provision is a rule of public policy or not. Ultimately, everything will depend on the position of the judge dealing with the particular situation.

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

Under general transport law (applicable to the carriage of goods by sea whenever there is no express provision regulating the particular situation within the carriage of goods by sea provisions) the carrier is the ‘contractual carrier’ (article 1008 CCC). However, according to article 991 CCC, whenever the carrier is not the owner or lessee of the vehicle (ie, the vessel), or does not have other title to control the vehicle in which the carriage is made, then the owner of said vehicle, the contracting carrier and the performing carrier, will be jointly and severally liable under the contract of carriage.

44 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?

See question 43.

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

In Colombian law, deviation constitutes a breach of contract. However, the Colombian regulation of voyage charter parties does not give deviation the effect of a repudiation of the contract; therefore, even in cases of deviation the shipowner would still have the possibility of making use of the exceptions agreed in the contract. Regarding carriage of goods by sea under bill of lading, article 1610 CCC states that the carrier will not be held responsible for damages that may arise out of reasonable deviation, meaning such deviations made to save (or attempt to save) life or goods at sea. Thus, any other deviation would constitute an infringement of the carrier’s duties under the contract. The carrier would then be considered liable unless he or she is able to rely in one of the events provided in article 1609 (very similar to article 4.2 of the Hague Rules), situations that are not available to the carrier whenever there is previous fault of ‘the carrier’ or the ‘maritime agent’ of the carrier (last paragraph, article 1609 CCC).

46 What liens can be exercised?

According to article 21 of Decision 487/2000, ‘maritime privileged claims’, namely those guaranteed by a maritime privilege (article 22 of Decision 487/2000 (see question 35)) will follow the ship, even if the ownership of the ship changes, or its flag, without registry needed. However, they will not follow the ship in case of judicial sale. According to article 22 of Decision 487/2000, the maritime privileged claims are:

• claims for wages, salaries and other sums debt to the captain and crew;

• claims arising out of compensation for death or injury of persons occurred either on board in water, or in land, in direct relation to the exploitation of the ship;

• claims arising out of salvage rewards;

• claims arising out of port and seaways charges and pilots; and

• claims arising out of a claim in tort for loss or material damage caused with the exploitation of the ship, different from damages caused to the cargo, containers or luggage onboard the ship.

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

If a carrier delivers the cargo without production of the bill of lading, the carrier will still be obliged to deliver the cargo to the legitimate holder of the bill or pay the compensation for breach of the contract of carriage. However, the carrier could still limit his or her liability (article 1644) towards the legitimate holder to the declared value of the cargo (if so), or to the valid limitation of liability agreed in the contract and/or evidenced in the bill of lading provided that this is not a derisory limitation amount, unless such delivery of the cargo without production of the bill of lading can be deemed as being a wilful misconduct or gross negligence, in which case the carrier will not be allowed to limit his or her liability. There are no clear precedents in case law as to when this fact can amount to wilful misconduct or gross negligence; thus every case should be analysed on its own merits.

48 What are the responsibilities and liabilities of the shipper?

According to article 1623 CCC, the shipper will only be liable to the carrier for loss or damage sustained as a consequence of his or her fault or the fault of one of his or her agents. Regarding the carriage of dangerous goods onboard, the local regime also follows the same logic brought by the Hague-Visby Rules. In fact, article 1611 CCC has a very similar provision to that contained in article 4.6 of the Hague-Visby Rules.

Shipping emissions

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

There is no ECA, as such, established in Colombian territorial waters.

50 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?

Requirements for sulphur content in diesel are those set forth in Law 1205 of 2008 (maximum 50 parts per million allowed). Sanctions for not observing this parameter are those provided in Resolution 180689 of 2010 of the Ministry of Mining and Energy. Article 1 of Decree 2107 of 1995 further prohibits the use of heavy oil containing more than 1.7 per cent m/m sulphur.

Regarding biofuels in general, the parameters that should be observed are those provided in Resolution 182087 of 2007 Ministry of Mining and Energy.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Harbour masters are empowered to start and carry out proceedings on the merits in cases of maritime casualties and accidents. The decision of a harbour master could be subject to an appeal procedure before DIMAR.

Issues relating to contracts, such as carriage of goods contracts, are generally dealt with by civil judges. The decisions of a first instance judge are regularly subject to appeal before his or her superior (usually a regional tribunal) and could, in some cases, also be subject to cassation before the Supreme Court of Justice upon fulfilment of several requirements.

Arrest of ships proceedings are dealt with by civil judges.

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

In cases where proceedings have been initiated in Colombia and a defendant is domiciled abroad, article 315 of the Colombian Civil Procedure Code establishes that the plaintiff will have 30 days (instead of the usual five days) to properly notify the claim to the defendant in order to give him the chance to appear in court (article 291 No. 3 of the General Procedure Code).

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

Chambers of commerce, regularly appointed as institutions in which arbitral proceedings would take place, usually have a list of arbitrators specialising in maritime law.

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

Colombia is a party to both the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and the Inter-American Convention on International Commercial Arbitration. There are also some domestic provisions regulating exequatur procedures to obtain execution of foreign judgments in Colombia in article 695 of the Colombian Civil Procedure Code (articles 605 to 607 of the General Procedure Code).

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

There are no domestic remedies for this situation if proceedings are initiated elsewhere in breach of a jurisdiction clause pointing to Colombian judges. However, if proceedings are initiated in Colombia in breach of a jurisdiction clause pointing to another jurisdiction to deal with the dispute, then, unless the contract or part of the contract is executed in Colombia, domestic procedures should be stopped by arguing the lack of jurisdiction of the Colombian courts (as a preliminary defence of the defendant).

56 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?

If domestic proceedings are initiated in breach of a clause providing for a foreign court or arbitral tribunal to have jurisdiction, under article 97 of the Colombian Civil Procedure Code, domestic proceedings should be stopped by arguing as preliminary defences either ‘lack of jurisdiction’ (No. 1) or an arbitral clause (No. 3) (Nos. 1 and 2, article 100 of the General Procedure Code).

Limitation periods for liability

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

According to article 2536 CC, the general time bar is 10 years.

However, there are special time bars such as: carriage of goods by sea contracts (bills of lading), two years; charter parties, one year; collisions, two years; general average, one year; salvage, two years; ship mortgages, one year; and marine insurance, two years.

The general approach in Colombian law is that neither parties nor tribunals can extend time-bar limitations due to the fact that they are generally considered a public policy rule.

58 May courts or arbitral tribunals extend the time limits?

See question 57.

Miscellaneous

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

The Maritime Labour Convention is not in force in Colombia. Thus, it does not apply to Colombian vessels.

60 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?

A shipping contract will probably be considered a commercial contract. According to article 869 – which is applicable to commercial contracts – if unforeseeable circumstances have made a contract during its execution not merely more onerous, but excessively onerous to perform for one party, that party could ask a judge for a revision of the contract.

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

A distinct feature of Colombian maritime law is that the ship’s agent is jointly and severally liable with the shipowner for the duties and liabilities of the ship in the Colombian jurisdiction.

José Vicente Guzmán

jvguzman@gealegal.com

Calle 82 No. 11 – 37 Of. 308

Edificio Confianza

Bogotá

Colombia

Tel: +57 1 6170 579 / +57 1 6170 580

Fax: +57 1 6108 500

www.gealegal.com

Croatia

Gordan Stanković and Maja Dotlić

Vukić & Partners

Newbuilding contracts

1 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 secondary importance only. Still, if the newbuilding is registered in the Croatian Register of Ships under Construction, Croatian law will govern the real-right aspects of the case.

2 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.

3 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.

4 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

5 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 12 metres in length and with a gross tonnage (GT) greater than 15 GT, or authorised to carry more than 12 passengers, may be registered in one of the following registers:

• Register of Merchant Ships;

• Register of Fishing Ships;

• Register of Ships in Public Service; and

• 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.

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 12 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.

6 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.

7 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.

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

Dual registration and flagging out are not allowed.

9 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 mortgage), demise charter, time charter, the right of pre-emption or any restrictions to the ownership.

Limitation of liability

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

Croatia is a party to the 1976 Limitation Convention as well as its 1996 Protocol. 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).

11 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.

12 In what circumstances can the limit be broken?

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’.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

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

14 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.

15 What sanctions may the port state control inspector impose?

The inspector may 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.

16 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

17 Which are the approved classification societies?

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

18 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

19 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.

20 Which international conventions or protocols are in force in relation to collision, 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 SOLAS;

• the 1989 Salvage Convention;

• the 1969/73 Intervention Convention;

• the 1973/78 MARPOL;

• 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;

• the 1990 OPRC Convention; and

• the 1992 Rio de Janeiro Convention.

21 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

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

The 1952 Arrest Convention is in force in Croatia.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

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, sub-paragraph (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.

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.

24 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.

25 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.

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

If the circumstances so justify, 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 the consequence of the arrest.

27 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?

The amount of security should be equal to the amount for which the arrest has been ordered. 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. 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.

28 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.

29 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.

30 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.

31 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.

32 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

33 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.

34 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 shipbroker, 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).

35 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;

• 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 of the claims in the same category, the priority among them is determined by special rules that vary according to the category in question.

36 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 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.

37 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.

38 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

39 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.

40 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.

41 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.

42 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.

43 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.

44 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.

45 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.

46 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.

47 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.

48 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

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

No.

50 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 of sulphur content 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 a new chemical analysis. 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.

Jurisdiction and dispute resolution

51 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.

52 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 the 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.

53 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.

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

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). 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 the Brussels I and the 1958 New York Convention.

55 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.

56 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. Regardless 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

57 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 these:

• 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 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 five years from the occurrence of damage.

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

58 May courts or arbitral tribunals extend the time limits?

See question 57.

Miscellaneous

59 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. 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 watch-keeping and on medical examination of seafarers, as well as the collective agreements supported by the Croatian Seafarers’ Union.

60 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.

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

In 2011, various amendments to the Croatian Maritime Code were promulgated. The amendments include the introduction of tonnage tax, inspired by the EU Guidelines on state aid in maritime transport (OJ c13, 17 January 2004), where tonnage tax is envisaged as a measure aimed at returning the tonnage under the registries of the EU countries. Other 2011 amendments to the Maritime Code include: provisions to implement the rules and standards envisaged in the Maritime Labour Convention 2006 (Council Directive 2009/13/EC), harmonisation with the EU rules on maritime casualty investigations, as well as certain employment benefits for seamen.

In 2013, a new set of amendments to the Maritime Code entered into force. The amendments include implementation of the EU legislation dealing with: maritime cabotage, port reception facilities, liability of carriers of passengers in the event of accidents, as well as insurance of shipowners for maritime claims. The amendments also include provisions strengthening the legislative framework for the protection of marine environment; detailed provisions on wreck removal (based on the 2007 Wreck Removal Convention); amendments dealing with salvage; provisions dealing with removal of substandard vessels that pose a threat to safety or the environment; as well as broadening the scope of application of the tonnage tax regime.

Gordan Stanković

gordan.stankovic@vukic-lawfirm.hr

Maja Dotlić

maja.dotlic@vukic-lawfirm.hr

Nikole Tesle 9/VI

51000 Rijeka

Croatia

Tel: +385 51 211 600

Fax: +385 51 336 884

www.vukic-lawfirm.hr

Cyprus

Michael McBride, Yiannis Christodoulou and Michael Papadopoulos

Chrysses Demetriades & Co LLC

Newbuilding contracts

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

Title in a newly built ship is evidenced by the issue of a builder’s certificate, that is to say, a certificate signed by the builder of the ship, and containing a true account of the ship’s particulars, and of the name of the person on whose account the ship was built, and if there has been any sale, the bill of sale under which the ship, or share therein, has become vested in the owner. As ships are moveable objects, it follows that upon transfer of title taking place between the builder and the owner, there must be a contemporaneous ‘physical’ delivery of the ship by builders to owners.

Consequently, absolute title in a ship passes by the builders to the shipowners by means of a builder’s certificate (and bill of sale, where applicable), and the physical delivery of such ship to the owner.

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

There are no statutory requirements applicable in Cyprus for refund guarantees issued by builders to shipowners to be valid, other than the general legal requirements for the underlying shipbuilding contracts to become effective in the first place.

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

An owner may apply to the Cypriot courts and request the issue of an order for ‘specific performance’ compelling the builder to deliver the ship physically to him. Specific performance is, however, a discretionary power of the court, and is applied in cases where an alternative remedy is not possible.

4 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?

A shipowner would have a cause of action against the builder for defects to his or her ship, both under the relevant shipbuilding contract and the warranty clause contained therein, and, under certain circumstances, the provisions of the law on the sale of goods.

In a sale of a newly built ship that continues under the builder’s warranty, and where such warranties are assigned to the purchaser, with the builder’s consent, then such purchaser would stand in the same legal position as the original shipowner against the builder in relation to these warranty claims. Where such warranties are not applicable, then considering that the rule of ‘privity of contracts’ applies in Cyprus, the purchaser would not have a right of claim against the builder, but only against the seller of the ship, and would be based upon the terms of the contract of sale of the ship between them. This is usually a memorandum of agreement based on the Norwegian sales form or similar.

Ship registration and mortgages

5 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?

All vessels used in navigation and not propelled by oars are eligible for registration in Cyprus provided that they meet the age restrictions set out in the official government policy regulating the registration of old ships in the Cyprus Ships Register. Vessels under construction are registrable in Cyprus.

6 Who may apply to register a ship in your jurisdiction?

A citizen of or a corporation or partnership established in Cyprus, the European Union, the European Economic Area (which includes Norway, Iceland and Liechtenstein), or in a third country where its control or ownership vests in EU interests may apply to register a ship under the Cyprus flag.

7 What are the documentary requirements for registration?

A Cypriot company is formed by the registration of the memorandum and articles of association with the Registrar of Companies, and the filing of the requisite company forms registering the appointment of directors, secretary and registered office.

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

Dual registration and flagging out are both possible in Cyprus. The basis for such types of registration is the bareboat chartering of a ship by the shipowner to the charterer, and on the condition that the respective laws of the underlying registry and of the bareboat registry, to explicitly permit dual registration, and to contain preventive covenants that matters relating to ownership, and to mortgages over the ship, shall be exclusively governed by the laws of the ships’ underlying register. The bareboat charterer must also undertake to maintain the same safety standards to the ship, even though the chosen bareboat register applies safety standards that are lower than those applied by the ships’ underlying register.

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

The Register Book is entrusted by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law 1963, as amended, to the Registrar of Cypriot Ships, and contains a description of the ship, and of the particulars of mortgages registered thereon. As there are two forms of mortgages, the one securing a principal amount and interest, and the other securing a current account, the information that is entered in the Register consists of the name and address of the mortgagee, the date of the mortgage instrument, time of registering, the form of the registered mortgage and its ranking.

Limitation of liability

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

The Convention on Limitation of Liability for Maritime Claims of 1976 and of its Protocol of 1996 amending the said Convention (Ratification) and for Matters Connected Therewith Law of 2005 (Law No. 20(III)/2005) applies.

The following claims are subject to limitation:

(i) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss;

(ii) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

(iii) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;

(iv) claims in respect of the raising, removal, destruction or the rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

(v) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; and

(vi) claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with this convention, and further loss caused by such measures.

The claims set out under (iv), (v) and (vi) are not subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.

The owner, charterer, manager and operator of a seagoing ship and salvors can limit their liability. An insurer of liability for claims is subject to limitation.

11 What is the procedure for establishing limitation?

Provision is made in the conventions ratified by Cyprus. The matter has not been tested before the Cypriot courts (see questions 40 to 47).

12 In what circumstances can the limit be broken?

The limit can be broken when the actual fault or privity of the shipowner is proved.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention limitation regime applies.

Port state control

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

The port control agency is entrusted to the Department of Merchant Shipping, and operates under the Paris Memorandum of Understanding of Port State Control.

15 What sanctions may the port state control inspector impose?

The port state control inspector may impose all sanctions provided for under the Paris Memorandum, including detention of ships.

16 What is the appeal process against detention orders or fines?

Orders made or fines imposed under port state control (PSC) fall under normal government administration practice, all of which is subject to recourse to the Supreme Court of Cyprus within 75 days of the giving of the order, or of the imposition of the fine.

Classification societies

17 Which are the approved classification societies?

All members of the IACS class societies are recognised by Cyprus.

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

A class society would be held liable if the cause of the action falls within the criminal domain.

For civil actions, a class society would generally be held accountable if it does not contractually disclaim liability with the shipowner.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes.

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

Collisions

• The Convention on International Regulations for Preventing Collisions at Sea, 1972 (Ratification) and for Matters Connected Therewith Law of 1980 (Law No. 18/80), and the following amendments:

• the Convention on International Regulations for Preventing Collisions at Sea, 1972 (Ratification) and for Matters Connected Therewith (Amendment) Law of 1981 (Law No. 8/81);

• the Convention on International Regulations for Preventing Collisions at Sea, 1972 (Ratification) and for Matters Connected Therewith (Amendment) Law of 1982 (Law No. 66/82);

• the Convention on International Regulations for Preventing Collisions at Sea, 1972 (Ratification of Amendments) Law of 1989 (Law No. 4/89); and

• the International Convention for the Unification of Certain Rules Concerning Civil Jurisdiction in Matters of Collision, 1952 (Ratification) Law of 1993 (Law No. 31(III)/93).

Salvage

• The Convention for the Unification of Certain Rules of Law Relating to Assistance and Salvage at Sea and Protocol of Signature, Brussels 23 September 1910 (extended to Cyprus on 1 February 1913).

Pollution

• the Convention for the Protection of the Mediterranean Sea Against Pollution and for Connected Protocols (Ratification) Law of 1979 (Law No. 51/79). (Gazette No. 1524, supplement I, dated 8 June 79);

• the Convention for the Protection of the Mediterranean Sea Against Pollution and for Connected Protocols (Ratification) (Amendment) Law of 2001 (Law No. 20 (III)/2001). (Gazette No. 3537, Supplement I (III), dated 15 October 2001);

• the Convention for the Protection of the Mediterranean Sea Against Pollution and for Connected Protocols (Ratification) (Amendment) Law of 2007 (Law No. 35 (III)/2007);

• the International Convention for the Prevention of Pollution of the Sea from Ships of 1973, its Protocol of 1978 and the Resolutions MEPC 14(20) of 1984, MEPC 16(22) and MEPC 21(22) of 1985 (Ratification) and for Matters Connected Therewith Law of 1989 (Law No. 57/89) and its amendments:

• the International Convention for the Prevention of Pollution of the Sea from Ships of 1973, its Protocol of 1978 and the Resolutions MEPC 14(20) of 1984, MEPC 16(22) and MEPC 21(22) of 1985 (Ratification) and for Matters Connected Therewith (Amendment) Law of 1995 (Law No. 11(III)/95);

• the International Convention for the Prevention of Pollution of the Sea from Ships of 1973, its Protocol of 1978, as Amended by the Resolutions of 1987–1995 (Ratification) and for Matters Connected Therewith (Amendment) Law of 2001 (Law No. 11 (III)/2001);

• the International Convention for the Prevention of Pollution of the Sea from Ships (Ratification) and for Matters Connected Therewith (Amendment) Law of 2003 (Law No. 38 (III)/2003);

• the International Convention for the Prevention of Pollution of the Sea from Ships (Ratification) and for Matters Connected Therewith (Amendment) Law of 2004 (Law No. 46 (III)/2004) (EU harmonisation law); and

• the International Convention for the Prevention of Pollution of the Sea from Ships (Ratification) and for Matters Connected Therewith (Amendment) Law of 2005 (Law No. 36 (III)/2005). (EU harmonisation law), including: the Submarine Pipe-Lines for the Transfer of Oil and Other Hydrocarbon Products Regulations, 1995 and the Port Reception Facilities for Ship-generated Waste and Cargo Residues Regulations, 2003;

• the International Convention for the Establishment of an International Fund for Compensation for Oil Pollution Damage of 1971 and of its Protocol of 1976 (Ratification) and for Matters Connected Therewith Law of 1989 (Law No. 109/89), and its amendment;

• the Protocol of 1992 Amending the International Convention for the Establishment of an International Fund for Compensation for Oil Pollution Damage of 1971 (Ratification) and Matters Connected Therewith (Amendment) Law of 1997 (Law No. 15(III)/97); and

• the International Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter, 1972 and the Resolutions LDC5(III), LDC6(III) of 1978 and LDC12(V) of 1980 (Ratification) and for the Matters Connected Therewith Law of 1990 (Law No. 38/90).

21 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 salvage form. Lloyd’s standard form is acceptable in Cyprus. Any person may carry out salvage operations.

Ship arrest

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

Cyprus is not a party to the 1952 Arrest Convention; however, the UK has passed the Administration of Justice Act 1956 to ratify the Convention and the Administration of Justice Act 1956 applies to Cyprus by virtue of its Constitution and section 29 of Law No. 14/60.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel may be arrested pursuant to any permissible in rem action under the Administration of Justice Act 1956. An associated vessel may be arrested if, at the time of the cause of action, it was entirely beneficially owned by the relevant owner or charterer.

24 What is the test for wrongful arrest?

The test for wrongful arrest is ‘bad faith’.

25 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, provided the bunker supplier shows that his or her claim falls within one of the sections in question 23 (subsection (m) in particular).

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

Yes, in the form of a local bank guarantee.

27 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?

The amount varies, as there is no general rule. Practically, usually a figure representing 10 to 15 per cent of the amount claimed is ordered to be put up.

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

The initial arrest expenses are paid by the arresting party to the admiralty marshal who is responsible for the maintenance of the vessel, while it is under arrest. Such expenses are paid out first in any priority proceedings.

29 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?

Not necessarily. An arrest may be obtained provided that a substantive action is filed on or before applying for the arrest. The action could then be stayed pending the determination of proceedings elsewhere.

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

A claimant may apply for an injunction freezing any movable property belonging to the defendant. There are also other types of injunction orders available such as Norwich Pharmacal and Chabra.

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

A party may apply, after closing of pleadings, for the discovery and inspection of documents. The party against whom such order is directed will not be at liberty to produce any documents during the trial which are not discovered. Any documents discovered may then be inspected. Further any party may apply to the court for leave to administer interrogatories.

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

It is possible to obtain an injunction in respect of bunkers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The arresting party or the admiralty marshal in whose custody the arrested ship is can apply for judicial sale.

34 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?

A judicial sale of a vessel can take place either:

• after judgment (in rem) is obtained whereby the admiralty marshal orders the appraisement (by a valuator) of the vessel, which is then sold by public auction. Furthermore, the admiralty marshal might in some circumstances request the court to order sale by private treaty; or

• before judgment, on the application of the arresting party or the admiralty marshal provided that the court is convinced that the vessel is a ‘wasting asset’.

The approximate costs (apart from legal fees) would depend on the value of the vessel (as a percentage is usually charged on the appraisement) and they then form part of the admiralty marshal’s expenses (see question 35). An approximate figure would be around €10,000.

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

The order is, from highest to lowest priority:

• admiralty marshal’s expenses;

• maritime lien (apart from salvage – pari passu);

• mortgages;

• statutory claims in rem (pari passu);

• claims of in personam creditors of the owner of the res; and

• the owner of the res for the (if any) balance.

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

It gives the purchaser good title extinguishing all prior liens and encumbrances on the vessel.

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

Provided it took place in a country that Cyprus has entered into a treaty with.

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

Yes. Cyprus is a signatory.

Carriage of goods by sea and bills of lading

39 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 International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading and Protocol of Signature, Brussels 25 August 1924 (extended to Cyprus on 2 June 1931) applies in Cyprus.

Carriage at sea begins on loading of the cargo, and ends on discharge from the ship (on passing the ship’s rails).

40 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?

There are no conventions or domestic laws in force.

41 Who has title to sue on a bill of lading?

There is little or no Cypriot case law on the matter, and the position under Cypriot law would be identical to that under English law. The Supreme Court of Cyprus in its admiralty jurisdiction applies the law that was applied by the High Court of Justice in the UK up to 1960. Any case law up to 1960 is of binding effect, and any subsequent authorities are of a very persuasive nature to the Cypriot courts.

Thus, the Bills of Lading Act 1855, is applicable in Cyprus (see Southfields Industries Ltd v M/V Adriatica K and others, (1989) 1 CLR 301; and Stavros Georgiou & Son (Scrap Metals) Ltd v the Ship ‘Lipa’ ibid). Section 1 of the Bills of Lading Act, 1855 reads as follows:

Every consignee of goods named in a bill of lading, and every endorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.

42 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 parties are free to expressly incorporate the terms of the charter party in the bill of lading.

General words in a bill of lading incorporating into it all the terms and conditions, or all the terms, conditions and clauses of such charter party, are not sufficient to bring such arbitration clause into the bill of lading so as to make its provisions applicable to disputes arising under that document (Elie Sadek and another v Efpalinos Shipping Company Limited and another (1983) 1 CLR 696).

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

Yes, it is recognised and binding.

44 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?

A charterer may be the carrier, and whether the bill of lading is an owner’s or charterer’s bill is a matter of fact. English case law would be followed to determine such a question.

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

Principles of English law are to be followed (ie, liability as common carrier). Where the Carriage of Goods by Sea Law applies, any deviation in saving or attempting to save life or property at sea, or any reasonable deviation, is not deemed to be a breach of the contract of carriage.

46 What liens can be exercised?

The following liens can be exercised:

• contractual liens, that is, those arising under a charter party, for example, against cargo or sub-charter hire or freight or sub-freights;

• at common law against the goods for freight, general average contributions, and expenses incurred by the shipowner or master in preserving the goods;

• maritime liens and statutory lien (once action in rem has been instituted) and a possessory lien, all against the ship; and

• the claims of the Republic of Cyprus for fees, dues, or tonnage taxes chargeable and leviable under the Merchant Shipping (Fees and Taxing Provisions) Law of 1992, constitute a lien on the ship.

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

It is the duty of the shipowner to see that the goods are delivered to the person to whom he or she has contracted to deliver them. Delivery to a person not entitled to the goods without production of the bill of lading is prima facie a conversion of the goods and a breach of the contract of affreightment (Archangelos Domain Limited v Adriatica Societa Per Azione Di Navigatione (1978) 1 CLR 439).

48 What are the responsibilities and liabilities of the shipper?

The principles of English law are to be followed.

Shipping emissions

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

Yes there is and it covers the whole of the Republic of Cyprus. Enforcement, however, is possible only in the areas that are under the control of the Cyprus government.

50 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 maximum permitted sulphur content in fuel is 0.1 per cent while the ship is at berth. Detailed evidence has to be maintained showing the steps taken to achieve compliance on those ships that have not been designed to use diesel and gas oil, or have not got the necessary technical adaptation to use such fuel. During changeover, specific entries must be entered in the official engine log of a ship. Enforcement is performed through PSC inspections. In addition to detention of the ship under PSC, the sanctions impose criminal liability on all the responsible persons with fines of up to €50,000, imprisonment of up to five years, or both and an administrative fine of up to €50,000 on the responsible surveyor.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Arrest proceedings and maritime claims (in rem and in personam proceedings) must be brought before the Supreme Court of Cyprus, in its admiralty jurisdiction. This court has exclusive jurisdiction over such questions or claims as defined by the Act. A recent amendment of the Courts of Justice Law 1960 as amended, has conferred limited admiralty jurisdiction upon the various district courts in Cyprus to hear certain admiralty actions subject to their referral by the Supreme Court.

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

The courts generally have discretion on the method they may direct service to be effected. Otherwise, depending on the country in which the defendant resides, there are numerous bilateral treaties and international conventions that Cyprus has ratified.

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

No, there is no domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration.

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

EU judgments

By article 33 of the EC Regulation, a judgment, including a decree, order, decision or writ of execution, given in a member state may be recognised in the other member states without any special procedure being required, and under no circumstances may a foreign judgment be reviewed as to its substance.

Foreign judgments

Recognition and enforcement of foreign judgments in civil and commercial matters and supplementary protocol thereto ratified by Law No. 11/76.

A decision rendered in one of the contracting states is entitled to recognition and enforcement in another contracting state under the terms of this Convention.

If not within the above Convention, the judgment creditor may apply to the district court at any time within six years after the date of the judgment, to have the judgment registered in the district court, pursuant to the Foreign Judgments (Reciprocal Enforcement) Law. Alternatively he or she may sue on the foreign judgment at common law.

Foreign arbitral awards

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed at New York on 10 June 1958 (the New York Convention), and in force as of 29 March 1981.

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

There are no specific remedies available. The defendant might file an action seeking a declaration that the claimants’ (foreign) action is null and void and should be stayed; however, Cypriot courts, as a matter of public policy, based on the principle of the comity of nations, would be very reluctant to entertain such an action and would prefer to leave the matter to the foreign court to decide.

56 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 apply for a stay of proceedings; however, the court always has discretion whether to grant such an application.

Limitation periods for liability

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

A new Law for the Limitation of Actions, Law 66(I) of 2012 has been enacted and came into force on 1 July 2012.

Actions based on torts are time-barred if not filed within six years (three years for negligence, nuisance and breach of statutory duty) from the date the cause of action arose.

Actions for breach of contract are time-barred if not filed within six years from the date the cause of action arose.

The Law contains a transitional provision for actions that would be considered time-barred (but for the provisions of the Law suspending the Limitation of Actions) at the time the present Law was enacted, which should be filed within one year from 1 July 2012.

The court has the discretion to extend the various time limits. Even though no case law exists on the matter, the court would most probably accept the parties’ agreement to extend the time limits.

58 May courts or arbitral tribunals extend the time limits?

Yes, they have discretion to do so, provided they satisfy themselves of certain requirements.

Miscellaneous

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

The MLC will apply fully in Cyprus, and the Department of Merchant Shipping is the responsible body to ensure application on all Cypriot ships.

60 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?

Yes it is possible to seek relief provided that economic conditions have prevented the performance of contractual obligations, but not merely made them more onerous to perform.

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

No.

Michael McBride

michael.mcbride@demetriades.com

Yiannis Christodoulou

yiannis.christodoulou@demetriades.com

Michael Papadopoulos

michael.papadopoulos@demetriades.com

13 Karaiskakis Street

3032 Limassol

Cyprus

Tel: + 357 25 8000 00

Fax: + 357 25 5880 55

www.demetriades.com

Denmark

Johannes Grove Nielsen and Camilla Søgaard Madsen

Bech-Bruun

Newbuilding contracts

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

The general rule is that title passes when the seller and the buyer have made a final, clear, specific and valid agreement, and when the seller has appropriated the materials.

This is typically done by registration of the ship under construction and the ownership thereof in the shipbuilding register of the Danish Ship Registry.

The parties may also enter into an agreement specifying when title will pass.

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

A refund guarantee is viewed as a contract and there are no formality requirements for contracts under Danish law.

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

If the yard refuses to deliver the vessel to the buyer without a valid reason, the yard will be in material breach of the shipbuilding contract. In this situation the buyer can demand specific performance, meaning that the buyer can demand the yard to complete or deliver the vessel, or both. A claim for specific performance can be filed as a civil claim in the Maritime and Commercial Court of Copenhagen or in a local court.

If the building of the vessel is completed and title has passed to the buyer, the buyer may force delivery through a local enforcement court.

4 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?

If the vessel is defective and damages result, the nature of the claim depends on whether damage has occurred to the ship itself, to an item of property other than the ship or caused personal injury.

If damages occur to the ship itself as a result of a defect of the ship, the shipowner will be entitled to claim damages. This means that the original shipowner can claim damages against the shipbuilder with reference to the shipbuilding contract, whereas a purchaser from the original shipowner can only claim damages towards the original shipowner, but not towards the shipbuilder. Such a claim would be based on the memorandum of agreement (lie in contract).

If damage occurs to an item of property other than the ship or if personal injury occurs and the damage is caused by a defect in the ship, the yard has, as the ‘producer’ of the ship, a fault-based liability based on the Danish case law-developed product liability rules. Thus, the person suffering the damage or injury, being the shipowner, a purchaser from the original shipowner or a third party may claim damages if the yard has acted with negligence.

Ship registration and mortgages

5 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?

In Denmark there are two different ship registries: a national registry for Danish-owned tonnage (DAS) and an international registry for ships engaged in foreign trade (DIS).

Danish vessels 20 GT or more are obliged to register in DAS or DIS. Danish vessels of between 5 and 20 GT have a right to register in DAS, but cannot be registered in DIS. Furthermore, warships, fishing vessels, boulder fishing vessels and recreational craft, as well as ships carrying passengers engaged in regular service between Danish ports, cannot be admitted to DIS.

A vessel registered in DAS or DIS flies the Danish flag.

Vessels under construction in Denmark can be registered in the shipbuilding register (a subdivision of DAS). It is a requirement that the vessel can be identified and that the gross tonnage is expected to be more than 5 GT. There is no nationality requirement.

6 Who may apply to register a ship in your jurisdiction?

A vessel is regarded as Danish, and thus eligible for registering in DAS or DIS, if it is owned by a Danish citizen, a corporation established according to Danish law or registered in the Danish Central Business Register, or by a partnership, of which half is owned by and the managing owner is: a Danish citizen, a corporation established according to Danish law or a corporation registered in the Danish Central Business Register.

A vessel may also be eligible for registration in DAS or DIS if it is owned by EU or EEA citizens, an EU or EEA corporation, an EU or EEA partnership, a non-EU or non-EEA corporation or a non-EU or non-EEA partnership. Vessels owned by non-EU or non-EEA citizens may not be registered. For non-Danish vessels there are two additional requirements for registration in DAS or DIS: that the vessel be administered, controlled and directed from Denmark (the activity requirement), and that the owner of the vessel has a connection to Denmark through a primary or secondary establishment (the establishment requirement). The specific conditions of the activity and establishment requirements depend on the type of vessel, the ownership and whether it is an EU or EEA vessel.

For all non-Danish vessels registration is an option not an obligation.

If a vessel cannot be regarded as Danish, based on the above outlined rules of nationality, and if the vessel does not fulfil the activity and establishment requirements, it will instead be regarded as a foreign vessel. A foreign vessel can be registered in DIS if the owner of the vessel is a foreign corporation in which a Danish citizen or corporation directly or indirectly holds a significant proportion of shares and through said shares has a significant influence. Furthermore, the corporation is required to appoint a Danish representative with authority to be served on behalf of the corporation and to fulfil obligations in accordance with Danish law.

7 What are the documentary requirements for registration?

The documentary requirements for registration vary depending on whether the registration is in DAS or DIS, whether it concerns a corporation, partnership, citizen or ship, and also on the type of ship.

The following documents are often required:

• the relevant notification form (can be found on the Danish Maritime Authority’s homepage, www.dma.dk);

• bill of sale;

• passport or similar proof of identity; and

• proof of cancellation from a prior registry.

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

Dual registration is only possible in the case of bareboat chartering.

A Danish ship registered in either DAS or DIS and bareboat chartered by a foreign charterer can, in addition to the registration in DAS or DIS, be registered in a foreign ship register for a period of up to five years. Mortgages and other rights will remain in the Danish registry but the ship is subject to the laws of the foreign state of registry. The registration is dependent on permission from the foreign registry as well as the registered owner.

Additionally, a foreign vessel on a bareboat charter not registered in DAS or DIS can be registered in DAS or DIS for a period of up to five years if the bareboat charterer fulfils the nationality requirements mentioned above. In this case the ship will fly the Danish flag and be subject to Danish law. The registration is dependent on permission from the foreign registry and the registered owner.

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

Title, mortgages and other rights are registered in either DAS or DIS and maintained by the Danish Maritime Authority (DMA) operating under the Danish Ministry of Business and Growth.

Limitation of liability

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

Denmark has ratified the 1976 Convention on Limitation of Liability for Maritime Claims as amended by the 1996 Protocol.

The following claims can be limited irrespective of the basis of liability:

• claims in respect of personal injury or damage to property occurring on board or in direct connection with the operation of the ship or with salvage operations;

• claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

• claims in respect of loss resulting from infringement of rights other than contractual rights occurring in direct connection with the operation of the ship or salvage operations;

• claims in respect of raising, removal, destruction or the rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

• claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; and

• claims in respect of measures taken to avert or mitigate loss, which is or would be subject to limitation of liability as well as loss caused by such measures.

According to the Danish Merchant Shipping Act, the ‘shipowner’ has the right to limit liability. A shipowner is defined as the party who equips, crews and runs the ship for his or her own account. Also, an owner of a ship (who is not the shipowner), a user, charterer, manager and anyone who provides services in direct connection with salvage operations can limit liability. Persons for whose acts the shipowner or any of those mentioned above is responsible may also limit liability and an insurer of the liability for claims subject to limitation can limit liability to the same extent as the insured.

11 What is the procedure for establishing limitation?

A limitation fund can be established with the Maritime and Commercial Court if the vessel has been arrested, if legal proceedings are commenced or if other legal steps have been taken with regard to a claim that can be limited.

The Maritime and Commercial Court establishes the fund when the limitation amount including interest is paid, a deposit is made, or sufficient security is provided.

12 In what circumstances can the limit be broken?

The right to limitation does not apply to claims for reward for salvage, contribution in general average, certain oil pollution or other waste damages, and nuclear damages.

Further, a person is not entitled to limit liability if the loss or damage resulted from a personal act or omission committed with the intent to cause such loss or damage, or recklessly with the knowledge that such damage would probably occur.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Denmark has ratified the 2002 Protocol to the 1974 Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, which entered into force in April 2014.

Port state control

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

The DMA is operating as the port state control agency under the Danish Ministry of Business and Growth.

15 What sanctions may the port state control inspector impose?

If the DMA finds during an inspection that a vessel does not adhere to Danish law, an order to have the vessel brought into compliance with the rule in question within a certain period can be given.

If the non-compliance is regarded as a serious offence, the DMA may choose to confiscate the vessel’s certificate or detain the vessel.

16 What is the appeal process against detention orders or fines?

If the DMA issues a detention order, the order can be appealed to the Danish Shipping Tribunal. Only the shipowner can appeal a detention order. An appeal has to be brought within four weeks of the detention order. The Tribunal will hear both the DMA and the shipowner, and will usually decide the appeal within four months thereafter.

Classification societies

17 Which are the approved classification societies?

In Denmark a number of recognised organisations are authorised to undertake statutory certification services for vessels registered in Denmark. The DMA has authorised eight recognised organisations: the American Bureau of Shipping; Bureau Veritas; Class NK (Nippon Kaiji Kyokai); DNV GL; Lloyd’s Register; the Polish Register of Shipping; RINA; and the Korean Register.

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

Both a shipowner and a third party may hold a classification society liable for damages that occur as a result of a faulty or defective classification.

In the relationship between the classification society and the shipowner, the classification society will usually incorporate extensive exemption or limitation of liability clauses, or both. These clauses might be set aside if the clause is regarded as unreasonable, but as a shipowner is a professional party, courts are likely to uphold a clause exempting negligence, whereas a clause exempting gross negligence is more likely to be set aside. The liability standard is fault-based negligence and the burden of proof is on the shipowner.

With regard to a classification society’s liability towards a third party, the classification society will usually not be allowed to rely on exemption or limitation of liability clauses, as these have not been agreed with the third party. The liability standard is fault-based negligence with the burden of proof on the third party.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The DMA can order wreck removal.

If a vessel is stranded or sunken and a danger or inconvenience for other vessels, the DMA will mark the wreck with buoys and contact the shipowner to inquire whether the shipowner will attempt salvage. At the same time the DMA will inform the shipowner of a certain depth of clear water required above the wreck and a date before which the shipowner has to achieve the required depth.

If the shipowner does not achieve the required depth within the given time frame the DMA will remove the wreck. The shipowner will be liable for any expenses connected to the wreck removal but can limit liability.

Denmark has signed the 2007 Nairobi International Convention on the Removal of Wrecks and deposited an instrument of ratification on 14 April 2014, thus triggering the Convention’s entry into force on 15 April 2015.

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

The Convention for the Unification of Certain Rules of Law with respect to Collision between Vessels 1910 is in force. In addition, the Danish Seaway Rules based on the Convention on the International Regulations for Preventing Collisions at Sea (COLREG) will apply.

Denmark ratified the 1989 International Convention on Salvage on 14 July 1996.

The Danish rules governing oil pollution are based on the International Convention on Civil Liability for Oil Pollution Damage (1992 Liability Convention), the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1992 Fund Convention) and the 2003 Supplementary Fund. In addition, the Danish rules regarding the marine environment include the 1973 Convention on Prevention of Pollution from Ships as amended by the 1978 and 1997 Protocols (MARPOL 73/78).

Furthermore, Denmark has signed, but not yet ratified, the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996 as amended by the 2010 Protocol. Denmark has ratified the International Convention on Civil Liability for Bunker Oil Pollution Damage 2003.

21 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?

The rules governing salvage are based on the 1989 International Convention on Salvage. The rules are not mandatory and a salvage contract, if entered into, will therefore displace the general provisions. However, a salvage contract can be annulled or modified if the contract has been entered into under undue influence or the influence of danger and if the terms are inequitable.

It is not a requirement that the parties enter into a salvage agreement, and thus not mandatory to use a specific local agreement. If the parties do enter into a salvage agreement Lloyd’s Standard Form of Salvage Agreement is acceptable but not always used.

Anybody may carry out a salvage operation. The shipowner may decide who among several possible salvors should carry out the operation.

Ship arrest

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

Denmark is a party to the International Convention relating to the Arrest of Seagoing Ships 1952, which has been implemented into the Danish rules regarding arrest.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

The general rule is that the arrest of ships may only be carried out as security for a maritime claim.

The following claims are maritime claims:

• damage to property caused by a ship through collision or in some other way;

• personal injury caused by a ship or arising in connection with operation of a ship;

• salvage;

• agreements contained in a chartering agreement or otherwise for the use or hire of a ship;

• agreements contained in a chartering agreement or otherwise for the carriage of goods on board a ship;

• loss of or damage to goods, including luggage, which is carried on board a ship;

• general average;

• bottomry;

• towage;

• port, canal and other waterway dues and charges as well as pilotage;

• delivery of goods or materials to a ship, irrespective of the delivery location, for use in its operation or maintenance;

• construction and repair or delivery of equipment for a ship, as well as costs and docking fees;

• wages for masters and other members of the ship’s complement;

• masters’ disbursements, including disbursements paid by shippers, charterers or agents on behalf of the ship or its owner;

• disputes on property rights to a ship;

• disputes between co-owners of a ship on property rights, possession, use or revenues of the ship; and

• mortgages on a ship.

In addition, arrest can be carried out as a security for non-maritime monetary claims in accordance with the Danish Administration of Justice Act if execution is not possible, if the possibility of payment will otherwise be significantly reduced and if the claimant does not wish to detain the vessel.

A vessel can be arrested in Danish waters regardless of the nationality of the vessel and the law governing the claim.

The general rule is that only the particular ship in respect of which the maritime claim arose may be arrested. However, sister ships owned by the shipowner of the ship in respect of which the maritime claim arose may also be arrested, provided that the claim is not a dispute on property rights to a ship, dispute between co-owners of a ship on property rights, possession, use or revenues of the ship or mortgages on such original ship.

Arrest of a ship without the owner being liable for the underlying claim is only possible if the claim is secured by a lien.

Arrest of associated ships is not possible.

24 What is the test for wrongful arrest?

The arrestor is obliged to initiate validation proceedings within a week of the arrest, during which the court will determine if the arrest was legal or wrongful. If the court concludes that the arrest was wrongful, for example, if the arrestor did not have a valid claim, the arrest will be lifted and the arrestor will be strictly liable.

25 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?

A bunker supplier who has entered into a contract for the supply of bunkers with a charterer cannot arrest the chartered vessel, as it is a requirement for arrest that the execution of the claim can be levied against the owner. Only if the arrestor has a claim against the owner or has a statutory maritime lien can the claim be levied against the owner. As a statutory lien is not granted to claims for the supply of bunkers and as the contract has been entered into with the charterer, the vessel cannot be arrested.

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

The arresting party will usually have to provide security for the damages and inconvenience that the arrest may cause the arrestee. The enforcement court specifies a sufficient amount, which will normally not exceed an amount corresponding to five days’ loss of hire.

Both parties may appeal the enforcement court’s decision regarding the amount of security to the Danish High Court, which will review the decision. The Danish High Court’s decision is final and cannot be appealed.

There are no rules regarding the form in which the arresting party has to provide security. Often enforcement courts demand a Danish bank provide the guarantee but there is no statutory authority to such a demand. The explanation to such a demand is probably that the court wants to make sure that the claimant can seek payment against the guarantee under Danish law. Since the introduction of the Brussels I Regulation the enforcement courts may, however, no longer have a valid reason to demand a guarantee to be provided by a Danish bank, at least not in cases where the guarantee is provided by an EU bank and governed by Danish law.

The court will usually also accept a letter of guarantee from a P&I club.

27 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?

The arrested party is able to prevent an arrest if it provides sufficient security for the arresting party’s claim including interest and costs. The enforcement court decides what will be sufficient security. Usually an amount corresponding to the total claim plus 30 to 40 per cent is regarded as sufficient.

With regard to the question of review of the amount determined by the enforcement court and the form of security required, see question 26, which applies equally to the security provided by the arrested party.

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

Usually the owner will not be deprived of the right of disposal entirely and the owner will therefore still be responsible for the maintenance of the vessel. In addition, the owner is not allowed to dispose of the vessel in a way that can impair the arrestor’s right.

29 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?

The arresting party is obliged to pursue the claim on its merits in the court that has jurisdiction of the claim. Thus, if a court outside Denmark has jurisdiction, the arresting party must pursue the claim there, by commencing legal proceedings within two weeks. Within the same time frame the arresting party must commence validation proceedings of the arrest in Denmark. The enforcement court will suspend the validation proceedings until the claim has been decided on the merits. If there is jurisdiction in Denmark, the validation proceedings must be commenced in Denmark within one week.

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

Under Danish law it is possible to levy execution on a property (eg, a vessel). Once execution is levied on a vessel, it gives the execution creditor a right to apply for a forced sale of the vessel. To levy execution on a vessel an enforceable judgment or court order, a settlement that expressly states that it is enforceable, an instrument of debt expressly stating enforceability or a mortgage is required.

Thus, this form of attachment can be used to secure payment of a right already established through a judgment, settlement agreement, debt instrument or mortgage.

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

The Danish Administration of Justice Act provides that a party in a civil case may request the court to order an opponent or a third party to deliver up physical evidence, such as documents and recordings. When requesting delivery up a party must explain the facts that are sought to be proven through the request as well as the grounds on which the party supports that the opponent is in possession of the evidence.

If a party does not comply with an order to deliver up it may be prejudicial to the party’s case as the court may choose to assume that the evidence not delivered supports the opponent’s arguments.

Furthermore, it is possible either before or after the initiation of a civil case to submit a question for an expert opinion. Such expert opinions usually consist of both an inspection and a valuation, and are a possible option for preserving evidence.

Once a case has been initiated before the courts by filing a writ an expert opinion will only be admissible if a request has been submitted to the court and the court has allowed an opinion to be obtained. Thus, a unilateral opinion obtained without the permission of a court is not admissible. However, if a party has obtained an expert opinion unilaterally before the initiation of court proceedings the opinion is admissible.

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

It is theoretically possible to arrest bunkers, but in practice many challenges will arise (eg, as mentioned above it is a requirement for arrest that the execution of the claim can be levied against the owner). This means that arrest can only be carried out with regards to a debtor’s own assets and not assets owned by anyone else and as bunker tanks are normally not emptied completely it may be a challenge to determine which part of bunkers is owned by a specific debtor.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Arrest is only an interim remedy designed to secure the payment of debt where execution is not immediately available. A judicial sale of a vessel requires that execution is first levied on the vessel. The requirements for levying execution are mentioned in question 30. Execution cannot be levied on the basis of a statutory maritime lien.

Once execution is levied on the arrested vessel, usually on the basis of the judgment regarding the merits of the claim, the person with the claim can apply for judicial sale.

34 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?

Once execution is levied on the vessel through the enforcement court, an execution lien is established. This gives the claimant the right to apply for judicial sale. To commence a judicial sale the claimant must apply for the sale with the enforcement court.

The judicial sale will be announced in the Official Danish Gazette as well as in local newspapers. The announcement has to be made at least six weeks before the sale and at least twice. If the vessel is registered in DAS or DIS the judicial sale will be registered therein.

In 2013, 96.2 per cent of all Danish enforcement proceedings were concluded within six months.

Upon the application for judicial sale a court fee of 800 Danish kroner must be paid. Once the judicial sale is completed an additional fee of 0.5 per cent of the highest bid including costs falls due.

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

Claims granted a statutory maritime lien have first priority. Claims secured by registered mortgages and all other claims have priority after maritime liens in the order in which they were established.

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

The legal effect of a judicial sale is that all liens and encumbrances on the vessel are extinguished, including maritime liens. The buyer will thereby be granted clean title.

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

A judicial sale in a foreign jurisdiction will be recognised and all liens and encumbrances will be extinguished if the vessel was present in the state where the judicial sale took place, and if the judicial sale was carried out in accordance with the law of the state and in accordance with the 1967 International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages.

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

Denmark is a signatory to the International Convention on Maritime Liens and Mortgages 1993, but has not yet ratified the Convention. The Danish rules are based on the 1967 International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages.

Carriage of goods by sea and bills of lading

39 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?

Denmark has ratified the Hague-Visby Rules and the rules are implemented in the Danish Merchant Shipping Act. However, a few provisions are based on the Hamburg Rules even though Denmark has not ratified the Hamburg Rules. Finally, a few provisions are purely Nordic provisions. The Danish Merchant Shipping Act is almost identical to similar acts in the other Nordic countries.

Denmark signed the Rotterdam Rules on 23 September 2009, but at the time of writing they have not yet been ratified.

The period of application of the rules in the Danish Merchant Shipping Act related to the carriage of goods by sea, depends on the specific rule in question. However, the rules regulating liability of the carrier are applicable for the period during which the carrier has the goods in his or her possession. Thus, the tackle-to-tackle principle does not apply.

40 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?

The Danish rules governing international carriage by road are based on the CMR Convention, the rules governing international transport by rail are based on the CIM Convention and the rules governing air transport are based on the Montreal Convention.

41 Who has title to sue on a bill of lading?

The rightful holder of a bill of lading has title to sue. Rights under a bill of lading, including title to sue, are transferred when the bill of lading is validly transferred. To what extent a bill of lading can be transferred depends on the wording of the bill of lading. It can be issued to a specific person or order or to a bearer. If it is issued to a specific person, it cannot be transferred and only that person has the right to sue. If it is issued to order, any person who by a consecutive series of transfers can prove that they are the rightful owner has title to sue on the bill of lading. If it is issued to the bearer, any person who has the bill of lading in their possession has the rights.

42 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?

Provisions in a charter party that are not included in the bill of lading may not be invoked against a holder unless the bill of lading makes reference to them. This means that if a charter party is deemed to be included in the bill of lading all the provisions of the charter party will be recognised. In the event that the charter party includes terms which conflict with the terms in the bill of lading or the mandatory Hague-Visby Rules, the bill of lading or the Hague-Visby Rules will take precedence over the charter party.

An abstract reference to a charter party with a jurisdiction or arbitration clause is normally not sufficient to make the jurisdiction or arbitration clause binding, but a clear reference directly to the jurisdiction or arbitration clause will be sufficient, and will thus be binding on a third-party holder or an endorsee if the clause specifies a venue within the EU.

If a venue outside the EU is agreed upon and the port of loading or port of discharge is in Denmark, Norway, Sweden or Finland, the clause will only be deemed to have prerogative effect which means that the agreed venue is only an additional venue and not an exclusive venue.

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

According to the Danish Merchant Shipping Act, the contracting carrier is jointly liable with the carrier actually performing the carriage.

44 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?

The contractual carrier is liable for cargo damage that occurs during transport. The contractual carrier may escape liability if the contractual carrier proves that loss or damage was not caused by any fault or neglect by him or her or any person for whom he or she is responsible.

A carrier performing part of a journey is only liable for the part performed by him or her.

The contractual carrier and the actual carrier may escape liability if they prove that the damage was caused by fault or neglect in the navigation or management of the ship by the master, crew, pilot or others who work in the service of the ship. Also, liability may be escaped in case of fire, unless caused by fault or neglect of the carrier himself.

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

A carrier is allowed certain flexibility when planning a voyage and an appropriate route, and can usually choose a route that he or she sees fit. If the vessel is regarded as having deviated the carrier will be liable for any loss or delay, unless deviation was carried out in order to save lives or to salvage a ship or property at sea.

46 What liens can be exercised?

The Danish Merchant Shipping Act provides a statutory maritime lien on a vessel for certain claims, including wages and other sums due to the master and other members of the ship’s company in respect of their employment on board; port, canal and other waterway dues and pilotage dues; compensation for personal injury occurring in direct connection with the operation of the ship; compensation for damage to property in direct connection with the operation of the ship, if the claim cannot be based on contract or rewards for salvage; removal of wrecks; and contribution in general average.

In addition, rewards for salvage and contribution in general average are secured by a lien on cargo. Claims based on the fact that the carrier or master, pursuant to their statutory power of attorney, have made an agreement, taken measures or made payments on behalf of the cargo owner, as well as claims by the cargo owner for indemnification for goods sold for the benefit of other cargo owners, are also secured by a lien on cargo. Claims by the carrier pursuant to the contract of carriage, including freight, provided the claim is valid against the party demanding delivery, are also secured by a lien on cargo.

A shipowner may by way of agreement establish a contractual lien in freights, subfreights or both. The relevant perfection is notification of the assignment to the (sub)charterer.

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

The rightful holder of the bill of lading is entitled to take delivery of the goods upon the presentation of the bill. The carrier is liable for any damage caused to the rightful holder of the bill of lading resulting from delivery of cargo to a person other than the rightful holder. Liability cannot be limited.

48 What are the responsibilities and liabilities of the shipper?

The shipper is liable for loss sustained by the carrier or the sub-carrier, including damage sustained by the ship, if such loss or damage was caused by fault or neglect of the shipper or any person for whom he or she is responsible.

If the shipper hands over dangerous goods to the carrier or a sub-carrier without informing him of the dangerous character of the goods and, if necessary, of the precautions to be taken, and if the recipient of the goods does not otherwise have knowledge of their dangerous character, the shipper is liable to the carrier and any sub-carrier for costs and any other loss resulting from the carriage of such goods. The carrier or sub-carrier may unload, render innocuous or destroy the goods, as the circumstances may require, without any obligation to pay compensation.

Shipping emissions

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

The European Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels with later amendments has been incorporated into Danish law by a Danish statutory order regarding the sulphur content in solid and liquid fuels. This means, that the emission of sulphur in Danish territorial waters is limited in accordance with the EU Directive.

Furthermore, the Baltic Sea IMO Emission Control Area and the North Sea IMO Emission Control Area include Danish territorial waters and thus, the emission of sulphur is limited by the rules regarding these ECAs.

50 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?

Ships flying the Danish flag in international waters and any ship in Danish waters may not use marine fuels with a sulphur content exceeding 3.5 per cent by mass. From 1 January 2020 the permitted sulphur content will be lowered to 0.5 per cent by mass.

Furthermore, passenger ships operating a regular service between harbours within the European Union may not use marine fuels exceeding 1.5 per cent by mass.

Within the Baltic Sea and the North Sea SOx ECAs the sulphur content of marine fuels may not exceed 1 per cent by mass until 31 December 2014 and 0.1 per cent by mass from 1 January 2015.

The emission limit while berthing is also regulated. Ships at berth may not use marine fuels with a sulphur content exceeding 0.1 per cent by mass.

Enforcement of the emission limits are secured through random sampling, analysis and inspection carried out by the Danish Environmental Protection Agency in cooperation with the DMA. Sampling can be carried out during the delivery of bunker fuel as well as from bunkers already on board a vessel. Furthermore, the DMA may inspect a ship’s log and bunker delivery notes.

The sanctions available for non-compliance are retention of a vessel, fines or up to two years’ imprisonment if non-compliance is deemed intentional and has caused damage to the environment or if it was pursued with the intention of earning a profit.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Danish Maritime and Commercial Court as well as local courts.

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

If the defendant has a presence in Denmark (ie, a Danish temporary residence or a Danish office), the defendant may be served there in person in accordance with the Danish Administration of Justice Act.

If the defendant does not have a presence in Denmark but is domiciled within the EU, service of court proceedings will be governed by EC Regulation No. 1393/2007 on the service in the member states of judicial and extrajudicial documents in civil or commercial matters (service of documents) which is in force in Denmark through a bilateral agreement of 2005 between the EU and Denmark.

The EU regulation establishes that a Danish court, as a transmitting agency, shall forward court proceedings to a local receiving agency, which will serve the documents in accordance with local national law. Court proceedings and other documents are required to be in a language that the addressee understands or in the official language of the member state addressed. No legalisation is required.

If the defendant is domiciled outside the EU, the 1965 Hague Convention on the service abroad of judicial and extrajudicial documents in civil or commercial matters applies. Service according to the Convention is similar to service under the regulation.

If the defendant is domiciled outside the EU and in a state that has not ratified the Hague Convention, service is carried out in accordance with national local law.

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

No, but the Maritime and Commercial Court uses lay judges with maritime expertise.

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

The Brussels Regulation No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters is in force in Denmark through Denmark’s bilateral agreement with the EU. In accordance with the regulation, judgments from within the EU are recognised without any special proceedings. By 10 January 2015 the Regulation will be replaced by an updated version of the Brussels Regulation No. 1215/2012.

Denmark is not a party to the Regulation No. 805/2004 creating a European Enforcement Order for uncontested claims.

With regard to arbitration awards, Denmark has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards and foreign arbitration awards are thus enforceable in Denmark.

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

If the claim is governed by the Brussels Regulation, a court that does not have jurisdiction shall, of its own motion, declare itself non-competent. However, until a court makes such declaration, another court which has jurisdiction, but which is second seised, is obliged to stay proceedings, in accordance with the lis pendens principle. Thus, if a claimant issues proceedings in breach of a jurisdiction clause, the defendant has to appear before the court and provide sufficient evidence in support of the jurisdiction clause enabling the court to declare itself non-competent.

However, when the revised Brussels Regulation enters into force on 10 January 2015, a court which has been delegated jurisdiction through a jurisdiction clause may review its jurisdiction even if an opponent has initiated proceedings in another jurisdiction, thus the lis pendens principle will not apply if a jurisdiction clause has been agreed upon between the parties. This means that a defendant may issue proceedings in Denmark and a Danish court will be able to hear the case on the merits even if proceedings have been initiated elsewhere first, in breach of a jurisdiction clause.

56 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?

Anti-suit injunctions are neither used nor recognised in Denmark or under the Brussels Regulation. Thus, if domestic proceedings have been initiated in breach of a jurisdiction clause, a defendant must appear before the Danish court and provide sufficient evidence supporting the jurisdiction clause. If sufficient evidence is provided, a Danish court will be obliged to dismiss the case and proceedings can be initiated before a competent court.

Limitation periods for liability

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

The ordinary time limit is three years from the time where the claim is due.

A shorter time limit applies to certain maritime claims. For salvage, collision and personal injury claims a two-year limitation period applies. For cargo damage, wrongful delivery of goods, incorrect statements in bills of lading and general average claims, a one-year period applies. Maritime liens expire after one year.

A preliminary agreement regarding an extension of a time limit is against mandatory statutory rules, and is thus not possible. However, a subsequent agreement extending the time limit can be entered into, and thus it is possible to extend the time limit by agreement.

58 May courts or arbitral tribunals extend the time limits?

Neither courts nor arbitration tribunals have authority to extend the time limit.

Miscellaneous

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

Denmark ratified the Maritime Labour Convention on 23 June 2011, and thus the rules laid out in the convention apply in Denmark. The Convention applies to all cargo and passenger ships flying the Danish flag. All cargo and passenger ships are subject to inspections, but only ships 500 GT and above engaged in international trade must be issued with a certificate.

The requirements specified in the Convention apply equally to Danish and non-Danish vessels. Thus, the DMA may retain both Danish and non-Danish vessels not complying with the requirements of the Convention.

60 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?

The general rule is that it is not possible to be relieved from the strict enforcement of the legal rights and liabilities of a shipping contract with reference to economic force majeure. Thus, shipbuilding contracts and long-term charter parties are enforceable even if a change (eg, in freight rates or steel prices) renders the contractual obligation more onerous on one party than originally expected.

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

No.

Johannes Grove Nielsen

jgn@bechbruun.com

Camilla Søgaard Madsen

csm@bechbruun.com

Langelinie Allé 35

2100 Copenhagen

Denmark

Tel: +45 72 27 00 00

Fax: +45 72 27 00 27

www.bechbruun.com

England & Wales

Kevin Cooper, Reema Shour, Sophie Short and Gina Pritchard

Ince & Co LLP

Newbuilding contracts

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

The shipbuilding contract will contain detailed provisions dealing with when title in the ship will pass. The parties are, in principle, free to agree whatever they like. However, title normally passes on delivery. In most shipbuilding contracts payment is by instalments and payment of the final instalment and delivery are simultaneous. This is often marked by a formal closing meeting.

It sometimes happens that, for whatever reason, the shipbuilder is not able to provide a refund guarantee (to secure the return of any pre-delivery instalments in the event of non-delivery). In such cases the contract might provide for the progressive transfer of title as the construction progresses.

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

Under section 4 of the Statute of Frauds 1677, a contract of guarantee is unenforceable unless it is made in writing, or is evidenced in a written note or memorandum. The agreement itself, or the note or memorandum of it, must be signed by the party to be charged, or by its agent. The note or memorandum must acknowledge the existence of the agreement and include the material terms of that agreement. It cannot be expressed to be ‘subject to contract’. There have been some interesting decisions on the validity of guarantees in the English courts in the last few years. In one case, the Court of Appeal held that a guarantee could be found in a chain of negotiating e-mails for the purposes of the Statute of Frauds, even though no hard copy of the final form of guarantee had been signed. The Court of Appeal also held that an e-mail salutation by a broker duly authorised to act on behalf of the guarantor was sufficient to constitute a signature for the purposes of the Statute of Frauds, irrespective of the intention with which the broker signed, and it was irrelevant whether or not the broker thought he or she was signing a guarantee. In another case, the Commercial Court considered a guarantee issued and sent by SWIFT (a secure international messaging service used by financial institutions). The guarantor bank’s name appeared in the header that was automatically inserted into the SWIFT message and the court’s view was that this constituted sufficient signature for the purposes of the Statute of Frauds.

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

An order for specific performance of a contract is a discretionary remedy. Such an order is not normally granted if compliance with it would require detailed judicial supervision. Thus an order for specific performance of a shipbuilding contract compelling the builder to complete and deliver the vessel is unlikely to be granted. The situation may well be different where the vessel is complete and it is possible for the yard to deliver it.

4 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 Consumer Protection Act 1987 (CPA) imposes a measure of strict liability for damage caused by a defective product. The person liable is the ‘producer’ of the product and, since the definition of product in the CPA expressly includes ‘ship’, the possibility arises, in theory at any rate, of anyone being able to make a claim against the shipbuilder under the CPA. However, damage to the product itself is expressly excluded under the CPA. Similarly, so far as concerns loss of or damage to property, the CPA only applies in respect of damage to property ordinarily intended for the private use or consumption of the person who suffers the damage. In short, therefore, the CPA is unlikely to apply to loss of or damage to commercial property, for example to cargo on the ship or to other vessels, although there is a possible exception where the vessel is for private use. Where the CPA does not apply, any remedy will depend upon the application of the usual principles of contract and tort.

Where the vessel is defective because of defects in workmanship or materials the shipbuilder will, subject to the terms of the contract, be in breach of contract and liable for any loss or damage sustained as a result. However, once the vessel has been accepted for delivery after sea trials, it is usually provided in the contract that such acceptance is final and binding such that the builder is not liable for pre-delivery defects. Contracts will, however, often also contain contractual warranties whereby the builder agrees to remedy defects discovered after delivery, subject to specific time limits within which claims can be made. They may also contain terms seeking to limit or exclude liability on grounds other than time. For example, statutory implied terms as to compliance with description, satisfactory quality and fitness for purpose are often excluded, as is liability for consequential losses. However, in England and Wales there are statutory provisions in place that, where applicable, affect a contracting party’s freedom. Where the Unfair Contract Terms Act 1977 applies, liability for death or personal injury cannot be excluded.

It may be that a purchaser from the original shipowner or other third party will be able to rely upon the Contracts (Rights of Third Parties) Act 1999 to bring a claim against the shipbuilder. Commercial contracts usually, however, contain an express clause excluding the operation of that Act. Purchasers from the original shipowner may take an assignment of any guarantee in the shipbuilding contract and this may well be enforceable through the original buyer even if there is a prohibition against assignment in the shipbuilding contract.

Nevertheless a claim will lie at the suit of a third party if he or she can demonstrate a negligent breach by the shipbuilder of a duty of care under the principles established in Donoghue v Stevenson [1932] AC 562.

Ship registration and mortgages

5 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?

Vessels eligible for registration in the Register of British Ships mirror the four parts of the Register:

• Part I – British ships that are not fishing vessels or small ships;

• Part II – fishing vessels;

• Part III – small ships under 24 metres in length; and

• Part IV – bareboat charter ships.

Vessels operated by the Royal Navy are not able to register on the British Ship Register but Royal Fleet Auxiliary vessels are permitted to register. Royal yachts have been known to register on the British Registry in the past but in order to do so they are still required to submit all documentation required for registration in the same way as any privately owned vessel coming to the flag.

The Merchant Shipping Act 1995 (MSA 1995) provides that to be a British ship, the legal and beneficial owners of every share of a ‘majority interest’ (ie, 33 per cent of the shares) in the vessel must be companies or subjects of Britain, or a British territory, or citizens of an EEA state. Each of the shares to be counted in the majority interest must be wholly owned by such qualified people. In the MSA 1995 ‘ship’ is defined as any vessel used in navigation, but this is likely to be interpreted more widely to include units capable of movement at sea, whether self-propelled or not. The Department of Trade has indicated that it considers submersibles and jack-up rigs as ships able to be registered under the MSA 1995. The Registrar of Shipping and Seamen should be consulted if eligibility for registration is not clear.

It is not possible to register vessels under construction under the UK flag.

6 Who may apply to register a ship in your jurisdiction?

The following are eligible to be owners of ships entered on the UK Register:

• British citizens;

• British Dependent Territories citizens;

• British Overseas citizens;

• companies incorporated in an EEA state;

• citizens of EU member states;

• companies incorporated in British overseas possessions, so long as their principal place of business is either in the UK or in those possessions; and

• European Economic Interest Groupings.

If none of those criteria can be met, a representative may be appointed. The representative must be either an individual resident in the UK or a company incorporated in an EEA state that has a place of business in the UK.

7 What are the documentary requirements for registration?

The following documents will generally need to be submitted in order to register:

• application to register;

• declaration of eligibility;

• bill of sale (for an existing vessel);

• certificate of incorporation (if the owner is a company);

• certificate of survey for tonnage and measurement;

• international tonnage certificate (for vessels greater than 500 GT);

• builder’s certificate (for a new-build vessel);

• deletion certificate or transcript from current register or an undertaking to provide one within six weeks;

• ship’s continuous synopsis record (for vessels greater than 500 GT); and

• mortgage registration forms (if appropriate).

The above list is a minimum and further documents may be required, in relation to, for example, safe manning, ISM Code, stability and crew.

Often, a limited company is incorporated in England and Wales for the purpose of being the registered owner of a vessel on the Register. The basic requirements under the Companies Act 2006 are:

• a memorandum of association: the memorandum simply states that the subscribers (i) wish to form a company under the 2006 Act, (ii) have agreed to become members of the company, and (iii), where the company is to have share capital, have agreed to take at least one share each;

• articles of association: the internal arrangements of a company are governed by its articles of association. A company may adopt its own articles or adopt one of the model articles of association prescribed for companies by the secretary of state either with or without modification. The relevant model articles applicable to the type of company in question will apply by default to newly incorporated companies unless they choose to vary or exclude those articles;

• shareholders: whether the incorporated company is a public limited company or a private company limited by shares, only one shareholder is required, irrespective of that shareholder’s nationality or place of residence;

• directors: a private limited company may have only one director, if permitted in its articles, while a public limited company must have at least two. At least one director on formation must be a natural person, but a director’s nationality or place of residence is irrelevant;

• company secretary: a private limited company does not need to have a company secretary, unless required to do so by its articles of association; a public limited company must have a formally qualified secretary; and

• filing: the memorandum of association and articles of association (if not adopting the relevant model articles), together with the payment of the requisite fee, must be filed at Companies House together with form IN01 (application for registration).

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

The dual registry system allows a charterer, leasing a ship registered in one country, to benefit from the advantages offered by another registry. It also allows the shipowner to maintain the original registration, which is merely suspended during the dual registration but regains its effectiveness upon termination of the charter.

The United Kingdom only allows dual charter registration under a bareboat charter and only when vessels are bareboat chartering into the UK. Neither the MSA 1995 nor its associated regulations contain any specific provisions allowing bareboat chartering out of a vessel flying the UK flag, although it is not expressly prohibited. The MSA 1995 and associated regulations do not recognise chartering out of a vessel with UK Primary Registration.

Ships can be bareboat chartered into the United Kingdom Register from any other world registry provided that the eligibility requirements for both vessel and charterer are met. As with owned ships, a representative person or managing charterer must be appointed. Once the initial paperwork is submitted the chosen name and port will be confirmed and an official number issued. Once these details have been marked on the ship, the certificate of registry will be issued and will last for five years or the duration of the bareboat charter agreement, whichever is the shorter.

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

The Registrar General of Shipping and Seamen maintains the mortgage register of a merchant ship. The register contains:

• type of mortgage;

• date of creation;

• date and time of registration;

• name and address of the mortgagee;

• number of shares mortgaged; and

• where relevant, original principal amount secured.

English law does not permit mortgages in favour of a bearer so the mortgagee must be named. The amount is secured and the repayments are not recorded. If the mortgage is discharged, this is endorsed on the reverse side of the mortgage and registered.

Limitation of liability

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

The UK is party to the 1976 Convention on Limitation of Liability for Maritime Claims (the 1976 Convention) as amended by the 1996 Protocol. Amendments to the 1996 Protocol were announced by the International Maritime Organisation (IMO) in April 2012, introducing new liability limits that are expected to come into force on 8 June 2015 and that will result in a 51 per cent increase on the current limits.

Under the 1976 Convention, the persons entitled to limit their liability include shipowners, charterers (including slot charterers, according to a decision of the English High Court), managers, operators and salvors as well as any person for whose act, neglect or default those parties are responsible, and the insurers of the liability of any of those parties. The English courts have held that the 1976 Convention also entitles the charterers to limit for claims brought against them by shipowners although, in those circumstances, charterers can only limit their liability for claims in respect of which limitation is available under article 2 of the 1976 Convention. By way of example, charterers can limit their liability in respect of an indemnity claim for any cargo claims brought against the shipowners, but they cannot limit their liability in respect of a claim for an indemnity for salvage costs or in respect of general average.

The 1976 Convention applies to seagoing ships, but the implementing legislation in the MSA 1995 extends the right to limit to non-seagoing ships as well as to hovercraft. The UK maintains a reservation in respect of article 2(1)(d) of the 1976 Convention with the result that liability for the cost of wreck removal is unlimited. That said, there are arguments that it is still possible to limit liability in respect of the recourse claims relating to wreck removal expenses.

Section 191 of the MSA 1995 also extends the right of limitation to harbour authorities, conservancy authorities, owners of docks and canals. The claims that can be limited are set out in the 1976 Convention. It should be noted that the UK excludes claims for ‘loss of life or personal injury’ suffered by passengers on seagoing ships from the list subject to limitation. All such claims are subject to the Athens Convention 1974 and the 2002 Protocol, which entered into force on 23 April 2014.

Under section 22 of the Pilotage Act 1987, pilots and pilotage authorities may limit their liability to £1,000 plus the pilotage fee for individual liability of the pilot and to £1,000 multiplied by the number of pilots employed by the pilotage authority in the case where the latter is liable for the acts of its pilots.

11 What is the procedure for establishing limitation?

Rule 61.11 of the Civil Procedure Rules stipulates that a limitation action must be started in the Admiralty Court by issuing a claim form. At least one defendant must be named in the claim form but other defendants may be described generically. If the action is successful and a limitation decree granted, the limiting party will be entitled to limit liability against any and all claims. It is possible to invoke limitation of liability without setting up a fund when commencing an action. However, in some circumstances there may be advantages in so doing, for example to protect against later increases in the fund or to make use of the rights contained in article 13 of the 1976 Convention, principally freedom from ship arrest in states party to the Convention. One issue that has come before the English courts is whether a limitation fund can be set up by way of a P&I club letter of undertaking. The English Court of Appeal has recently clarified that it is possible (subject to certain requirements) to constitute a tonnage limitation fund in England with a guarantee, including a P&I club letter of undertaking.

Limitation may also be pleaded by way of defence. Success with that defence, however, will only establish the right to limit liability to the claimant in that particular action and not liability to any other claimants. It is not necessary to set up a limitation fund where limitation is pleaded by way of defence.

The limits are calculated on the basis of a sliding scale depending on the vessel’s limitation tonnage.

12 In what circumstances can the limit be broken?

Article 4 of the 1976 Convention provides that a person shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. The cases demonstrate that it is extremely difficult to break this limit.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea 1974 (Athens Convention), has been in force in the UK, by virtue of section 183 of the MSA 1995, since June 1996.

The Protocol to the Athens Convention was adopted in 2002 and came into force on 23 April 2014 in 17 states: Albania, Belgium, Belize, Bulgaria, Croatia, Denmark, Greece, Latvia, Malta, the Netherlands, Norway, Palau, Panama, Saint Kitts and Nevis, Serbia, Syrian Arab Republic and the United Kingdom.

The 2002 Protocol has replaced fault-based liability with strict liability. The carrier will be liable unless it can show that the incident resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible nature or, alternatively, that the incident was wholly caused by an act or omission of a third party with the intent to cause the incident.

The 2002 Protocol raises the limits of liability for death of, or personal injury to, a passenger from 46,666 SDR to 250,000 SDR (approximately US$385,000). Where losses exceed this new limit, and are caused as a result of fault or neglect on the part of the carrier, there is an overall increased limit of liability of 400,000 SDR (approximately US$616,000) per passenger. Carriers cannot limit liability where they acted with intent to cause such damage or recklessly and in the knowledge that their actions would probably cause damage. Under the Protocol, Member States have an opt-out provision, allowing them to retain or introduce higher limits of liability, or indeed unlimited liability, for personal injury and death claims under their national law.

For loss of or damage to luggage, the limit varies:

• the liability of the carrier for the loss of, or damage to, cabin luggage is limited to 2,250 SDR (approximately US$3,500) per passenger, per carriage;

• the liability of the carrier for the loss of, or damage to, vehicles including all luggage carried in or on the vehicle, is limited to 12,700 SDR (approximately US$19,500) per vehicle, per carriage; and

• the liability of the carrier for the loss of, or damage to, other luggage is limited to 3,375 SDR (approximately US$5,200) per passenger, per carriage.

The 2002 Protocol also states that compulsory insurance is required to cover passengers on ships. Third-party claimants are now entitled to bring a direct claim resulting from a shipping-related incident against the liability insurer, up to the strict liability limit of 250,000 SDR (approximately US$385,000) per passenger for each distinct occasion.

The 2002 Protocol applies to all international carriage where a ship is registered in the UK, the contract of carriage has been made in the UK, or the place of departure or destination is in the UK. The 2002 Protocol does not, however, apply to vessels registered to carry no more than 12 passengers.

Port state control

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

Modern port state control in the UK derives from the voluntary commitment of EU member states to the memorandum of understanding agreed in Paris in 1982 (the Paris MoU). This was given a legal framework by the EU Council Directive 95/21/EC on port state control of shipping, which was implemented in the UK by the Merchant Shipping (Port State Control) Regulations 1995, Statutory Instrument 1995 No. 3128, as subsequently amended.

Directive 2009/16/EC on Port State Control replaces the existing Directive 95/21/EC and has been implemented into UK legislation by the Merchant Shipping (Port State Control) Regulations 2011, which came into force on 24 November 2011. In July 2013 a legislative resolution proposing a new directive to align Directive 2009/16/EC with the requirements of the Maritime Labour Convention 2006 (MLC) was passed in the European Parliament. Among other things, the amendments deal with how the requirements under the MLC are to be monitored as part of a member state’s port state control duties. The European Council adopted the new Directive 2013/38/EU on 22 July 2013 and it came into force on 20 August 2013, the date of entry into force of the MLC.

The Port State Control agency in the UK is the Maritime & Coastguard Agency, which is an executive agency of the Department of Transport. It was established in 1998 as a result of the Port State Control (Amendment) Regulations, Statutory Instrument 1998 No. 1433, and the merger of the Marine Safety Agency and the Coastguard Agency.

15 What sanctions may the port state control inspector impose?

Under the Paris MoU a state is obliged to carry out an annual total number of inspections equivalent to at least 25 per cent of the number of individual ships to which the Port State Control Regulations apply and that enter the ports of a state in a representative calendar year. The UK has set itself a target of 25 to 30 per cent. Selecting which vessels to inspect can be complex. Annex 1 of Council Directive 95/21/EC (as amended) identifies those ships that are an overriding priority for inspection. These include:

• ships that have been reported as having deficiencies that may prejudice safe navigation;

• ships that have failed to comply with applicable regulations regarding the carriage of dangerous and polluting goods;

• ships that have been the subject of reports or complaints from legitimately interested persons or bodies about shipboard living and working conditions;

• ships that have:

• been involved in collision, grounding or stranding on their way to the port;

• been accused of discharging harmful substances or effluents; or

• manoeuvred in an erratic or unsafe manner or otherwise operated in such a manner as to pose a danger to persons, property or the environment; and

• ships that have been suspended from their class for safety reasons in the course of the preceding six months.

In addition to the above ‘overriding factors’, there are various ‘target factors’ that set out a system further prioritising inspection of ships.

Usually inspections are unannounced. The port state control officer (PSCO) will examine, inter alia, the external condition of the ship, all relevant certificates and documents that are required to be carried on board and, where there are ‘clear grounds’ for believing that the condition of a ship or its equipment or crew does not meet requirements, more detailed inspection may be undertaken.

The following sanctions may be imposed:

• an improvement notice, which requires that a particular defect is rectified within a stated period (section 261 of the MSA 1995);

• a prohibition notice, which requires that a particular activity cease (section 262 MSA 1995);

• a detention notice, whereby the vessel is prevented from leaving port until the PSCO is satisfied that the deficiencies have been properly rectified and the detention notice has been lifted. The vessel is only permitted to be moved from the place of detention if the repairs cannot be made at that place, or if there are overriding reasons of safety. Unauthorised departure from the port of detention may incur liability to a fine or imprisonment; or

• an access refusal notice – this is a sanction available to a PSCO in relation to oil, gas and chemical tankers, bulk carriers, or passenger ships where the vessel is registered in a state that is on the blacklist in the annual Paris MoU report and the vessel has previously been detained as required in the Paris MoU. Once the vessel has called at a port and been detained, the access refusal notice may be issued. This notice bans the vessel from the Paris MoU region.

Since 1 January 2011, Directive 2009/16/EC has replaced Directive 95/21/EC. Directive 2009/16/EC is a recast of Directive 95/21/EC and contains the amendments that have been made to date, as well as new amendments. The key change implemented by the new Directive is a new inspection regime which introduces a more risk-based system of targeting ships and dispenses with the 25 per cent inspection commitment. Each ship in the database is allocated a risk profile out of the three possible risk profiles: ‘high risk’, ‘low risk’ or ‘standard risk’. When determining a ship’s risk profile, the following criteria are considered: type of ship, age of ship, flag, ‘recognised organisation’ (an organisation, usually a classification society, that is authorised by a member state to carry out surveys and issue certificates on its behalf – see question 17), company performance, number of deficiencies and number of detentions. Company performance is a new criterion found in the new Directive and is based on the company’s performance in the Paris MoU region with respect to the number of deficiencies per inspection and number of detentions in the preceding three-year period.

The frequency of periodic inspection will depend on the risk profile of the ship. Ships with a high, standard or low-risk profile will be inspected six, 12 or 36 months, respectively, after the previous inspection. Ships with ‘overriding factors’, as described in Annex I Part II 2A of the Directive, will be inspected regardless of the period since the last inspection. Inspections may take place before they are due at the discretion of inspectors five, 10 or 24 months after the previous inspection for a ship with a high, standard or low-risk profile, respectively. A ship with ‘unexpected factors’ as described in Annex I Part II 2B may be inspected according to the professional judgement of the inspector. The interval until the next inspection restarts after each inspection. Ships other than those described above will not, generally, be selected for inspection.

In addition to the new inspection regime as outlined above, Directive 2009/16/EC extends the current refusal of access sanction so that it is applicable to all ship types registered with a black or grey-listed flag on the Paris MoU White – Grey – Black Lists, where the individual flag state administrations are ranked according to how their ships have performed in relation to port state control within a period of three years. The ‘black list’ shows the flag states that have significantly more detentions than the average number within the Paris MoU. The ‘grey list’ shows the flag states that have a number of detentions corresponding to the average. The ‘white list’ represents quality flags with a consistently low detention record.

Under Directive 2009/16/EC, banning is based on the number of detentions a ship has had within a specified period. A ship that flies a black-listed flag will be banned if it has been detained more than twice in the preceding 36 months. A grey-listed flag ship will be banned if it has been detained more than twice in the preceding 24 months. Minimum ban times are applicable as follows: three months for the first ban and 12 months for the second ban. A detention occurring after the second ban may lead to permanent exclusion from EU ports and anchorages.

16 What is the appeal process against detention orders or fines?

Regulations 14 to 16 of the Merchant Shipping (Port State Control) Regulations 2011 provide owners and masters with rights of appeal and compensation in respect of a detention notice or access refusal notice. An independent arbitrator decides the appeal. The notice of reference form must be sent to the PSCO within 21 days of receipt of the detention or access refusal notice. A notice of appeal should also be sent to the Maritime and Coastguard Agency office that issued the order. There is no requirement for the arbitrator to be a professional or a member of a particular arbitration association. The appeal can be stopped at any time. Detention will not be suspended by issuing a notice of reference, nor does the arbitrator have the power to suspend the detention. The burden of satisfying the arbitrator that there were no reasonable grounds for the detention lies with the shipowner. If the arbitrator decides that there was no valid basis for the detention, he or she must cancel the detention. Alternatively, the arbitrator may confirm the detention or issue a modified detention order. The arbitrator may also order that the owner be compensated for any loss suffered as a result of the detention, including lost freight, port expenses and legal costs. Appeal against the arbitrator’s decision is only possible on a question of law or serious irregularity. In the only case for a century dealing with the legality of detention of a vessel under the UK merchant shipping legislation, the disponent owners of a cruise ship sought to challenge the validity of two notices of detention issued by the Maritime and Coastguard Agency, but did not appeal the notices within the 21-day period stipulated by the Regulations. The court, asked to decide a number of preliminary issues, held that some technical defects in the two notices of detention issued did not invalidate them.

Classification societies

17 Which are the approved classification societies?

The UK Ship Register has agreements with seven classification societies to act as ‘recognised organisations’ authorised to conduct statutory surveys and certification on UK Registered Ships:

• the American Bureau of Shipping;

• Bureau Veritas;

• Nippon Kaiji Kyokai;

• DNV GL;

• Lloyd’s Register of Shipping; and

• RINA UK Ltd.

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

Classification societies usually exclude their liability in contract. However, it is theoretically possible for a classification society to incur liability in tort if the claimant can establish that the classification society owed a duty of care, that that duty of care was breached and that such breach resulted in loss or damage to the claimant. Although the landmark decision of the House of Lords (as it then was) in Marc Rich & Co v Bishop Rock Marine (The Nicholas H) [1995] 2 Lloyd’s Rep 299 established that classification societies do not owe a duty of care towards third parties in respect of their classification and certification duties, recent international developments concerning the liability of classification societies may lead the UK Supreme Court to decide differently should a new case come before it.

The International Association of Classification Societies, which has 12 full members, has introduced a level of self-regulation among its members, including the formation of uniform standards on technical safety rules. In addition, the Erika III package of maritime safety and anti-pollution reforms came into force on 17 June 2009 and includes a Regulation and a Directive on common rules and standards for ship inspection within the EU and survey organisations authorised to operate on behalf of member states. The Directive has been enacted by means of Amendment 3 to MSN 1672 (M+F). The Regulation is binding in its entirety and directly applicable in all member states. In summary, these enactments provide for classification societies to achieve the status of ‘recognised organisations’ on behalf of member states in certain circumstances, whereupon they will be subject to the uniform rules and standards and minimum criteria laid down for such recognised organisations in these instruments. The Directive also contains provisions concerning the financial liability of recognised organisations in the case of a wilful act, omission or gross negligence.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Under the MSA 1995 a harbour or conservancy authority has the power to remove, destroy, take possession of or mark a wreck where, in the opinion of the authority, the wreck is an obstruction or danger. The authority may sell the removed vessel and reimburse their expenses from the proceeds. The authority may contract with a third party for the removal or salvage of a wreck. Liability for the costs of wreck removal lies with the owner (as mentioned in question 10, such liability is unlimited), notwithstanding that a third party may be ultimately liable, for example, where there has been a collision as a result of the negligence of another vessel.

Where there is no harbour or conservancy authority with the power to remove a wreck, the General Lighthouse Authority has the same powers to remove a wreck in its area.

The Nairobi International Convention on the Removal of Wrecks 2007 will enter into force on 14 April 2015 following the deposit, on 14 April 2014, of an instrument of ratification by the 10th ratifying state, Denmark, with the IMO.

The Convention sets out uniform international rules which aim to ensure that wrecks located beyond a country’s territorial sea are removed promptly and effectively. An order can be given if the wreck is likely to be a hazard to navigation or a threat to the environment. It also places a positive obligation on the master of a wrecked vessel to report it to the concerned state.

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

The Collision Convention 1910 was implemented into national legislation by the Maritime Conventions Act 1911, which was repealed and replaced by the MSA 1995. The Convention on the International Regulations for Preventing Collisions at Sea, 1972 (as amended) (COLREGs) are in force by virtue of the MSA 1995 and apply to all British ships wherever they may be, and to all foreign ships within UK waters.

The International Convention on Salvage 1989 applies in the UK.

Also in force is the International Convention for the Prevention of Pollution from Ships 1973 as amended by the 1978 Protocol (MARPOL 73/78) and subsequently amended by the 1997 Protocol. Further, the International Convention on Civil Liability for Oil Pollution Damage 1992 (CLC 1992), the Fund Convention 1992 and the Supplementary Fund Protocol 2003 apply in the UK.

The International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, which entered into force on 21 November 2008, applies in this jurisdiction. This instrument aims to ensure that adequate, prompt and effective compensation is available to persons who suffer damage caused by spills of oil when carried as fuel in vessels’ bunker tanks.

21 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 form of salvage agreement. Lloyd’s open form (LOF) is acceptable and indeed that is the most common form of salvage agreement in the world. However, the LOF does not have to be used and parties can agree their own terms and conditions. Usually, salvage operations are undertaken by professional salvage contractors, but anyone can carry out salvage operations and then bring a claim for common law salvage.

Given the wide usage of the LOF form worldwide, Lloyd’s publish updated versions at appropriate intervals. The most recent edition of the LOF was published in 2011. A revised edition of the accompanying Lloyd’s Standard Salvage and Arbitration Clauses (LSSA Clauses) was also released. In summary, there have been two major changes to the LOF itself: the details of LOF awards are to be made available on the Lloyd’s website, although by subscription only; and Lloyd’s now requires that all agreements to use the LOF be reported to Lloyd’s. There have also been some changes to the LSSA Clauses in relation to the security a salvor may obtain from the owners of a salved vessel. The principal changes are as follows: a salvor is now entitled to demand security for the fees incurred or reasonably anticipated to be incurred; and notice of the salvage operation can now be provided to the insurers of the property rather than the owners themselves. This change was aimed at reducing the number of notices that needed to be sent out because one insurer may act for a number of owners.

The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 (the Hong Kong Convention), was adopted at a diplomatic conference in May 2009. It is aimed at ensuring that ships, when being recycled after reaching the end of their operational lives, do not pose any unnecessary risks to human health, safety or to the environment. As of July 2014, the Hong Kong Convention has only three ratifications and has not come into force. It will enter into force 24 months after the date on which 15 states, representing 40 per cent of world merchant shipping by gross tonnage, have ratified it. Furthermore, the combined maximum annual ship recycling volume of those states must, during the preceding 10 years, constitute not less than 3 per cent of their combined merchant shipping tonnage.

However, the European Ship Recycling Regulation entered into force on 30 December 2013. The Regulation implements the requirements of the Hong Kong Convention prior to the Convention’s ratification and subsequent entry into force.

Ship arrest

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

The UK is a party to the Convention Relating to the Arrest of Seagoing Ships, Brussels, 1952.

The UK has not, as yet, ratified the International Convention on the Arrest of Ships 1999 (Arrest Convention 1999). The Convention entered into force on 14 September 2011 among its 10 acceding states, following the accession by the requisite 10th state, Albania, six months before. The 11 states to which the Arrest Convention 1999 applies are Albania, Algeria, Benin, Bulgaria, Congo, Ecuador, Estonia, Latvia, Liberia, Spain and Syria. Denmark, Finland, Norway and Pakistan have signed the Arrest Convention 1999 but have not, as of July 2014, ratified it. Other states, for example Russia and Colombia, have incorporated elements of the Arrest Convention 1999 into domestic law. Among the changes that the Arrest Convention 1999 introduces to the Arrest Convention 1952 is the addition of new categories of maritime claim, including environmental claims; wreck removal claims; claims for insurance premiums and P&I club calls; claims for commissions, brokerages and agency fees; claims arising out of sale contract disputes and claims for special compensation under article 14 of the Salvage Convention 1989.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Section 20(2) of the Senior Courts Act 1981 lists 19 types of maritime claim within the admiralty jurisdiction of the High Court and in respect of which a vessel may be arrested. These include claims relating to the possession or ownership of, or mortgage on, a ship, claims for damage done by or to a ship, claims for loss of life or personal injury due to a defect in a ship, claims for loss of or damage to goods carried on a ship, other claims relating to the carriage of goods on a ship, claims relating to the use or hire of a ship, claims for salvage, towage and pilotage, claims for goods and materials supplied to a ship, claims in respect of the construction or repair of a ship, claims by the master or crew for wages, claims arising out of a general average act, and claims arising out of bottomry and collisions. Notable exceptions to this list, where arrest is not possible, include claims for insurance premiums and for legal costs.

English law treats both English and foreign-flag vessels equally and it does not distinguish between ‘Convention’ and ‘non-Convention’ vessels.

It is possible to arrest sister ships but not associated ships. Sister ships are vessels that at the time when action is brought are owned by the same person who was the legal owner or demise charterer of the ship in connection with which the claim arises at the time when the cause of action arose.

24 What is the test for wrongful arrest?

A claim for wrongful arrest usually requires demonstration of bad faith or gross negligence.

While not strictly speaking cases of wrongful arrest, there have been English court decisions where Senegalese cargo underwriters, through the Senegalese receivers, attempted to hold shipowners and their P&I club ‘to ransom’ by arresting vessels in Senegal and insisting on a Senegalese law and jurisdiction clause in the bank letter of guarantee to govern the substantive cargo claims, in circumstances where the bills of lading incorporated an English law and London arbitration agreement. The court held that the owners were entitled to damages from the time when the vessel could and should have been released with adequate security in place.

25 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 English law, a bunker supplier can only proceed against the party with whom that supplier has contracted and cannot arrest a vessel if it did not contract directly with the owner or demise charterer. Furthermore, even if the bunker supply contract with the charterer contains an express term giving the supplier a lien on the vessel under the law governing that contract, this would have no effect under English law because the owners are not party to that contract. The majority decision of the Privy Council in The Halcyon Isle [1980] 2 LLR 325 held that the lex fori alone governs the recognition and ranking of foreign maritime liens under English law and this majority view has subsequently had considerable persuasive effect in cases decided in a number of jurisdictions. The bunker supplier may have a claim against the shipowner for conversion of the bunkers (and thereby be entitled to arrest the vessel) where the bunker supply contract contains a retention of title clause, provided that the property in the bunkers does not pass from the supplier until payment for them has been made – see The Saetta [1993] 2 Lloyd’s Rep 268. However, in those circumstances, the shipowner may be able to rely on section 25(1) of the Sale of Goods Act 1979 as a buyer of the bunkers from the charterer in good faith and without notice of any adverse right of the bunker supplier – see The Fesco Angara [2010] EWHC 619. Where the requirements of section 25(1) of the Sale of Goods Act 1979 are met, the owner will acquire clean title to the goods.

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

It is not necessary under English law for the arresting party to provide counter-security. However, a personal undertaking is required from the arresting party to the admiralty marshal to pay all costs of arrest, care and custody, upon the demand of the admiralty marshal.

27 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?

The amount of security to be provided must be reasonable and the assessment may be based on an approximation. ‘Reasonable’ in this context will generally mean the claimant’s best arguable case, plus interest and costs. Clearly there is scope for negotiation as to what the claimant’s best arguable case is. Only if such negotiations are unsuccessful will the court determine the amount and form of the security to be provided. In any event, the security cannot exceed the value of the ship.

As to the form of security, this is not prescribed and is a matter for negotiation between the parties. If the court is forced to intervene, then it will look to the financial standing of any guarantor being proposed (whether that guarantor is the shipowner, his or her P&I club or another entity). It is not necessary for the security to be provided by an independent financial institution in order to be considered adequate.

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

The costs of arrest, care and custody are reimbursed to the admiralty marshal by the arresting party, but the arresting party will likely be able to recover the costs from the defendant when the ship is sold because the admiralty marshal’s costs and expenses rank first in priority of claims against the proceeds of sale of the vessel.

29 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?

Article 7 of the 1952 Arrest Convention, to which the UK is a party, specifies the circumstances in which the arresting court has jurisdiction to hear the claim on the merits. In England, the right to arrest is co-extensive with a right to hear the claim on its merits. This jurisdiction is not exclusive and, at least in theory, the claimant could arrest in England for security only and then pursue his or her claim in a different jurisdiction. More typically, however, the claimant will both arrest the vessel in England and seek to pursue the claim here and the defendant may seek to stay the English court proceedings in reliance on a foreign jurisdiction clause or by asserting forum non conveniens. If the English court grants a stay in favour of proceedings elsewhere, it has jurisdiction to maintain the security pending the outcome of the foreign proceedings.

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

The main English law interim remedy is the freezing injunction (formerly known as a Mareva injunction). A freezing injunction is an interim order prohibiting the respondent from dealing with or disposing of its assets. It is used to preserve those assets with a view to enforcing a judgment against them. It is important to note that such an injunction is not, of itself, a form of security. It does not grant any kind of priority over the assets for example, but it does oblige the injuncted party to either comply with the terms of the order or to be held in contempt of court. The threat of the injunction (or its effect once obtained) may, however, be sufficient to persuade the other party to provide security voluntarily.

A freezing order will generally be capped at the amount of the claim, but it is possible to obtain orders that do not have a cap or that relate to a specific asset or assets. In circumstances where some or all of the respondent’s assets are outside the jurisdiction, the court may grant a worldwide freezing order.

There are six general conditions for the granting of a freezing injunction:

• the applicant must have an underlying cause of action;

• the English court must have jurisdiction (this may be its jurisdiction in support of foreign proceedings);

• the applicant must have a good arguable case;

• there must be evidence that the respondent has assets against which a judgment could be executed;

• there must be a risk that any judgment would not otherwise be satisfied; and

• the applicant must provide an undertaking in damages.

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

Orders for the delivery up of property are available under the Torts (Interference with Goods) Act 1977 (the Act), but not more generally. Among other things, the Act provides remedies for the wrongful interference with goods, such as the torts of trespass to goods and conversion. The availability of an order for delivery up as an interim remedy may result in a claim being brought in tort, even if a claim would also lie in contract. An example of a claim for conversion in respect of which an order for delivery up under the Act might be sought is a claim for wrongful retention of cargo.

In a wider context, interim orders are available for the detention, custody, preservation or inspection of relevant property. In particular cases, the court may also make orders allowing samples to be taken or experiments to be conducted on relevant property. The court may also, in certain circumstances, order the sale of goods (generally perishable goods).

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

Arresting bunkers is not possible under English law, although bunkers could still be the subject of a freezing injunction (see question 30).

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The arresting party can apply for judicial sale of the vessel where it has not received security for its claim from the defendant shipowner.

In addition, the defendant shipowner can also apply for appraisement and sale pendente lite, for example where a private sale being negotiated by the shipowner falls through.

If the arresting party obtains an order for judicial sale but then receives adequate security for his or her claim then, in normal circumstances, the arresting party would consent to the vessel’s release from arrest and would also consent to the order for sale being vacated. However, if other maritime claimants have filed caveats against the vessel’s release from arrest, then they would be notified and would be given a short window of opportunity to arrest the vessel themselves and restore the order for the vessel’s sale.

34 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?

A judicial sale normally takes place under the supervision and control of the court. The admiralty marshal is responsible for dealing with the formalities of the judicial sale, in accordance with the order of the Admiralty Court. There is a standard Admiralty Court order for sale of a ship, which can be varied if necessary. The usual order made either on judgment or pendente lite is that the property be appraised and sold by the admiralty marshal. An order for sale can usually be obtained within about a month of the arrest. The court will usually make such an order based on the grounds that the vessel is a wasting asset. The vessel will then be appraised, advertised for sale and sold by sealed tender. In order to maximise the sale price, the vessel will be advertised worldwide in appropriate shipping publications and prospective buyers are given a reasonable opportunity to inspect and submit tenders.

A sale will normally take place about four or five weeks after the order for sale is made. Unless the net proceeds of sale are sufficient to meet all the claims against the vessel, or all the parties reach agreement as to the distribution of the fund, it will be necessary for the court to determine how the fund is to be divided among the several claimants, and whether any particular claimant is to be afforded priority over any other claimant. Any party who has obtained or obtains judgment against the vessel or the proceeds of sale of the vessel may then apply to the court for the determination of the order of priorities of the various claims against the proceeds of sale of the vessel. The determination of priorities may only be made by the admiralty judge unless otherwise ordered by him.

It normally takes between three and five months for the whole process to be completed, namely arresting the vessel, obtaining an order for sale, completing the sale, determining the priorities and making payment.

The court costs for judicial sale amount to 1 per cent on the first £100,000 and 0.5 per cent on the balance of the sale proceeds.

As an alternative to sale by public auction, the vessel may, in appropriate cases, be sold by private treaty. In such a case, the Admiralty Court exercises its discretion to order that the vessel be sold to a named buyer at a specified price. This has become known as the ‘fast track’ or the ‘private court sale’ procedure. Such orders are normally made if the court is satisfied that the specified price is unlikely to be bettered using the traditional public tender procedure and that the interests of other claimants against the vessel are not prejudiced. In order to satisfy the court of this, the claimant seeking a fast-track sale (usually a bank with a mortgage over the vessel) is usually required to present three independent ship valuations to the court and details of the proposed sale. The proposed buyer will be expected to pay a price reflecting the highest valuation. On completion of the sale, the gross proceeds of sale are paid into court. A recent Admiralty Court decision has, however, cast doubt on this practice. In that case, the Admiralty Court held that, as a general principle, such an order should not be made, notwithstanding that the proposed price appears to be at or about the market value of the vessel because there remains a risk that the vessel would not be sold at the best possible price. In the judge’s view, the traditional method of sale, whereby the admiralty marshal advertises the sale and invites offers to buy the vessel, is designed to enable the vessel to be sold at the best possible price.

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

The order of priority of claims against an arrested vessel or the proceeds of sale depends on the category of the claim. In brief:

• maritime liens (concerning damage done by ships; salvage; crew wages and emoluments; master’s wages and disbursements; fees and expenses incurred by a receiver of a wreck; bottomry and respondentia) rank first in priority. There are rules governing the priority of the various maritime liens among themselves and the respective dates on which the competing claims arose may be relevant;

• mortgages and similar charges rank second. Registered mortgages rank in order of registration and ahead of unregistered mortgages; and

• all other claims in rem rank pari passu, such as claims for necessaries, claims arising under charter parties and bills of lading and claims for ship repairs.

However, there are various other claims that must be paid out of the fund before it is divided among maritime claimants. These include the costs and expenses of arrest, custody and sale; court commission on the sale price; sums due to other parties who at the time the sale order was made, had a common law possessory lien over, or a statutory right to detain the vessel (eg, for port charges).

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

The judicial sale of a vessel gives the purchaser clean title free of all maritime liens and other charges or encumbrances. After the sale, all claims or demands against the vessel can only be enforced against the proceeds of sale.

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

Where a foreign court has ordered the sale of a vessel, the English court will recognise that sale unless it can be shown to be a sham.

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

No, it is not. It is worth noting though that the International Maritime Committee is currently debating a proposed convention on the judicial sale of vessels to deal principally with the situation where a judicial sale in one jurisdiction is not recognised in another jurisdiction.

Carriage of goods by sea and bills of lading

39 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-Visby Rules (HVR) were enacted into domestic legislation by the Carriage of Goods by Sea Act 1971 to which the rules are attached in full as a schedule and, by section 1(2), are given the force of law. Under article I(e) of the HVR, carriage by sea covers the period from the time when the goods are loaded on board the ship to the time they are discharged from the ship. However, as confirmed by the decision in Pyrene v Scindia Navigation [1954] 2 QB 402, the parties are free to agree on the role each is to play in the loading and the extent to which loading and discharging are brought within the carrier’s obligations is left to the parties themselves to decide.

The UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules) will enter into force one year after 20 states have ratified the Rotterdam Rules. As of July 2014 there were 25 signatories to the Rotterdam Rules but only three ratifications (Spain, Togo and Congo). The UK Department of Transport has set up a consultative working group to consider the impact of the Rotterdam Rules. At present, it is not clear if and when the UK will ratify the Rotterdam Rules. However, a formal consultation process, including an impact assessment, will take place before the UK government takes a decision on the Rotterdam Rules.

40 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?

Road

The Convention on the International Carriage of Goods by Road 1956 (CMR) has been implemented into English law by the Carriage of Goods by Road Act 1965. The provisions of the CMR will apply to the international road leg of a carriage that comes before or after another mode of transport, including transport by sea carriage.

Air

The Convention for the Unification of Certain Rules for International Carriage by Air 1999 (the Montreal Convention), which replaces the Warsaw Convention in respect of international carriage by air, has been implemented into English law by the Carriage by Air Acts (Implementation of the Montreal Convention 1999) Order 2002. Article 38 of the Montreal Convention provides that in the case of combined carriage performed partly by air and partly by any other mode of carriage, the provisions of the Convention shall only apply to the carriage by air.

Rail

The UK is also a signatory to the Convention Concerning the International Carriage of Goods by Rail 1980 (COTIF) and to the Protocol of Vilnius (Protocol of 3 June 1999) for the modification of the Convention, which is given force in English law by virtue of the Railways and Transport Safety Act 2003 and the Railways (Convention on International Carriage by Rail) Regulations 2005. COTIF 1980 as modified by the Protocol of 1999 applies to passengers, their luggage and goods under international transport documents made out for a journey over the territories of at least two member states, provided that carriage takes place exclusively over railway lines registered under the Convention.

41 Who has title to sue on a bill of lading?

Anyone who is a ‘lawful holder’ of a bill of lading has rights of suit under the contract of carriage as if he or she had been an original party to that contract. The ‘lawful holder’ is identified in the Carriage of Goods by Sea Act 1992, section 5(2) as:

(i) a person with possession of the bill who, by virtue of being the person identified in the bill, is the consignee of the goods to which the bill relates;

(ii) a person with possession of the bill as a result of the completion, by delivery of the bill, of any endorsement of the bill or, in the case of a bearer bill, of any other transfer of the bill; or

(iii) a person with possession of the bill as a result of any transaction by virtue of which he or she would have become a holder falling within (i) or (ii) above had not the transaction been effected at a time when possession of the bill no longer gave a right (as against the carrier) to possession of the goods to which the bill relates.

Once it is established that a person is the ‘lawful holder’, the next requirement for acquisition of rights is that the person must be regarded as having become the lawful holder in ‘good faith’. However, the concept of good faith is not defined in the 1992 Act.

42 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 extent to which the terms of a particular charter party will be incorporated into a bill of lading depends upon the proper construction of the bill of lading incorporation clause.

Where the words used in the clause refer by name or number to a specific clause or clauses in the charter party then those will be incorporated. Where the words in the bill of lading incorporation clause are general – for example, ‘all terms, conditions and exceptions of the charter party’ – then only such terms as are appropriate to the carriage and delivery of the goods will be incorporated, and not terms collateral to those matters.

A charter party jurisdiction or arbitration clause is a collateral clause and will not be incorporated into a bill of lading unless it is specifically referred to in the incorporation clause, for example ‘all terms, conditions and exceptions, including the arbitration clause in the charter party’.

A jurisdiction or arbitration clause in a charter party that is validly incorporated into a bill of lading is binding on a third party ‘lawful holder’ of the bill.

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

Normally the bill of lading will be signed by or on behalf of the master and a bill so signed is prima facie an ‘owners’ bill’ imposing on the shipowner responsibility for performing the contract of carriage. This will be the case even though the bill might be issued on the charterers’ (or sub-charterers’) form and signed by him.

An ‘identity of carrier’ clause in a bill of lading is a clause that provides that the contract contained in or evidenced by the bill is to be between the shipper and the shipowner. ‘Demise clauses’ are in principle valid and effective but they are not conclusive and may be overridden if the bill of lading has been signed in such a way, and contains terms and conditions as to indicate, that it is a charterers’ bill rather than an owners’ bill and the responsibility for the carriage lies with the charterers. The bill of lading as a whole will be considered and the question asked as to how the bill is likely to be regarded by a reasonable person acquainted with the shipping trade.

44 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?

Where the bill of lading is a charterer’s bill but the carrier in fact is the shipowner he or she may be liable in tort for damage to the cargo. However, this can raise complex questions relating to the ownership of the cargo at the time of the loss or damage, and whether the shipowner, as the actual carrier, can rely on the bill of lading terms, particularly the Hague or the Hague-Visby Rules. The general principle is that the actual carrier can do so only in exceptional circumstances such as where there is a ‘Himalaya clause’ that extends the protections in the bill to third parties. There is also authority that in appropriate circumstances a ‘bailment on terms’ arises such that when the shipowner (the actual carrier) takes physical possession of the cargo he or she does so on the terms of the bill of lading.

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

Deviation has been defined as an intentional and unreasonable change in the geographical route of the voyage as contracted. The key words are ‘as contracted’: there is a right at common law to depart from the normal route in order to avoid danger to the ship or cargo or to save human life, similarly article IV(4) of the Hague or Hague-Visby Rules specifically provides that any deviation in saving or attempting to save life or property at sea, or any reasonable deviation, should not be considered a breach of the rules or of the contract of carriage. Departure from the normal route in these circumstances will not be a deviation. Also, there may be an express ‘liberty clause’ in the contract of carriage.

However, when there is a deviation, as defined, this will be a breach of contract rendering the carrier liable for losses caused by the deviation, and if loss arises while the vessel is deviating, the carrier will only escape liability if he or she can prove that the loss would have happened anyway. Furthermore, a deviating carrier may lose the benefit of clauses in the contract of carriage that are to his or her advantage and so be disentitled from relying on clauses exempting him from liability. This latter rule is harsh and anomalous and doubts have been expressed as to whether its full rigours will now be applied by the courts.

The issue of justifiable deviation has been much discussed in the context of piracy and whether a master or shipowner is justified in deviating from the vessel’s route in order to avoid capture of the ship. There is also much debate over specific deviation clauses in charter parties and whether they excuse the payment of hire in the event the vessel departs from the agreed route due to the risk of being hijacked. This debate has led to the formulation of specific piracy clauses, including by the Baltic and International Maritime Council (BIMCO) and the International Association of Independent Tanker Owners, with the intention of providing protection to shipowners.

46 What liens can be exercised?

In the context of a discussion of carriage of goods by sea and bills of lading, relevant liens include:

• the shipowner’s lien on the cargo – in respect of freight (this type of lien arises at common law) and, depending upon its terms, other amounts payable to the shipowner under the contract of carriage (this type of lien is a contractual lien). A lien on the cargo will normally be exercised either by refusing to discharge the cargo or warehousing it ashore pending payment of sums due. They are ‘possessory’ liens, which means that they are entirely dependent upon possession and will be lost if possession is lost;

• the shipowner’s lien on sub-freight or sub-hire – this type of lien will only arise if the contract of carriage is subject to the terms of a validly incorporated charter party containing a relevant lien clause. It can therefore only arise as a matter of contract. The property that is subject to the lien is the charterer’s right to be paid sub-freight or sub-hire under a sub-charter of the vessel, and the lien is exercised by the shipowner effectively intercepting the sub-freight or sub-hire and directing that it be paid to him instead of to the charterers. The English Commercial Court has clarified the nature of charter-party liens and has held that a lien on sub-freight or sub-hire creates an assignment by way of a charge. A significant consequence of this decision is that, as a security interest, an equitable charge may require registration in certain jurisdictions; and

• liens on the ship – this type of lien is not dependent upon possession and is exercisable by an action in rem commenced by arresting the vessel. A small number of claims within the admiralty jurisdiction, principally those involving damage done by ships, salvage and in relation to seamen’s and master’s wages, will give rise to a maritime lien. Such a lien operates effectively as a charge on the ship that will follow the ship, notwithstanding a change of ownership. A number of other maritime claims (identified in question 23), while they do not give rise to a maritime lien, are enforceable by an action in rem and arrest of the vessel and are commonly referred to as giving rise to statutory liens. The right to arrest in respect of such claims is lost if there is a change of ownership of the vessel but the right will be protected if court proceedings are commenced prior to the change of ownership.

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

In the absence of an express term in the bill of lading, delivery of cargo without production of the original negotiable bill of lading is a breach of contract that will render the carrier liable for the value of the cargo to the ‘lawful holder’ of the bill entitled to immediate possession of the cargo. The position regarding non-negotiable bills of lading is not so clear-cut, especially where the person seeking delivery of the goods is the consignee named on the bill of lading. There is no decision directly on the point, but the view has been expressed that goods should not be surrendered without presentation of the original bill.

Notwithstanding the above it is, in practice, not always possible for the original bills to reach a receiver prior to arrival of the vessel at the discharge port. Accordingly it is common for charter parties to include a clause requiring delivery against a letter of indemnity (LOI) or bank guarantee. Delivery against such a document will enable liability to be passed on to the indemnifier or guarantor. However, great care must be taken when drafting the LOI or bank guarantee so as to stipulate the party to whom delivery should be made. In one case, where owners delivered the cargo to someone other than the receiver named in the LOI without production of the bills of lading, the charterers’ undertaking in the LOI to provide security was held not to be engaged.

In 2012, the English Court of Appeal confirmed previous case law that the provisions of an LOI issued by receivers to voyage charterers requesting delivery of the cargo without the presentation of bills of lading may extend to owners in their capacity as charterers’ agents for the purpose of delivering the cargo such that owners were entitled to enforce the LOI in their own name pursuant to section 1(1) of the Contracts (Rights of Third Parties) Act 1999 where the LOI provided an indemnity in favour of charterers’ ‘servants and agents’.

It remains unclear whether the one-year time limit under article III(6) of the Hague-Visby Rules applies to claims for loss or damage brought pursuant to an LOI issued to allow delivery of cargo without presentation of original bills of lading.

48 What are the responsibilities and liabilities of the shipper?

Under article III(5) of the Hague-Visby Rules, the shipper is deemed to have guaranteed to the carrier the accuracy at the time of shipment of the information furnished by him as to the marks, number, quantity and weight of the cargo, and is obliged to indemnify the carrier for loss, damage or expenses resulting from any inaccuracies. Similarly, articles IV(2)(n) and (o) exempt the carrier from liability for loss of or damage to the cargo arising or resulting from insufficiency of packing and insufficiency or inadequacy of marks.

Other than his or her obvious duties in the light of the above provisions to ensure that the cargo is properly identified and packed, the only positive obligation on the shipper is the duty, which arises at common law, not to ship ‘dangerous’ goods without the consent of the carrier. This includes not only goods that are likely to cause physical loss of or harm to the ship, but also goods that might lead to the detention of the ship.

This duty is amplified and extended in article IV(6) of the Hague-Visby Rules and has been interpreted extremely widely to include just about any cargo that directly or indirectly causes or threatens to cause loss of life, damage to the ship or other cargo, delay or expenses to the carrier. One interesting decision considered the issue of whether the presence of rats in a cargo of soya bean meal pellets rendered the cargo dangerous. In that case, it was held that a cargo ‘loaded with a rat’ was not a dangerous cargo.

Shipping emissions

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

Yes. The North Sea (and English Channel) ECA, which has been in effect since 22 November 2007 pursuant to Annex VI of the IMO’s International Convention for the Prevention of Pollution from Ships (MARPOL), which came into force in May 2005. It has been implemented into UK domestic law by the Merchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008. Annex VI to MARPOL provided that the sulphur content in fuel oil in ECAs should not exceed 1.5 per cent by mass. Annex VI was subsequently revised (see below).

50 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 revised Annex VI to MARPOL came into force on 1 July 2010 and imposed more stringent limits on sulphur content in fuel. In particular, the revisions provided for a reduction in the sulphur content of any fuel oil used on board ships outside the ECAs (the global sulphur cap) to 3.5 per cent (from the previous 4.5 per cent) from 1 January 2012, followed by a further reduction to 0.5 per cent from 1 January 2020, subject to a feasibility review to be completed no later than 2018. The sulphur limits applicable in ECAs were reduced to 1 per cent as of 1 July 2010 (from the previous 1.5 per cent), with a further reduction to 0.1 per cent from 1 January 2015. It is left to member states to ensure compliance with these requirements and to impose the appropriate penalties. In the UK, the authorities may detain or fine a vessel, irrespective of flag, for non-compliance.

In order to bring sulphur limits applicable within the EU in line with IMO-imposed levels, EU Directive 2005/32/EC came into force on 1 January 2010. The Directive applies to all vessels, irrespective of flag, ship type, age or tonnage, and requires EU member states to take all necessary steps to ensure that ships berthed or anchored within their ports for longer than two hours do not consume marine fuel with a sulphur content exceeding 0.1 per cent by mass. The Directive was implemented into domestic law by the Merchant Shipping (Prevention of Air Pollution from Ships) (Amendment) Regulations 2010 and the UK has been enforcing the Directive since 20 April 2010. Article 12 of the Directive states that it is left to member states to determine the applicable penalties for breach, subject to the requirement that these must be effective, proportionate and dissuasive. In the UK, the authorities may detain a vessel, impose a fine, or both in the event of non-compliance with the Directive.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

If the amount involved is more than £100,000, the claim can be brought in the High Court in London. Smaller claims are decided by the county courts. The majority of maritime disputes are heard by the Commercial Court or Admiralty Court, which are specialist divisions of the High Court.

The following proceedings must be started in the Admiralty Court:

• proceedings in rem commenced in order to arrest a vessel (see question 23);

• collision claims;

• limitation actions; and

• salvage claims.

Any other admiralty claim as defined in section 20 of the Senior Courts Act 1981 can be started in the Admiralty Court.

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

The rules governing service of court proceedings outside the jurisdiction are set out in Part 6 of the Civil Procedure Rules. A revised Part 6 came into force on 1 October 2008. Broadly, a claim form may be served on a defendant outside the jurisdiction without permission of the court where the defendant is domiciled in:

• Scotland or Northern Ireland;

• a state that is a party to the Brussels Convention or Brussels Regulation (sometimes also referred to as EU Council Regulation No. 44/2001 or the Judgments Regulation) (EU member states); or

• a state that is a party to the Lugano Convention 2007 (Iceland, Switzerland and Norway).

As regards other jurisdictions, the permission of the court is required. The claimant needs to establish that the claim has a reasonable prospect of success and that England and Wales is a proper place in which to bring the claim. There are a number of grounds listed in the practice direction to Part 6 that may qualify the claim as being suitable for service out of the jurisdiction. These include but are not limited to the following: a contractual claim where the contract was made within the jurisdiction, is governed by English law or contains an English jurisdiction agreement; a claim for salvage services performed within the jurisdiction; the person out of the jurisdiction that is to be served is a necessary and proper party to the proceedings; a claim in tort where the damage was sustained within the jurisdiction or the damages sustained resulted from an act committed within the jurisdiction.

The methods of service on a defendant out of the jurisdiction are service in accordance with the Brussels Regulation; service through foreign governments, judicial authorities and British consular authorities; and service by any method permitted by a Civil Procedure Convention or by any other method permitted by the law of the country in which it is to be served. Specific rules apply to service on a foreign state. However, no person is authorised or required to do something that is contrary to the law of the country where the claim or other document is to be served.

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

The London Maritime Arbitrators Association specialises in maritime dispute resolution. It has a panel of 37 full members. There is also a list of supporting members who are prepared to accept appointments as arbitrators. The LMAA has four sets of rules – for small claims, fast and low-cost arbitration, intermediate claims and larger cases – as well as mediation terms. The most recent sets of LMAA rules came into effect as of 1 January 2012.

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

A foreign judgment is not automatically enforceable in England and Wales. There are a number of regimes for the recognition and enforcement of foreign judgments depending, in broad terms, upon whether they are judgments of courts in Europe (broadly speaking for the purposes of this response, member states of the EU and the European Free Trade Association), in Commonwealth countries or elsewhere in the world.

Europe

The Brussels Convention or Brussels Regulation and the Lugano Convention govern the recognition and enforcement of judgments from the member states of the European Community, Iceland, Norway and Switzerland. The Civil Jurisdiction and Judgments Act 1982 was originally passed to implement the Brussels Convention into English law. This Act was subsequently amended by the Civil Jurisdiction and Judgments Act 1991 to implement the Lugano Convention 1988 into English law. Thereafter, the Civil Jurisdiction and Judgments Order 2001 gave the English courts jurisdiction under the Brussels Regulation. The Brussels Regulation largely supersedes the Brussels Convention. The Civil Jurisdiction and Judgments Regulations 2009 have now implemented the Lugano Convention 2007 into national law.

Enforcement of a foreign judgment under the Brussels Regime or Lugano Convention is straightforward and does not require the English courts to reassess the merits of the claim. The main examples of when the English courts will refuse to enforce such a judgment are if the judgment is contrary to English public policy or the judgment is irreconcilable with an earlier judgment given in England or Wales involving the same causes of action and between the same parties.

Furthermore, a European enforcement order (EEO) is available to a judgment creditor who wishes to enforce a judgment obtained in an uncontested claim within the EU. An uncontested claim is where the debtor has not objected to the claim in the course of court proceedings or has not appeared in court or has admitted that the claim exists and is justified in the course of court proceedings. The EEO does not require registration or judicial approval in England and Wales before it can be enforced. Rather, a judgment that has been certified as an EEO by the member state court of origin is, for enforcement purposes, treated as though it had been given by the courts of England and Wales.

The Commonwealth and other statutory regimes

The Administration of Justice Act 1920 governs the recognition and enforcement of judgments from Commonwealth and other countries (53 in all), and the Foreign Judgments (Reciprocal Enforcement) Act 1933 governs the recognition and enforcement of judgments from a further 11 countries. Broadly, under these Acts a foreign judgment may be registered for enforcement in England and Wales. The procedure for registration is relatively straightforward. The requirements for registration to take place include the following: the judgment must not have been obtained by fraud or be contrary to English public policy and the court that issued the judgment should have had jurisdiction. Once registered, the judgment takes effect as if it were an English judgment.

Elsewhere

Recognition and enforcement of judgments from the courts of countries that do not come within the statutory regimes is subject to common law rules. In very brief terms, these require the commencement of a new action on the judgment. The underlying claim will not be examined on the merits, and provided that the original court had jurisdiction according to English conflict of law rules, that the judgment is for a debt or a definite sum of money (not being a tax, fine or penalty), is final and conclusive and its enforcement would not be contrary to public policy, then the person seeking enforcement will be entitled to judgment in England for the amount due under the foreign judgment.

Arbitration awards

As of July 2014, the Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) has 150 contracting States. The majority of arbitration awards can, therefore, be enforced under the New York Convention, to which the UK is a party. Provisions for the enforcement of arbitral awards are set out in section 66 of the Arbitration Act 1996. Enforcement of non-New York Convention awards will be governed by section 66 of the Arbitration Act and by common law – the requirements are that the arbitration agreement must be valid under its governing law and the award must be final. The award will not be enforced if the arbitrators had no jurisdiction, the award was obtained by fraud, or the proceedings were contrary to natural justice or where its enforcement would be contrary to public policy.

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

The English court may issue an anti-suit injunction restraining a party from commencing or continuing proceedings in a foreign court in breach of an exclusive jurisdiction clause or an arbitration agreement. Breach of the injunction will be a contempt of court and any judgment obtained will not be recognised or enforced in England.

The European Court of Justice has, however, held that the courts of the countries in which the Brussels Convention or Brussels Regulation and Lugano Convention apply cannot issue anti-suit injunctions to restrain proceedings in another state where the particular Convention applies. Pursuant to these Conventions, where proceedings are commenced in more than one member state and those proceedings relate to the same cause of action between the same parties, the member state court to which the dispute is later referred must stay its proceedings in favour of the other court. It is for the court to which the dispute was first referred to decide whether it has jurisdiction.

Furthermore, while the Brussels Regulation is expressly stated not to apply to arbitration, the European Court of Justice has held that courts of an EU member state cannot issue anti-suit injunctions to restrain court proceedings in another EU member state where proceedings have been commenced in breach of an arbitration agreement. The European Court of Justice found that court proceedings and judgments relating to arbitration, including whether the arbitration agreement is valid, fall within the scope of the Brussels Regulation.

Anti-suit injunctions continue to be available in England to restrain breaches of English jurisdiction and clauses subjecting disputes to arbitration in England and Wales where court proceedings have been commenced outside the EU. The English Commercial Court has also ruled that an English arbitral tribunal can award damages or an indemnity for breach of a contractual obligation to arbitrate, including where that breach is by way of commencement of proceedings in another EU member state court pursuant to the Brussels Regulation.

The European Court’s interference with arbitration (especially as arbitration is expressly excluded from the Brussels Regulation) led to calls for reform of the Brussels Regulation. As a result, revisions to the Brussels Regulation will come into force in member states on 10 January 2015. The UK has chosen to opt into the reformed Regulation. Among other things, the reformed Regulation provides that, where parties have conferred exclusive jurisdiction in their agreement on a member state court, any other member state court shall stay proceedings brought before it until the court provided for in the jurisdiction agreement rules on its own jurisdiction. This is so irrespective of which court proceedings are commenced first. The reformed Regulation also clarifies the scope of the arbitration exception and confirms that the New York Convention takes precedence over the Brussels Regulation and, therefore, member state courts are permitted to recognise and enforce an arbitral award even if it is inconsistent with another member state court’s judgment. The reformed Regulation further confirms that a member state court can decide on the validity of an arbitration agreement even where the matter has been referred to another member state court first and also that the Regulation does not apply to any court proceedings relating to or in support of arbitration.

56 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 English court has powers to stay proceedings started in England on the ground that there is an exclusive jurisdiction or arbitration clause or on the grounds of forum non conveniens, that is, if the defendant demonstrates that there is a more appropriate forum for trial of the action. The court will take into account such factors as any foreign proceedings currently under way, rules as to costs of proceedings in the foreign forum or if the alternative forum has little experience of handling complex commercial disputes etc. The court cannot stay proceedings on the grounds of forum non conveniens if the proceedings fall within the Brussels Regulation, Brussels Convention or Lugano Convention.

Limitation periods for liability

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

Under the Limitation Act 1980, the ordinary time limit for actions founded on tort or contract, except for personal injury claims, is six years from the date on which the cause of action accrued. Where the loss or damage is latent and was not known about prior to the expiry of the limitation period, the claimant has three years from either the date of knowledge of loss or the date when he ought reasonably to have known of the loss. This applies to claims in both contract and tort but, except in actions involving personal injury, there is an overriding time limit of 15 years.

Where the claim is for death or personal injury the limitation period will expire three years from the date of the act or omission that caused the death or personal injury, or knowledge if later.

Where the action is ‘upon a speciality’, which would be the case in relation to a contract made by deed, the period is 12 years.

Various international conventions prescribe limitation periods for certain specific claims. For example: one year for cargo claims under the Hague or Hague-Visby Rules; two years for collision claims under the Maritime Conventions Act; and two years for salvage claims under the Salvage Convention 1989 (incorporated into English law by the Merchant Shipping (Salvage and Pollution) Act 1994).

Time limits can be extended by agreement. In practice, agreement must be reached before the time limit has expired. It should also be noted that if, by virtue of the application of English conflict of laws principles, a foreign law applies to the claim, then the applicable time limit will be that of the foreign law, not English law, and the ability or otherwise to extend that time limit by agreement will be a matter for that foreign law.

58 May courts or arbitral tribunals extend the time limits?

The expiry of a limitation period under the Limitation Act 1980 or any other Act of Parliament usually provides the defendant with a complete defence to the claim made against him, as it is contrary to public policy for potential defendants to be indefinitely exposed to litigation. Under section 33 of the Limitation Act 1980, the court has a discretionary power to extend a time limit in certain circumstances but only in respect of actions for personal injuries or death.

The court has the power to extend most procedural time limits, for example by granting the claimant an extension of time to serve proceedings on the defendant in certain circumstances.

English arbitral tribunals will have the power to extend time limits for commencing arbitral proceedings. Once any available arbitral process for extending time to begin arbitration proceedings has been exhausted, the court has the power under section 12 of the Arbitration Act 1996 to extend the time limit for commencement of arbitral proceedings in restricted circumstances.

Miscellaneous

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

The Maritime Labour Convention 2006 (MLC) entered into force internationally on 20 August 2013. As of July 2014, 61 countries, including the UK, had ratified the MLC. Each country that ratifies the MLC is under an obligation to apply its standards in its domestic law. Three ‘red ensign’ states have ratified the MLC and the rest are expected to follow suit. Red ensign states are UK Crown Dependencies (Isle of Man (ratified), Guernsey and Jersey) and UK Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands (ratified), Falkland Islands, Gibraltar (ratified), Montserrat, St Helena and the Turks and Caicos Islands).

The MLC came into force in the UK on 7 August 2014. Shipowners now need to ensure that vessels flying the UK flag comply with its requirements. Subject to certain exceptions, the MLC applies to vessels of all tonnages, whether publicly or privately owned, that are ordinarily engaged in commercial activities. As a general rule, vessels of 500 GT or over must obtain certification from the Maritime and Coastguard Agency, (UK flag-state control), which the vessel will carry on board. The certification documents are known as the declaration of maritime labour compliance and the maritime labour certificate, and are evidence that the vessel is prima facie compliant for the purposes of port state control in other ratifying state parties. Carrying the certification should avoid the need for port state control to carry out a physical inspection of the vessel.

UK port state control will inspect vessels for MLC compliance when they call at a UK port. In the case of a vessel flying the flag of a state party, the vessel should be able to present certificates issued by the relevant flag state authority or appointed recognised organisation evidencing that the vessel is compliant. The principle of ‘no more favourable treatment’ contained in the MLC will additionally require UK port state control to inspect vessels flying flags of non-ratifying countries for compliance with the MLC. In that case, a physical inspection of the vessel will need to be carried out by port state control to verify that the vessel complies with the MLC’s 14 minimum requirements regarding seafarers’ working and living conditions. This is expected to be a slower process than the submission of certification by vessels whose flag state is a party to the MLC. If the vessel does not comply with those minimum conditions, she may be subject to delays in port and possibly detention.

Additional rules will apply to regulate recruitment and placement (manning) agents based in the UK and will require them to operate a system of protection by way of insurance or other appropriate measures to compensate seafarers for financial loss as a result of the failure of the agent or the shipowner to meet its obligations to the seafarer.

60 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?

The English courts robustly enforce the provisions of freely negotiated commercial contracts between parties of similar bargaining power. The exception to this is legislation aimed at protecting consumers. Attempts to argue that a contract has been frustrated, for example because economic conditions have made it more onerous to perform, are usually unsuccessful. Furthermore, there is no concept of force majeure in English common law similar to the civil law concept. Force majeure will therefore only apply to English law contracts where the parties have expressly incorporated a force majeure clause. Commercial parties who wish to protect themselves from extreme economic and financial movements should therefore consider incorporating suitable provisions into their contracts, such as price escalation clauses, material adverse change clauses and force majeure clauses.

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

It should be noted that international conventions have the force of law in the UK only if and to the extent that they have been incorporated into domestic law by a statute. If there is any difference between such a statute and the text of the convention, then the statute will take precedence.

Update and trends

Sanctions

International sanctions against Iran and other ‘rogue’ states, together with their impact on the global maritime industry, have remained a hot topic. They are discussed below in broad terms.

Iran

EU Regulation 1263/2012 (as amended), which came into force on 23 December 2012, remains the main EU legislation imposing sanctions on Iran. It contains prohibitions relating to Iranian petroleum, petrochemicals and natural gas as well as the sale, supply, transfer or export of graphite and raw or semi-finished metals, such as aluminium and steel to Iran; the sale, supply or transfer of key naval equipment and technology for shipbuilding, maintenance or refit to Iran or to Iranian or Iranian-owned enterprises engaged in the shipbuilding sector; the supply of vessels designed for the transport or storage of oil and petrochemical products to Iranian entities or bodies or in respect of Iranian oil and petrochemical products; and flagging and classification services to Iranian oil tankers and cargo vessels. The Regulation also prohibits EU financial institutions from transferring funds to or from Iranian financial institutions and their branches and subsidiaries, wherever located, and to or from financial institutions controlled by persons and entities domiciled in Iran. The list of sanctioned entities subject to asset freezing also continues to grow.

The United States also maintains significant and wide-reaching sanctions on Iran, including sanctions that purport to apply extra-territorially to non-US persons. These include: sanctions on exports of petroleum and petrochemicals from Iran; the designation of Iranian port operators and entities linked to Iran’s energy, shipping and shipbuilding sectors as blocked persons; a prohibition on the supply of metals to Iran; and further restrictions on financial transactions linked to Iran.

The most significant development over the last year has been the agreement of the Geneva Joint Plan of Action. In November 2013, the P5+1 (United States, United Kingdom, Germany, France, Russia and China) reached an agreement with Iran whereby Iran would curb its nuclear programme in return for a reversible suspension of certain trade restrictions against it under the EU and US sanctions regimes. Once Iran had taken steps to comply with its obligations under the agreement, the EU introduced EU Council Regulation of 20 January 2014 suspending certain sanctions, including those relating to petroleum and petrochemical products. The United States also suspended similar sanctions in response to Iran’s cooperation. The EU suspension is due to expire on 19 July 2014 and it remains to be seen how matters will develop thereafter.

Syria

The EU has maintained restrictive measures against Syria. These include a number of export and import bans, such as a ban on the import, purchase and transport of crude oil and petroleum products from Syria. There are also restrictions on investment, including a ban on investment in the Syrian oil industry. Restrictions affecting the transport sector include an obligation on member states to inspect vessels and aircraft if there are reasonable grounds to believe they carry arms, related material or equipment that might be used for internal repression. The United States also has sanctions in place against Syria that affect dealings by US persons or those within the jurisdiction of the United States.

Ukraine and Russia

The EU has introduced sanctions against individuals and entities in Ukraine and Russia for their involvement in the well-publicised events within Ukraine over the last year and, in particular, the annexation of Crimea. The United States has sanctioned a greater number of individuals and entities than the EU and has also discussed the imposition of US sanctions on various sectors of the Russian economy if matters do not improve. To date, the sanctions from the EU and the United States have been targeted at specific individuals and entities and, while the United States may move towards a wider sanctions regime, the EU authorities appear to be cautiously against such escalation.

Anti-corruption

Global anti-corruption initiatives have continued apace. While the UK Bribery Act 2010 that came into force in July 2011 has not yet resulted in a corporate prosecution, the UK Serious Fraud Office (SFO), the primary UK agency for investigating and prosecuting bribery and corruption, is reportedly investigating a number of major British corporates over allegations of bribery and corruption overseas. In October 2013, the head of the SFO, David Green, indicated that a number of cases against corporate criminals were being advanced and would be brought at the right time. The lack of corporate prosecutions to date has been defended by the SFO on the basis that the agency has so far been dealing with offences committed under the old anti-corruption legislation in the United Kingdom, which has made it harder to bring companies to account for their misdemeanours. Furthermore, while it was reported that a review of the Act was to be undertaken by the UK government and that, among other things, the blanket prohibition on facilitation payments (or ‘grease’ payments) was to be reconsidered, the Ministry of Justice confirmed in July 2013 that there was no intention to relax the application of the Act. Indeed, the SFO is seeking an amendment to the Section 7 ‘failure to prevent bribery’ offence under the Act, expanding its scope to cover failure to prevent all acts of financial crime. The intention would be to prosecute corporates that have benefited from the criminal conduct of their staff, thereby giving corporates an added incentive to discourage criminal conduct by their employees. In addition, as of 24 February 2014, Deferred Prosecution Agreements (DPAs) became available to UK prosecuting agencies in relation to offences committed by corporates. In broad terms, DPAs are agreements between prosecutors and corporates whereby the prosecution of a corporate that is allegedly guilty of an economic crime may be suspended, conditional upon the corporate agreeing to a number of imposed conditions that may include, among other things, the confiscation of the profits of wrongdoing, payment of a significant fine and agreeing to establish anti-corruption policies and procedures. In addition to the publication of a joint code of practice on the use of DPAs by the directors of the SFO and of Public Prosecutions for the Crown Prosecution Service, new sentencing guidelines applicable to corporate convictions for bribery, fraud and money laundering have been published and will come into effect as of 1 October 2014. The guidelines are relevant to DPAs and convictions in court and set out the criteria to be considered and the steps to be taken by judges in determining sentences, and judges and prosecutors in proposing and approving the terms of a DPA. Finally, BIMCO is reported to be working on a new charterparty clause that allocates risk as between owners and charterers for complying with applicable anti-corruption legislation and establishing anti-corruption procedures. This proposed anti-corruption clause is aimed partly at addressing the problem of facilitation payments in the shipping industry. As of July 2014, it had not been confirmed when the final approved clause would be published.

Civil procedure reform

In April 2013, civil litigation reforms, known as the ‘Jackson Reforms’, came into force in the courts of England and Wales. The Jackson Reforms have brought sweeping changes in relation to the conduct of civil litigation in English courts, including the English Commercial Court, where most shipping and trade-related disputes are heard. The broad objective of the Jackson Reforms was to bring about a change in the culture and attitude of the way in which civil litigation is conducted, by requiring that cases are dealt with not only justly, but also at proportionate cost. In broad terms, the reforms are directed at:

• achieving more efficient case management by reducing delay and other unwarranted non-compliance with court orders and rules. This is to be achieved through the courts adopting a more stringent attitude to granting relief from sanctions;

• managing and reducing civil litigation costs, which were considered to have become disproportionate and thereby an impediment to access to justice. This is to be achieved by, inter alia, requiring parties to provide costs budgets and keep to their budgets; and

• introducing changes to the way in which cases may be funded, including the introduction of a form of contingency fees, known as damages-based agreements (DBAs).

The expectation is that, over time, the Jackson Reforms will result in a reduction in overall civil litigation costs, as well as greater discipline among litigating parties and their lawyers in complying with procedural rules and timetables.

The Northern Sea Route and the Polar Code

Global warming has resulted in a significant increase in Arctic temperatures in recent years, with ice receding and shipping lanes that were previously considered impassable becoming available for voyages between Europe and Asia between 1 July and 1 November each year (this period is expected to lengthen as the area becomes increasingly free of ice). This has led to a continued increase in maritime traffic in the Northern Sea Routes (NSR). It has been reported that approximately 71 vessels transited the NSR in 2013 (compared with 46 vessels in 2012), with a cargo volume of more than 1.4 million tonnes. The Arctic Council has reported that the NSR offers between 35 and 60 per cent savings in distance over the conventional route through the Suez Canal for ships travelling between Europe and the Far East. This in turn leads to bunker cost savings. The NSR also allows vessels to circumvent the risk of piracy off the coast of Africa. While the current level of NSR traffic remains negligible as compared with the number of vessels transiting the Suez Canal, it is believed that, in time, the NSR might become an alternative to conventional routes between Europe and Asia.

However, increased maritime traffic in the NSR has led to environmental concerns regarding pollution risks from shipping emissions and oil spills. As a result, the IMO has drafted a Polar Code to cover all aspects of shipping in the Arctic and Antarctic areas, from education and training to construction, safe navigation in ice and operation in cold temperatures. The Polar Code consists of two parts, the mandatory safety element and the non-mandatory environmental protection element. The application of the mandatory safety parts of the Polar Code was approved at the 93rd session of the IMO Maritime Safety Committee (MSC 93) with a view to their adoption at MSC 94 in November 2014. They will be applicable to all passenger and cargo ships above 500 gross tons entering the Polar Areas and will be implemented through the International Convention for the Safety of Life at Sea 1974 (SOLAS). If adopted at MSC 94, the Polar Code will come into force on 1 July 2016.

In addition to the environmental concerns, the NSR have raised various other issues for the international shipping industry, including:

• navigational risks;

• how to allocate risks contractually between shipowners and charterers under their charterparties (eg, for deviation from a direct route due to ice, vessel breakdown or damage due to ice, and liability for costs of ice breakers);

• potential routing conflicts (the rapidly changing and harsh weather conditions of the region heighten the risk of navigational orders conflicting with employment orders); and

• the challenge for marine underwriters in pricing and reserving Arctic risks.

Regulation of pollution from ships

There continue to be a number of international initiatives aimed at reducing pollution from ships. In particular, as of July 2014, 42 states have either ratified or announced the upcoming ratification of the Ballast Water Management Convention (BWMC). The 42 states have just over 32 per cent of the world fleet’s gross tonnage registered with them. Although conditions for entry into force have been met for the threshold of 30 states, additional tonnage is still needed to meet the 35 per cent GT of the world fleet threshold; the BWMC will enter into force 12 months after that threshold is met. In May 2013, the IMO Marine Environment Protection Committee, at its 65th session, agreed to reschedule the BWMC implementation dates in order to smooth the installation scheduling for ships installing ballast water management systems. As a result, ships are not required to install such a system until their first renewal survey after the BWMC comes into force.

Furthermore, the United States Caribbean Sea Emission Control Area (ECA) came into effect, under MARPOL Annex VI, on 1 January 2014, bringing in stricter controls on emissions of sulphur oxide, nitrogen oxide and particulate matter for ships trading in certain waters adjacent to the coasts of Puerto Rico and the United States Virgin Islands. The ECA was designated under MARPOL amendments adopted in July 2011. There are now four designated ECAs in effect globally: the United States Caribbean Sea ECA and the North American ECA; and the sulphur oxide ECAs in the Baltic Sea and North Sea areas.

There have also been a number of amendments to the International Convention for the Prevention of Pollution from Ships, which entered into force on 1 January 2014. The amendments included revised MARPOL Annex III Regulations for the prevention of pollution by harmful substances carried by sea in package form.

Kevin Cooper

kevin.cooper@incelaw.com

Reema Shour

reema.shour@incelaw.com

Sophie Short

sophie.short@incelaw.com

Gina Pritchard

gina.pritchard@incelaw.com

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Estonia

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Newbuilding contracts

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

For title in the ship to pass from the shipbuilder to the shipowner, a notarised agreement between the shipbuilder and the shipowner is required and a corresponding entry shall be made in the Register of Ships. The title in the ship passes only after the entry is made, so the exact time when the title passes is not for the parties to decide. Another aspect of such a transaction is the passing of risk of accidental loss of or damage to the ship being sold – as a rule, the risk passes to the shipowner upon delivery of the ship, even when the title itself has yet not passed. The parties can change when the risk passes.

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

The guarantor must be a person engaged in an economic or professional activity. A guarantee issued by a consumer (a natural person who performs a transaction not related to an independent economic or professional activity) is not valid. In practice, the guarantee document is in made writing.

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

It is possible to file an action ordering the performance of an obligation to deliver the vessel with the Estonian courts, when the vessel has been completed and the yard groundlessly refuses to deliver her despite the buyer having fulfilled all of his or her relevant obligations under the shipbuilding contract. On the basis of an enforcement instrument (court judgment) the bailiff should grant a term of up to three months to the debtor for the voluntary compliance with the enforcement instrument. Upon failure to voluntarily comply with the instrument, the bailiff should release the vessel from the possession of the debtor and grant its possession to the claimant. There is, however, no case law on the subject.

4 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 shipowner’s claim against the shipbuilder would in such circumstances arise from the shipbuilding contract or from the principles of unlawful causing of damage (tort). The purchaser’s claim against the shipbuilder could arise from the principles of unlawful causing of damage.

Product liability regulation in Estonia is primarily aimed at protecting the interests of consumers. Pursuant to the section of the Estonian Law of Obligations Act concerning product liability (based on the EC Council Directive No. 85/374/EEC), the producer shall be liable for causing the death of a person and for causing bodily injury to or damage to the health of a person if this is caused by a defective product. If a defective product causes the destruction of or damage to a thing, the producer shall be liable for damage caused thereby only if:

• this type of product in question is normally used outside economic or professional activities;

• the victim mainly used the product outside the economic or professional activities of the victim; and

• the extent of the damage exceeds an amount equal to €500.

Ship registration and mortgages

5 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?

The types of vessels registered in the Estonian Register of Ships are:

• seagoing vessels of at least 12 metres in length;

• inland vessels of at least 12 metres in length; and

• sailing yachts and launches shall be entered in the register of ships if the overall length of the sailing yacht or launch is at least 24 metres.

It is possible to register vessels under construction in the Estonian Register of Ships under Construction.

6 Who may apply to register a ship in your jurisdiction?

A ship shall be registered if the owner of the ship submits a notarially authenticated petition for registration of the ship.

The owner of a ship registered in Estonia can be:

• an Estonian citizen resident in Estonia;

• a general and limited partnership which is located in Estonia and in which Estonian partners have a majority of votes; and

• another legal person in private law that is located in Estonia and in the management boards or equivalent bodies of which Estonian citizens form the majority.

A citizen of a member state of the European Union and a company or other legal person in private law founded pursuant to the law of a member state of the European Union whose seat and business establishment is in a member state of the European Union shall, upon request, be equal to the ‘owner’ specified above, provided that the person has:

• a residence or a permanent business establishment in Estonia, and the ship itself is not deemed to be a business establishment; or

• a permanent representative whose residence or seat is in Estonia and who is responsible for compliance with the technical, social and administrative requirements established with regard to seagoing vessels in Estonia and who directly controls and monitors the use of the ship.

7 What are the documentary requirements for registration?

In order to register a seagoing vessel, the following documents or documents that contain the following information shall be submitted:

• the name, number or other mark of identification of the ship;

• the type of main engines of the ship, the type of the ship according to its purpose, and the main material of the hull;

• the home port;

• the place and year of build and the name of the builder;

• the ship’s call sign;

• the IMO number, the results of official measurement and the output of the engines;

• the owner, the co-owners and the percentage of each owner’s share of the common ownership, and in the case of the owner having a local representative, information regarding the representative (his or her authority, compliance with the requirements established for the operators of ships in Estonia and consent for being a representative);

• the legal basis for acquiring ownership;

• proof of the right to fly the national flag of the Republic of Estonia;

• documents that certify that the ship complies with the safety requirements for ships established in the Republic of Estonia;

• the provisional certificate of nationality, if issued; and

• a receipt for payment of the state fee.

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

Estonia allows dual charter registration under a bareboat charter both out of and into Estonia.

Flagging out

If a seagoing vessel that is required to fly the national flag of the Republic of Estonia is transferred to a person for use in the person’s own name for at least one year on the basis of a bareboat charter, and if the person is not a citizen of the Republic of Estonia resident in Estonia and does not have the right to fly the national flag of the Republic of Estonia on the person’s ships, the Minister of Economic Affairs and Communications may permit the ship to be entered in the register of another state at the request of the owner, if this is permitted by the laws of the corresponding state. The maximum duration of such permit is two years. At the request of the owner the permit may be extended for one year at a time.

Upon application for a permit to fly the national flag of another state, the shipowner shall submit the following documents in Estonian or together with a notarially authenticated Estonian translation:

• a notarially authenticated petition of the shipowner;

• the written charter contract of the ship;

• the consent of the foreign register of ships for dual registration; and

• the certificate of seagoing vessel, and the certificate of nationality, if issued.

Flagging in

A seagoing vessel of at least 12 metres in length may fly the national flag of the Republic of Estonia on the basis of a provisional certificate of nationality issued by the Estonian Maritime Administration at the request of the charterer if:

• the charterer of the ship belongs to the set of persons specified above (see paragraph 1, question 5);

• the ship has been bareboat chartered for use in the charterer’s own name;

• the shipowner consents to the exchange of flags; and

• the law that had applied with regard to the ship does not prohibit flying the national flag of the Republic of Estonia.

The maximum duration of a provisional certificate of nationality issued by the Estonian Maritime Administration shall be two years. At the request of the charterer, a permit may be extended one year at a time.

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

There is no separate register of mortgages in Estonia. Mortgages are entered in the register of ships, which is maintained by the registration departments of the county courts. The registry departments maintain information about the mortgagee (name and registry code), date of entry, the monetary amount of the mortgage (the sum of the mortgage), amendments to entries and deletion.

Limitation of liability

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

The liability limitation regime for Estonian shipowners and salvors is based on the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC), as amended by the 1996 protocol, which Estonia ratified in 2002 (in force from 1 February 2003). In addition to this Convention, the limitation of liability is regulated by the respective articles of Merchant Shipping Act (MSA), which establishes some exceptions or difference to LLMC regimes. The limitation can be applied to the same claims and to the same extent as established by LLMC except for:

• the limit of liability for a ship with a gross tonnage of up to 250 shall be one-half of the limits of liability for a ship with a gross tonnage of up to 500, pursuant to paragraph 1(b) of article 6 of LLMC (MSA p. 71); and

• application of LLMC limitation pursuant to its paragraph 1(b) of article 6 (limitations in paragraphs 2 and 3 of article 6 of LLMC are not applied) to claims for reimbursement of the costs of lifting, removal, destruction of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board the ship, unless it is dangerous to the environment; this limit of liability applies to claims which have arisen from the same event against the same group of persons within the meaning of paragraph 1(a),(b) or (c) of article 9 of LLMC (MSA paragraph 72); this exception has been established on basis of paragraph 1 of article 18 of LLMC.

MSA provides priority to the claims arising from damage to port facilities, basins, waterway and navigation facilities with respect to claims specified in paragraph 1(b) of article 6 of LLMC as permitted by the Convention.

Shipowners and salvors (as defined in LLMC) can limit their liability as stipulated in LLMC and in addition to these, pilots can benefit from LLMC limitation regime as specified in paragraph 1(a) and (b) of article 6 of LLMC (MSA paragraph 74).

11 What is the procedure for establishing limitation?

In order to establish a fund and later distribute the funds, proceedings should be commenced in the court of law, where the claim against the person entitled to establish the fund is filed (MSA paragraph 78(1)). A person entitled to limit the liability should file the respective application to the court and provide requested information regarding the incident, certain date about the applicant, the ship and number of passengers (if any) (MSA paragraph 80). The court will determine on basis of the Convention the amount of the fund, which should be deposited on an account prescribed by the court (MSA paragraph 83). The cash deposit may be replaced by other security, which the court can determine at their discretion (MSA paragraph 84).

12 In what circumstances can the limit be broken?

The same circumstances as stipulated in the Convention.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The liability limitation regime in respect of passenger and luggage claims for shipowners or carriers is based on the 1974 Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, as amended by the 1976 protocol, which Estonia ratified on 5 June 2002 (in force from 1 October 2002 in Estonia).

In relation to the Athens Convention, the 2002 protocol has also been introduced, but Estonia has not ratified it. However, it has been implemented by Regulation (EC) No. 392/2009 on the liability of carriers of passengers by sea in the event of accidents (the PLR Regulation), which has been directly applicable to Estonia and other EU member states since 31 December 2012. The PLR Regulation ensures a single set of rules governing the rights of carriers and passengers in the event of an accident across the EU.

MSA paragraph 61(1) contains a reference to the PLR Regulation in respect of maximum limitations of carriers’ liability. However, MSA paragraph 61(2) establishes an exception for regular passenger lines that increased liability over that stipulated by the PLR Regulation shall apply if prescribed by the laws of the state from which a vessel has departed or that is the destination of a voyage.

Port state control

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

Port state control is executed by the Estonian Maritime Administration – a governmental agency that operates within the area of government of the Ministry of Economic Affairs and Communications.

15 What sanctions may the port state control inspector impose?

The Estonian Maritime Administration may:

• prohibit a ship from leaving a port (detention);

• prohibit the use of a ship’s compartments, shipboard installations or work equipment if the condition thereof endangers the life or health of crewmembers or passengers;

• issue precepts for the elimination of deficiencies and a term for the elimination of deficiencies;

• impose a fine of up to €3,200 (up to €1,000 for natural persons), if a person fails to observe the precept;

• allow the ship, with the approval of the maritime administration of the flag state and if the seaworthiness of the ship allows this, to proceed to the nearest appropriate repair yard available where the ship can be repaired;

• suspend a regular service or prohibit commencement of a regular service of a ro-ro passenger ship or a high speed passenger craft; and

• prohibit ships flying a foreign flag from entering Estonian ports or anchorage.

16 What is the appeal process against detention orders or fines?

A challenge may be submitted to the head of the Maritime Safety Service of the Maritime Administration within thirty days as of the date of detention, prohibition on entry, suspension of a regular service or prohibition on the commencement of a regular service.

If a decision of the Maritime Administration does not satisfy a shipowner or the representative thereof, the shipowner or a representative thereof has the right to file a complaint to an administrative court.

Classification societies

17 Which are the approved classification societies?

• Lloyd’s Register;

• Bureau Veritas;

• DNV GL;

• the American Bureau of Shipping;

• Registro Italiano Navale; and

• the Russian Maritime Register of Shipping.

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

A classification society may be held liable following general legal principles (on basis of breach of contract or in tort, depending on the case), however, no such case has yet been tested in the Estonian courts.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

If sunken property obstructs vessel traffic; maritime trade or hydrotechnical work; endangers human life or health; threatens to pollute the environment; is washed ashore; or extends above water, then the Maritime Administration specifies a period within which the owner of the property is required to raise the property.

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

In Estonia the following conventions or protocols are in force in relation to collision, salvage and pollution:

• the International Convention on Salvage 1989;

• the Convention on the International Regulations for Preventing Collisions at Sea (COLREG) 1972;

• MARPOL 1973/1978;

• IMO protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution Damage, 1969;

• IMO protocol of 1992 to amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971 and the Supplementary Fund Protocol 2003; and

• the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, which entered into force on 21 November 2008.

21 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. The Lloyd’s standard form is acceptable. There are no restrictions as to who can carry out salvage operations.

Ship arrest

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

Estonia is party to the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

In Estonia a ship, irrespective of her flag or law governing the claim, may only be arrested in respect of maritime claims as per article 1(1) of the International Convention on the Arrest of Ships 1999 (incorporated into the Estonian Law of Maritime Property Act) and maritime liens as per article 4(1) of the International Convention on Maritime Liens and Mortgages 1993 (incorporated into the Estonian Law of Maritime Property Act).

Arrest of associated ships is permissible as per article 3(2) of the International Convention on the Arrest of Ships 1999.

24 What is the test for wrongful arrest?

In practice no specific test has been elaborated for wrongful arrest. The party who applied for securing an action shall compensate the damage caused to the other party by the securing of the action, if:

• a court judgment for refusal to satisfy or hear the secured action enters into force, or the proceeding in the matter is terminated on any other grounds except approval of the compromise of parties;

• it becomes evident that no claim for securing a claim or no cause for securing the action existed at the time of securing the action; or

• a ruling on securing the action, which was made before the action was filed, has been revoked due to the fact that the action was not filed on time.

Claims could also arise from unlawfully caused damage on basis of fault (carelessness, gross negligence or intent) by the tortfeasor.

25 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?

Arrest is permissible of a ship in respect of which the bunker claim is asserted if the demise charterer of the ship at the time when the claim arose is liable for the claim and is demise charterer or owner of the ship when the arrest is effected.

However, there was a case where the court arrested a ship for a bunker claim against the time charterer. In our opinion this position is erroneous, although the question has not been reviewed in the Supreme Court.

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

Yes. In case of monetary claims the court shall make the securing of an action or continuation of securing of an action dependent on the provision of security in order to compensate for possible damage caused to the opposing party. The security must be lodged by the due date set by the court. If the security is not lodged by the due date, the court shall refuse to secure the action or cancel the measures for securing the action.

The amount of security must be at least 5 per cent of the claim, but in any case not less than €32. Estonian courts have discretion to determine a security amount based on the potential size of losses and expenses the shipowner may incur. However, security of between 5 and 15 per cent of the claim amount has often been sufficient. At the request of the defendant, the amount of security to be provided by the arresting party may be increased.

Security shall be lodged by depositing money or securities on the deposit account of the court, or by submitting an irrevocable and unconditional guarantee document issued by a credit institution from the Republic of Estonia or another member state of the European Union for an unspecified term for the benefit of the other party.

27 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?

On the basis of the nature of the claim and supporting documents filed by the arresting party together with the arrest application, the court shall determine the sum of money upon payment of which to the court’s determined bank account or upon the provision of a bank guarantee to the extent of which the execution of the ship arrest will be terminated. In such case, the court shall cancel, based on the defendant’s application, the arrest and substitute it for the deposited sum of money or a bank guarantee. The sum is usually equal to the claim amount that has been stipulated in the ship arrest application. As to whether such sum is subject to review, there is no practice as of yet. Substitute security to release an arrested ship can be a deposit of cash to be paid to a specified account of Estonian Ministry of Finance or an irrevocable and unconditional guarantee document issued by a credit institution of the Republic of Estonia or another member state of the European Union for an unspecified term for the benefit of the arresting party. Parties may agree other substitute security, inter alia, a P&I guarantee or cash deposit at a public notary account with special agreement, however, in reality, the practice of ship release for substitute security is awaiting court approval.

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

The owner shall remain responsible for the vessel under arrest.

A bailiff may demand that a claimant make an advance payment for particularly high enforcement costs, such as costs related to the transport, storage and guarding of goods and other similar costs.

29 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 a ship in Estonia simply to obtain security and then pursue the claim elsewhere.

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

For locally registered ships, the establishment of a judicial mortgage on a ship or seizure of a ship, including a prohibition on selling the seized ship.

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

Yes.

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

In principle, yes. But, as there is no case law, various legal complications may arise when attempting to arrest bunkers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

A bailiff shall conduct enforcement proceedings (including judicial sale of an arrested vessel) on the basis of an application of a claimant and an enforcement instrument.

34 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?

Two types of sales regarding arrested ships can be distinguished. First, based on an application by the claimant or debtor, the court may order the sale of an arrested ship before rendering the judgment if the value of the ship is likely to decrease significantly or preservation of the ship would involve unreasonable costs.

Secondly, the ship may be sold in the execution proceedings of court judgment. In that case the claimant submits an application for enforcement and the judgment to a bailiff, who commences enforcement proceedings (ie, starts preparing a compulsory auction).

The bailiff will give notice of the compulsory auction to:

• the register of ships in which the ship is registered;

• all known pledgees;

• the known owners of claims secured by a maritime lien; and

• the shipowner.

The enforcement proceedings should be finished and the ship sold by way of compulsory auction within six to 12 months from the date of application to the bailiff.

There are no court costs involved in the enforcement proceedings, only enforcement costs, which shall eventually be borne by the debtor (covered by the proceeds from the sale). There is no way to know the definitive amount of the enforcement costs, except for the bailiff’s fee, which is calculated as a percentage of the claim (eg, for a claim of €2 million the bailiff’s fee is €30,133).

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

The money received from the sale shall be distributed in the following order of priority:

• the expenses connected with the forced sale and arrest of the ship, and expenses that the state incurs for removal of the ship from the waterways in order to secure safe navigation;

• claims secured by a maritime lien;

• claims secured by a ship mortgage; and

• other claims.

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

If a ship is sold by compulsory auction, the bailiff shall issue a certificate at the request of the purchaser that the ship is free of maritime liens, mortgages and other encumbrances.

If a ship is sold by compulsory auction, all encumbrances shall be deleted on the basis of a certificate issued by the bailiff provided that all entitled persons are notified of the compulsory auction as required. Encumbrances to which the purchaser agrees are not deleted.

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

Yes, provided that the judicial sale was carried out in accordance with the laws of that jurisdiction and the International Convention on Maritime Liens and Mortgages 1993.

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

Estonia has acceded to the Convention.

Carriage of goods by sea and bills of lading

39 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?

Estonia signed the International Convention for the Unification of Certain rules of Law Relating to Bills of Lading (Hague Rules) in 1924 but did not ratify it. Regardless of this, most Estonian shipping companies base their international contracts of carriage of goods by sea on Hague Rules as amended by the 1976 protocol (the Hague-Visby Rules). The Hamburg Rules have not been ratified by Estonia, however, many principles laid down in the Hamburg rules were implemented into the Estonian Merchant Shipping Act (MSA), which is mandatory for Estonian cabotage carriage of goods by sea. MSA stipulates that the carrier shall be liable for the loss of or any damage to the goods caused between the time the goods are accepted for carriage (by the carrier) and the time these are delivered (paragraph 25), which corresponds to the principles of the Hamburg Rules. The goods are deemed to have been delivered if the consignee or its representative (or third-party holder of the bill of lading) has acquired direct possession of the goods or in certain case the goods are stored or deposited at the port of destination is such way that they are available to the consignee (or third-party holder of the bill of lading).

The UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules) are under consideration in Estonia and no decision in respect of this is expected soon.

40 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?

Estonia has ratified the Convention on the Contract for the International Carriage of Goods by Road (CMR) on 3 May 1993, the Convention for the Unification of Certain Rules Relating to International Carriage by Air (1929 Warsaw) on 16 March 1998, the Convention for the Unification of Certain Rules for International Carriage by Air (1999 Montreal) on 10 April 2003 and the Convention Concerning International Carriage by Rail on 20 August 2008.

Estonia has regulated domestic transport of passengers by the Public Transport Act adopted on 26 January 2000.

41 Who has title to sue on a bill of lading?

The consignee or third-party holder of the bill of lading has title to sue. The shipper has title to sue on basis of bill of lading only in case if the shipper itself is consignee stipulated in the bill of lading (MSA paragraph 38(3)). The shipper can sue the carrier on basis of the contract of carriage of goods.

42 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?

As a general rule the terms of the charter party can be incorporated into the bill of lading and these are binding to the third-party holder or endorsee of the bill (MSA paragraph 38(2)), however the arbitration clause has specific requirements for its validity to the parties. Thus third parties can easily object to the arbitration clause incorporated into the bill of lading with reference to the charter party. There is no case law on this subject matter yet.

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

The issues covered by the ‘demise’ clause and the identity of carrier clause are covered by the concept of ‘actual carrier’ introduced into Estonian maritime laws in 2002. Based on this, the actual carrier is liable for loss of or damage or delay of the cargo jointly and severally with the contractual carrier if the damage is caused during the period when the goods are being carried by the actual carrier. An agreement between the contractual carrier and the shipper or consignee regarding non-application of the limits of liability specified in the Act or extension of the liability of the carrier applies to the actual carrier only if the actual carrier has agreed thereto in writing (MSA paragraph 34(1)).The actual carrier may present the same objections against a claim submitted against the actual carrier as may be presented by the contractual carrier (MSA paragraph 34(2)).

44 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?

Shipowners may be liable for cargo damage depending on the circumstances and the terms of the contract of carriage of goods and the charter party. A shipowner can rely on the terms of the bill of lading if it can be considered as the actual carrier of the damaged cargo.

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

The carrier shall not be liable for violation of the contract for the carriage of cargo, including any deviation from a vessel’s route, if the violation was caused by taking necessary measures to rescue persons or salvage property at sea.

46 What liens can be exercised?

The carrier has a lien on cargo and cargo documents in order to secure its claims arising from: the contract for the carriage of cargo and claims arising from earlier contracts of carriage; forwarding contracts; and storage contracts entered into with the shipper according to the Merchant Shipping Act.

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

The carrier is obliged to deliver the goods to the consignee (or third-party holder of the bill of sale) only if the bill of lading is returned to the carrier and the consignee (or third-party holder) provides a signature concerning the fact that delivery of goods has been taken place (MSA paragraph 45). If the carrier violates this obligation then the carrier can be liable for loss of goods before rightful consignee (or third party holder). In such case the carrier cannot limit its liability on basis of the liability limitation regimes established for the carriage of goods. If several holders of originals of the bill of lading claim delivery of the goods, the carrier is obliged to arrange to have the goods stored or deposited on the account of the rightful owner of the goods and shall inform the holders of the bill of lading claiming delivery of the goods thereof.

48 What are the responsibilities and liabilities of the shipper?

If the goods require special care upon loading, unloading or during carriage, the shipper is obliged to inform the carrier in good time and shall indicate the measures that may be needed (MSA paragraph 9). In the case of dangerous goods, the shipper is obliged to inform the carrier of the nature of the danger in good time in writing (MSA paragraph 8). Before the goods are delivered to the carrier, the shipper is obliged to place the documents and information which are necessary for the loading and unloading of the goods and for conducting other formalities related to carriage, in particular for customs clearance, at the disposal of the carrier (MSA paragraph 10). The carrier is entitled to demand from the shipper the information and documents necessary for the issue of a bill of lading (MSA paragraph 40(2)).

Shipping emissions

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

Estonia, as a country with coastline on the Baltic Sea, has a sulphur-content ECA in force. Estonia has ratified Annex VI of MARPOL, which became valid in Estonia on 18 October 2005.

50 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?

A limit of 0.1 per cent m/m of sulphur in a vessel’s fuel oil has been established in Estonia. This is checked by inspectors of the Estonian Maritime Administration on the basis of ship’s documents (oil book, log, etc). In case of discovered non-compliance the inspectors of the Estonian Environmental Inspections will be informed, who have authority to take samples of fuel oil and make analyses thereof, which should prove non-compliance (if any). The inspectors of the Estonian Environmental Inspections have an independent right to check the fuel oil of vessels, however, their inspections of vessels are rare. The Estonian government has prepared an adoption of EU sulphur directives (the Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC and Directive 2012/33/EU of 21 November 2012 amending Council Directive 1999/32/EC as regards the sulphur content of marine fuels) into Estonian laws, which should establish sanctions for non-compliance.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There are no specialised courts dealing with maritime disputes, county courts have universal jurisdiction to hear all civil, criminal and misdemeanour matters as court of first instance.

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

In Estonia, the Code of Civil Procedure governs service of procedural documents in foreign states.

The provisions of the Code of Civil Procedure apply to the service of procedural documents in another member state of the European Union unless otherwise provided by Regulation 1393/2007 on the service in the member states of judicial and extrajudicial documents in civil or commercial matters.

A procedural document may also be served in a foreign state pursuant to the Convention on the service abroad of judicial and extra-judicial documents in civil and commercial matters, or another international agreement.

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

There is no such arbitral institution specialising in maritime disputes in Estonia. However, there are some permanent arbitral tribunals, where parties can, if so agreed, appoint maritime specialists of their choosing as their respective arbitrators.

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

Recognition and enforcement of foreign judgments and awards is governed by:

• the Code of Civil Procedure;

• the Code of Enforcement Procedure;

• Council Regulation No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, and other European Union instruments (eg, Regulations 805/2004, 1896/2006 and 861/2007);

• legal aid treaties with the Russian Federation and Ukraine; and

• the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

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

There is no precedent in Estonia concerning anti-suit injunctions, nor is there any legal basis to apply for such an injunction.

In the event that a non-EU court which made the decision did not have jurisdiction to make the decision in compliance with the provisions of Estonian law regulating international jurisdiction, then such a decision will not be recognised.

56 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 court should itself refuse to hear a statement of claim if the parties have made an agreement on jurisdiction prescribing jurisdiction of a specific court, or if the parties have entered into an agreement for referral of the dispute to arbitration except in the case where the action contests the validity of the arbitral agreement.

In case the court itself does not refuse to accept an action, then a party can request the court to do so, referring to an agreement on jurisdiction or an arbitral agreement.

Limitation periods for liability

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

The limitation period for a claim arising from a transaction is, as a rule, three years. In some exceptional cases it may be as much as five or even 10 years.

The limitation period for claims arising from unlawfully caused damage (tort) is three years as of the moment when the entitled person became or should have become aware of the damage and of the person obliged to compensate for the damage, but in any case not more than 10 years after performance of the act or occurrence of the event which caused the damage.

According to the General Part of the Civil Code Act the parties may agree upon shortening or extending the limitation period (the maximum limitation period extension is up to 10 years).

58 May courts or arbitral tribunals extend the time limits?

No.

Miscellaneous

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

Estonia has not yet ratified the Maritime Labour Convention (MLC), however, preparation for its ratification is in process. Estonia has adopted a new Maritime Labour Law (MLL), which is based on the MLC. The MLL entered into force on 1 July 2014.

60 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?

In principle, yes. There is an equivalent of the clausula rebus sic stantibus doctrine stipulated in the Estonian Law of Obligations Act, according to which, if the circumstances under which a contract is entered into change after the entry into the contract and this results in a material change in the balance of the obligations of the parties due to which, the costs of one party for the performance of an obligation increase significantly or the value of that which is to be received from the other party under the contract decreases significantly, the injured party may demand amendment of the contract from the other party in order to restore the original balance of the obligations.

Moreover, if the bases for amendment of a contract exist but, due to the circumstances, amendment of the contract is not possible or would not be reasonable with respect to the other party, the party aggrieved by alteration of the balance of the obligations may withdraw from the contract or, in the case of a long-term contract, cancel the contract.

The application of this principle is subject to fulfilment of a number of further conditions.

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

Shipowning companies do not pay any tonnage tax or annual corporate tax in Estonia. Only income tax is due on the distribution of dividends, which forms 21/79 of the dividends received.

There is no age limit beyond which ships may not be registered in Estonian ship registries.

Indra Kaunis

kaunis@shippinglawyers.eu

Sadama 4

Tallinn 10111

Estonia

Tel: +372 6 409 504 / +372 6 409 505

mail@shippinglawyers.eu

www.shippinglawyers.eu

France

Christine Ezcutari

Norton Rose Fulbright LLP

Newbuilding contracts

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

Pursuant to article L 5113-3 of the Transport Code, unless otherwise agreed, title in the ship passes from the shipbuilder to the shipowner only on the date of delivery of the ship, after sea trials. The parties may agree that title will pass during the course of construction, before delivery.

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

As with shipbuilding contracts, there are no specific formalities to be complied with for the refund guarantee to be valid. The only requirements are that the refund guarantee must be made in writing and be properly executed by the parties thereto.

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

The seller is under an obligation to deliver the ship to the purchaser. Pursuant to article 1610 of the Civil Code, if the yard, being solely responsible for the delay, fails to deliver the vessel, the purchaser may elect either to rescind the contract or request the delivery of the vessel (which may cause practical issues at the time of enforcement). In any case, the yard may be liable for damages.

4 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?

Pursuant to article L 5113-4 of the Transport Code, the shipbuilder is liable for latent defects of the ship, even if the ship was accepted without reservation by the customer. The owner can take action against both the shipbuilder and the shipbuilder’s sub-supplier, if the latter was responsible for supply or installation of the defective machinery or equipment. The owner must commence proceedings within one year of the discovery of the latent defect (Transport Code, article L 5113-5). Any lawsuit, including summary proceedings, stalls the limitation period.

According to article L 5113-6 of the Code, the same provisions apply in the case of a ship repair contract.

The shipbuilding contract may contain specific provisions concerning the shipbuilder’s warranty regarding latent or apparent defects, in particular, extending its duration.

In addition, if the vessel does not comply with the contract specifications, the purchaser has a claim in damages against the seller (provided that the purchaser accepted delivery with reservation if the non-compliance was apparent on delivery, or the non-compliance was not apparent at the time of delivery).

The effects of an agreement for the sale and purchase of a ship are governed by the provisions of the Civil Code. Pursuant to article 1648 of the Civil Code, the action resulting from latent defects must be brought by the buyer within a period of two years following the discovery of the latent defect.

If the vessel is defective and loss or damage results from such defect, a direct claim in tort by any person (including third parties) incurring the loss or damage would lie in product liability against the shipbuilder, pursuant to articles 1386-1 et seq of the Civil Code. The damage to the defective vessel itself is not covered by these provisions. The vessel is defective if it does not provide the safety that a person is entitled to expect. This regime applies to all manufacturers, including shipbuilders.

Such action for the recovery of loss or damage is time barred after a period of three years from the date on which the claimant knew or should have known of the loss or damage, the defect and the identity of the manufacturer (Civil Code, article 1386-17).

Ship registration and mortgages

5 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?

As there are several registries in France, ships are registered with the local customs authorities of their home port.

One of the registries is the French International Register (RIF) created in 2005 (Law No. 2005-412 of 3 May 2005). Article L 5611-2 of the French Transport Code provides that the following vessels are eligible for registration with the RIF: (i) vessels engaged in deep-sea trade or in international cabotage, except for passenger vessels sailing scheduled voyages between EU countries; and (ii) commercially-operated leisure vessels of over 24 metres in overall length, manned with a professional crew. Article L 5611-3 of the French Transport Code provides the following list of ships that are not eligible for registration under the RIF:

• passenger ships sailing scheduled intra-community lines or, in accordance with a list fixed by regulation, scheduled international lines;

• vessels operating exclusively in national domestic trade (domestic cabotage);

• port assistance vessels, in particular those assigned to towing at the port, maintenance dredging, boatage, piloting and buoyage; and

• professional fishing vessels.

It is possible to register vessels under construction.

6 Who may apply to register a ship in your jurisdiction?

General registration

For general registration under the French Flag RIF for vessels of more than 24 metres in length, purchased in a non-European Union country after all duties and taxes have been paid, or purchased in the European Union, and where the shipowner is an individual or group of individuals, the following conditions apply:

• single shipowners must come from a member state of the European Economic Area (the European Union, Iceland, Norway or Liechtenstein);

• in the case of several shipowners, at least half of these individuals must be nationals of a member state of the European Economic Area; and

• the shipowner (or the designated manager if there are several owners) must reside in France or elect domicile in France if he or she resides there for less than six months per year.

Where the shipowner is a legal entity or a group of companies, the following conditions apply:

• at least 50 per cent of the corporate shipowners must have their registered office or principal establishment in a member state of the European Economic Area; and

• the ship must be managed and controlled by the registered office or a principal establishment in France or, failing that, by a permanent establishment of the vessel’s owner company domiciled in France.

In respect of a lessee of a new or second-hand vessel intended to be acquired by a leasing agreement, the conditions described above for the shipowner will also apply.

Temporary registration

For temporary registration (special approval for vessels flying under a foreign flag) for vessels of more than 24 metres in length, purchased in a non-European Union country after all duties and taxes have been paid, or purchased in the European Union, and where the shipowner is an individual or group of individuals, the conditions described above apply.

Where the shipowner is a legal entity or a group of companies, the following conditions apply:

• at least 25 per cent of the corporate shipowners must have their registered office or principal establishment in a member state of the European Economic Area; and

• the ship must be managed and controlled by the registered office or a principal establishment in France or, failing that, by a permanent establishment of the vessel’s owner company domiciled in France.

In respect of bareboat chartered vessels of more than 24 metres in length (only if the laws of the state of the foreign flag allow suspension of their flag), the conditions regarding a bareboat charterer, whether a natural person or legal entity, are the same as for a shipowner under general registration under the French flag.

Suspension of registration

For suspension of registration under the French flag for vessels of more than 24 metres in length that are subject to a bareboat lease to a foreign company and that will fly a foreign flag for the entire lease period, and where the shipowner is a legal entity or a group of companies, the following conditions apply:

• the company cannot be established on the territory of the European Economic Area; and

• the ship must be managed and controlled by a permanent office (see conditions above) located outside French territory.

7 What are the documentary requirements for registration?

If the purchaser is entitled to register at the RIF (see question 5), it must follow a multi-stage process: reservation of the name, approval to sail under the French flag, registration and declaration of the ship’s complement.

More precisely, the shipowner must request three kinds of documents from the RIF to fully register the ship:

• a name reservation request through Cerfa form No. 12701*01;

• a request for a transfer of ownership through the Cerfa form No. 12702*01 and in the case of second-hand vessels, for the change of flag or deletion of foreign flag; and

• an application for permission to fly the French flag and the registration through Cerfa form No. 12704*01. This application must be accompanied by various documents. The list of these documents varies depending on whether the ship is a new build or second hand.

Documentary requirements regarding new vessels or vessels under construction

The application for permission to sail under the French flag and the registration must be accompanied by the following documents:

• the articles of association and a trade register extract for the purchaser;

• the shipbuilding contract and (if relevant) any addenda thereto;

• evidence of the signatories’ authority;

• any documents relating to the financing of the ship (for example, any lease contract);• in the event that the ship is to be owned by an economic interest grouping: the bareboat charter to the end user; and the articles of association and trade registry extract pertaining to the charterer;

• the protocol of delivery and acceptance;

• any relevant co-ownership agreement;

• the minutes of the board of directors in which the purchase of the vessel was decided;

• a certificate of cancellation of the foreign flag if the ship has been under such a flag during the construction; and

• the certificate of non-mortgage registration.

Documentary requirements regarding second-hand vessels

The list of documents regarding a second-hand ship is as follows:

• the articles of association and a trade register extract of the purchaser;

• deed of ownership or copy of the contract of sale if there has been a change of owner;

• evidence of signatories’ authority;

• any documents relating to the financing of the ship (for example, any lease contract);

• any relevant co-ownership agreement;

• international tonnage certificate of the previous flag;

• a cancellation certificate of the foreign flag;

• the certificate of non-mortgage registration; and

• the protocol of delivery and acceptance.

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

Dual registration by way of suspending a flag is possible in respect of ships over 24 metres that are bareboat chartered to a foreign company. Those ships will fly the foreign flag throughout the bareboat charter.

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

Maritime mortgages are registered on a special register maintained by the registry of ship mortgages at the local customs authorities of the home port of the vessel.

As the registry of ship mortgages is a public registry, one may gather information regarding, inter alia, the name of the vessel, the date of the registration of the mortgage, the identity of the creditors, the debtor and the secured amount.

Limitation of liability

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

Regarding international conventions, the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) as amended by the protocol of 1996 is in force in France.

Under French law, articles L 5121-1 et seq of the French Transport Code apply.

The limitation regime applies to both contractual and non-contractual claims. Article L 5121-4 provides a list of claims which cannot be limited, such as claims arising from salvage and assistance operations and general average contribution. The parties who can limit their liability pursuant to article L 5121-2 of the Transport Code are the charterer, the shipowner, the manager, the captain or their employees.

11 What is the procedure for establishing limitation?

Under French law, it is not compulsory to set up a fund. In practice however, it is common to provide a limitation fund. To establish limitation, an ex parte request must be made before a commercial court having territorial jurisdiction. Once the fund is set up (constituted either by a bank deposit or guarantee), the judge will record the constitution of the limitation fund. Creditors may then have the possibility to dispute the constitution of the fund, however, no specific maritime provisions are provided in that respect. Once all issues are resolved, the distribution of the fund takes place.

Factors used to calculate the fund include, among others, the nature of the damage, the relevant regime and the tonnage of the ship.

Notwithstanding the above, under French law, there is a separate right to plead limitation without setting up a fund.

12 In what circumstances can the limit be broken?

Pursuant to article 4 of LLMC 1976, ‘a person liable shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.’

Under French law, the limit will be broken if it is proved that the loss resulted from an inexcusable fault. French courts assess in abstracto the concept of such fault and assess the fault against the concept of professional conduct. For instance, any breach of the fundamental obligation of seaworthiness is an inexcusable fault.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, as amended by the Protocol of 2002, is applicable for European Union member states as the European Union has ratified the Athens Convention. Article 1 of EC Regulation No. 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents provides that the Regulation lays down the community regime relating to liability and insurance for the carriage of passengers by sea, as set out in the relevant provisions of, notably, the Athens Convention. The Regulation declares the Athens Convention applicable where the ship is flying the flag of, or is registered in, a member state, the contract of carriage has been made in a member state, or the place of departure or destination according to the contract of carriage is in a member state.

In January 2014 the French Minister of Foreign Affairs presented a bill authorising the adhesion of France to the Athens Convention.

Port state control

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

France is a party to the Paris Memorandum of Understanding on Port State Control of 1982 (the Paris MoU). Pursuant to the Paris MoU, each contracting party shall maintain an effective system of port state control with a view to ensuring that, without discrimination as to flag, foreign merchant ships calling at a port of its state, or anchored off such a port, comply with certain international standards as provided in international conventions listed under section 2 of the Paris MoU.

Directive No. 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port state control (the 2009 Directive on Port State Control) takes into account the provisions of the Paris MoU.

On a national scale, port state control is operated by an office of port state control that is part of the Directorate of Maritime Affairs, under the authority of the Directorate-General of Infrastructure, Transport and Sea, which is part of the French Ministry of Ecology, Sustainable Development and Energy.

On a regional scale, inspections are carried out by highly skilled and trained inspectors of Interregional Directorates of the Sea, officials of the French Ministry of Ecology, Sustainable Development and Energy.

15 What sanctions may the port state control inspector impose?

In compliance with the Paris MoU, during these inspections, inspectors may order the detention of a foreign vessel to request the rectification of all deficiencies detected which are clearly hazardous to safety. Under such circumstances, the inspector may also prohibit the ship from continuing a hazardous operation due to established deficiencies. These provisions are also provided by the 2009 Directive on Port State Control which states that in case of deficiencies which are clearly hazardous to safety, health or the environment, the competent authority of the port state where the ship is being inspected shall ensure that the ship is detained or the operation in the course of which the deficiencies are revealed is stopped.

Article L 5334-4, 1 of the Transport Code provides, in particular, that access to a port is denied to any ship that receives a formal prohibition order from a state acting in accordance with the provisions of the Paris MoU. New articles 41-8 et seq of Decree No. 84-810 dated 30 August 1984 (created by Decree No. 2012-161 dated 30 January 2012) also describes the measures of the detention of a vessel and prohibition of vessels from accessing a port.

16 What is the appeal process against detention orders or fines?

Article 41-12 of Decree No. 84-810 dated 30 August 1984 (created by Decree No. 2012-161 dated 30 January 2012) sets out the appeal procedure.

The appeal procedure provides that any appeal against a decision of an inspector shall be presented by the shipowner, operator of the ship or its representative before the chief of the centre of ship safety. Any appeal against the decision rendered by the afore-mentioned chief shall be presented before the minister of maritime affairs.

The appeal shall be made by the shipowner, operator of the ship or its representative within 15 days of being notified of the decision of the inspector.

Classification societies

17 Which are the approved classification societies?

In France, the authorised classification societies are Bureau Veritas, DNV-GL AS and Rina Services SpA, which are all members of the International Association of Classification Societies, founded in 1968.

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

The liability of a classification society may arise under contract law. French courts acknowledge the validity of non-liability clauses inserted in contracts entered into between shipowners and classification societies. Provisions limiting the liability of classification societies are also valid under French law. However, the application of such clauses is excluded in the event of gross negligence on the part of the classification society.

A classification society may also incur liability in tort and may be criminally liable.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The state or a local authority can order wreck removal. The law provides extensive powers to the relevant administration to remove wrecks, in particular when they present a danger to navigation and the environment. Notably, under the circumstances described in article L 5242-18 of the Transport Code, the state or the port authority, as relevant, may act on their own initiative at the shipowner’s cost and risk.

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

Regarding collisions, the International Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels (Brussels, 23 September 1910), the International Convention for the Unification of Certain Rules relating to Penal Jurisdiction in Matters of Collision and Other Incidents of Navigation, the International Convention for the Unification of Certain Rules relating to Civil Jurisdiction in Matters of Collision (both adopted in Brussels on 10 May 1952) and the International Regulations for Preventing Collisions at sea dated 20 October 1972 are in force in France.

Regarding salvage, the International Convention for the Unification of Certain Rules of Law relating to Assistance and Salvage at Sea (Brussels, 23 September 1910) and the International Convention on Salvage (London, 28 April 1989) are in force in France.

Regarding pollution, the International Convention for the Prevention of Pollution from Ships 1973 (MARPOL) as modified by the protocol of 1978, the International Convention on Civil Liability for Oil Pollution Damage 1969 (CLC) as replaced by the protocol of 1992 and the 1992 protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund 1992) are in force in France.

21 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. The Lloyd’s standard form of salvage agreement is acceptable. Another form of salvage agreement commonly known as the ‘Formule Villeneau’ may also be used.

There are no specific restrictions on who may carry out salvage operations. Usually, these are carried out by specialised companies.

Ship arrest

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

The International Convention for the Unification of Certain Rules relating to the Arrest of Seagoing Ships, Brussels, 10 May 1952 (the 1952 Convention), is in force in France. However, France is not a party to the International Convention on the Arrest of Ships signed in Geneva on 12 March 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

In France, the applicable source of law will either be the 1952 Convention or Decree No. 67-967 and the Transport Code.

Under French law and according to article L 5114-22 of the Transport Code, a ship may be arrested pursuant to an ex parte request for an order of conservatory arrest for any claim, as long as the claim appears to be well founded in theory.

Under the 1952 Convention, a vessel can be arrested in respect of a maritime claim as defined and listed by article 1 of the 1952 Convention. The 1952 Convention will apply to any vessel flying the flag of a contracting party in the jurisdiction of any contracting party to the 1952 Convention.

If the vessel is flying the flag of a non-contracting party to the 1952 Convention, the vessel may be arrested in the jurisdiction of any contracting state in respect of any of the maritime claims enumerated in article 1 of the 1952 Convention, or of any other claim for which the law of the contracting state permits arrest.

In relation to associated ships, in the 1990s the French courts developed the ‘theory of the community of interests’ enabling the creditors of company X, shipowner of vessel A, to arrest vessel B, owned by company Y, if such creditors are able to provide evidence of some confusion of assets between X and Y. Such evidence was, at that time, easily provided.

Following the development of the theory, the French courts were quickly overwhelmed by the number of arrests in France by creditors from around the world and had to tighten the criteria. Since then, in a series of decisions of the French Supreme Court, it was held that creditors must demonstrate that the companies are fictitious, which in practice is extremely difficult to evidence.

24 What is the test for wrongful arrest?

A wrongful arrest would lie in the abuse of the right to arrest a vessel – an absence of legitimacy, malice or the inappropriateness of the measure may constitute an abuse. In the event of such an abuse, the judge may award damages to the arrestee.

25 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?

It is possible for a bunker supplier to 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. The creditor of a charterer may arrest the vessel as long as the creditor benefits from a maritime lien.

Under French law and pursuant to article L 5114-8, 6 of the Transport Code, the bunker supplier will have a maritime lien if it entered into a contact with the captain of the vessel in relation to the supply of bunkers ordered outside the vessel’s home port.

In addition, under international law and pursuant to the 1952 Convention, the claimant is entitled to arrest a ship in respect of a maritime claim arising out of goods or material wherever supplied to a ship for her operation or maintenance.

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

The arresting party does not have to provide security. The debtor can obtain the release of the arrest if it can provide a satisfactory guarantee to the arresting party.

27 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?

In the event the shipowner or the charterer suffers a loss due to the arrest of the ship, such parties may apply for an emergency proceeding to request the release of the ship from the arrest. Under the terms of article 489 of the French Code of Civil Procedure, at the request of the shipowner on a subsidiary basis, the judge may authorise the release of the ship subject to the issuance of a guarantee or security. Pursuant to article 518 of the Code of Civil Procedure, the nature, extent and conditions of the guarantee must be specified in the decision that prescribes its creation. Article 519 of the Code of Civil Procedure provides that where the guarantee or security is a sum of money, it will be deposited at the Caisse des Dépôts et Consignations (a French state-owned bank which effects various tasks of public interest); it may also be deposited at the request of one of the parties in the hands of a third party appointed for that purpose. In the latter case, the judge who consents to this request will state in his or her decision the conditions of such deposit. In the event that the third party refuses to accept such deposit, the sum will be deposited, without any new decision in this respect, in the Caisse des Dépôts et Consignations.

Where the value of the guarantee may not be determined immediately, the judge will invite the parties to appear before him with any evidence at a given date (article 520 of the Code of Civil Procedure).

Pursuant to article 522 of the Code of Civil Procedure, the judge may, at any time, authorise the substitution of the initial guarantee or security by one of an equal value.

The shipowner may ask for the release of the ship and may also request on a subsidiary basis to ‘relocate’ the arrest by replacing the arrested ship by another vessel belonging to the shipowner. If such replacement does not affect the creditor’s rights, the judge may accept such ‘relocation’ (Court of Appeal of Aix-en-Provence, 10 March 1987).

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

The bailiff in charge of the arrest of a ship will designate a person responsible for the surveillance of the vessel while under arrest. The French Supreme Court held in a decision dated 3 March 1998 (Cass com 3 March 1998, 95-20.69) that the shipowner is responsible for the maintenance of the arrested vessel.

29 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?

Whether pursuant to the 1952 Convention or under French law, a French court’s examination of the merits of the claim to decide the arrest of a ship will be limited to the allegation of the claim. The parties must then pursue the claim on its merits in the courts that have jurisdiction to decide.

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

Pursuant to article 531 of the Civil Code, the attachment of a ship is subject to a specific legal regime, as a ship represents a specific type of property. Pursuant to the Transport Code, apart from the ship arrest, a creditor can benefit from a maritime lien that can be executed on the freight, if the claim has become due during the transport and if its value is still in the hands of the captain or the owner’s agent (L 5114-8 – L 5114-9). In addition, the creditor can seek the arrest of the debtor’s receivables.

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

Orders for delivery up or preservation of evidence or property are not available in their conventional form in French maritime law. Pursuant to article 531 of the Civil Code, the attachment of a ship is subject to a specific legal regime, as a ship represents a specific type of property. Therefore, procedural measures envisaged by the Transport Code are applicable to ships. Article L5114-21 of the Transport Code provides that a judge may issue an order pursuant to which a ship that has been placed under arrest obtains a right to leave the port for one or several journeys upon the deposit of adequate security and on condition that the ship returns to the port within the term specified by the judge. In the event that the ship does not return to port within the specified time period, the security is awarded to the creditors.

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

Yes, it is possible to arrest bunkers of the ship. The arrest of the ship’s bunkers is subject to the same legal regime as the arrest of the ship itself.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Creditors of the shipowner may apply for judicial sale of the vessel.

34 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?

The procedure for initiating and conducting judicial sale of a vessel is provided by articles 34 et seq of Decree No. 67-967 dated 27 October 1967 and articles L 5114-23 et seq of the Transport Code.

The initial step in such procedure is the notification by a bailiff to the shipowner of an order to pay (article L 5114-23 of the Transport Code). The creditor must be in possession of an executory title, namely, either a judgment evidencing that the payment is due or, in certain cases, a notarised deed. If payment is not made, the bailiff will then issue attachment minutes, which will be notified to the relevant port authorities.

In relation to the second phase of the procedure, summons to appear will be served in order to carry out the auction of the ship and the attachment minutes will be filed with the relevant ship and mortgage registry. The arrest will then be notified to the creditors. The court will determine the conditions regarding the auction sale of the vessel.

The timing of the procedure will depend on a number of factors, for example, whether the ship is registered under the French flag or a foreign flag. The court costs in connection with the sale will be determined by the judgment given by the court. The costs will usually reflect the fees incurred in relation to the ship’s detention and the expenses incurred in the course of court proceedings.

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

The order of priority of claims against the proceeds of sale may be set out as follows:

• maritime liens – article L 5114-8 of the Transport Code provides the following list of maritime liens:

• legal costs incurred in relation to the sale of the ship and the distribution of the proceeds of the sale;

• tonnage taxes or port taxes and other taxes, pilotage fees and fees associated with the conservation of the vessel since the entry of the vessel at the costs incurred in the last port of call;

• crew costs;

• salvage and general average contribution;

• claims arising out of collisions, accidents at sea and damage to port structures and cargo; and

• costs incurred by the captain outside the home port of the vessel for the preservation of the ship or the continuation of the journey;

• mortgages over the ship;

• other secured claims; and finally

• all other unsecured claims.

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

The judicial sale of a vessel will serve to extinguish prior liens and encumbrances including maritime liens as provided by article L 5114-19, 2 of the Transport Code.

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

The judicial sale of a vessel in a foreign jurisdiction will be recognised in France. It was held in a decision dated 4 October 2005 (No. 01-18201) by the French Supreme Court that a decision of a foreign court regarding a judicial sale has legal effects in France.

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

France is not a party to the International Convention on Maritime Liens and Mortgages 1993.

Carriage of goods by sea and bills of lading

39 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 entered into force on 2 June 1931 and France ratified these rules on 9 April 1936;

• the Hague-Visby Rules 1968 entered into force on 23 June 1977 and France ratified these rules on 10 July 1977;

• the SDR Protocol 1979 entered into force on 14 February 1984 and France ratified this protocol on 18 November 1986;

• the Hamburg Rules entered into force on 1 November 1992 but they have not been ratified by France; and

• the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules) has not been ratified by France.

For the purpose of the application of such rules, carriage at sea begins when the goods are loaded on to the vessel and ends when they are discharged from the vessel.

40 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?

The following conventions regarding road, rail and air transport that apply to stages of the transport other than by sea are in force in France:

• the Convention on the Contract for the International Carriage of Goods by Road 1956 and the Protocol of 1978;

• the Convention Concerning the International Carriage of Goods by Rail 1980 as amended by the Protocol of 3 June 1999; and

• the Convention for the Unification of Certain Rules for International Carriage by Air 1999.

Regarding domestic law, the French Transport Code, applicable since 1 December 2010, is in force.

41 Who has title to sue on a bill of lading?

In principle, the consignee has title to sue on a bill of lading (Cass com 24 November 1975, No. 74-12.782).

The French Supreme Court has recognised that the consignor may have title to sue on a bill of lading if the consignor suffered loss or damage. The real consignee may also have title to sue on a bill of lading.

42 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?

In principle, clauses of the charter party that are not incorporated in the bill of lading and that have not been accepted by the holder of the bill of lading are not binding. A reference in the bill of lading to a clause in the charter party will not be binding.

However, if the clause of the charter party is entirely reproduced in the bill of lading, and if the holder or endorsee of the bill of lading has accepted such clause, it will be binding.

The above principle appears to be tempered by the jurisprudence in respect of arbitration clauses.

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

The ‘demise’ and identity of carrier clauses are not prohibited under French law. However, such clauses are not considered to be binding by the French courts.

44 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?

In a large number of charterer’s bills of lading, the name of the carrier is not provided. Where such bill of lading is kept by the charterer, the contractual relations are governed by the charter agreement. However, issues arise where this type of bill of lading is passed on to a consignee who is a third party to the charter agreement. In the event of loss or damage to cargo the third-party holder may only rely on the charterer’s bill of lading, which does not provide information on the carrier. In this respect, the French Supreme Court has held that when the bill of lading mentions neither the shipowner’s nor the charterer’s name and when the charter party that it refers to is not reproduced in or attached to the bill of lading, the recipient and its insurers are entitled to bring an action against the apparent carrier, namely, the shipowner. This entitlement exists regardless of the existence of information regarding the identity of the charterer, which may have resulted from elements external to the bill of lading and which were revealed after delivery thereof (Cass com 21 July 1987, Bull 1987 IV No. 211 p 156).

It is interesting to note that article 37 of the Rotterdam Rules states that if the carrier is not identified in the contract particulars, but the contract particulars indicate that the goods have been loaded on board a named ship, the registered owner of that ship is presumed to be the carrier. However, the shipowner will not be held liable if he or she proves that the ship was under a bareboat charter at the time of the carriage, identifies this bareboat charterer and indicates its address, in which case this bareboat charterer is presumed to be the carrier. Alternatively, the registered owner may rebut the presumption of being the carrier by identifying the carrier and indicating its address. The bareboat charterer may also rebut the presumption of being the carrier in the same manner.

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

Loss or damage resulting from a vessel’s deviation in order either to save or attempt to save lives or property at sea or any reasonable deviation, will not be considered as a breach of the contract of carriage and the carrier will not be liable for any subsequent loss or damage as provided by the Hague Rules and article L 5422-12 of the Transport Code.

However, the carrier may be held liable for any loss or damage resulting from an unreasonable deviation, such as a voluntary deviation towards a manifestly unsuitable port.

46 What liens can be exercised?

Pursuant to article L 5422-8 of the Transport Code, the carrier has a lien on the cargo for payment of its freight.

Article L 5114-8, 5 of the Transport Code provides for, among other things, a lien on the ship in relation to claims for loss or damage to cargo.

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

A delivery without production of the bill of lading may render the carrier liable. In practice, it is common for the consignee or his or her representative not to be in possession of the bill of lading at the discharge port. The carrier will accept to deliver the cargo without production of the bill of lading provided that an ‘autonomous guarantee’ is issued. The French courts have held that delivery of cargo by the carrier without the delivery of such guarantee requested by the consignor is a breach of contract.

Under the Rotterdam Rules, the limitation of liability not only covers loss or damage to the cargo but also covers breaches of the carrier’s obligations. The Rotterdam Rules also provide specific provisions regarding delivery of cargo in the absence of a negotiable transport document.

48 What are the responsibilities and liabilities of the shipper?

In addition to the duty to present the goods properly packed and marked at the time and place determined in the bill of lading, the shipper has a duty of sincerity regarding the nature and value of the goods, in particular regarding dangerous goods.

The shipper is also responsible for paying for the freight, unless otherwise agreed by the parties. A ‘paid freight’ note is usually affixed on the bill of lading.

Pursuant to article L 5422-10 of the Transport Code, the shipper is liable for any damage to the ship or other goods caused by its fault or the inherent defect of its goods. If the shipper did not respect his or her duty of sincerity regarding the nature of the goods, the carrier will not be liable for the loss of these goods.

Article L 5422-11 of the Transport Code provides a one-year time limit on claims against the shipper.

Shipping emissions

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

Yes. France is a member state of the International Maritime Organization and it is through this organisation that the International Convention for the Prevention of Pollution from Ships (MARPOL) was adopted in 1973. In 1997, an amendment was adopted and a new Annex VI was added. Annex VI entered into force on 19 May 2005 and was modified in 2008.

This annex sets emission limits for ship exhausts such as sulphur oxides, nitrogen oxides, suspended particles, volatile organic compounds and banned substances that thin the ozone layer. In Europe, the Baltic Sea became the first fully implemented sulphur oxides emission control area (SECA) in August 2006. One year later, in August 2007 the North Sea and the English Channel became the second SECA.

Annex VI is integrated into EU law by Directive No. 2012/33/EU of the European Parliament and of the Council of 21 November 2012, amending Council Directive 1999/32/EC as regards the sulphur content of marine fuels. This Directive applies to all ships whatever their flag state. Therefore, any ship that is located in the territorial waters or exclusive economic zone of a European Union member state must comply with the requirements of the Directive.

50 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?

According to Directive No. 2012/33/EU, the applicable cap on the sulphur content of fuel oil depends on the geographic area in which the ship is navigating:

• within an emission control area: the sulphur content of any fuel oil used by any ship navigating in this area must not exceed 1 per cent m/m. As of 1 January 2015, this threshold will be decreased to 0.1 per cent; and

• outside an emission control area: the sulphur content of any fuel oil used by any ship must not exceed 4.5 per cent m/m. Since 18 June 2014, this threshold has decreased to 3.5 per cent and from 1 January 2020, the authorised percentage will be 0.5 per cent.

According to annex VI of the MARPOL Convention, under the general requirements, the sulphur content of any fuel oil used on board ships shall not exceed the following limits:

• 4.5 per cent m/m prior to 1 January 2012;

• 3.5 per cent m/m on and after 1 January 2012; and

• 0.5 per cent m/m on and after 1 January 2020.

Within an emission control area, the sulphur content of fuel oil used on board ships shall not exceed the following limits:

• 1.5 per cent m/m prior to 1 July 2010;

• 1 per cent m/m on and after 1 July 2010; and

• 0.1 per cent m/m on and after 1 January 2015.

In France the control procedure is provided in a ministerial order dated 23 November 1987 relating to security. In accordance with article 213-6.18 of this order, the details of the fuel oil used by a vessel must be recorded in a bunker delivery note, accompanied by a sealed sample. This sample should be signed by the supplier and the ship’s representatives. It should also be retained on board for a period of at least 12 months and in an accessible place since an inspection can occur at ‘any reasonable time’.

Article L 218-15 of the French Environmental Code provides that a master of a ship who is found guilty of violating the MARPOL Convention and, in particular, Rule 14 (regarding sulphur emissions), will be punished with a €200,000 fine and imprisonment for up to one year.

Once Directive No. 2012/33/EU is implemented, its provisions relating to controls and sanctions will therefore be applied. In this regard, the directive is quite clear but not particularly innovative. Concerning the controls, the member states shall take all necessary measures to check by sampling that the accepted sulphur threshold is complied with. Moreover, according to the Commission, the sanctions imposed by the member states shall be effective, proportionate, and dissuasive.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The French commercial courts will usually have jurisdiction regarding maritime disputes. However, it is important to note the use of arbitration in settling international maritime disputes. A large number of contracts, such as shipbuilding contracts, contracts in respect of salvage operations and charter agreements, provide an arbitration clause.

The French Maritime Court will exercise jurisdiction over maritime disputes regarding, among other things, offences committed by professionals of the maritime industry, the captain of a ship or the crew.

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

In addition to the Council Regulation (EC) No. 1393/2007 of 13 November 2007 on the service in member states of judicial and extrajudicial documents in civil or commercial matters (service of documents), the main rules in France that govern service of court proceedings on a defendant located out of the jurisdiction are set out in the French Code of Civil Procedure.

Furthermore, articles 14 and 15 of the Civil Code set out the rule known as ‘privileged jurisdiction’. Article 14 states that ‘an alien, even if not residing in France, may be cited before French courts for the performance of obligations contracted by him in France with a French person; he or she may be called before the courts of France for obligations contracted by him in a foreign country towards French persons’ and article 15 states that ‘a French national may be called before a French court with respect to obligations he or she has borne abroad, even towards an alien’.

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

The Paris Maritime Arbitration Chamber (CAMP) is the French arbitral institution specialising in settling maritime disputes in a fast and economical way. The CAMP is made up of institutional members, which are legal entities and professionals of the maritime sector.

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

Regarding the recognition and enforcement of foreign judgments, the European Union rules are laid down in the Council Regulation (EC) No. 44/2001 of 22 December 2000 and the Council Decision of 15 October 2007 on the signing, on behalf of the Community, of the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. The provisions of the Code of Civil Procedure will also apply.

Regarding the enforcement of foreign arbitral awards, France is a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Pursuant to this convention, each of the contracting states shall recognise the arbitral awards as binding and enforce them in accordance with the procedural rules of the territory where the award is relied upon.

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

In principle, French courts do not issue anti-suit injunctions.

Under French law, if the claimant, in breach of a jurisdiction clause, issues proceedings elsewhere in France, the party who wishes to raise the plea of lack of jurisdiction, under penalty of inadmissibility, must do so before the court at which the matter is brought and explain which jurisdiction it believes the matter should be brought before (article 75 of the Code of Civil Procedure).

56 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 can raise a plea of lack of jurisdiction before the court.

In the presence of an arbitration clause, the ‘compétence-compétence’ principle applies. Where a dispute, which is referred to an arbitration tribunal pursuant to an arbitration agreement or arbitration clause, is brought before a court of law of the state, the latter must decline jurisdiction unless the matter has not yet been brought before an arbitration tribunal and the arbitration agreement is manifestly null (article 1448 of the Code of Civil Procedure).

Limitation periods for liability

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

Time limits vary depending on the nature of the claim.

In respect of contractual claims, a one-year time limit applies to claims arising under a contract of carriage governed by French law as well as claims arising under a voyage or time charter agreement governed by French law. The one-year time limit also applies to cargo claims under the Hague Rules 1924. The time limit can be extended by agreement.

In relation to liability in tort a longer time limit applies, which will usually be of five years for commercial disputes. However, in respect of claims against the carrier, whether the claims are grounded in contract or in tort, the one-year limit applies.

58 May courts or arbitral tribunals extend the time limits?

Courts and arbitral tribunals may not extend the time limits.

Miscellaneous

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

The Maritime Labour Convention applies to its full extent in France and to vessels flying the French flag. Indeed, the French Law No. 2012-1320 dated 29 November 2012 authorises the ratification of the Maritime Labour Convention. The Convention entered into force on 20 August 2013, and has been in force in France since 28 February 2014.

60 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?

In the absence of a contractual ‘hardship’ clause, it would be very difficult to obtain relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract. Article 1134 of the French Civil Code incorporates the principle of ‘pacta sunt servanda’ (ie, the terms of a contract are generally binding as between the parties thereto and a judge is not entitled to modify the agreement or order its non-performance, even where economic circumstances have rendered the contract particularly onerous for one of the parties). The only statutory exception to this rule is when an event that constitutes force majeure has occurred; however, under French law force majeure will only be deemed to have occurred when the event in question is irresistible (not simply an event which makes performance more difficult), unforeseeable (which may not necessarily be the case even for dramatic natural events such as hurricanes or human events such as wars), external (which would not necessarily be the case if a party’s performance is hindered by the acts of its own subcontractors) and does not imply fault on the part of the party wishing to excuse its non-performance.

Contractual ‘hardship’ clauses, which oblige the parties to negotiate in good faith modifications to the contract in the event of the occurrence of circumstances which upset the original economic equilibrium of the contract, are valid under French law but in practice their application is difficult, as the courts are wary of ordering modifications in the event that the parties, despite negotiating in good faith, are unable to agree on the necessary modifications. In any event, the court will also scrutinise closely whether the events in question actually fall within the scope of the events referred to by the parties in the contract as triggering application of the hardship clause in the first place.

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

France adopted Law No. 2011-13 of 5 January 2011 regarding Anti-Piracy and State Police Powers at Sea, amending Law No. 94-589 of 15 July 1994. This law enhances preventive and repressive measures, in particular on the high seas to provide a more efficient anti-piracy regime.

Update and trends

On 19 June 2014, the French Parliament adopted a bill authorising the presence of private armed guards on board vessels trading in areas at risk of piracy.

Christine Ezcutari

christine.ezcutari@nortonrosefulbright.com

ParisEight

40 rue de Courcelles

75008 Paris

France

Tel: +33 1 56 59 50 00

Fax: +33 1 56 59 50 01

www.nortonrosefulbright.com

Germany

Thomas Wanckel and Jan Albers

Segelken & Suchopar

Newbuilding contracts

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

German law generally differentiates between the actual transfer of ownership and the contractual obligation to transfer ownership (the principle of the abstract nature of rights in rem). For the transfer of ownership of the vessel a separate legally relevant act is required.

According to section 950 of the German Civil Code (BGB) the shipyard initially becomes the owner of the newly built vessel. The title of ownership can pass over to the shipping company at any time during construction. After launching it is sufficient that the parties make an informal agreement that contains when the title of ownership shall pass. Before the launch of the vessel there is the additional requirement that the parties agree on a constructive possession of chattels. If a vessel that is not yet ready for delivery is registered in the vessel registry then the above-mentioned agreement has to be registered in the vessel register as well.

A title is normally transferred after successful delivery and completion of sea trials. Until then the purchaser is able to put forward warranty claims and will only be obliged to pay the purchase price at the time the title in the ownership is transferred. If the builder and the purchaser have agreed on payment by instalments of the purchase price, it is standard practice according to article 8(b) of the AWES Standard Shipbuilding Contracts to transfer title of ownership of the vessel that is not yet ready for delivery to the purchaser in order to cover risks.

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

In Germany refund guarantees are not common practice. The purchaser is sufficiently secured against the contingency risk of the shipyard. The title of ownership can be transferred without delivery of the vessel so that in the case of insolvency of the shipyard other creditors would not be able to satisfy their claims.

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

A shipbuilding contract is a combined contract for work and services (section 651 BGB) according to which the purchaser has a claim against the shipyard for transfer of title of ownership if and when the contractually agreed delivery date is reached. This claim can be enforced with a legal action before the courts.

In any case, the shipyard can claim a right of retention (section 320 BGB) when the parties agreed that the delivery of the vessel would depend on the payment of the purchase price and when this price has not been paid.

4 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?

If a vessel has a contractual defect and if this will result in damage to the vessel or to any other property or injuries to persons coming into contact with the vessel within the scope of the intended use, the purchaser of the vessel may claim damages under the shipbuilding contract. If applicable, the general principle of the contract shall be applied with a protective impact in favour of third parties.

If persons will be injured owing to defective construction or manufacture of the vessel, they will be entitled to make a claim in tort under section 1 of the Product Liability Act and under section 823 BGB, irrespective of the contractual relations.

Ship registration and mortgages

5 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?

The owner of a ship that has to fly the German flag is obliged to register the ship with the German Register of Ships if the ship’s hull length exceeds 15 metres (section 10 of the Register of Ships Regulation). According to section 1 of the Maritime Flag Law, ships have to fly the German flag if the owner is:

• a German citizen with permanent residence in Germany; or

• a partnership or legal entity with a registered office in Germany, insofar as the majority of the members of the management or the board of directors are German citizens.

Furthermore, according to section 2 Maritime Flag Law, ships are eligible for registration under the German flag if the owner:

• is a community of heirs, provided that German citizens hold the majority of the deceased’s estate and that this community is represented only by Germans having their residence in Germany;

• is, in any of the aforementioned cases, a natural person having its residence in the EU;

• is a company founded in the EU and having its registered office in the EU, provided that this company has authorised a person with residence in Germany to take over certain responsibilities; or

• is a natural or legal entity of a third country, provided this country is party to a relevant bilateral agreement with Germany or the EU.

A vessel under construction can be registered in the German ship Construction Register, according to section 65 et seq of the Register of Ships Regulation.

6 Who may apply to register a ship in your jurisdiction?

The shipowner is entitled to apply for the registration of the ship (see question 5). Where the ship is owned by several persons or companies, all the owners must be party to the application.

7 What are the documentary requirements for registration?

The documents required for registration usually include:

• the formal application in writing;

• proof of ownership;

• certificate of registration (of the shipowning company);

• measurement certificate; and

• proof regarding the deletion from foreign registers.

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

Dual registration is not possible in Germany. The ship register will only register vessels that are entitled to fly the German flag (see above). If a vessel is still registered in a foreign registry she cannot be registered in the German Ship Register (section 14 Register of Ships Regulation). A German ship may, however, also be bareboat charter registered under another flag.

German law provides for two possibilities of flying a flag of convenience. The first possibility (in essence temporary) permits a vessel to fly the flag of another country while ownership continues to be registered in Germany. With the consent of the German Federal Ministry of Transport the vessel is allowed to fly the flag of her bareboat charterer’s state. The attributes of registration are therefore divided between the registry of the owner and that of its ‘user’, the bareboat charterer.

The other possibility, which is of less importance, means that the operation, navigation and the management of the vessel remain in Germany while the title of ownership of the vessel is transferred to a person or company abroad with its principal place of business in another country, or where the German shipowner changes his or her place of business abroad. With this alternative the obligation to fly the German flag expires.

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

Mortgages are registered in the ship register at the local court of the home port of the vessel, and thus where the principal place of business of the shipowner is located.

An excerpt from the ship register consisting of three parts will be generated for each vessel. The first part contains the data of the vessel and the flag law; the second part details the owner as well as any respective priority notices and other protective rights; and the third part details the encumbrances of the vessel, such as ship mortgages, legal usufructs and liens of co-owners.

The granting of a ship mortgage is subject to the agreement of the parties and the registration. The creditor, the amount of the claim, a possible interest rate and the amount of any ancillary performances must be entered.

Limitation of liability

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

Germany has ratified the 1996 Protocol to the Convention on Limitation for Maritime Claims, which is thus directly applicable law in Germany. In sections 611 to 617 of the German Commercial Code (HGB) some additional provisions and procedural requirements are laid down.

The following claims can be limited:

• claims in respect of loss of life or personal injury or loss of or damage to property, occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;

• claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

• claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operation;

• claims in respect of the removal, destruction or the rendering harmless of a ship that wrecked, including anything that is or has been on board such ship;

• claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability and further loss caused by such measures; and

• all claims in connection with the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992.

The following parties can limit their liability:

• the owner;

• the charterer and the bareboat charterer as well as the charterer by demise;

• the manager also in terms of the managing company and the operator;

• the salvor and its assistant; and

• the employees of the shipowner.

If there is a direct claim against the insurer, then the insurer shall be entitled to the benefits of the limitation ‘to the same extent as the assured himself’.

11 What is the procedure for establishing limitation?

The procedure for establishing limitation is divided into three sections.

First, there is an opening proceeding that shall be held at the local court. All debtors can file an application for the opening of redistribution proceedings, which can limit their liability in accordance with material regulation.

After payment of the liability sum or payment of the surety, the proceedings shall be opened. On opening, the liability of all debtors to the claims affected by the proceedings is limited to the liability sum. The court determines an administrator attorney who shall relieve the distribution court and support the claims registered by the creditors.

The opening proceedings shall be concluded with a public demand to all creditors of the claims covered by the proceedings and to the debtors, who are limitedly liable to the applicants for claims from the same event, to take part in the proceedings.

Secondly, the declaratory proceedings shall follow the opening proceeding. There shall be an examination appointment to examine the registered claims.

Thirdly, the distribution proceedings follow. At distribution, the declaratory claims shall be taken into consideration in the ratio of their sums.

12 In what circumstances can the limit be broken?

The right to limit the liability can only become null and void if the party liable has caused the damage either with intent or carelessly and with the knowledge that such damage would probably occur.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Passenger and luggage claims are regulated by the German Commercial Code (sections 536 to 552), which is similar to the Athens Convention 2002. However, most cases will come under EU Regulation No. 392/2009, which implements the Athens Conventions 2002 in the EU. This Regulation applies directly and replaces the German Commercial Code (see section 536(2)).

Port state control

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

The procedure of the port state control agency in order to guarantee the safety on board the vessel is governed by the Paris Memorandum of Understanding on Port State Control (Paris MoU) and Directive 95/21/EC. This is governed in Germany by the Ship Safety Act and the Maritime Responsibilities Act.

The Ship Safety Division is instructed to carry out the port state control procedure. It is a public corporation and has sovereign rights as port state control agency and is controlled by the Federal Ministry of Transport.

15 What sanctions may the port state control inspector impose?

The shipowner and the captain are obliged to cooperate with and enable the performance of the port state control. An initial inspection is carried out to evaluate the overall condition of the vessel (article 6 Directive 95/21/EC). If there is a suspicion that regulations for the vessel’s safety have been violated, a more detailed inspection is carried out. If it is determined that the vessel is unseaworthy, then the port state control agency is authorised to detain the vessel in the respective port or to shut down operations. This order will continue in force until the complete elimination of the defect has been determined by a subsequent inspection. The port state control agency has no power to issue sanctions.

16 What is the appeal process against detention orders or fines?

Two appeal processes are possible against the directives of the port state control agencies. First of all, the shipowner may enforce the general appeal procedures of administrative law. An objection can be filed within one month. If the measures imply a serious impact on the shipowner then he or she is able to apply for provisional legal protection.

In addition, the flag state or an acknowledged classification society will have the option to obtain a decision of the vessel within the scope of a remonstration with the port state. If the port state will not change its decision, a remonstration will be possible under the Paris MoU within 120 days. This will institute a review panel, again reviewing the order. The result of such a review will not be binding for the port state.

If a vessel has been wrongfully detained, the owner will be entitled to claim compensation.

Classification societies

17 Which are the approved classification societies?

In Germany the recognised classification societies are DNV GL, Lloyd’s Register of Shipping, Bureau Veritas, American Bureau of Shipping, Registro Italiano Navale and Nippon Kaiji Kyokai.

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

The question of the liability of the classification societies is not yet sufficiently clear.

Classification societies are active either under private or public law. If they become active owing to an agreement with the shipping company and if a claim arises due to a breach of duty, they are liable to the shipping company under the agreement. In the same manner, third parties could derive claims for damages from this agreement against the classification society if they are to be protected by this agreement.

In addition, liability in tort can exist towards the shipping company or a third party inasmuch as its prerequisites are fulfilled. Apart from liability for intent and gross negligence for personal damage, an exclusion of liability is basically possible for contractual claims. This does not apply for tortious claims of third parties. If the classification society is active under public law, public liability claims against the state come into consideration.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

If a wreck or helplessly drifting ship impairs the safety or ease of traffic on a national waterway, the competent shipping office may not only decree an order against the ship and the owner with the aim of forcing removal, but also carry out removal itself. The state authority can refer here to the Waterways Act and after due warning, dispose of the rescued objects itself by way of administrative enforced proceedings.

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

Germany is a contracting state to the Brussels Convention of 1910 on Collision and of 1952 on Civil Jurisdiction in case of Collision. Both conventions are incorporated in the HGB.

The rules of the International Convention of Salvage 1989 were embodied in sections 574 to 587 HGB. At the same time alterations and necessary adjustments were made in other German statutes. At the centre of the new salvage law is the obligation of the salvor in a salvage attempt not only to protect the crew, ship and cargo but also the environment.

21 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?

Lloyd’s standard form of salvage agreement is acceptable and there is no mandatory local form of salvage agreement.

Every kind of salvor can carry out salvage operations. There are no mandatory local requirements.

Ship arrest

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

Germany is a member of the Brussels Arrest Convention of 1952, but the legal opinion in Germany is that the provisions of the German Code of Civil Procedure (ZPO) should prevail.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

An arrest may be applied for if the creditor’s claim is for payment or may become a claim for payment that is generally broader than the claims admitted under the Brussels Arrest Convention of 1952.

According to a recent revision of the German maritime law, it is not required anymore that a ‘good reason’ for the arrest is shown by the applicant. This elimination of the requirement for a ‘good reason’ actually means a substantial improvement of the applicant’s chances to obtain an arrest order by the German courts. In contrast to the provisions of the previous law, the applicant does not need to give evidence that the enforcement of the judgment in the main proceedings would be rendered impossible or substantially more difficult if the ship would not be arrested. The applicant now only needs to prove that the claim for payment actually exists.

24 What is the test for wrongful arrest?

German law is rather strict on compensation for wrongful arrests. Section 945 ZPO stipulates a strict liability that arises irrespective of illegality or fault on the part of the applicant for arrest and is instead exclusively dependent on the decision of the judge that the arrest was unjustified from the very beginning. This would predominantly cover any situations in which it later turns out that a claim for payment does actually not exist.

25 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?

The arrest can only be applied for if the shipowner is personally liable for the creditor’s claim. If the creditor has supplied a bunker to a chartered ship and has not been paid, he or she has to demonstrate to the court that the managers of the ship or the master acted on behalf of the shipowners rather than for the charterers. If not, one can only arrest bunkers, which in practice is quite a difficult procedure (see question 32).

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

Due to the rather strict rules on compensation for wrongful arrests under German law, the judge may require the applicant to provide counter-security in order to enforce the arrest order. While the precise amount of the counter-security required is determined by the judge at his or her discretion, the basic rule is that the amount of the security is to be calculated on the basis of a potential claim for compensation of the debtor with regard to the creditor in case the arrest eventually turns out to be wrongful. In this context, the ship’s charter rate for the off-hire period may be a reasonable guideline; by contrast, the amount of the main claim is basically of no relevance and may only be relied on only if there are no other figures available. As a general rule, counter-security of the creditor will be ordered in cash or – if so requested in the application – may be given by a bank guarantee of a first-class European bank.

27 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?

German courts usually order that the arrest is to be lifted in case the debtor provides security covering the creditor’s entire main claim for payment. As regards the form, the same requirements apply as mentioned above. There is an opportunity to subsequently review the arrest order if the underlying conditions have changed.

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

With the seizure, the bailiff takes possession of the vessel. He or she takes care of the supervision and custody of the vessel and prevents the vessel’s unauthorised departure from the port by informing the port state control, the water police and the pilot.

29 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?

The arrest proceedings in Germany are basically irrespective of the question of where to proceed on the merits of the case. It should be noted, however, that in consequence of the arrest, proceedings on the merits may also be pursued in Germany, provided the parties did not agree on a contractual clause establishing a foreign and exclusive place of jurisdiction.

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

If the ship concerned flies the German flag and if an arrest has been granted by the courts, then the creditor may apply for the registration of a priority notice with the ship register in order to prevent the sale of a ship or the registration of a prior mortgage.

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

The burden of proof basically lies with the applicant; and with regard to arrest proceedings the required standards of proof is even higher. This means that, in practice, the application for an arrest is usually accompanied by an affirmation in lieu of an oath stating that the details provided in the application are correct. Since in the usual case of a ship arrest, the court will not fix a hearing date due to the urgency of the matter, its decision will be to consider whether the submitted evidence is either sufficient or not sufficient. There will be no additional order.

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

Yes, it is basically possible to arrest bunkers and to obtain an attachment order in respect of bunkers. There are, however, certain difficulties related to the arrest of bunkers, which are predominantly due to factual considerations, such as in which manner to pump out the bunkers etc.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The creditor can apply for judicial sale of an arrested vessel.

34 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?

The procedure for a judicial sale of registered vessels is stipulated in sections 864 et seq ZPO and sections 162 et seq of the Compulsory Auction of Immoveable Property Act. The competent court is the local court where the vessel is lying or anchored. Following the application for sale by the creditor, the court gives an order to guard the vessel and take it into legal custody. Then the court determines a date for the auction sale, followed by a pre-hearing; the calling of the case; giving public notice of the auction of the vessel, the creditors and the claims upon it; and the assessment of the lowest bid, together with the announcement of the official rules of the judicial sale. Then the judicial sale itself, together with the bids, is conducted until the vessels sale to the highest bidder is concluded. The time frame between the determination of the date for the auction and the auction itself is at least three months.

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

Maritime liens prevail over all other liens on the ship as well as all the ship’s mortgages.

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

The judicial sale serves to extinguish all prior liens and encumbrances on the vessel including maritime liens, granting a purchaser clean title to the vessel.

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

In general, yes; it depends on whether the foreign judgment is not contrary to public policy and whether the foreign judgment (arbitration award) will be recognised by the German courts.

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

No, but Germany has implemented the 1967 Convention into the Commercial Code.

Carriage of goods by sea and bills of lading

39 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?

Germany has not ratified the Hague-Visby Rules and is still a contracting state to the Hague Rules, but has implemented the Hague-Visby Rules into the HGB. Therefore, according to German law, an interpretation of the Hague-Visby Rules is only made insofar as they are incorporated into German law. Germany has not ratified the Hamburg Rules.

Germany has not ratified, accepted or approved the UN Convention on Contracts for the International Carriage of Goods (the Rotterdam Rules).

Carriage at sea in general begins when the goods have been handed over to the carrier and ends when the next carrier (trucker or port warehouse) takes them over.

40 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?

The United Nations Convention of International Multimodal Transport of Goods (Geneva, 24 May 1980) is not in force in Germany. For multimodal transport section 452 HGB applies when and if there is a general connection to Germany, such as the contracting parties agree on the applicability of German law or if both parties are situated in Germany. In other cases the international conventions such as the CMR, the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal 1999), the CMNI and the Hague-Visby Rules and others could be applicable.

41 Who has title to sue on a bill of lading?

The equivalent of the common law bill of lading in Germany is the Konnossement. The rights arising out of the contract of carriage as contained in the Konnossement can be transferred. A Konnossement is endorsable only if it is ‘to order’. Typically, a Konnossement is issued to order with a blank endorsement. However, if the order clause is missing, but the consignee’s name is mentioned, then such bill of lading is called a Namenskonnossement or Rekta-konnossement. Under such bill of lading the named consignee has title to sue.

42 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 recent revision of the German maritime law also caused a fundamental change in the legal position regarding the validity of incorporation clauses. Whereas under the previous rules incorporation clauses were in general accepted if the reference was made expressly and visibly in the printed terms on the front page of the bill of lading, the new German law breaks with this international standard and no longer acknowledges the incorporation of the terms of a charter party into the bill of lading. In order to effectively include an arbitration clause, it is necessary that this clause is printed on the bill of lading itself.

Since this legal position under the new German law deviates from the usual position of most other jurisdictions, and since it does not conform to the common practice (see clause 1 of BIMCO’s Congenbill 2007), the same case may be treated differently by different courts. While, for instance, English courts would hold themselves competent based on the incorporation clause of the bill of lading, such clause would be considered invalid under German law meaning that German courts would also consider themselves competent to hear the case.

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

According to two main decisions of the Federal High Court of Germany, the identity of the carrier clause was held to be invalid. There is no doubt that there is a conflict between the naming of the carrier on the front page of the bill of lading and the IOC clause on the reverse side. This conflict is solved by authors and authorities like the Federal High Court of Germany as follows: ‘The explicit naming of the carrier on the front page of the bill of lading has to be regarded as an individual agreement which overrules any standard business conditions,’ and as such the bill of lading conditions including the IOC clause are examined by the Federal High Court of Germany.

44 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 bill of lading has been issued by the carrier, this will only oblige the carrier. The party obliged under a bill of lading may thus not only be the shipowner but everybody issuing a charter party.

If a bill of lading issued by the master or by another representative of the shipowner does not state the name of the carrier, then the shipowner will be regarded as the carrier; if it has been incorrectly stated, then the shipowner shall be liable towards the consignee to compensate any damages incurred thereby.

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

An unjustified deviation is regarded as a breach of duty. Therefore, the carrier will be liable for any loss caused by the deviation without being able to rely on the exclusion of liability pursuant to section 498(2) HGB or on the excepted perils of section 499 HGB. Only if a deviation from the route has been made due to nautical errors will section 512(2) HGB be applicable in favour of the carrier, provided that in the carrier’s general business terms an exclusion of liability for nautical errors is stipulated.

46 What liens can be exercised?

The carrier has a statutory lien for the goods owing to the freight and to the ancillary costs and demurrage.

This lien will continue despite a loss of possession as long as the goods have been deposited because the goods had not been accepted. The lien will continue after delivery as long as the goods are in the possession of the consignee, but this has to be enforced through a court within 30 days. The realisation will be made through auction or in the open market upon a respective warning towards the consignee or the shipper.

The lien may be acquired in good faith. This means that the carrier will also acquire a lien to goods, which are not owned by the carrier or shipper, if the carrier had accepted the authorisation of the shipper for shipment without gross negligence. The lien acquisition is restricted. However, if the goods have been lost by the owner, no lien will be created.

In the case of the acceptance of the goods by the shipper, the carrier will also be entitled to a lien.

47 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 delivers the goods without presentation of a bill of lading, the carrier will violate a cardinal duty and will be liable as in the case of a loss of the goods.

If the delivery without presentation of bill of lading is unavoidable, because the bill of lading is not yet in the possession of the consignee yet, the carrier will usually request a statement of the consignee (letter of indemnity).

48 What are the responsibilities and liabilities of the shipper?

In German law, the Befrachter is the person contracting with the carrier. In addition, and peculiar to German law, there is also the Ablader and the Drittablader. The Drittablader is unique to the German legal system and is not the same as a freight forwarder. The Ablader is responsible for damages resulting out of false declaration of cargo, especially with regard to dangerous goods (section 488 HGB). With regard to the freight contract, the Ablader is also liable for possible mistakes in relation to the delivery of goods (section 488 HGB).

Shipping emissions

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

The North Sea and the Baltic Sea have been declared emission control areas (ECAs) for sulphur oxide pursuant to Annex VI of MARPOL 73/78. In addition, the European Commission has established EU Sulphur Directive 1999/32/EC as amended by Directive 2005/33/EC, which covers in geographical terms the ECAs under Annex VI of MARPOL 73/78 but also contains provisions applicable in European ports.

50 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 threshold for the sulphur content of fuel oils is set at 1.5 per cent m/m in respect of the Baltic Sea region as well as in respect of the North Sea and the English Channel. As of 1 January 2010 the cap on sulphur in European ports is 0.1 per cent m/m.

Compliance with these requirements is ensured by regular inspections. The authority competent for inspections under Annex VI of MARPOL 72/78 is the Federal Maritime and Hydrographic Agency in Hamburg, which exercises sovereign powers and conducts inspections as a matter of port state control.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Marine cargo claims may be tried in civil courts. Depending on the value of the claim it has to be filed with the local court or the regional court. In general, all courts are competent to hear federal law and therefore the whole of maritime law. In any case, the panel for commercial matters (the commercial division) of the regional court will be the appropriate court of first instance.

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

Foreign parties are generally treated as domestic parties during civil proceedings before German courts. Thus, these parties will enjoy the same legal protection as domestic parties. There are some peculiarities, however, with respect to some regulations. The ability to act as a party or to institute legal proceedings is governed by section 50 ZPO. Pursuant to this section, foreign companies have the capacity to be sued, even though such company is not acknowledged in Germany as an incorporated company. A statement of claim must be delivered to the respondent overseas (section 376, 183 ZPO). A hearing of evidence is also possible abroad (section 363 ZPO).

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

Arbitration is frequent in maritime cases, mostly subject to the rules of the German Maritime Arbitration Association (GMAA). The panel of arbitrators under the GMAA rules is composed of two arbitrators; the parties may agree on one or three. Another possibility of conducting arbitration in Germany is ad hoc arbitration for which modern rules of law are contained in the Code of Civil Procedure.

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

Germany is a party to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

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

If a jurisdictional clause has been agreed upon between the parties, according to which a German court has the exclusive competence to decide the matter, then any action pursued in another country will neither result in an acknowledgement of such foreign judgment in Germany nor in an exclusion of a simultaneous action in Germany.

According to Regulation No. 44/2001/EC, a double pendency of a claim before several courts in the EC is impossible. If a legal action has been assigned to a European court by way of a jurisdictional clause, the other European courts will be bound by this clause and will reject the action for reasons of lack of jurisdiction.

If an action is instituted before a court outside the EC, this other undecided case will not be regarded as a legal impediment for the action, if a jurisdictional clause had exclusively provided for German law. Such a foreign legal action would only present a legal impediment if the judgment of these proceedings would also be acknowledged in Germany. This is, however, not the case due to the inadmissibility of a legal action before a foreign court (section 328 ZPO).

56 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 agreement on a foreign place of jurisdiction or place of arbitration will present a legal impediment for German courts to be officially taken into account, so that an action would be rejected in Germany.

It is a condition, however, that the jurisdictional clause be agreed upon in a legally valid manner. An agreement may be invalid pursuant to German law if this would result in a violation of essential principles of German law (section 138 BGB). This is the case if the court agreed upon would apply a law according to which the liability of the carrier would be below the scope of liability of the Hague Rules. In addition, the German court will review the readiness for admission of the foreign court. In contrast thereto, it is of no relevance whether or not the subsequent judgment would be acknowledged in Germany.

Limitation periods for liability

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

According to section 605 HGB, the time within which the cargo claimant may bring a suit is one year. Any action relating to carriage of goods is therefore time-barred if judicial or arbitral proceedings have not been instituted within this period.

The one-year time limitation applies to all claims arising out of freight contracts and bills of lading as well as to charter parties such as voyage charters, for example. It is possible to extend the time limit for these claims by agreement.

Non-contractual claims and claims in tort are covered by section 823 BGB in conjunction with other regulations. These claims are governed by the specific time limit and regulations applicable to such claims. It may be generally stated that any non-contractual claims will usually be time-barred at a later stage. It is not possible to extend the time limit by agreement for such claims.

58 May courts or arbitral tribunals extend the time limits?

No, it is not possible for arbitral tribunals or courts to extend the time limits.

Miscellaneous

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

On 16 August 2013 Germany ratified the Maritime Labour Convention (MLC), which entered into force on 20 August 2013. Germany has already transferred the main principles of the MLC into a national Sea Labour Law, which entered into force on 1 August 2013 and replaces the old Seafarers’ Act, in force since 1957. The new law applies to about 870 ships flying the German flag.

60 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?

It is basically not possible under German law to seek relief from the obligations assumed under a contract. The freedom of contract is a basic principle of German law, according to which the parties to a contract are responsible for the fulfilment of their contractual obligations. Only in the event that the circumstances that formed the basis of the contract have significantly changed since the contract was entered into and if the parties would not have entered into the contract if they had foreseen this change, may adaption of the contract be demanded (section 313 BGB). However, it should be stressed that the courts impose very high requirements for establishing that the underlying circumstances have changes in a sufficient manner.

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

Following the revision of the German Transport Law (not including maritime law), the German Commercial Code contains particular rules on carriage of goods in multimodal transport. Since the liability in multimodal transport follows the network principle, loss of or damage to cargo has to be compensated according to maritime law if the multimodal carrier proves that the damage occurred during the sea-leg of the voyage. If the place of the incident cannot be ascertained, the carrier is liable under the particular rules of the German Transport Law. Liability then is rather strict and limited to 8.33 SDR per kilo of cargo.

Segelken & Suchopar

Thomas Wanckel

wanckel@sesu.de

Jan Albers

albers@sesu.de

Baumwall 7

20459 Hamburg

Germany

Tel: +49 40 37 68 050

Fax: +49 40 36 20 71

hamburg@sesu.de

www.sesu.de

Indonesia

Sahat AM Siahaan, Ridzky Firmansyah Amin and Desi Rutvikasari

Ali Budiardjo, Nugroho, Reksodiputro

Newbuilding contracts

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

Title in the ship shall pass from the shipbuilder to the shipowner when the ship has been delivered and registered in the register of Indonesian ships and the deed of registration of the vessel is made and issued. The parties can agree to change the time when title will pass.

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

Basically, the holder of the guarantee shall issue a document stating that such guarantee shall be refunded.

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

If the yard refuses to deliver the vessel, the local courts could consider compelling such delivery upon examining a lawsuit on the ground of breach of contract or tort.

4 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?

Article 19 of Law No. 8 of 1999 concerning Consumer Protection provides that entrepreneurs shall be obliged to pay compensation for the damages, contamination or services suffered by the consumer as a result of consuming or using the goods, services, or both produced or traded. In this regulation ‘entrepreneurs’ means an Indonesian legal entity or non-legal entity that performs its activities within Indonesia.

The lawsuit could be filed against the shipbuilder on the ground of breach of contract. A purchaser from the original shipowner will not have legal standing to claim any liability against the shipbuilder, as it only has legal ties with the original shipowner. As for a third party that has sustained damage, however, a claim would lie on the basis of tort.

Ship registration and mortgages

5 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?

Based on article 158 of Law No. 17 of 2008 concerning Shipping (the Shipping Act) and article 5 of Regulation of the Ministry of Transportation No. 13 of 2012 concerning Vessel Registration and Nationality (Regulation No. 13/2012), the following are the requirements for vessels to be eligible to register under the Indonesian flag:

• the vessels have been measured and have obtained the measurement certificate;

• the vessels have a minimum tonnage of 7 GT;

• the vessel is owned by an Indonesian individual or individuals or a legal entity established under Indonesian law and domiciled in Indonesian jurisdiction; and

• the vessel is owned by an Indonesian joint venture legal entity whose majority shareholder is Indonesian.

It is possible to register vessels under construction under the Indonesian flag. Article 14 of the Regulation No. 13/2012 provides that a ship under construction, whether in Indonesia or overseas, can be registered temporarily in Indonesia with the authorised ship registry office. A temporary registration certificate will be issued on the condition that the vessel construction has physically reached, at least, the completion stage of the hull, main deck, and the entire superstructure.

6 Who may apply to register a ship in your jurisdiction?

The following may apply for vessel registration:

• an Indonesian citizen;

• a legal entity established under Indonesian law and domiciled in Indonesian jurisdiction; and

• an Indonesian joint venture legal entity whose majority shareholder is Indonesian.

See also question 5.

7 What are the documentary requirements for registration?

The documentary requirements for vessel registration are as follows:

(i) evidence of title over the vessel;

(ii) identity of the owner;

(iii) taxpayer’s registration number;

(iv) measurement certificate; and

(v) evidence of payment for the transfer of ownership duty, in accordance with the prevailing laws and regulations.

The evidence of title as indicated in (i) above is:

• for a new vessel constructed by a shipyard:

• shipbuilding contract;

• protocol of delivery and acceptance; and

• shipbuilder’s certificate;

• for a new vessel constructed by a traditional shipbuilder:

• builder’s certificate acknowledged by a local head of district; or

• builder’s certificate accompanied by a written statement issued by a local head of district explaining the title of the vessel;

• for a vessel previously registered in other jurisdiction:

• bill of sale, signed before and attested by a notary or authorised government official of the original flag country; and

• protocol of delivery and acceptance;

• sale and purchase agreement or deed made before a notary;

• notarial deed of grant;

• court stipulation of an inheritance;

• court order of a district court or a final and binding court judgment; or

• minutes of auction.

The evidence of the identity of the owner as indicated in point (ii) above is:

• an identity card in the case of an individual owner; or

• a deed of establishment or a deed of amendment of a company’s articles of association made before a notary, showing the latest composition of directors, shareholders, or both, which has obtained approval from the Ministry of Law and Human Rights.

Registration of vessel previously registered in other jurisdiction must be accompanied by a written statement from the original ship registry evidencing the deletion of the vessel from that registry.

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

In accordance with articles 160 and 167 of the Shipping Act, dual registration and flagging out are not allowed.

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

Based on article 60 of the Shipping Act, the person responsible for maintaining the register of mortgages is the registrar and recorder for the registration and transfer of ownership of ships at the place where the ship is registered. Subsequently, information in respect of a vessel’s registration, including mortgage (or hypothec) of the vessels, shall be recorded in the Main Register of Ship Registration, which is maintained at the Directorate General of Sea Communications at the Ministry of Transportation.

Information contained in the register of mortgages includes, inter alia, the name of the vessel, the owner of the vessel, the name of the mortgagor and mortgagee, the value of mortgage, etc.

Limitation of liability

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

Under Indonesian law, the following regimes apply with regard to limitation of liability as governed under the Indonesian Commercial Code: package and tonnage limitation of liability. Claims that can be limited are cargo claims and claims on damage of vessel caused by collision. Carriers, operators, or both, as well as owners of a vessel, can limit their liability.

11 What is the procedure for establishing limitation?

Pursuant to article 316a of RV (the old Dutch Civil Procedural Law applied for Europeans, which is still used for guidance by Indonesian judges), it is necessary to provide a cash deposit to the registrar of the court. However, to the best of our knowledge, there has never been any precedent of the court applying this procedure.

The limitation fund is calculated as stipulated in article 474 of Indonesian Commercial Code regarding tonnage liability in relation to cargo damage, which provides that if the carrier is the operator of the ship, the liability for loss or damage to the goods carried by the ship shall be limited to 50 rupiahs per cubic metre of the net tonnage of the vessel, increased, in the case of a mechanically propelled vessel, by what was deducted to determine that tonnage, from the gross tonnage for the space occupied by the means of propulsion. The original text of the provision in the Indonesian Commercial Code reads ‘50 guilders’, however, this is widely interpreted as 50 rupiahs.

The same calculation as described above is also applicable with regard to the application of article 541 of the Indonesian Commercial Code, which provides the tonnage limitation in the case of collision.

We are not aware of any precedent concerning the application of these terms.

A separate right to plead limitation without setting up a fund could be agreed upon by the parties concerned.

12 In what circumstances can the limit be broken?

The limit can be broken if it is proven that: there is serious negligence on the part of the master or crew; because of an act of God or force majeure; or because of the fault of a shipper who has not properly informed the carrier of the nature of the goods.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Indonesia is not a party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. Obligations of ship operators carrying passengers (or water transportation companies, as they are described in the Shipping Act) and the rights of passengers are briefly set out in the Shipping Act and some of its implementing regulations. In line with Government Regulation No. 20 of 2010, as amended by Government Regulation No. 22 of 2011 (GR No. 20 of 2010 as amended), carriers are obliged to insure their liability in relation to death or injury to passengers and delays in transportation. Further, based on article 181(5) of GR No. 20 of 2010 as amended, the limit for insurance liability arising out of delays in transportation of passengers will be based on contractual arrangements between the operators and passengers, evidenced by the terms and conditions on the tickets.

Port state control

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

The port state control agency is the harbour master. Such agency operates under the authority of the Directorate General of Sea Communications.

15 What sanctions may the port state control inspector impose?

The sanction that may be imposed by the port state control inspectors (harbour masters) is that they will not issue port clearance for vessels entering or leaving the port.

The ship can be detained with the approval or under the order of the court.

16 What is the appeal process against detention orders or fines?

The appeal process against detention orders or fines is to file an objection or rebuttal to the district court that issued the orders.

Classification societies

17 Which are the approved classification societies?

The Regulation of the Minister of Communications No. PM 7 of 2013 regarding the Obligation of Indonesian Flagged Vessels to be Classified under Classification Bureau (Decree No. 7/2013) obliges every Indonesian-flagged ship being 20 metres LBP or more, of 100 GT or more, or having a main engine of 250 HP or more, to be classified under the rule of PT Biro Klasifikasi Indonesia (BKI), an Indonesian classification society. Alternatively, such vessels may also be dually classified under foreign classification societies acknowledged by the Indonesian government. These classification societies are members of the International Association of Classification Society, comprising:

• the American Bureau of Shipping;

• Bureau Veritas;

• the China Classification Society;

• the Croatian Register of Shipping;

• DNV GL;

• the Indian Register of Shipping;

• the Korean Register of Shipping;

• Lloyd’s Register of Shipping;

• Nippon Kaiji Kyokai;

• the Polish Register of Shipping;

• Registro Italiano Navale; and

• the Russian Maritime Register of Shipping.

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

There is no regulation pertaining to the liability of a classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The state authority, in this case the Directorate General of Sea Communications, may order wreck removal under article 203 paragraph (1) of the Shipping Act, while local authorities cannot do so.

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

As regards the conventions or protocols in relation to collision, by Presidential Decree No. 50 of 1979 Indonesia ratified the Convention on the International Regulation for Preventing Collisions at Sea, 1972.

For the conventions and protocols in relation to pollution, by Presidential Decision No. 18 of 1978 Indonesia has ratified the International Convention on Civil Liability for Oil Pollution Damage, 1969. The protocol of 1992 to amend that Convention has also been ratified by Presidential Decision No. 52 of 1999. In addition, by Presidential Decision No. 46 of 1986, Indonesia has ratified the Marine Pollution Conventions of 1973 and 1978.

Indonesia has not yet ratified any conventions or protocols in relation to salvage.

21 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. Salvage operations may be carried out by companies with permits from the Directorate General of Sea Communications for such operations.

Ship arrest

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

Indonesia has not yet ratified any of the conventions regarding arrest of ships.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Pursuant to article 222 paragraphs (1) and (2) of the Shipping Act, an arrest of a vessel can only be conducted by a written order from the court based on the existence of a maritime claim. An order from the court for the arrest of vessel in respect of a maritime claim will be issued without the process of submitting a civil claim or lawsuit.

With respect to the arrest, the vessel’s flag will not make a difference in respect of claims for arresting the vessel.

Associated ships may be arrested in any circumstances where there are strong reasons to arrest.

It should be noted that under Indonesian law, arrest of ships based on the existence of a civil claim will fall under the regime of conservatory attachment, which would mean that an arrest of vessels can also be performed by an interlocutory decision in the form of an attachment order from the court during the course of a civil case. Such attachment can affect any assets of the defendant and not only the vessel.

24 What is the test for wrongful arrest?

Wrongful arrest can be challenged in court based on error with respect to the status of ownership of the arrested ship or the legal procedure of the arrest.

25 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?

No. A bunker supplier cannot arrest a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer. A bunker supplier has the contractual relationship with the charterer, not with the vessel owner. Since the charterer does not own the vessel, the bunker supplier cannot arrest the vessel that is owned by a third party (ie, the vessel owner).

A bunker supplier cannot arrest the vessel since the vessel is not an asset of the charterer with whom a bunker supplier has a contractual relationship.

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

Under Indonesian law, it is not necessary for the arresting party to provide security.

27 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?

Under Indonesian law, there are no stipulations requesting the arrested party to provide security.

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

As regards the maintenance of the arrested vessel, in practice, the owner or operator of the vessel shall be responsible.

29 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?

The arresting party must pursue the claim on its merits. In practice, arrest of a vessel is similar to imposing a conservatory attachment on the property of a party that has failed to fulfil its obligations.

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

Yes. The claiming party may request that the court order a conservatory attachment. A conservatory attachment is affected by means of an interlocutory decision of the court in the form of attachment order during the course of a civil case. Such attachment can affect any assets of the defendant, whether moveable or immoveable. Note that to seek an order for conservatory attachment, a claim on the merits will have to be submitted beforehand.

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

No. Such orders are not recognised under Indonesian law.

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

No. Arrest or attachment over bunkers cannot be performed in Indonesia. Bunkers cannot be separated from the vessel. Thus, an arrest or attachment must be sought over the vessel.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The plaintiff in a civil claim may apply for judicial sale of an arrested vessel.

34 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?

The judicial sale of a vessel is recognised as a form of execution or enforcement of a court decision and may only be performed after obtaining a final and binding decision from the court.

Following such decision from the court, the winning party should submit a petition for execution to the court. Furthermore, the court shall issue a warning twice to the losing party to obey the court’s decision. Failure to obey such warning will result in the court issuing an execution order to the court bailiff and the State Receivables and Auction Office to perform such judicial sale in the form of an auction. Prior to the auction, the Auction Office will also announce the auction twice. The whole process, in practice, will take quite a considerable time.

The court costs for the judicial sale vary depending on the stipulation issued by the head of each district court. Additionally, there are also the costs of the Auction Office, taxes and the cost for the change of ownership.

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

Pursuant to article 316 of the Indonesian Commercial Code, the following claims are prioritised against the proceeds of sale:

• costs of execution;

• debts due to the master and the crew arising under the seafarer’s agreements relating to the period during which they have served aboard the ship;

• remuneration due for salvage, pilotage dues, canal and harbour dues and other shipping dues; and

• debts arising from collisions.

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

In Indonesia, the judicial sale can be deemed as an execution sale through the process of public auction conducted under court order. The legal effect would be a change of ownership over the vessel. Should the vessel be subject to encumbrances or liens, the holder of the said security rights may lodge rebuttal against the process of the judicial sale, as a vessel that is encumbered with a lien or maritime liens cannot be the subject of a judicial sale.

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

Yes, insofar as the judicial sale of the vessel is performed in accordance with the prevailing laws and regulations in that jurisdiction.

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

Yes. By Presidential Decree No. 44 of 2005, Indonesia has ratified the International Convention on Maritime Liens and Mortgages 1993. However, at the time of writing, the implementing regulation of the Presidential Decree is not yet available.

Carriage of goods by sea and bills of lading

39 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 and Hague-Visby Rules have not been ratified by Indonesia, but in practice the parties may refer to any of the provisions of those rules in the bill of lading.

The Hamburg Rules have been ratified by Indonesia, but in practice they are not implemented.

As to the Rotterdam Rules, up to this point there has not been any proposal from Indonesia to ratify, accept, approve or accede to the Rules.

40 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?

In relation to multimodal transport, there are Government Regulations No. 8 of 2011 concerning Multimodal Transport and Regulation of the Minister of Transportation No. 8 of 2013 concerning Implementation and Commercial Operation of Multimodal Transport. Nevertheless, these regulations do not specifically address 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.

Indonesia is also a signatory to the ASEAN Framework Agreement on Multimodal Transport, 17 November 2005.

41 Who has title to sue on a bill of lading?

Either the shipper, consignee, or the notified party have title to sue on a bill of lading.

42 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?

Any relevant terms in the charter party can be included into the bill of lading. A jurisdiction or arbitration clause in a bill of lading would be binding on a third-party holder or endorsee of such bill of lading.

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

Such clauses are unknown in Indonesian shipping practice and are therefore not applicable.

44 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?

Shipowners are not liable unless there is provision in the contract relating to the shipowner. The defence that the shipowner can raise is that it has no legal relationship at all, since it is not a party to the contract of carriage. However, the shipowner can rely on the terms of the bill of lading to defend itself, even though it is not a contractual carrier, as long as the rights and obligations of the shipowner are also stipulated therein. Alternatively, the shipowner may also use the terms of the bill to point out that they have no obligations whatsoever with regard to the contract of carriage.

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

The effect of deviation from a vessel’s route on contractual defences would depend on the content of the contract.

46 What liens can be exercised?

Based on article 316 of the Indonesian Commercial Code, the following are the privileged rights (comparable to liens):

• costs of execution;

• debts due to the master and the crew arising under the seafarer’s agreements relating to the period during which they have served aboard the ship;

• remuneration due for salvage, pilotage dues, canal and harbour dues and other shipping dues; and

• debts arising from collisions.

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

Delivery of cargo without production of the bill of lading may take place against certain guarantee provided by the consignee.

By the parties’ agreement, carriers are not prohibited from limiting the liability of the carrier.

48 What are the responsibilities and liabilities of the shipper?

Based on articles 468, 504, 517p, 519u, 520i and 520j of the Indonesian Commercial Code, the shipper shall be liable for damages and late delivery of the goods or cargo occurring due to its own fault. Accordingly, the shipper is obliged to provide goods or cargo in good condition and on time, as well as proper information relating to the nature of the goods or cargo. Furthermore, the shipper shall be liable to pay damages resulting from the shipper’s request to discharge and rearrange the goods or cargo at his or her own initiative.

Shipping emissions

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

There is no emission control area in force in Indonesia.

50 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?

There are no regulations capping the sulphur content of fuel oil used in Indonesian territorial waters.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Any district court (the court of first instance) exercises jurisdiction over maritime disputes in Indonesia. The relevant court should be the court in the domicile of the defendants or location of the vessel.

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

The rules that govern service of court proceedings are contained in the Indonesian Civil Procedural Laws (HIR, RBG and RV). Service of court proceedings must be performed by a court bailiff from the district court having jurisdiction over the domicile of the defendant.

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

The domestic arbitral institution is called the BANI Arbitration Centre, whose head office is located in Jakarta. Branch offices are located in Batam, Bandung, Denpasar, Medan, Surabaya, Palembang and Pontianak. The BANI Arbitration Centre has arbitrators who are expert in maritime law and business.

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

A foreign judgment cannot be enforced in Indonesia. Foreign judgments must be re-litigated and the previous judgment shall be treated as evidence in the new case filed in Indonesia.

Recognition and enforcement of arbitration awards is governed by Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution, which refers to the rules of the 1958 New York Convention with respect to international arbitration awards.

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

A defendant could submit an objection or demurrer challenging jurisdiction in their submission.

56 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?

A defendant may file an objection or demurrer regarding the competency of the forum, as stipulated in the relevant contract in their submission.

Limitation periods for liability

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

In general, as regards time limits for breach of contract and tort, article 1967 of the Indonesian Civil Code, imposes a 30-year time limit.

However, the Indonesian Civil Code and Commercial Code also stipulate the time limits for particular claims, including those related to maritime claims. Such time limits could be extended or reduced by agreement of both parties.

58 May courts or arbitral tribunals extend the time limits?

In practice, the courts or arbitral tribunals have full discretion on this. Therefore, they may extend the time limits.

Miscellaneous

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

Indonesia has not yet ratified the Maritime Labour Convention and therefore it is not applicable in this jurisdiction.

60 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?

Economic conditions will not prevent parties from seeking the strict enforcement of their legal rights and liabilities under a shipping contract against another party. Should economic conditions impede the performance of a shipping contract, parties should attempt an amicable negotiation.

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

One of the key provisions of the Shipping Act, which was passed in April 2008, are the cabotage rules, which limit domestic carriage (coastal or inter-island trade) to Indonesian national flag-carrying vessels. In addition, the vessels are required to be crewed by Indonesian citizens. The Cabotage Law was effectively implemented on 7 May 2011.

Pursuant to the Cabotage Law, a new Government Regulation and Ministry of Transportation Regulation issued in 2011 exempts foreign vessels from operating in six specific activities. These regulations serve to implement the general provisions in the Cabotage Law that are stipulated under Law No. 17/2008. The specific activities that are still exempted from the Cabotage Law are as follows:

• oil and gas exploration;

• offshore drilling;

• offshore construction;

• offshore support activity;

• dredging works; and

• salvage and underwater works.

Sahat AM Siahaan

ssiahaan@abnrlaw.com

Ridzky Firmansyah Amin

tamin@abnrlaw.com

Desi Rutvikasari

drutvikasari@abnrlaw.com

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Ireland

Helen Noble and Damien Magee

Campbell Johnston Clark

Newbuilding contracts

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

The passing of title for a newbuild from shipbuilder to shipowner will occur, in accordance with Irish contractual law, as per the terms and conditions of the shipbuilding contract. The contract will generally contain provisions for payment and the passing of title. Although the parties are free to agree to the title of the ship transferring at any time prior to the delivery of the ship, such as upon the payment of the first instalment of the purchase price, it will generally pass on delivery. As a general rule, the final instalment payment will occur simultaneously with delivery.

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

Under Irish law there are a number of formalities to be complied with in order for a guarantee to be enforceable:

• it must be given for consideration;

• it must be in writing in accordance with the Statute of Frauds 1695; and

• it must be properly signed by someone who has the authority to sign on the bank’s behalf.

The company’s constitutional documentation must also empower entering into a guarantee.

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

Under Irish law, the court has discretion to make an order for specific performance of a term of a contract, including a term requiring delivery of a ship under a shipbuilding contract. In the High Court decision of Aranbel Limited v Darcy and Others (2010) IEHC 272, Mr Justice Clarke emphasised that an order of specific performance will not be made where there is no reasonable prospect of the order concerned being complied with. Thus, achieving a successful order will depend on what stage the ship build is at. Alternatively, the court may make an order for damages.

4 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?

A claim that a vessel is defective and damage resulted can be made under statute, contract or tort.

Statute

Section 2(1) of the Liability for Defective Products Act 1991 imposes on a ‘producer’ a strict liability regime for damages caused by a defective product, although the onus of proving the damage, defect and causal relationship remains on the claimant by virtue of section 4 of the Act.

Under section 2(2) of the 1991 Act, a producer is taken to mean:

• the producer of a raw material, the manufacturer of a finished product or of a component part;

• the importer of a product;

• any person putting their name, trademark or other distinguishing feature on the product; and

• any person supplying a product whose producer or importer cannot be identified.

In this case, the person liable will be the shipbuilder or any manufacturer of component parts or raw materials.

Section 7(1) provides for a three-year limitation term for the initiation of proceedings under the Act. A producer ceases to be liable 10 years after the date on which the product was put into circulation.

Contract

Where the vessel is defective, the shipbuilder will also generally be liable for damages in respect of any loss sustained due to a breach of contract. The shipbuilding contract will generally set out the remedies for a damaged or defective vessel. It will also generally contain exclusion clauses, warranties or time limits outside of which no claims can be pursued.

Tort

A tortious action fills a void by providing relief for persons who either do not have the benefit of a contractual relationship with the shipbuilder, such as a third party that has sustained damage, or indeed any subsequent purchaser from the original shipowner. This will allow for a claim under the tort of negligence. In contrast to an action for breach of contract, the fundamental purpose of an award of damages in tort is to put the party concerned back into the position they would have been in had the wrongdoing not occurred.

Based upon decisions such as Ward v McMaster (1989) ILRM 400, in order to succeed in a tortious claim, the claimant will need to show that the shipbuilder:

• owed a duty of care;

• breached that duty of care; and

• caused the claimant damage as a result of the breach.

In order to establish the existence of a duty of care, the claimant will need to show a relationship of proximity between the parties such that the alleged wrongdoer would be aware that carelessness on its part is likely to cause damage to the claimant. However, it is always important to note that any such claim may be restricted by warranties provided in the original shipbuilding contract.

The limitation periods for initiating proceedings are discussed in detail in question 56.

Ship registration and mortgages

5 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?

Under section 18(1) of the Mercantile Marine Act 1955 and the Fisheries (Consolidation) Act 1959, as amended by the Fisheries (Amendment) Act 1962 and the Fisheries (Amendment) Act 1983, it is obligatory to register the following categories of vessel:

• ships wholly owned by persons being citizens of Ireland or Irish bodies corporate and that are not registered under the law of another country; and

• fishing vessels 35 feet and over in length, wholly owned by qualified persons or bodies.

The following categories of vessel are exempt from the obligation to register:

• ships not exceeding 15 net register tons (other than fishing vessels over 35 feet in length) provided they are used only in navigation on the rivers, canals, lakes or coasts of Ireland, Great Britain, the Channel Islands or the Isle of Man, or within the territorial waters off their coasts;

• ships acquired before the passing of the Principal Act in 1955;

• ships in respect of which the Minister for Transport, Tourism and Sport has, under section 21 of the Act, consented to registry under the law of another country; and

• ships owned by Irish citizens not ordinarily resident in the state.

Where the delivery of a newly built ship to the purchasers does not take place until after completion of trials, an official number may be allocated on a provisional basis.

6 Who may apply to register a ship in your jurisdiction?

Under section 16 of the Mercantile Marine Act 1955 as amended by the Merchant Shipping (Miscellaneous Provisions ) Act, 1998 the following are entitled to be registered as an owner of part owner of a ship in Ireland:

• the government;

• a minister of the government;

• a national of a member state of the European Union;

• a body corporate established under and subject to the law of and having its principal place of business in a member state of the European Union; and

• nationals of, and bodies corporate having their principal place of business in a reciprocating state and entitled under the laws of that state to own a ship having nationality thereof. The current reciprocating states are the United Kingdom and the Commonwealth states of Canada, New Zealand and Pakistan.

7 What are the documentary requirements for registration?

The following forms and documents are required for registration:

• form GR 342 – notice of proposed name for an Irish ship;

• certificate of surveyor from the surveyor of ships;

• declaration of ownership on prescribed form;

• for new builds: a builders certificate detailing size and tonnage, when and where built, person for whom built and if sold, a bill of sale and any necessary certificate of deletion if formerly registered in another state under a shipbuilding number;

• for second-hand ships: builder’s certificate (if there is one), bill of sale and evidence of deletion from foreign registry;

• any mortgage on the prescribed form;

• for bodies corporate the memorandum of association, articles of association and certificate of incorporation will need to be produced to the registrar; and

• the carving and marking note returned by the surveyor of ships.

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

Under section 18(1) of the Mercantile Marine Act 1955, unless it is an exempted vessel, a vessel owned by an Irish citizen or company must register in Ireland. If an Irish owner wishes to flag the vessel outside of Ireland, it must obtain permission of the Minister to register the vessel under the law of another country, pursuant to section 21 of the 1955 Act. Dual flagging is not possible.

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

The register of ships is maintained by the Office of the Revenue Commissioners in the Register Book. The following details must be entered in relation to a mortgage in the various relevant columns of the Register Book:

• the transaction number;

• the reference letter in the case of a mortgage;

• the full name of the mortgagor;

• the number of shares covered by the mortgage;

• the type of transaction and date; and

• the name, address and occupation of the mortgagee.

Details will also be entered in relation to later transactions concerning the vessel such as discharge of a mortgage; details of the mortgage, such as the amount and rate of interest; current holders of the mortgages; and transferees of mortgages.

Mortgages are recorded by the registrar in the order in which they are presented to him or her for registration. Priority is accorded to mortgagees according to the date and time at which the mortgage is recorded by the registrar and not the date of execution.

Limitation of liability

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

Ireland is party to the International Limitation of Liability for Maritime Claims Convention 1976 (the Convention) as enacted in Ireland by the Merchant Shipping (Liability of Shipowners and Others) Act 1996 (the 1996 Act). The Sea Pollution (Hazardous Substances) Compensation Act 2005 gives effect to the 1996 protocol to the Convention. The Convention applies to seagoing ships. Article 1(2) section 9 of the 1996 Act extends the application of the 1976 Convention to any structure (whether completed or in the course of completion) launched and intended for use in navigation as a ship or a part of a ship and also extends to non-seagoing ships (section 10 of the 1996 Act).

Article 2 of the 1976 Convention lists the claims that are subject to limitation. However, clause 11 qualifies article 2 by stating that notwithstanding paragraph 1(d) or 1(e) of article 2 of the Convention, the right to limit liability under that Convention shall not apply to claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been onboard such a ship and article 3 (claims excepted from limitation) of that Convention shall be construed accordingly.

The party entitled to limit liability under the Convention is the shipowner, as defined in articles 1(2) as owner, charterer, manager and operator of a seagoing ship. The question as to whether a charterer has the right to limit liability has not come before the Irish courts. The Irish courts would, however, find the judgment of the UK Courts in CGM v Classica Shipping (2004) EWCA Civ 2004 to be persuasive authority.

SI No. 686/2011 European Union (Insurance of Shipowners for Maritime Claims) Regulation 2011 gave effect in Ireland to Directive 2009/20/EC on the insurance of shipowners for maritime claims, provides that shipowners shall ensure that the vessel insurance covers maritime claims subject to limitation of liability under the 1976 Convention, and that the limits of liability in that insurance in respect of any one incident are of an amount equal to the relevant maximum amount set under the 1976 Convention. Failure on the part of a shipowner to meet the insurance requirements would constitute an offence and be liable to summary conviction (liable for a fine or imprisonment for up to 12 months).

The Oil Pollution of the Sea (Civil Liability and Compensation) Act 1988-2005 enacted into Irish law the CLC Convention. The HNS Convention was enacted into Irish law by the Sea Pollution (Hazardous Substances) (Compensation) Act.

11 What is the procedure for establishing limitation?

Under the Convention, limitation can be sought by a party pleading a right to limit as a defence against a claim made against it. Alternatively, a party anticipating a claim being made against it may take the initiative and itself commence limitation proceedings seeking that the court determine its right to limit its liability under the Convention. If successfully pleaded as a defence, liability will be limited to the amount per claim provided for in the Convention.

A limitation fund does not need to be constituted in order to avail of the benefit of limitation.

Article 6 of the Convention sets out the basis upon which the limitation fund is calculated. Broadly, the fund is calculated by multiplying the gross tonnage of the vessel, multiplied by a specified number of special drawing rights. Section 13 provides that the value in the currency of the state of the unit of account specified in that Convention shall be taken to be the value (ascertained in accordance with article 8 of that Convention) in that currency of such a unit of account on the relevant day specified in the said article or, if its value on that day cannot be so ascertained, its value in that currency on the latest day before such day on which it can be so ascertained.

A shipowner seeking to limit his or her liability under the CLC or HNS Conventions must first apply to the court for an order limiting his or her liability under sections 12 and 14 of those acts, respectively, before the court will order a payment into court.

Interest on the limitation fund runs from the date of the accident to the date of payment into court. However, under section 14 of the 1996 Act, the Minister may prescribe by order the rate of interest to be applied for the purposes of paragraph 1 of article 11 of the 1976 Convention.

Where a fund has been established with a court in accordance with article 11 of the Convention for the payment of claims, the court may stay any proceedings relating to any claim arising out of that occurrence which are pending in that court, or any court of lower jurisdiction to that court, against the person by whom the fund has been constituted.

12 In what circumstances can the limit be broken?

The Convention provides for a virtually unbreakable system of limiting liability. However, article 4 does provide that a person shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. It will therefore be extremely difficult for the limit to be broken.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention 1974 and its 1976 Protocol have force of law in Ireland by virtue of Part III of the 1996 Act. This Convention and Protocol are set out in the second schedule to the 1996 Act parts I and II. Maritime passenger claims, therefore, fall to be dealt with in Ireland in accordance with the provisions of the Athens Convention, including the limits of liability as amended under the protocol.

As from 31 December 2012, EU Regulation No. 392/2009 applies in Ireland by virtue of SI No. 552 of 2012 and effectively raises the limits of liability and introduces compulsory insurance to cover passengers on ships as per the 2002 Protocol to the Athens Convention. The application of the regulation is deferred in relation to Class B ships travelling in the state until 31 December 2018. The SI provides for prosecution and fines of up to €5,000 on summary conviction for failure to comply with the legislation.

SI No. 552 of 2012 also gives effect to EU Council decisions 2012/22/EU and 2012/23/EU amending the 1996 Act to give the force of law to the 2002 Protocol to the Athens Convention.

Port state control

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

The port state control agency in Ireland is the Marine Survey Office, which is part of the Maritime Safety Directorate, which in turn, is an executive agency of the Department of Transport, Tourism and Trade. It operates under SI No. 656 of 2010, the European Communities (Port State Control) Regulations 2010.

15 What sanctions may the port state control inspector impose?

If, after an initial inspection, the inspector confirms or reveals deficiencies in a ship that are clearly hazardous to safety, health or the environment, the Marine Survey Office shall ensure that the ship is detained or that the operation in the course of which the deficiencies were revealed is stopped. The competent authority may cause a direction to be given to the owner or master of a ship and the owner or master shall comply with the direction. Failing to do so is an offence.

In exceptional circumstances, where the overall condition of a ship is substandard, the competent authority may suspend the inspection of that ship until the responsible parties take the steps necessary to ensure that it complies with the relevant requirements of the Conventions.

Under Regulation 24, proceedings for an offence under these Regulations may be brought and prosecuted by the Minister. A person guilty of an offence under Regulations 5(7), 8(2), 11(9), 16(11), 18(9) or (10), 19(5) or (6), 20(4) or 21(3) is liable on summary conviction, to a fine not exceeding €5,000.

16 What is the appeal process against detention orders or fines?

Under regulation 17 of the 2010 Regulations the owner or operator of a ship, or his or her representative in the state, shall have a right of appeal against a detention or refusal of access by the competent authority. The lodging of such an appeal does not, however, cause the detention or refusal of access to be suspended.

The competent authority shall notify the master of a ship so detained, or refused access, of the practical arrangements for lodging an appeal. An appeal under this regulation shall be made to a judge of the circuit court in whose circuit the port in which the ship is, or has been, detained is located and shall be made within seven working days of the commencement of the detention or refusal of access, unless the court considers that there is good and sufficient reason for extending that period. On hearing an appeal, the court may confirm or vary the detention, or refusal of access, or allow the appeal.

A decision of a circuit court on an appeal is final, save that, by leave of the court, an appeal can be made to the High Court on a specified question of law.

Classification societies

17 Which are the approved classification societies?

The approved classification societies depend on the type of vessel. However, the main approved classification societies are: American Bureau of Shipping, Bureau Veritas, Det Norske Veritas, Germanischer Lloyd, Nippon Kaiji Kyokai, Lloyd’s Register, Registro Italiano Navale and Russian Maritime Register of Shipping.

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

A classification society could technically be held liable in both contract and tort for breaches of contract or breach of its duty of care although there is no Irish case law in this regard. Also, a society will generally have excluded their liability in contract. Any claim under tort will require the claimant to establish that the classification society owed a duty of care, that the duty of care was breached and that such breach resulted in loss or damage to the claimant. EU Directive 2009/15/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations contains articles relating to the financial liability of recognised organisations for any marine casualty caused by a wilful act, omission or gross negligence. The EU Directive was transposed into Irish law by the European Communities (Ship Inspection and Survey Organisations) Regulations 2011.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Under section 40 of the Merchant Shipping (Salvage and Wreck) Act 1993, which enacts the International Convention on Salvage 1989 (the 1989 Salvage Convention), the Minister has the general superintendence throughout the state of all matters relating to every wrecked or stranded vessel or other wreck. Under section 41 of the Act, the Minister may appoint a designated receiver of the wreck if it is considered appropriate to do so.

The Minister shall indemnify each receiver against all and any actions, expenses, costs, claims, demands and other liabilities in respect of any action by or omission or negligence on the part of the receiver.

Although Ireland is a party to the Nairobi International Convention on the Removal of Wrecks, 2007, the Convention has yet to be enacted into Irish legislation.

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

The 1989 Salvage Convention is in force in Ireland and has been incorporated into Irish law through the Merchant Shipping (Salvage and Wreck) Act 1993 (see question 18).

Also in force is the International Collision Convention 1952 enacted in Ireland by the Jurisdiction of Courts (Maritime Conventions) Act 1989.

The International Civil Liability for Oil Pollution 1969 and also the International Carriage of Hazardous and Noxious Substances by Sea (HNS) Convention 1996 have been implemented into Irish law.

21 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 form of salvage agreement, with the Lloyd’s open form in common usage. There are no restrictions on who may carry out salvage operations and the parties involved may agree on whatever salvage agreement, or terms and conditions, they deem to be appropriate given the circumstances.

Under section 22 of the Merchant Shipping (Salvage and Wreck) Act 1993, the Minister for Transport has the right to give directions in relation to salvage operations if it is felt necessary.

Ship arrest

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

Ireland is a party to the International Convention Relating to the Arrest of Seagoing Ships 1952 (1952 Arrest Convention). The Jurisdiction (Maritime Conventions) Act, 1989 was passed for the purposes of adopting the 1952 Arrest Convention. To date, Ireland has not ratified the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

The initial claims for which a vessel could be arrested are set out in sections 27 to 37 of the Court of Admiralty (Ireland) Act 1867. These are: all claims whatsoever relating to salvage and to enforce the payment thereof; all claims in the nature of towage and to enforce payment thereof; any claims for damage received or done by any ship; any claim for the building, equipping or repairing of any ships; any claim by a seaman of any ship for wages earned by him on board the ship; any claim in respect of a registered mortgage, and any claim by the owner of any bill of lading of any goods carried into any port in Ireland in any ship for damage done to the goods by the negligence or misconduct of or for any breach of duty or breach of contract on the part of the owner, master or crew of the ship.

The claims for which a vessel can be arrested were extended as per article 1 of the 1952 Arrest Convention.

It is only possible to arrest a vessel in Ireland that is flying the flag of one of the contracting states. It is not possible to arrest associated ships. However, it is possible to arrest a sister ship of Convention countries under which the original claim is actually founded. This was upheld in the High Court case, the MV ‘Kapitan Labunets’ (1995) 1 ILRM 430.

24 What is the test for wrongful arrest?

The test for wrongful arrest is usually bad faith or gross negligence. There is very little Irish case law relating to wrongful arrest and what amounts to a good and sufficient reason. However, in the 1997 case of MV Blue Ice (1997) IEHC 56, reference was made to the need to establish a ‘fair and statable’ case and ‘sufficient grounds for the arrest of the vessel’.

25 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?

Vessels are regularly arrested in Ireland by bunker suppliers relying upon the provision of the 1952 Arrest Convention relating to the supply of goods and materials to a vessel. The Irish courts have not, however, had to consider the position as to whether there is a valid claim to arrest or a valid substantive claim in circumstances where the bunker supply contract is with the time charterer and that contract and any applicable terms and conditions, as a matter of law, cannot bind or apply to the owners of the vessel. If and when the matter comes before the Irish courts it would undoubtedly be argued that the Irish courts should be guided by English law, which adopts the view that as the charterers are supplying and paying for the bunkers for the duration of the charter period, the time charterer will be regarded as owner of the bunker with all the disadvantages that that implies (eg, the risk of an attachment of bunkers to secure some claim against the charterer possibly wholly unconnected with the ship upon which the bunkers are or with the owner of that same ship).

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

The arresting party is not required to provide security. However, the solicitor for the arresting party must give an undertaking to the admiralty marshal to indemnify the admiralty marshal for all losses and expenses incurred in arresting a vessel.

27 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?

The court will order an amount of security that reflects the principal amount claimed plus any contractual interest and costs that will be incurred by the arresting party arguing its case to conclusion. Evidence of a legal costs accountant will be persuasive evidence as to the appropriate amount for legal costs. The amount ordered by way of security can be reviewed subsequently and at any point in time up to conclusion of the substantive proceedings. The Court has jurisdiction to amend the amount of security under order 64, rule 41 of the Rules of the Superior Courts. In practice, security takes the form of an appropriate guarantee from a recognised bank or a letter of undertaking from a recognised P&I club. Order 54 of the Rules of the Superior Courts, however, provide for putting in bail or payment of monies into court.

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

The admiralty marshal is responsible for the maintenance of an arrested vessel.

29 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?

Arresting a vessel in Ireland establishes jurisdiction in Ireland for the purposes of substantive proceedings. However, proceedings can be pursued in another jurisdiction where both parties agree or where there is a binding arbitration clause.

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

The Irish courts recognise liens that arise by operation of law or by agreement between parties. The right to exercise a lien may be challenged by, for example, interlocutory proceedings such as an injunction or enforced by a mandatory injunction. In addition, a maritime claim can be enforced in the same way as any other contractual or tortious claim though the courts and if judgment obtained can be enforced, against goods and chattels.

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

It is possible in Ireland to obtain orders from the courts for the preservation of evidence or to obtain access to evidence, examine witness and obtain discovery. It is also possible in Ireland to obtain injunctions (prohibitory, mandatory and quia timet) to preserve evidence, such as a Mareva injunction, now known as a freezing order (following on from the ruling of the English Courts in Mareva Compania Naviera SAV International Bolt Carriers SA [1975] Lloyds reports) and an Anton Piller order (following the principles espoused by the English Courts in Anton Piller KG v Manufacturing Processes Limited (1976) CH5). In addition, the Rules of the Superior Courts provide for discovery of documents.

32 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 in this jurisdiction but it may be possible to obtain a freezing injunction.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The arresting party can apply for the judicial sale of an arrested vessel.

34 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?

An application can be made to the Admiralty Court for the judicial sale of an arrested vessel by an arresting party where no security or insufficient security is put forward by the shipowner or where the parties have failed to reach an agreement.

In default of appearance the admiralty judge can also, under Rule 35 of Order 64 of the Rules of the Superior Courts, if satisfied the arresting party’s claim is well founded, pronounce the claim and at the same time order the vessel to be appraised and sold.

On application for sale of the vessel the appraisal and sale is carried out by the admiralty marshal who appoints an auctioneer to carry out the sale. An order for sale can be obtained relatively quickly within the time of arrest when it becomes clear no security or insufficient security is posted or the owners fail to come on record. The sale itself will then usually also take place relatively quickly (ie, within four to eight weeks. The net proceeds are paid into court and, after payment of the sale or appraisal expenses and other expenses of the admiralty marshal, the various interested parties may agree distribution or priority, or an application can be made to court for determination of the order of priorities in circumstances where judgment has been given. Adjudication of priorities can take some time.

The court costs associated with a judicial sale are usually 5 per cent of the sale price. There is also duty payable to the court of 10 per cent of the sale proceeds. Both of these amounts come out of the sale proceeds.

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

In Ireland the determination of priorities is decided by the admiralty judge after hearing arguments from the competing claimants on priority. As a rule of thumb, wages of seamen and the admiralty marshal’s expenses will be afforded priority over a mortgagee.

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

The buyer will get clean title and the claims that existed presale against the vessel are transferred to a claim against the sale proceeds.

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

Yes, the Irish courts will recognise the judicial sale of a foreign-registered vessel.

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

No.

Carriage of goods by sea and bills of lading

39 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?

Section 31 of the Merchant Shipping (Liability of Shipowners and Others) Act 1996 gives the Hague-Visby Rules force of law in Ireland. The Rules are set out in full in the third schedule of the Act.

40 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?

Road

The Convention on the International Carriage of Goods by Road 1956 was implemented in Ireland by the International Carriage of Goods by Road Act 1990 and given force of law in the state by section 2 of that Act.

Rail

The Convention Concerning the International Carriage of Goods by Rail 1980 (COTIF) has been ratified in Ireland.

Air

The relevant conventions are the Warsaw Convention 1929, and the Hague Protocol of 1955. Also, the Convention for the Unification of Certain Rules for International Carriage by Air 1999 (the Montreal Convention) was ratified and given force of law in Ireland through the Air Navigation (International Conventions) Act 2004.

41 Who has title to sue on a bill of lading?

The applicable law in this regard is section 1 of the Bills of Lading Act 1855 which provides that every consigner of goods named in a bill of lading, and every endorsee of it to whom the ownership of the goods described in it shall pass, will have transferred to them all rights of action, and be subject to the same liabilities, in respect of such goods as if the contract contained in the bill of lading had been made with them.

The law in relation to bills of lading in Ireland has not been updated since the 1855 Act and has been criticised on a number of grounds. First, it only transfers rights of suit where the property passes to a consignee or endorsee. A pledgee of goods would not acquire the property. Furthermore, the wording of section 1 of the 1855 Act is such that a property must pass by reason of consignment or endorsement. It does not apply to waybills, multimodal transport documents or delivery orders.

The limitations in section 1 of the 1855 Act have, to some extent, been overcome by the long-established principle in the UK and Ireland that where a consignee takes delivery of goods from the carrier by presenting the bill of lading and paying outstanding charges, a contract on the terms of the bill of lading may be implied between the consignee and carrier. The Irish courts would follow the leading UK case Brandt v Liverpool, Brazil and River Stream Navigation Co Ltd (1924) 1 KB 575 where the preconditions for implying a contract were held to be: the holder of the bill must have some interest in the property; the actions of the parties must be construed as offer and acceptance and sufficient consideration must be provided. However, there are still situations where it is impossible to establish an implied contract bringing parties back to the section 1 of the 1855 Act difficulties. The UK sought to lessen difficulties arising from privity of contract issues by the Contract (Rights of Third Parties) Act 1994. In Ireland there has been no reform to section 1 of the Bills of Lading Act 1855 or any introduction of legislation similar to the Contracts (Rights of Third Parties) Act 1999. The Law Reform Commission of Ireland published a report in 2008 on Privity of Contract and Third-Party Rights in which it recognised the shortcomings with section 1 of the 1855 Act and recommended statutory reform.

42 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?

Any term of the charter party can be incorporated by reference into a bill of lading. While there has not been a decided case in Ireland specifically on this point, it seems extremely likely that the Irish courts would follow the position in the UK and Australia whereby arbitration clauses, as collateral clauses, will not be incorporated into a bill of lading unless they are specifically referred to in the incorporation clause.

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

This issue has not been addressed by the Irish legislature or courts to date. However, the Irish courts have traditionally demonstrated a reluctance to interfere with contractual terms agreed at arm’s length by commercial entities. In such circumstances, it seems highly likely that such clauses would be accepted as valid.

44 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?

The shipowner may be liable in tort for damage caused even where it is not the contractual carrier, depending on the cause of the damage. In such circumstances, the shipowner would be able to rely on any of the defences available at common law. In addition, the shipowner may have incorporated a Himalaya clause into the contract – such a contract allows for any servant, agent or contractor to be entitled to the protection of exemptions within the contract itself as the carrier is not only acting on behalf of himself but also on behalf of those parties named. However, it will be vital for shipowners to bear in mind that the Hague-Visby Rules provide for limits on the types of exclusion clause utilised by shipowners.

It should also be noted that the Merchant Shipping (Liability of Shipowners and Others) Act 1996 expressly excludes shipowner’s liability where any:

• property on board the ship is lost or damaged by reason of fire on board the ship; or

• precious materials (eg, precious stones) are lost or damaged by reason of larceny etc, and the nature and value of these items has not been described to the owner or master of the ship in the bill of lading or otherwise in writing.

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

This will depend largely on the terms of the contract agreed between the parties. As the vessel’s route will normally constitute a key term of the charter party, deviation therefrom will constitute a breach of that contract rendering the carrier liable for the losses caused by the deviation. Of course, the carrier will have a defence at both at common law and under Rule 4(4) of the Hague-Visby Rules if the deviation was undertaken to avoid damage to the ship or a risk to human life.

46 What liens can be exercised?

All liens that arise by operation of law or by prior agreement between the parties can be exercised. However, it is important to note that section 16 of the Merchant Shipping (Liability of Shipowners and Others) Act 1996 provides that no lien or other right in respect of any ship or property shall affect the proportions in which a fund, as provided for in article 12 of the Convention on Limitation of Liability for Maritime Claims 1976, is distributed among the several claimants concerned.

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

This will amount to a breach of the carrier contract unless express provision for the exclusion of liability has been made in the contract. Section 3 of the Bills of Lading Act 1855 provides that a bill of lading in the hands of a consignee or endorsee is conclusive evidence, against the master or other person signing it, that the goods representing to have been shipped on board a vessel have been shipped. In such circumstances, it is advisable that goods should not be surrendered without presentation of the original bill.

This gives rise to difficulties in circumstances where the bill of lading will not always reach the endorsee before the ship reaches the port of discharge. This difficulty can be avoided by substituting the bill of lading with a sea waybill for the purposes of obtaining delivery of the goods – however, it is vital to note in this context that while a waybill can act as a receipt for the goods and provides evidence of the contract of carriage, it is different from a bill of lading in that it is not a negotiable document of title.

48 What are the responsibilities and liabilities of the shipper?

The shipper is bound by the terms of the Hague-Visby Rules and its rights and responsibilities are set out in those Rules. The holder of the bill of lading will also be bound by those Rules. The other key obligation owed by a shipper is to refrain from shipping ‘dangerous goods’ without the consent of the carrier.

Shipping emissions

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

At present Ireland does not have an ECA similar to that applicable in the English Channel or the North Sea. There is ongoing debate as to whether Ireland should designate the Irish Sea as an ECA or if the current practice of permitting the use of sulphur oxides at the level of the global cap should remain.

50 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?

At present Ireland has not designated any ECAs within domestic waters. As a result, the cap on the content of sulphur content of fuel oil is that dictated by international standards, being 3.5 per cent m/m, pursuant to annex IV to the MARPOL Convention and EU directives addressing the issue that have been implemented into Irish domestic law through the Sea Pollution (Prevention of Air Pollution from Ships) Regulations 2010 (SI No. 313 of 2010) (as amended).

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Section 5(1) of the Jurisdiction of Courts (Maritime Conventions) Act 1989 confers jurisdiction on the High Court to hear and determine proceedings in relation to maritime claims. It includes all maritime claims listed in article 1 of the International Convention relating to the Arrest of Seagoing Ships. Order 64 of the Rules of the Superior Courts deals with admiralty claims. The Admiralty Court, which is a specialist division of the High Court, has jurisdiction to hear maritime disputes in Ireland. Pursuant to Order 63A of the Rules of the Superior Court, the Commercial Court has jurisdiction to hear claims arising from the carriage of goods by sea where the value of the claim exceeds €1 million.

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

The rules and procedures that govern service of court proceedings within EU member states, are set out in Council Regulation (EC) 1348/2000 on the service of member states of judicial and extra judicial documents in civil and commercial matters. This Regulation came into force on 31 May 2001 and has direct effect. The county registrar is responsible for transmitting the documents to be served and receiving the documents from another state for service. Order 11D of the Rules of the Superior Courts provides for service of judicial documents within the EU in accordance with this regulation.

The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 governs service of judicial documents within signatory countries. The Rules of the Superior Courts implement this Convention. The Convention requires each signatory to set up a central authority that can receive requests for service of documents within that country from judicial officers of another contracting country. Service can be effected through the master of the High Court or by forwarding the judicial documents directly to the central authority of the country in which the defendant is to be served.

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

There is no domestic arbitral institution established with a panel of arbitrators specialising in maritime arbitration in Ireland.

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

The rules as to recognition and enforcement of foreign judgments and awards are set out in Council Regulation (EC) 444/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (also known as Brussels 1 Regulation). In Ireland the European Communities (Civil and Commercial Judgments) Regulations 2002 (SI 52/2002) give effect to the Brussels 1 Regulation.

Arbitration

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, was given effect in Irish law by Part III of the Arbitration Act 1980. Ireland has made the reciprocity reservation under article 1(3) of the Convention, which means that under the Convention one can only enforce awards that were made in a state that is a party to the Convention.

In practical terms, the New York Convention has been overtaken in Irish law by the UNCITRAL Model Law on International Commercial Arbitration which was given the force of law by the Arbitration (International Commercial) Act 1998. A party may now seek recognition and enforcement of an arbitration award under articles 35 and 36 of the Model Law. Unlike the New York Convention, the Model Law, as implemented by the 1998 Act, allows enforcement of an arbitration award irrespective of where it was made. It does not need to be a foreign award, nor is there a requirement that it be given in a state which is a party to any particular convention.

Ireland is a party to the Washington Convention on the Settlement of Investment Disputes between States and Nationals of other States, 1965 (the ICSID Convention). Part IV of the Arbitration Act 1980 makes provision for enforcement under this Convention. The procedure entails an application for permission for enforcement under the provisions of section 16(1) of the 1980 Act.

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

The Irish courts can issue an anti-suit injunction preventing proceedings being commenced in a foreign court where it would be in breach of an exclusive jurisdiction or arbitration clause. However, in Turner v Grovit C-159/02, the European Court of Justice (ECJ) ruled that the Brussels Convention is to be interpreted to preclude the grant of an injunction whereby a court of a contracting state prohibits a party to proceedings pending before it from commencing or continuing legal proceedings before a court of another contracting state even where that party is acting in bad faith with a view to frustrating the existing proceedings.

The ECJ more recently determined in West Tankers Inc v RAS Riunione Adriatica di Sicurta SpA (2007) UKHL 4 (the Front Comor) that courts of an EU member state cannot issue anti-suit injunctions against the court of another member state. The ECJ went as far as determining that anti-suit injunctions granted by the court of a member state to prevent proceedings commenced before the court of another member state are contrary to existing EC law, on the grounds that the parties are subject to an existing arbitration agreement. The emphasis here is on court proceedings in other EU member states and thus does not apply to arbitral proceedings or court proceedings in non-EU or Lugano Convention states. The recent English commercial court ruling in Ecom Agroindustrial Corp Ltd v Mosharaf Composite Textile Mill Ltd [2013] EWHC 1276 (Comm) in relation to non-EU member state anti-suit injunctions would likely be found to be influential by the Irish courts. As a result it is possible, absent a strong reason against the grant of the present injunction existing, that the Irish courts may grant an anti-suit injunction in proceedings not connected to court proceedings in another EU member state.

56 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?

Where there is an exclusive jurisdiction clause or arbitration clause in place, the Irish courts have the power to stay or decline jurisdiction on the grounds of forum non conveniens (ie, there is a more appropriate forum for the trial of action). In order for the defendant to obtain a stay on domestic proceedings, the defendant must demonstrate that there is a more appropriate forum than the Irish courts for the trial of action and that it is in the interest of justice. However, where the Brussels Convention or Brussels Regulations apply to the proceedings, the Irish courts cannot decline jurisdiction conferred on it by the Convention or Regulations.

Limitation periods for liability

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

In relation to breach of contract claims, section 11(1)(a) of the Statute of Limitations Act 1957 provides that actions founded on simple or quasi-contract will be statute-barred where they are taken more than six years from accrual of the cause of action.

For claims in tort, section 11(2) of the Statute of Limitations Act 1957 provides for a general rule that tortious claims must be brought within six years of the accrual of the cause of action. However, it is vital to note that a limitation period of two years will apply from the date the cause of action accrues or the date the claimant has knowledge (which ever is later) for actions in respect of personal injuries based on negligence, nuisance, or breach of duty. Furthermore, special provisions apply in respect of maritime cases. Under section 46(2) of the Civil Liability Act 1961, a claim against the owners or operators of a vessel for personal injury or fatal injury or property damage suffered by a passenger on that vessel or for damage to another vessel or cargo must be initiated within two years of the accrual of the action. It should be noted that section 46(3) confers discretion on the court to extend this period subject to such conditions as it sees fit. It is not possible to extend the statutory limitation periods by agreement.

58 May courts or arbitral tribunals extend the time limits?

The court has discretion under section 46(3) of the Civil Liability Act 1961 to extend this period subject to certain conditions as it deems fit. In Lawless v Dublin Port and Docks Board (1998) 1 ILRM 514 the court held that the plaintiff must show special circumstances before an extension of time would be granted. The court will consider the degree of blameworthiness of the defendant and the length of the delay.

Miscellaneous

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

Marine Notice No. 42 of 2013 issued by the Department of Transport, Tourism and Sport on 22 August 2013 provides guidance on the approach of Ireland to the Convention prior to ratification of the Convention in Ireland. The Marine Notice effectively adopts the provisions of the Convention and provides guidance to shipowners on implementation. On 22 July 2014, it was announced that Ireland has formally ratified the Convention and it will have effect in Ireland from 21 July 2015.

60 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?

There is no Irish case law to suggest that where economic conditions have made contractual obligations more onerous to perform this will entitle a party to seek relief from the strict enforcement of legal rights and liabilities under a shipping contract.

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

See ‘Update and trends’.

Update and trends

In December 2012 the Irish government published the Consolidated Companies Bill, which recently (April 2014) completed the report stage. It is anticipated that the bill will be passed into law during 2014. The bill not only consolidates existing legislation (stretching back to 1963) but also amends the company law so that there can be single-director companies with a one-document constitution, potentially dispensing with the need to have a physical annual general meeting. In addition, the legislation provides that existing Irish companies will have to either register as a company limited by shares or as a designated activity company. Further, the bill provides for greater transparency for the obligations of directors, which is a welcome development.

In 2014 amendments to the Foreshore Act of 1933 will finally be passed into law. In October 2013, the Minister of State for Housing and Planning published the General Scheme of Maritime Area and Foreshore (Amendment) Bill 2013. The bill entails significant implications for future marine development and management in Ireland.

Finally, in December 2013 the Minister for Transport, Tourism and Sport announced the long-awaited publication of the Merchant Shipping (Registration of Ships) Bill 2013. The bill proposes a substantial update to the system for the registration of ships in Ireland to include the introduction of a new, centralised, electronic register of ships. The bill is at an advanced stage.

Helen Noble

helen@cjclaw.com

Damien Magee

damien@cjclaw.com

98 Lower Baggot Street

Dublin 2

Ireland

Tel: +353 1 660 0061

www.cjclaw.com

Italy

Pietro Palandri and Marco Lopez de Gonzalo

Studio Legale Mordiglia

Newbuilding contracts

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

Normal practice in Italy is that transfer of ownership of the ship under construction is governed by provisions to this effect agreed by the parties in the contract.

Most commonly, it is agreed that ownership will be transferred upon delivery; in this case pre-delivery instalments are secured by refund guarantees or by a mortgage on the ship under construction.

Although not common, it is also possible to agree that ownership will be transferred step by step, concurrent with payment of pre-delivery instalments.

In the absence of any contractual clause (which in practice will occur very rarely), it has been held that ownership will pass upon delivery (see Court of Cassation judgment No. 4350/1998).

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

There are no specific rules regarding the wording of refund guarantees and common international standards are generally followed.

As to form, the refund guarantee must be in writing and an authenticated SWIFT message is often required. No permission from financial, banking or currency authorities is required for an Italian bank to issue a refund guarantee.

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

If the yard refuses to deliver the vessel, the most effective remedy available to the party is to file an application in the local courts to obtain a court order for delivery or seizure, or both.

In order to do so, the applicant must provide written proof of its right to have the vessel delivered.

Furthermore, the court can grant the order with provisional enforceability if there is a serious danger in delay. It is up to the applicant to request provisional enforceability and present arguments concerning the prejudice that a delay would cause.

4 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 claim of the shipowner against the shipbuilder for damages caused by defects of the vessel lies in contract. Under article 1490 of the Italian Civil Code, the seller must guarantee the purchaser in respect of hidden and apparent defects of goods. The parties can agree to extend the duration of the guarantee or to fix a maximum cap for the damages to be paid.

In the case of purchase from the original shipowner, the purchaser can, alternatively, sue the shipowner according to article 1490, or bring a claim against the shipbuilder in tort. It is also possible for the purchaser to become an assignee of the shipowner’s rights, so that the purchaser can bring a direct action against the shipbuilder under contract law.

A third party that has sustained damage can, alternatively, bring an action in tort against the shipowner or shipbuilder.

Ship registration and mortgages

5 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?

Under article 143 of the Code of Navigation, registration of a ship in the Italian registry is subject to the following requirements:

• the ship is owned, for at least half of the shares of property, by an Italian or European person or entity; or

• the new build or ship previously registered in a non-European country is owned by a non-European person or entity that directly assumes the operation of the ship through a branch in Italian territory.

For ships under construction there is a separate registry (article 234 of the Code of Navigation). The shipbuilding contract and a declaration that construction has been started must be registered. The registration is made in the name of the builder or the buyer, depending on who holds title in construction.

6 Who may apply to register a ship in your jurisdiction?

The only party who may apply to register a ship is the shipowner, who can be a private or public entity.

7 What are the documentary requirements for registration?

If the nationality requirements as per article 143 of the Code of Navigation are met, the documents required for the registration of the vessel are those listed in article 315 of the Regulation for Maritime Navigation, namely:

• the document that certifies the ownership of the vessel;

• the tonnage certificate; and

• the authorisation for using the specific name of the vessel.

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

Italian law excludes, in principle, the possibility of applying for registration of a ship that is already registered in another country. However, if the vessel registered in a foreign country is bareboat chartered to someone who fulfils the requirements of article 143 of the Code of Navigation (see question 5), and the foreign registry allows it, the vessel could be entered in a special Italian registry.

Flagging out in relation to a bareboat charter is also possible, but subject to prior notice as per article 156 of the Code of Navigation, in order to protect creditors.

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

Maritime mortgages are recorded in the registry in which the vessel is registered. For vessels that are bareboat chartered, the registration of mortgages remains in the primary registry.

Limitation of liability

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

According to article 7 of the Code of Navigation, shipowners’ liability is ruled by the law of the ship’s flag. Therefore, the limitation regime in respect of claims arising from the operation of the vessel to be applied by the Italian courts depends on the national law or international conventions ratified by the country of the ship’s flag.

Italy has not ratified the Convention on Limitation of Liability for Maritime Claims (LLMC).

However, by means of Legislative Decree No. 111/2012 the Italian government has enacted the provisions of EU Directive 2009/20/EC on the insurance of shipowners for maritime claims. The Decree also introduces into Italian law a new regime of limitation of liability of shipowners. Articles 7 and 8 of the Decree have introduced, for vessels with a gross tonnage of more than 300, limits of liability identical to those provided for under Chapter II of the LLMC Convention, as amended by the protocol of 1996.

For vessels with a gross tonnage of less than 300, article 275 of the Code of Navigation remains applicable.

11 What is the procedure for establishing limitation?

Pursuant to the rules of the Code of Navigation, a shipowner who intends to avail him or herself of the benefit of limitation must present an application with the relevant documents to a judge, along with a cash deposit for the limitation fund. After ascertaining the existence of the conditions required by the applicable law, a tribunal will declare the limitation procedure open.

12 In what circumstances can the limit be broken?

The rules concerning the circumstances in which the limit can be broken are, currently, confused, because Decree No. 111/2012 does not include a rule similar to article 4 of the LLMC Convention. It is also impossible to refer to article 275 of the Code of Navigation, because article 12 of Decree No. 111/2012 has restricted its application to vessels under 300.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Pursuant to article 8 of Decree No. 111/2012 in relation to credits arising from a single event, the limitation of liability of the owner of a passenger ship in relation to the death or personal injury of a passenger is equal to 175,000 SDR multiplied by the number of passengers that the vessel can carry.

The EU recently implemented two important pieces of legislation on passengers’ rights, namely Regulation (EU) No. 1177/2010 concerning the rights of passengers when travelling by sea and inland waterways, and Regulation (EC) No. 392/2009 on the liability of carriers of passengers by sea in the event of accidents, implementing the Athens Convention 1974 relating to the Carriage of Passengers and their Luggage by Sea, as amended by the protocol of 2002 on the carriage of passengers (according to IMO 2006 guidelines for implementation of the Athens Convention).

Port state control

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

From a national point of view, the port state control officer is the harbour master.

Italy is party to the Paris Memorandum of Understanding on Port State Control of 1982.

For European countries such as Italy, the provisions of the Paris Memorandum are reinforced by EU Directive No. 2009/16/EC on port state control, which substantially endorses the content of the Memorandum. Italy put this Directive into effect by means of Legislative Decree No. 53 of 24 March 2011.

15 What sanctions may the port state control inspector impose?

According to the Memorandum, when deficiencies are found that render the ship unsafe to proceed to sea or that pose an unreasonable risk to safety, health or the environment, the ship may be detained. The harbour master will issue a notice of detention to the master, which will also contain the information that the ship’s owner or operator has the right of appeal.

16 What is the appeal process against detention orders or fines?

The appeal must be filed to the territorially competent regional administrative tribunal within 60 days of the notification of detention and made against the Ministry of Transport. A complaint may also be addressed by all the interested parties (including classification societies, flag states and ISM operators) to the harbour master’s headquarters.

Classification societies

17 Which are the approved classification societies?

Pursuant to Legislative Decree No. 314/1998, if a classification society meets certain special requirements, the Italian administration can authorise it to become an approved classification society. However, in Italy, presently RINA is the only classification society responsible for classification and tonnage measurement.

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

The only precedent is the decision rendered by the Tribunal of Genoa in 2010 in a case regarding the claim of a charterer against a classification society for the damages suffered due to the detention of the vessel, after an inspection under the Paris Memorandum had been carried out.

The Tribunal of Genoa held that the negligent attestation of the class of a vessel by a classification society could be regarded as the cause of the incorrect evaluation by the charterer in the selection of the vessel to charter.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Pursuant to article 73 of the Italian Code of Navigation, in the event that the wreck of a vessel in a port, bay, canal or within the territorial sea is, in the judgment of the maritime authority, a danger or hindrance to navigation, the maritime authority can order the owner to effect, at his or her own expense, the removal of the wreck, and fix the date for the removal.

If the owner does not comply with the order within the fixed date, the authority itself carries out the removal and can sell the wreck on behalf of the state.

If the situation is urgent, the authority can immediately act on behalf and at the expense of the owner. In all cases the owner will eventually be responsible for the costs of removal.

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

The 1910 Collision Convention is in force.

Jurisdiction will be founded on the 1952 Brussels Convention on Civil Jurisdiction in Collision Matters. Therefore, an Italian Court will have jurisdiction if Italy is either:

• the place where the defendant has his or her habitual residence or place of business;

• the place where arrest has been effected of the defendant ship or of any other ship belonging to the defendant that can be lawfully arrested, or where arrest could have been effected and bail or other security has been furnished; or

• the place where the collision occurred.

A party can claim all damages that are immediate and direct consequences of the collision, including physical damages and loss of earnings.

Italy has ratified the 1989 London Convention on Salvage, which, therefore, applies as a general rule.

The limitation period for enforcing salvage claims in our jurisdiction is two years from the day on which the salvage operations are completed (article 500 of the Code of Navigation).

The salvor can arrest the salved ship (or a sister ship) under the 1952 Brussels Convention on the arrest of ships. They can also arrest the cargo within 15 days of discharge and before it has been lawfully delivered to a third party.

Italy has also ratified the International Convention on Civil Liability for Oil Pollution Damage as amended in 1992 (CLC Convention), as well as the Fund Convention as amended in 1992 and the supplementary Fund Protocol of 2003.

Furthermore, a general obligation of clean-up is imposed by the Code of Environment (Legislative Decree No. 152/2006) on the party responsible for pollution of the sea. In case of omission, the clean-up is carried out by the public administration, which can then claim relative costs from the responsible party (article 250 of the Code of Environment).

Finally, it must be noted that EU Regulation No. 1257/2013 provides for a new discipline in ship recycling. The regulation, which, according to its article 32, shall not apply earlier than 31 December 2015, introduces the same standards for ship recycling as imposed by the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 2009 (not yet in force), and establishes a list of recycling facilities authorised to conduct ship recycling operations.

21 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. According to Regulation (EC) No. 593/2008 (Rome I), the applicable law for salvage agreements is chosen by the parties. Thus, Lloyd’s standard form of salvage agreement is acceptable.

There are no specific rules on who may carry out salvage operations, which can be performed by occasional or professional salvors or by the Italian coastguard.

Ship arrest

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

The International Convention Relating to the Arrest of Sea-Going Ships 1952 is in force. The 1999 version of the Convention has not been ratified by Italy.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Under the Brussels Convention 1952, a vessel registered in a contracting state can only be arrested for maritime claims as defined and listed in article 1 of the Convention. Ships flying the flag of a non-contracting state can be arrested in Italy for any claim.

Sister ships can be arrested in Italy while, save for exceptional cases, associated ships cannot.

Italian courts are, in fact, very reluctant to pierce the corporate veil, as it is a settled rule that each company is a separate and autonomous business entity, liable only for its own debts and with its own assets. It has been held by Italian courts that, under article 3(1)(2) of the 1952 Brussels Convention, it is possible to arrest a ship when the shares of the owning company are owned by the same companies or persons owning the ship in respect of which the maritime claim arose. The burden of proof of ownership is on the claimant.

24 What is the test for wrongful arrest?

A claimant may be liable for damages for wrongful arrest if the claim for which the arrest has been granted does not exist and if he or she has acted without due care.

25 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?

Article 1(k) of the Brussels Convention 1952 provides the right to arrest a ship in respect of a maritime claim arising out of goods or material wherever supplied to a ship for her operation or maintenance; on the other hand, in Italy only privileged creditors are entitled to attach a vessel if it belongs to a third party and not to the debtor.

In Italy there are conflicting views regarding the coordination of article 3(4) and article 9 of the Convention. While discussion is still ongoing, it remains up to each court to decide whether to grant or refuse the arrest of a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer.

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

A court may, at its discretion, order the applicant to provide a counter-security in favour of the owner to cover damages in case the arrest is eventually found to be wrongful.

27 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?

When granting an arrest, the judge must also state the amount for which the arrest has been granted. The security that the court orders the arrested party to provide is, therefore, equal to that sum.

The form of security is usually agreed by the parties. If they fail to reach an agreement, the form of security is decided by the judge, and will normally be a cash deposit. The judge may also authorise the release of the ship against other forms of security, such as a bank guarantee.

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

Normal practice is that the shipowner, being already in possession of the vessel and responsible for her maintenance and operations, continues to take care of her while under arrest.

In particular circumstances, such as the vessel being abandoned, the court will appoint a custodian according to article 676 of the Italian Code of Civil Procedure, who will guard the vessel and be responsible for her maintenance. The court can also decide to appoint the claimant as custodian.

29 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?

Rules related to jurisdiction are not affected by the arrest procedure in Italy. It is, therefore, possible to arrest a vessel in Italy and then carry out arbitration or start proceedings on the merits in another country. However, proceedings on the merits must be started within 60 days from the day the order of arrest is issued by the court.

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

Yes. According to article 646 of the Code of Navigation the court, or, in case of particular urgency, the harbour master or judicial police, can take suitable measures in order to prevent the ship from leaving the port.

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

Yes, it is possible to preserve property or evidence by means of an arrest ordered by the court according to articles 670 and 671 of the Italian Code of Civil Procedure.

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

It is possible to arrest bunkers in Italy, although it is unusual in practice as major practical problems arise in connection with evidence of property of the bunker and the actual enforcement of the arrest.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

As stated by article 474 of the Italian Code of Civil Procedure, enforcement proceedings can only be commenced on the basis of an enforceable judgment or notarial deed.

34 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?

Rules concerning the judicial sale of a vessel can be found in articles 643 to 686 of the Code of Navigation and articles 483 to 542 of the Italian Code of Civil Procedure.

The procedure for carrying out the judicial sale of a vessel must start with service by the court bailiff on the shipowner of an order to pay and a deadline to do so, with the notice that, in case of non-compliance, the creditor will proceed with the attachment of the debtor’s goods. In order to do so, the creditor must be in possession of an enforceable title, usually a judgment.

If the debtor fails to pay within the deadline, the creditor will be entitled to serve a writ of attachment to the debtor and the master of the vessel, through the bailiff. The same writ of attachment must be sent to the harbour master of the port where the ship is registered, so that it can be recorded in the registry. The procedure can be joined by other creditors, in accordance with articles 499 and 500 of the Italian Code of Civil Procedure.

Once the vessel is attached, it cannot leave the port without the specific permission of the court. If the debtor persists in not paying, a creditor is entitled to apply for the judicial sale of the vessel not before 30 days and not after 90 days from the date of attachment. The application must be served, through the bailiff, on the debtor and on all other creditors who joined the procedure.

Within 30 days of the application being served it must be filed at the competent court so that an expert can perform a survey in order to render an estimated value of the vessel. After hearing all interested parties, the judge will then order the sale of the vessel. The sale is carried out by means of a public auction.

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

The order of priority of claims on the proceeds of a judicial sale of a vessel is as follows:

• legal costs related to the entire proceedings for the sale of the vessel;

• creditors with privileges or maritime liens;

• mortgagees;

• unprivileged or unsecured creditors who intervene promptly in the proceedings;

• unprivileged or unsecured creditors who do not intervene promptly in the proceedings; and

• all other unsecured claims.

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

Judicial sale of a vessel will extinguish prior liens, mortgages and other encumbrances. As provided by article 678 of the Code of Navigation, after the judicial sale the judge will issue a decree adjudicating the vessel to the new shipowner. In addition, with the same decree the judge will order the competent registry to delete any mortgage on the vessel.

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

Pursuant to article 157 of the Italian Code of Navigation, in the case of award of a ship to a non-EU entity, the successful bidder must file a notice to the registry in which the vessel is registered, within 60 days from the date of award, in order to obtain deletion from the registry.

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

Italy is party to the 1926 Convention on Maritime Liens and Mortgages, but not the 1993 Convention.

Carriage of goods by sea and bills of lading

39 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 of 25 August 1924 on bills of lading were ratified by Italy on 7 October 1938 and entered into force on 7 April 1939.

On 22 August 1985 Italy ratified the protocols of 1968 and 1979 (Hague-Visby Rules), which entered into force on 22 November 1985.

The Hague-Visby Rules are to be considered as ‘special’ Italian law, and overrule the Code of Navigation’s ‘general’ laws.

Italy has not ratified the Hamburg Rules or the Rotterdam Rules.

40 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?

In cases of combined or multimodal transport, Italian courts have stated that the Civil Code shall apply.

Italy has also ratified the Convention on the Contract for the International Carriage of Goods by Road (CMR Convention) and the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention).

41 Who has title to sue on a bill of lading?

According to Italian law, only the legitimate holder of the original bill of lading has title to sue. Once the bill of lading has been surrendered to the carrier against delivery of the goods, the cargo owner can also sue.

Therefore, the shipper cannot sue unless he or she has retained possession of the original bill of lading or has become an assignee of the rights of the consignee or cargo owner.

Insurers may bring a suit in their own name, but must be properly subrogated in the rights of their assured by means of a receipt and assignment of rights.

42 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?

According to case law, the clauses of a charter party are only binding on the third-party holder of the bill of lading if the charter party is specifically mentioned in the bill of lading. The courts consider as sufficiently specific the mention of the place of issue and the date of the charter party.

With regard to arbitration or jurisdiction clauses, case law states that such clauses must be specifically incorporated into the bill of lading, with a clause worded as follows: ‘all terms and conditions of the charter party dated on… in…, including the arbitration or jurisdiction clause apply.’

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

Certain judgments of Italian courts have stated that identity of carrier clauses are to be considered null and void pursuant to article 3(8) of the Hague-Visby Rules, although none of these judgments are recent.

44 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?

According to articles 2043 to 2049 of the Civil Code and article 274 of the Code of Navigation, shipowners could be held responsible in tort if they are not the contractual carrier.

A judgment of the Supreme Court also stated that shipowners could only be held liable under contract. In such a case, the Court stated that the concept of ‘transporteur’ in the 1924 Brussels Convention also includes the ship (ie, shipowners who are not contractual carriers). Therefore, according to this decision, the Convention also applies to shipowners who are not contractual carriers.

If a properly drafted Himalaya clause is included in the contract, shipowners can rely on the terms and conditions of the bill of lading even if they are not the contractual carriers.

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

Deviation, if not reasonable or not effected under article 4(4) of the 1924 Brussels Convention, is considered a breach of contract that entitles the claimant to damages. The deviation, if made solely in the carrier’s interest, excludes the possibility to benefit from the carrier’s limitation of liability. Therefore, the carrier should prove that the deviation occurred in order to save human life, for humanitarian reasons or due to force majeure. If the issue is disputed the courts will decide on a case-by-case basis.

46 What liens can be exercised?

Liens can be exercised on a ship and on cargo.

Liens on a ship are regulated by article 552 of the Code of Navigation, which states that they can be exercised for judicial expenses due to the state or done in the interest of creditors for conservative actions on the vessel; for duties of anchorage, lighthouse, port and other duties and taxes of the same type; for pilotage, custody and maintenance of the ship after arrival in the last port; for credits arising from the crew contract or from the contract of employment of the master; credits for the sums advanced by the ministry or the consular authority for the maintenance or repatriation of crew members; credits for social security contributions; indemnities for salvage and general average; indemnities for collision and damages to port, dry docks and navigable ways; indemnities for death or injuries of passengers or crew and for loss or damage of cargo and baggage; and credits arising from the contract or operations carried out by the master, even when he or she is the shipowner, for the maintenance of the ship or for the prosecution of the voyage.

Liens on cargo are regulated by article 561 of the Code of Navigation and can be exercised for judicial expenses due to the state; customs duties; indemnity for salvage and the sum due to general average; credits arising from the contract of carriage, including discharging expenses and storage costs; and for the master’s obligations on the cargo in the case that he or she needs to collect money for the prosecution of the voyage.

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

The carrier incurs liability under the contract if it delivers the cargo without production of the original bill of lading. In principle, limitation of liability should be excluded under article 1693 of the Civil Code and article 422 of the Code of Navigation, because wrongful delivery could be considered as a voluntary default of the carrier.

48 What are the responsibilities and liabilities of the shipper?

The shipper could be liable for deficiency in packaging, not providing the carrier with customs documentation, false declarations regarding the nature of goods and false declarations regarding the carriage of hazardous goods.

Shipping emissions

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

Italy is a member of the International Maritime Organization and has adopted the International Convention for the Prevention of Pollution from Ships (MARPOL), which was ratified by Law No. 662 of 29 September 1980 and Law No. 438 of 4 June 1982. Annex VI of the Convention, which sets emissions limits for ship exhausts, entered into force on 19 May 2005.

The European Union adopted Directive 2012/33/EU, which modified the prior Directive 1999/32/EU, regarding the sulphur content of marine fuels. Italy has not yet implemented this Directive.

50 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?

Italy is implementing Directive 2012/33/EU, which contains the applicable cap on the sulphur content of fuel oil. The Directive contains different caps depending on the geographic areas in which the vessel is navigating:

• pursuant to article 4a of the Directive, member states shall take all necessary measures to ensure that marine fuels are not used in the areas of their territorial seas, exclusive economic zones and pollution control zones if the sulphur content of those fuels by mass exceeds 1 per cent until 31 December 2014, and 0.1 per cent from 1 January 2015; and

• outside the emission control areas the sulphur content by mass shall not exceed 3.5 per cent from 18 June 2014, and 0.5 per cent from 20 January 2020.

Enforcement of the regulatory requirements relating to low-sulphur fuel follows Legislative Decree No. 202/2007, which provides sanctions for the violation of the MARPOL Convention, according to which the master, crew and shipowner will be punished with a fine of between €10,000 and €80,000 and imprisonment for between six months and three years.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There are no specific courts in which shipping disputes are litigated, although the courts of the main maritime districts have divisions that mainly deal with these types of claims and have significant experience in maritime matters.

Choice of forum clauses will be considered valid by Italian courts if they comply with the provisions set out by article 23 of Council Regulation (EC) No. 44/2001. In the event that proceedings are commenced before an Italian court with no jurisdiction, this must be challenged by the defendants in their first pleadings.

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

The service of court proceedings abroad is governed by the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

Should the service be performed on a person resident or domiciled in a country not party to the Convention, it shall be performed through diplomatic channels.

If the service cannot be performed under the Convention or through diplomatic channels, article 142 of the Code of Civil Procedure applies. In this case, the service is effected directly by registered mail to the addressee, and another copy is forwarded by the public prosecutor to the Ministry of Foreign Affairs, which will execute the service. Within the EU, Regulation No. 1393/2007 applies.

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

There are no domestic arbitral institutions in Italy dealing with maritime arbitration. Arbitration clauses in shipping contracts, even if between Italian parties, very often provide for arbitration in London.

Arbitration can be instituted in Italy according to articles 806 et seq of the Italian Code of Civil Procedure and it can be ‘ritual’ (arbitrato rituale) or ‘informal’ (arbitrato irrituale). The main difference between the two procedures is that in ritual arbitration the arbitrators actually replace the ordinary courts and their award is enforceable like a judgment, while in informal arbitration the arbitrators are deemed to act as agents to whom the parties have delegated the function of settling the dispute by means of a document (the award) that is in the nature of a settlement agreement rather than a judicial decision. An award in informal arbitration cannot, therefore, be directly enforced, but must be litigated like a contract and effected through the enforcement of the judgment rendered on it.

Under Italian law, arbitration clauses must be in writing (ie, in a document signed by the parties), and Italian courts are very strict in enforcing such provisions.

Since September 2013, compulsory mediation has been in force in Italy for certain kinds of claims. As far as shipping is concerned, mediation is compulsory for insurance claims and must be carried out before any proceedings against insurers are brought in court.

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

The rules on the recognition and enforcement of judgments rendered in other European Union member states are set out by EC Regulation No. 44/2001. For all other countries, international and bilateral conventions may apply (eg, judgments rendered in Switzerland, Norway, Denmark and Iceland will be recognised and enforced according to the Lugano Convention 2007 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (succeeding the Lugano Convention 1988), which is, in fact, very similar to EU legislation).

If EU Regulation No. 44/2001 or international conventions do not apply, Italian courts will apply articles 64 to 71 of Italian Law. No 218/1995, which provides a test that only considers the regularity of proceedings followed in rendering the judgment, without any consideration of the merits.

Regarding the enforcement of foreign arbitral awards, Italy is a signatory party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Pursuant to this Convention, Italian courts will consider the arbitral awards rendered in another contracting state as directly binding in Italy. Enforcement will be provided by means of an exequatur procedure that involves a petition being filed with the competent court of appeal, whose decision on whether to grant or reject the enforcement of the award can be challenged by any interested party within 30 days.

As far as awards rendered in countries not party to the 1958 New York Convention are concerned, Italian courts will apply articles 839 to 840 of the Italian Code of Civil Procedure, whose test for recognition and procedure for enforcement are very similar to those described above.

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

Under Italian law, the defendant must raise the objection of lack of jurisdiction of Italian courts at the beginning of his or her case.

Italian law does not provide for anti-suit injunctions.

56 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?

See question 55.

Limitation periods for liability

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

Limitation periods depend on the nature of the claim. According to article 2951 of the Italian Civil Code, a one-year time limit applies to claims arising under a contract of domestic rail or road carriage. If a claim arises under a contract of domestic sea carriage, the time limit will be six months if the carriage is within Europe or Mediterranean countries (article 438, paragraph 1 of the Code of Navigation). Otherwise, the time limit is one year (article 438, paragraph 2 of the Code of Navigation).

When the contract of carriage by sea is governed by the Hague-Visby Rules, the one-year time limit of article 3(6) will apply.

Other limitation periods in shipping are one year for charter parties (six months or one year for voyage charter or contracts of carriage), two years for collision damages and salvage remunerations, and three years for oil pollution damages.

The general rule for liability in tort provides a five-year time limit.

Time limits cannot be extended or shortened by agreement between the parties but, if the claimant serves a writ of notice of claim with a request of payment, domestic law time limits may be interrupted and a new period will commence.

The one-year time limit of article 3(6) of the Hague-Visby Rules can be extended by agreement.

58 May courts or arbitral tribunals extend the time limits?

Courts or arbitral tribunals cannot extend the time limits provided by internal laws or international conventions.

Miscellaneous

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

Italy ratified the Maritime Labour Convention 2006 on 12 September 2013.

However, the regulations of the Convention must be implemented with some amendments to national legislation, which are currently being examined by Parliament.

60 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?

The Italian Civil Code provides that a party can only require the termination of a contract where the performance has become too onerous for contracts in which there is a lapse of time between stipulation and performance, if the performance has become too onerous for one of the parties and if this is due to unforeseeable events. The concept of ‘too onerous’ must be examined in light of the economic conditions of the whole contract.

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

No.

Pietro Palandri

pietro.palandri@mordiglia.it

Marco Lopez de Gonzalo

marco.lopez@mordiglia.it

Via XX Settembre 14/17

16121 Genoa

Italy

Tel: +39 010 586 841

Fax: +39 010 562 998

www.mordiglia.it

Japan

Shuji Yamaguchi

Okabe & Yamaguchi

Newbuilding contracts

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

There is no clear provision as to the timing of the title transfer in the Japanese Civil Code or Commercial Code. The shipbuilding contract form of the Japan Shipping Exchange provides that the fourth instalment (the final instalment) shall be paid upon delivery of the ship but has no clear provision about the time of the title transfer. In such case, the title shall be seen to pass from the shipbuilder to the shipowner upon delivery of the ship. It is possible to agree to change the time when the title will pass.

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

A refund guarantee is usually provided by way of a letter of guarantee issued by a bank acceptable to the buyer in accordance with the shipbuilding contract. The letter of guarantee shall be stamped by the company’s signature seal or signed by the person representing the bank or the surety. If Japanese law is the governing law, it should be clearly stated that the bank or the surety shall guarantee the builder’s refund obligation ‘jointly and severally’ with the builder.

If the guarantee is issued without joint and several obligation, the bank or the surety can be entitled to request the buyer to claim against the builder and attach the builder’s assets first, if they exist (Civil Code, articles 452 and 453).

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

If the yard refuses to deliver the vessel, a provisional delivery order can be obtained at a local court. The buyer should prove that all contractual conditions have been fulfilled by the buyer but the yard refuses to deliver the ship at the agreed delivery time and place. Security by way of a cash deposit or a bank guarantee will be requested by the court. The security amount would be between one-fifth and one-third of the value of the vessel.

4 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?

Under the Japanese Product Liability Law (PLL), if the vessel is defective and loss of life or personal injury or any damage to properties other than the ship itself results, a product liability claim is possible by the shipowner, a purchaser from the shipowner or any third party that has sustained damage (PLL, article 3). The time bar will be three years from the time the claimant notices the damage or loss and the identity of the liable party (PLL, article 5).

It is possible in the contract to limit or exclude the builders’ liability to the shipowners as long as it is not against public policy in Japan. However, it is not possible to exclude the builder’s liability towards the third party based on PLL by the contract.

Ship registration and mortgages

5 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?

Japanese-flagged ships must be owned by:

• the Japanese government or a public entity;

• Japanese persons;

• a company established by Japanese law, all of whose representatives and two-thirds or more of the directors are Japanese; or

• another legal entity established by Japanese law whose representatives are all Japanese (the Ship Law, article 1).

It is possible to register vessels under construction (Commercial Code, article 851).

6 Who may apply to register a ship in your jurisdiction?

Article 1 of the Ship Law provides that owners of Japanese ships as detailed in question 5 may apply to register a ship.

7 What are the documentary requirements for registration?

For registration applicants must present the ship’s certificate of tonnage and certificate of shipbuilding.

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

Dual registration is not possible but flagging out is possible. When the ship loses Japanese nationality, the shipowner shall close the ship registration and return the certificate of the ship’s nationality (the Ship Law, article 14).

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

The registry office maintains the register of mortgages. The mortgage registration contains:

• the date when the mortgage registration is applied;

• the date when the ship is mortgaged and for what reason;

• the name and the address of the mortgagee;

• the name and the address of the debtor;

• the credit amount; and

• the interest rate or penalty, if any.

Limitation of liability

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

Japan ratified the Protocol of 1996 to amend the Convention on Limitation of Liability For Maritime Claim 1976 and amended the Japanese Law of Limitation of Liability of Shipowners (LLS). It became effective on 1 August 2006.

The following claims are subject to limitation of liability (LLS, article 3):

• claims in respect of loss of life or personal injury or loss of or damage to property occurring on board or in direct connection with the operation of the ship or with salvage operation and consequential loss therefrom;

• claims in respect of loss resulting from delay of the carriage by sea of cargo, passengers or their luggage;

• claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations; and

• claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person may limit his or her liability in accordance with the law.

However, a passenger’s claims in respect of loss of life or personal injury shall be excepted from the limitation process.

Shipowners and salvors may limit their liability. ‘Shipowner’ means the owner or charterer, including a bareboat charterer.A non-vessel operating common carrier shall not limit its liability in the limitation proceedings.

11 What is the procedure for establishing limitation?

Shipowners or salvors may file an application to commence the procedure of limitation of liability. They should present the court with prima facie evidence that the claim amount, which may be subject to the limitation of liability, may exceed the limitation amount and the list of the potential claimants’ names and addresses (LLS, article 18).

If the court considers that the limitation procedure should be commenced, it will order the applicants to provide the cash deposit. The limitation fund should be the limitation amount plus 6 per cent interest from the accident to the date when the cash deposit is provided or the date when the guarantee contract is filed in the court. The current exchange rate of SDR to yen shall be used at the date when the cash deposit is actually provided or the date when the guarantee contract is filed in the court (LLS, article 19).

Instead of a cash deposit, a guarantee contract with a bank, an insurance company or a P&I club with its office in Japan may be acceptable upon the approval of the court (LLS, article 20).

12 In what circumstances can the limit be broken?

A liable shipowner or salvor shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission committed with intent to cause such loss or recklessly and with knowledge that such loss would probably result (LLS, article 3, paragraph 3).

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

There is no limitation of liability in respect of passenger or luggage claims provided in any law or regulation in Japan. If any limitation to the passenger’s claim for his or her life or injury is provided in the contract, it may be null and void as it is against public policy. There are some contracts that provide ¥150,000 per person as the limitation of liability for luggage. Japan is not a signatory of Athens Convention.

Port state control

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

The Foreign Ship Control Agency will conduct port state control inspections in accordance with:

• the Convention on the International Regulations for Preventing Collisions at Sea 1972;

• the International Convention on Load Lines 1966;

• the Protocol of 1978 relating to the International Convention for the Prevention of Pollution from Ships 1973;

• the International Convention for the Safety of Life at Sea 1974; and

• the International Convention on Standards of Training Certification and Watchkeeping for Seafarers 1978.

15 What sanctions may the port state control inspector impose?

The Ministry of Land, Infrastructure, Transport and Tourism may order an inspection of a ship in order to take the necessary steps to fulfil the conditions required by the conventions. If the master does not follow the order, the ship shall not be allowed to enter the port or be ordered to go out of the port and the master may be fined at or less than ¥300,000.

If the Ministry considers that the ship may be dangerous, the ship may be detained and moved to the designated place.

16 What is the appeal process against detention orders or fines?

The shipowner may apply to the Ministry to re-inspect the ship and if this does not work, the shipowner will commence proceedings at a competent court.

A fine may be imposed by a court. The shipowner may appeal to the higher court.

Classification societies

17 Which are the approved classification societies?

Nippon Kaiji Kyokai and Lloyd’s Register.

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

A classification society shall be liable by breach of contract or in tort if it is negligent in its performance.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The Japanese Coast Guard may order the shipowner to remove the wreck or to take necessary steps to protect pollution to sea when it considers that the sea is being polluted or might be polluted by a sunken or grounded ship (the Law on Prevention of Sea Pollution, article 40).

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

Japan ratified the Convention for the Unification of Certain Rules of Law with respect to Collision between Vessels 1910, but has not ratified the International Convention of Salvage 1989.

21 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 a salvage agreement form (on a ‘no cure, no pay’ basis) implemented by the Japan Shipping Exchange as a local form but it is not mandatory. Lloyd’s standard form of salvage agreement is quite popular in Japan. Nippon Salvage Co Ltd and Fukada Salvage & Marine Works Co Ltd are popular salvage companies in Japan.

Ship arrest

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

Japan has not ratified either the International Convention on the Arrest of Seagoing Ships 1952 or the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

The claimant can arrest or attach the vessel, or other assets in Japan, owned by the defendant, by means of a provisional attachment order. It is possible but difficult to arrest an associated vessel that is virtually under the same ownership. In order to pierce the corporate veil, it is necessary to prove that the shipowning company is a sham company or that its establishment is regarded as abusing its right.

The claimants can arrest the vessel if they have a lien over the ship under Japanese law (see question 46).

24 What is the test for wrongful arrest?

If the claimant is negligent, the claimant shall be liable in tort for the owner’s loss.

25 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?

A bunker supplier can arrest the vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to the contract with the owners or the bareboat charterers but not with the time charterer or the voyage charterer.

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

In the case of provisional attachment, the security by way of cash deposit or the letter of guarantee issued by a Japanese licensed bank or insurance company amounting to one-fifth to one-third of the claim shall be required.

27 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?

The security amount is about one-fifth to one-third of the claim amount but the ship’s value will be taken into account. The security amount will not be changed subsequently.

In the case of a lien, no security is required.

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

The ship administrator shall be appointed by the court at the expense of the arresting party. While the vessel is under arrest, the necessary insurance premium is paid by the arresting party.

29 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?

The vessels may be arrested by preliminary arrest, maritime lien or mortgage, or final judgment.

When claimants initiate a preliminary arrest of a vessel, they will prove a prima facie claim against the shipowners and pay the security ordered by the court, which is usually about one-third to one-fifth of the claim amount. If a preliminary arrest of a ship has been effected, the claim on the merits will be litigated at the forum of the claim, not necessarily in Japan. If the ship is arrested by maritime lien or mortgage or final judgment, the claim on its merit should be decided in the same court that issued the arresting order, unless otherwise agreed between the parties, and the ship is released.

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

The attachment of the bank account or any other property owned by the shipowner is possible.

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

Orders for the preservation of evidence can be issued by the court.

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

It is theoretically possible to arrest the bunker, but usually the bunker is owner by the charter. In such a case, the owner’s approval is necessary if the bunker is under control of the owner.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Judicial sale can be applied for by claimants with a maritime lien or mortgage over the ship or with the final judgment against the shipowners in favour of the claimants.

34 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?

The vessel shall be arrested by court order and evaluated by the court. The date for the judicial sale shall be fixed and notified to the public. It takes about six months to be concluded, but may be prolonged subject to the size or the type of the vessel. The court may order the claimants to deposit the costs in advance for the sale, which includes costs for maintenance, evaluation etc, and will vary subject to the size or the type of the vessel. It is difficult to estimate the amount but it will not be less than ¥1.5 million.

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

The first priority of claims are maritime liens, as provided in the Commercial Code, article 842.

A maritime lien has priority over a mortgage. Next, claims without any priority shall be eligible. The order among the maritime liens is explained in question 46.

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

Judicial sales serve to extinguish all prior liens and encumbrances on the vessel, including maritime liens and thereby give the purchaser clean title (Civil Execution Law, article 59).

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

Usually, judicial sale of a vessel in a foreign country will be recognised, provided that it is not against Japanese public policy. There is no precedent case concerning this problem in Japan.

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

No, Japan is not a signatory of the Convention.

Carriage of goods by sea and bills of lading

39 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?

Japan has ratified the Hague-Visby Rules. Japan’s International Carriage of Goods by Sea Act (JCOGSA) is basically the same as the Hague-Visby Rules.

The JCOGSA shall apply to sea carriage from port to port but a special clause beneficial to the carrier may be valid before loading or after discharge.

Japan has not yet decided to ratify the Rotterdam Rules.

40 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?

The Commercial Code is applicable to road transport, domestic water transport and domestic air transport and does not provide for any limitation of liability. Limitation set out in contract may be valid subject to the public policy. The time bar is one year.

The Rules for Carriage by Rail are applicable to rail transport. The limitation of liability is ¥40,000 per kilogram and the maximum liability is ¥4 million per package. The time limit is one year.

The Montreal Convention is applicable to international air carriage. The limitation liability is 19 SDR per kilogram. The time limit is two years.

41 Who has title to sue on a bill of lading?

A bona fide bill of lading holder has the title to sue on a bill of lading.

42 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?

It is possible to incorporate the terms in a charter party into the bill of lading by a bill of lading clause, but it may be regarded as invalid if it is to relieve the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure in the duties and obligations, or lessening such liability provided in Hague-Visby Rules.

There is no clear precedent about the validity of a jurisdiction clause or arbitration clause in a charter party, the terms of which are incorporated in the bill of lading. The Supreme Court of Japan held regarding the validity of a jurisdiction clause of the bill of lading on 28 November 1975 that ‘it shall be sufficient as the style of the agreement of international jurisdiction, if the court in a specified country is clearly identified in the document presented by one of the parties and the existence and the contents of the jurisdiction agreement are clear.’

Therefore, such jurisdiction or arbitration agreement shall be considered valid as long as the place or the country is clearly identified in the bill of lading.

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

The Supreme Court of Japan held on 27 March 1998 that the demise clause shall be valid. However, there are still contradictory judgments. Therefore, the present situation is that the demise clause or the identity of carrier clause may be regarded as basically valid but still arguable in a Japanese court.

44 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 may be claimed against in tort. He or she may be entitled to rely on the bill of lading defence, as long as the necessary Himalaya clause exists in the bill of lading. A Himalaya clause is regarded as legally valid in Japan (Civil Code, article 537).

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

Any deviation to save or attempt to save life or property at sea or any other reasonable deviation shall not be deemed to be an infringement or breach of the contract. Otherwise, deviation shall be regarded as the fault of the carrier and if loss of or damage to the cargo was caused by the deviation, the carrier shall be liable. However, the carrier shall still be entitled to rely on the package or weight limitation or the one-year time limit. The deviation itself has no special effect under Japanese law. If the claimants try to break the limitation of liability, they should prove the damage resulted from an act or omission of the carrier done with intent to cause damage or recklessly and with knowledge that damage would probably result (JCOGSA, article 13-2).

46 What liens can be exercised?

No contractual lien is valid under Japanese law.

The Commercial Code, article 842 provides for a statutory lien (called a ‘preferential right’ in Japanese laws) over the ship, its appurtenances and unpaid freight. The claims that have preferential right are:

(i) expenses relating to the sale of the ship and its appurtenances by court auction and the expenses of preservation after commencement of the proceedings for the sale by court auction;

(ii) expenses of preservation of the ship and its appurtenances at the last port;

(iii) all public dues levied on the ship in respect of the voyage;

(iv) pilotage dues and towage dues;

(v) salvage remuneration and the ship’s contribution to general average;

(vi) claims that have arisen from the necessity for the continuance of the voyage;

(vii) claims of the master and other mariners that have arisen from the employment contract; and

(viii) claims that have arisen from the sale or construction and the equipment of the ship, if the ship has not made any voyage after her sale or construction; and

(ix) claims in respect of the equipment and food and fuel of the ship for her most recent voyage.

The priority of the claims shall be determined by the above order.

However, if there are two or more of the claims mentioned in items (iv) to (vi) above, a claim arising later shall take precedence over an earlier one (Commercial Code, article 844).

The claims subject to the limitation of liability of shipowners shall have the lien over the ship (LLS, article 95 (see question 10)). The priority of claims as preferential right shall be below item (viii) above. Therefore, a cargo claim or collision claim shall have the lien over the ship.

If the bill of lading is issued by the charterer who chartered the ship directly from the shipowner, the claimants are entitled to exercise the lien over the ship (JCOGSA, article 19). The priority rank is the same as the claims subject to the limitation of liability of shipowner.

The lien shall be valid for one year from when the claim has arisen (Commercial Code, article 847). No extension is allowed. The claimants should arrest the ship within one year. The lien of (viii) of the above shall be extinguished by the departure of the ship.

A maritime lien has priority over the ship’s mortgage (Commercial Code, article 849).

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

The carrier shall be liable for the loss of the cargo caused by the delivery without the bill of lading. However, the carriers shall be entitled to rely on the package or weight limitation unless it is proved that loss or damage resulted from an act or omission of the carrier done with intent to cause damage or recklessly and with knowledge that cargo loss or damage would probably result.

The carrier shall be entitled to rely on the one-year time limit.

48 What are the responsibilities and liabilities of the shipper?

The shipper shall declare the dangerous cargo to the carrier. Otherwise, the shipper may be liable for damages arising from an accident caused by the dangerous cargo.

The bill of lading holder shall be liable for unpaid freight and other charges over the cargo if he or she receives the cargo (JCOGSA, article 20).

Shipping emissions

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

No ECA exists in Japan.

50 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 3.5 per cent m/m cap on sulphur content is applicable. No sanction is available for non-compliance.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There is no maritime court specialising in maritime claims. The relevant district court will have jurisdiction over a maritime dispute.

If the defendant has a registered office, the local court at the defendant’s office address has the jurisdiction over any claim against the defendant (Civil Procedure Law (CPL), article 4).

• the court of the place of delivery has jurisdiction over a bill of lading claim (CPL, article 5-1);

• the court of the Ship Registry has jurisdiction over claims in respect of charter or voyage against shipowners and charterers (CPL, article 5-6);

• the court where the ship is present has jurisdiction over liens or ship arrest (CPL, article 5-7);

• the court where an accident occurs or loss or damage was found has jurisdiction over claims in tort (CPL, article 5-9); and

• the court where a ship first arrives after a collision or maritime accident has jurisdiction over the claim in respect of the collision or the maritime accident (CPL, article 5-10).

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

Japan ratified the Hague Convention on Civil Procedure Matters in 1954 and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters in 1965. The conventions shall be applicable to the service to the signatory countries.

All service to foreign countries shall be done through the authority of the foreign countries or Japanese diplomatic authority (CPL article 108).

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

The Japan Shipping Exchange has the Tokyo Maritime Arbitration Commission (www.jseinc.org/en/tomac/index.html).

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

The foreign judgment may be enforceable if all the following conditions are fulfilled (CPL, article 118):

• the foreign court holding the judgment has jurisdiction over the case in accordance with the applicable law or convention;

• the defeated defendant was served with the necessary writ or order at the commencement of the procedure or defended to the litigation;

• the content of the judgment or the procedure is not against Japanese public policy; and

• there is reciprocity.

Japan ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958. The award of the signatory country of the New York Convention shall be enforceable as long as the enforceable condition of the Convention is fulfilled.

In order to enforce the foreign judgment or arbitral award in Japan, the claimants should obtain the enforcement judgment at a Japanese court. In the proceedings of the enforcement judgment, only the question of the legality of the procedure shall be considered and not the merits of the case.

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

Even if the claimants issue proceedings in a foreign country in breach of a Japanese jurisdiction clause, a Japanese court or Japanese law does not have any remedies for the defendant. Anti-suit injunctions do not exist in Japan.

56 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 defendants may be entitled to argue the jurisdiction and to request the court to dismiss the proceedings. Proceedings shall be dismissed, not stayed, if the exclusive jurisdiction clause is considered valid.

Limitation periods for liability

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

Type of claim

Time limit

Breach of commercial contract

Five years (Commercial Code, article 522)

Liability in tort

Three years (Civil Code, article 724)

Shipowner’s claim against charterer, shipper or consignee

One year (Commercial Code, article 765)

Claim based on bill of lading

One year (JCOGSA, article 14)

Claim based on collision

One year (Commercial Code, article 798)

Claim based on collision (Convention applicable)

Two years (Collision Convention, article 7)

Insurance claim based on policy

Three years (Insurance Law, article 95, paragraph 1)

It is possible to extend the Hague-Visby time limit (JCOGSA, article 14, paragraph 2).

The agreement of the extension of the time limit shall not be allowed in Japan but it is possible to waive the benefit of elapsed time.

58 May courts or arbitral tribunals extend the time limits?

Neither courts nor arbitral tribunals have any legal basis on which to extend the time limit.

Miscellaneous

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

Japan has not ratified the Maritime Labour Convention.

60 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?

If the Civil Reorganisation Law or the Company Rehabilitation Law is applied, the debt or the obligation shall be subject to the applicable law.

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

Japan has ratified the following conventions in respect of oil pollution damage:

• the International Convention on Civil liability for Oil Pollution Damage 1992;

• the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992; and

• the Protocol 2003 to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992.

Update and trends

The Japanese government decided to amend the Transport and Maritime Law (Commercial Code) applicable to domestic transport. The new law will be drafted within one to two years.

Okabe & Yamaguchi

Shuji Yamaguchi

s-yamaguchi@olo.gr.jp

Eiha Shinkawa, 5th Floor

1-5-17 Shinkawa

Chuo-Ku, Tokyo 104-0033

Japan

Tel: +81 3 3555 7931

Fax: +81 3 3555 7934

www.olo.gr.jp

Korea

Sung Keuk Cho and Hee-Joo Lee

Cho & Lee

Newbuilding contracts

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

There is no clear provision as to the timing of the title transfer in the Korean Commercial Code (KCC). The SAJ (Shipbuilders’ Association of Japan) form is widely used in Korea as a shipbuilding contract (it is usually agreed, however, that the governing law is English law and the jurisdiction is the London Maritime Arbitrators Association), and the title passes from the shipbuilder to the shipowner upon delivery of the ship.

Nonetheless, the parties can agree as to when title will pass. However, the change of title in the ship cannot be contested against a third party unless it is registered and recorded on the certificate of a ship’s nationality (article 743 of the KCC).

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

As a contract of guarantee, there are no specific formalities necessary for a refund guarantee to be valid, as long as there is proof of existence of a guarantee contract. A refund guarantee is usually provided by way of a letter of guarantee issued by a bank (sometimes by an insurance company), acceptable to the buyer in accordance with the shipbuilding contract. The letter of guarantee is stamped by the company’s signature seal or signed by the person representing the bank or insurance company.

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

If the yard refuses to deliver the vessel, an order for provisional disposition of delivery can be applied to a local court. The buyer should prove that it has fulfilled all contractual but the yard is refusing to deliver the ship at the agreed delivery time and place. Security by way of a cash deposit or a surety bond will be requested by the court. The security amount will be about one-tenth of the value of the ship.

4 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?

Under the shipbuilding contract, the builder is responsible for defective work (liability in contract).

On the other hand, under the Korean Product Liability Act, if a vessel is defective and results in loss of life, personal injury or any damage to properties other than the ship itself, a product liability claim can be brought by the shipowner, a purchaser from the original shipowner or any third party that has sustained damage (article 3 of the Product Liability Act). The time bar will be three years from the time the claimant notices the damage or loss and the identity of the liable party.

Ship registration and mortgages

5 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?

Korea maintains two different types of registration of vessels. The first is the recording system (Register Book) maintained by the register office of the district court. The title to the vessel and the mortgage are publicly announced via the Register Book. The other type is the registration records maintained by the local port authority (Regional Maritime Affairs and Port Administration) regarding obtaining the Korean flag. Vessels recorded in Korea have the right to fly the Korean flag.

Korean-flagged ships can be owned by:

• the Korean government or a public entity;

• Korean citizens;

• a commercial corporation established under Korean law; or

• a corporate body other than those mentioned above, whose principal place of business is located in Korea and whose representatives are all Korean (article 2 of the Korean Ship Act).

It is not possible to register vessels under construction under the Korean flag. However, it is possible to record a mortgage on a vessel under construction (articles 787 and 790 of the KCC).

6 Who may apply to register a ship in your jurisdiction?

As explained in question 5, owners of Korean ships may apply to register a ship under the Korean flag.

7 What are the documentary requirements for registration?

In order to register under the Korean flag, applicants must present the ship’s certificate of tonnage and a certified copy of the ship registry (article 8(1) of the Ship Act and article 10 of the Enforcement Decree).

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

Dual registration is not possible, but flagging out is possible.

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

The court register office maintains the register (recording) of mortgages. The mortgage registration contains the date when the mortgage registration was applied for, the date when the ship was mortgaged, the name and address of the mortgagee, the name and address of the debtor, and the credit amount.

Limitation of liability

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

Korea is not a contracting party to either the 1976 International Convention on Limitation of Liability for Maritime Claims (LLMC) or the 1996 Protocol to the 1976 LLMC. However, the KCC adopted most provisions in the 1976 LLMC. There is also the Korean Act on the Procedure for Limitation of Liability of the Shipowners, etc, which provides procedures for shipowners’ limitation proceedings.

The following claims are subject to limitation of liability (article 769 of the KCC):

• claims in respect of loss of life or personal injury or damage to goods or property other than the ship herself, which have occurred on board or in direct connection with the operation of the ship;

• claims in respect of loss resulting from delay of the carriage of cargo, passengers or their luggage;

• claims in respect of other loss resulting from infringement of rights other than contractual rights, which have occurred in direct connection with the operation of the ship; and

• claims in respect of measures taken in order to avert or minimise loss arising from the cause of claims described in the first three points of this list.

Registered shipowners, charterers, managers and operators can limit their liability.

11 What is the procedure for establishing limitation?

Shipowners or others entitled to limit their liability may file an application to commence the procedure of limitation of liability. They should present the court with prima facie evidence that the claim amount, which may be subject to the limitation of liability, may exceed the limitation amount and the list of the potential claimants’ names and addresses.

If the court considers that the limitation proceeding should be commenced, it will order the applicant to provide a deposit. Instead of a cash deposit, a letter of guarantee from a bank, insurance company or a P&I club is usually acceptable upon the approval of the court.

The limitation fund is calculated according to the law of the vessel’s flag country.

12 In what circumstances can the limit be broken?

A shipowner shall not be entitled to limit his or her liability if it is proven that the loss resulted from his or her personal act or omission committed with intent to cause such loss or recklessly with knowledge that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Korea has not ratified the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. Instead, similar to the 1996 LLMC, article 770, section 1, paragraph 1 of the KCC provides that the limit of liability in respect of claims for loss of life or personal injury to passengers of a ship is 175,000 SDR (special drawing rights) multiplied by the number of passengers which the ship is authorised to carry in accordance with the ship’s inspection certificate. This is a global limitation regime and not an individual limitation of 175,000 SDR per passenger.

The luggage claims are subject to the package limitation of 666.67 SDR per package or 2 SDR per kilogramme, whichever is higher, as provided in article 797 of the KCC. The luggage claims are also subject to global limitation, as provided in article 770, section 1, paragraph 3 of the KCC, which reads as follows:

The limit of liability in respect of any other claims than paragraphs 1 and 2 shall be calculated as follows:

• 83,000 SDR for a ship with a tonnage below 300 tons;

• 167,000 SDR for a ship with a tonnage not below 300 tons but not exceeding 500 tons; and

• for a ship with a tonnage in excess of 500 tons, the following amounts shall be added to 167,000 SDR:

• for each ton from 501 to 3,000 tons, 167 SDR;

• for each ton from 30,001 to 70,000 tons, 125 SDR; and

• for each ton in excess of 70,000 tons, 83 SDR.

Port state control

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

The Ministry of Oceans and Fisheries is the body responsible for the port state control.

Staff of the Regional Maritime Affairs and Port Administration of the Ministry of Oceans and Fisheries carry out the port state control.

Korea is a member of the Memorandum of Understanding on Port State Control in the Asia-Pacific Region (the Tokyo MOU), which came into effect in April 1994. The Tokyo MOU is one of the most active regional port state control (PSC) organisations in the world. The organisation consists of 18 member authorities in the Asia-Pacific region.

15 What sanctions may the port state control inspector impose?

Port state control inspectors are entitled to issue an order to rectify deficiencies or an order prohibiting departure of a vessel until the vessel’s deficiencies have been rectified.

16 What is the appeal process against detention orders or fines?

The shipowner may apply for an objection to the Minister of Oceans and Fisheries within 90 days after receipt of the deficiency correction order or departure prohibition order (the Minister should then notify the result within 60 days). The shipowner may also commence an administrative action without applying for an objection.

Classification societies

17 Which are the approved classification societies?

The Korean Register of Shipping (KR) is the approved classification society.

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

A classification society may be liable based on breach of contract or in tort if it is negligent in its performance. However, there seems to have been no court case seeking the KR’s liability.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The Minister of Oceans and Fisheries can order wreck removal to the owner or possessor of the drifting or sunken object when such an object is found that may obstruct navigation of a vessel or where there is such a risk of obstruction (article 26 of the Korean Public Order in Open Ports Act).

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

Korea is not a party to the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910, but several provisions were adopted in articles 876 to 881 of the KCC.

Korea is also not a party to the International Convention on Salvage 1989, but many provisions were adopted in articles 882 to 895 of the KCC.

21 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, and Lloyd’s standard form of salvage agreement is quite popular in Korea. There are several Korean private salvage companies, including Korea Salvage Co, Ltd, and international salvage companies.

Ship arrest

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

Korea has ratified neither the International Convention Relating to the Arrest of Sea-Going Ships 1952 nor the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

There are two types of vessel arrest available in Korea: the first is the provisional arrest (or prejudgment attachment) and the second is the maritime lien arrest.

Provisional arrest (or prejudgment attachment) is available to a claimant and may be obtained to secure his or her claim (any type of claim including cargo claim and outstanding amount owed by the shipowner) against the shipowner. For a prejudgment attachment, a counter-security is required. A counter-security is usually about one-tenth of the claim amount. If the court allows, a claimant may deposit such a counter-security by way of a surety bond issued by an insurance company.

Maritime lien arrest is the other type of arrest available in Korea for those claims that give rise to a maritime lien. A claimant who is entitled to a maritime lien or to foreclose the mortgage on the vessel may arrest a vessel for an auction sale of the vessel. For a maritime lien arrest, a counter-security is not required. However, when an application for the arrest is made, the auction costs including appraisal fees must be paid to the court. These advanced auction costs will be paid back to the claimant prior to other claims from the auction proceeds. The amount of auction costs that must be paid to the court differs depending on the size of the claim.

Under the Korean Conflict of Laws Act, whether or not a claim gives rise to a maritime lien will be determined under the law of the vessel’s flag country.

It is impossible to arrest an associated or sister vessel.

24 What is the test for wrongful arrest?

When it manifestly turns out that the claim itself does not exist at all or provisional arrest of an associated vessel.

25 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 is generally difficult. However, a bunker supplier can effect a maritime lien arrest (not provisional arrest) in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, rather than the owner, of that vessel, provided that bunker supplies give rise to a maritime lien under the law of the vessel’s flag country.

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

See question 23.

27 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?

The arrested party has to provide the full amount claimed by the arresting party in cash, or a letter of undertaking (usually issued by the vessel’s P&I club), if the arresting party agrees to accept it in exchange for withdrawal of the application for provisional arrest or maritime lien arrest.

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

Upon the arresting party’s application to the court, a company that is specialised in the maintenance and preservation of a vessel is usually appointed by the court.

29 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?

As regards provisional arrest, it is possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere (usually at a competent tribunal according to the terms of the carriage contract or the bill of lading). A provisional arrest in Korea does not automatically create jurisdiction on the merits in Korea.

In the case of maritime lien arrest, the auction sale of the vessel is also carried out in Korea, so the arrested party, if he or she wishes, should object to the auction sale of the vessel at the Korean court.

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

The attachment of real estate, bank account, account receivables or chattel owned by the shipowner is possible.

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

Upon the claimant’s application, an order for delivery up or preservation of evidence or property and an order for production of documents can be issued by the court.

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

It is theoretically possible to arrest the bunkers, but this would be difficult in practice.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Judicial sale can be applied for by a claimant who has a maritime lien claim (as explained in question 23 above) or mortgage over the ship or the final and conclusive judgment against the shipowners in favour of the claimant.

34 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?

The procedure for initiating and conducting judicial sale of a vessel will be in the following order: application by the arresting party, the court’s order for the arrest and judicial sale of the vessel, appraisal of the vessel, advertisement of the auction, sale procedure (bidding), payment by the successful bidder and distribution of the auction proceeds.

The process would usually take six to 18 months, depending on the market situation.

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

The order of priority is determined according to the law of the vessel’s flag country.

For Korea-flagged vessels, maritime lien claims have priority over pledge and mortgaged claims.

The auction costs (service costs, appraisal fees, and costs for, inter alia, maintenance, preservation of the vessel and wharfage during the auction proceeding) will, in principle, be paid prior to other claims from the auction proceeds. Also, crew members’ claims for salary for the last three months and for accident compensation have priority over maritime lien claims.

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

Judicial sales serve to extinguish all prior liens and encumbrances on the vessel, including maritime liens, and thereby give the purchaser clean title.

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

Usually, judicial sale of a vessel in a foreign jurisdiction will be recognised, unless it is against Korean public policy.

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

No, Korea is not a signatory to the International Convention on Maritime Liens and Mortgages 1993.

Carriage of goods by sea and bills of lading

39 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?

While Korea has neither ratified nor acceded to the Hague Rules 1924, the Hague-Visby Rules 1968, the Hamburg Rules, or the UN Convention on Contracts for the International Carriage of Goods, Korea has adopted most provisions of the Hague-Visby Rules 1968 in the KCC.

The carriage of goods by sea begins from receipt of goods at the loading port and ends upon delivery of goods at the discharge port (port to port).

Korea has not yet decided to ratify the Rotterdam Rules.

40 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?

The KCC is applicable to road transport. There is no separate law applicable to rail transport. On the other hand, the Railroad Enterprise Act (article 25) provides that article 135 of the KCC applies mutatis mutandis with respect to loss, damage, or delay of cargo during railroad transport.

As Korea has ratified the Montreal Convention, such Convention is applicable to international air carriage. Articles 895 to 935 of the KCC have similar provisions to the Montreal Convention, which would be applicable for domestic air carriage and air carriage between Korea and non-signatory countries.

41 Who has title to sue on a bill of lading?

A holder of the original bill of lading has title to sue on a bill of lading.

42 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 terms in a charter party can be incorporated into the bill of lading, as long as the date of the charter party is described on the bill of lading. A jurisdiction or arbitration clause in a charter party, the terms of which are incorporated in the bill, is binding on a third-party holder or endorsee of the bill.

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

An previous decision of a Korean court recognised the validity of the ‘demise’ clause or identity of carrier clause. However, more recent Korean court decisions seem to put more emphasis on the description on the front side of a bill of lading, ie, who is described and signed ‘as carrier’ at the right bottom of the signature section on the front side of a bill of lading (thus, it seems that the demise clause or identity of carrier clause in the reverse terms of a bill of lading is no longer valid and binding).

44 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?

Even if the shipowners are not the contractual carrier, they can be liable for cargo damage in tort. If they are the actual carrier or the subcontractors named under the Himalaya clause in the bill of lading, they can rely on the defences and limitation of liability available under the KCC or the terms of the bill of lading, as long as such terms are not invalid under the KCC.

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

The carrier shall not be liable for any loss or damage to cargo resulting from any deviation to save life or property at sea or any other reasonable deviation. However, the majority academic view is that an unreasonable deviation is a breach of the contract of carriage, despite existence of a liberty clause.

46 What liens can be exercised?

The statutory maritime lien recognised over the ship, its appurtenances and unpaid freight under the KCC (article 777) are the following:

• court-related expenses, port dues, pilotage, towing charges and preservation expenses or survey fees for the vessel after entering the port;

• claims of the crew or servants of the owner arising from the employment contract;

• salvage remuneration and the ship’s contribution to general average; and

• claims for collision and other maritime accidents, damages to the navigational aids, port facilities and fairway and claims for loss of life or damages to crew or passenger.

The lien shall be valid for one year from when the claim has arisen (article 786 of the KCC). No extension is allowed.

The master has a lien on the cargo for the unpaid freight, demurrage, contribution for general average or salvage, etc (article 807 of the KCC), and the carrier can place the cargo on auction sale so as to receive the said outstanding amount (article 808 of the KCC). The carrier also has a commercial lien on the cargo (owned by the debtor) in their possession for an outstanding amount arising from a commercial transaction (article 58 of the KCC).

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

The carrier shall be liable for the loss of cargo caused by the delivery without receipt of the original bill of lading. However, the carrier can rely on the package (666.67 SDR per package or unit) or weight limitation (2 SDR per kilogramme) under the KCC, unless it is proven that loss or damage resulted from an act or omission of the carrier itself (representative director or managerial level officers in case of a corporation) done with intent to cause damage or recklessly with knowledge that cargo loss or damage would probably result.

48 What are the responsibilities and liabilities of the shipper?

The shipper shall deliver the cargo at the time and place as agreed between the parties or according to the custom of the loading port (article 792 of the KCC), pay the freight, declare the dangerous cargo to the carrier (article 801 of the KCC) and not provide dangerous goods (article 800 of the KCC). The bill of lading holder shall be liable for unpaid freight and other charges over the cargo if he receives the cargo.

Shipping emissions

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

There is no ECA in force in Korean domestic territorial waters.

50 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 3.5 per cent m/m on sulphur content of fuel oil (bunker C oil) is applicable (article 42, paragraph 2 of the Enforcement Decree of the Ocean Environment Management Act). Port state control inspectors inspect ships in Korean waters to verify that they possess a valid IAPP certificate, and in the absence of a valid certificate, they can issue an order to rectify the deficiency or an order prohibiting the departure of a vessel.

A shipowner that fails to comply with the said requirement shall be liable for a fine not exceeding 10 million won or to imprisonment for a term not exceeding one year (article 129, section 1, paragraph 6 of the Ocean Environment Management Act).

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There is no maritime court specialising in maritime claims. The relevant district court will have jurisdiction over a maritime dispute. Usually, the court having jurisdiction over the port (eg, the Busan District Court or the Seoul Central District Court) has jurisdiction over a maritime dispute.

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

Korea ratified the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters in 1965. All service to foreign countries shall be done through the Korean diplomatic authority.

In the case of provisional arrest or maritime lien arrest of a vessel, the service will be effected on the master, and in the case of action on the merits, the service will be on the place if the place of service has been designated or otherwise, service overseas.

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

The Korean Commercial Arbitration Board and the Seoul International Dispute Resolution Center (established in 2013) have a panel of maritime arbitrators specialising in maritime arbitration.

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

Foreign judgments may be enforceable if all the following conditions are fulfilled:

• the foreign court holding the judgment has jurisdiction over the case in accordance with the applicable law or convention;

• the defeated defendant was served with the necessary writ or complaint at the commencement of the procedure or defended his or her case at the litigation;

• the contents of the judgment or procedure is not against Korean public policy; and

• there is reciprocity.

As for arbitration, Korea ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

In order to enforce the foreign judgment or arbitral award in Korea, claimants should obtain an enforcement judgment from a Korean court. In the proceedings of the enforcement judgment, only the question of the legality of the procedure shall be considered, not the merits of the case.

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

Even if the claimants issue proceedings in a foreign country in breach of the exclusive jurisdiction clause providing for a Korean court, a Korean court or Korean law does not have any remedies for the defendant. Anti-suit injunction does not exist in Korea. On the other hand, a Korean defendant in a foreign court proceeding may be entitled to commence legal proceedings in Korea based on the Korean court exclusive jurisdiction clause and to raise defences and limitation of liability according to Korean law.

56 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 would be entitled to argue the foreign court or arbitral tribunal jurisdiction and to request that the court dismiss the proceedings. Proceedings shall be dismissed, not stayed, if the jurisdiction clause is deemed valid.

Limitation periods for liability

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

• Claim under a bill of lading: one year (article 814 of the KCC), extendable by parties’ agreement.

• Claim under the charter party: two years (articles 840, 846 and 851 of the KCC), extendable by parties’ agreement.

• Claim for collision: two years (article 881 of the KCC), extendable by parties’ agreement.

58 May courts or arbitral tribunals extend the time limits?

No, neither courts nor arbitral tribunals can extend the time limits.

Miscellaneous

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

Korea ratified the Maritime Labour Convention on 9 January 2014.

60 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?

In principle, it is impossible to seek relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract. However, if the Debtor Rehabilitation and Bankruptcy Act is applied, the debt or obligation shall be subject to that Act.

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

Not applicable.

Sung Keuk Cho

skcho@cholee.co.kr

Hee-Joo Lee

hjlee@cholee.co.kr

10th floor, Kais System Bldg.

118 Seochojungang-ro, Seocho-gu

137-881 Seoul

Korea

Tel: +82 2 592 5790

Fax: +82 2 592 5798

www.cholee.co.kr

Latvia

Edward Kuznetsov

Maritime Legal Bureau

Newbuilding contracts

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

The Latvian Maritime Code (LMC) does not contain particular regulations regarding demands to shipbuilding contracts. Consequently legal relationships between a shipbuilder and shipowner are regulated by common law and, particularly, by the Latvian Civil Code if a shipbuilding contract is subject to Latvian law. To pass title in a ship, a shipbuilder must alienate and pass a ship to the owner. In practice, parties to the contract fix these actions at the moment of the title in the ship passing to the shipowner by concrete agreements or protocols. If the purchaser of the ship is known, the shipbuilder issues a shipbuilder’s certificate.

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

No special formalities are required for the refund guarantee or warranty to be valid. Latvian common law regulates the procedure of warranty issue. A guarantee or warranty when issued must be written and signed by authorised persons.

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

In theory it is possible to bring a suit to the court and to ask the court to compel such delivery. This could be done both in common civil suits and civil process order. In practice, however, such suits have not been brought until now. Appropriate disputes between parties of the contract are usually settled by dispute resolution agreements.

4 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 terms of the shipbuilder’s guarantee are always included in the shipbuilding contract. Therefore it is possible to claim against the shipbuilder for failing to meet the guarantee terms and to demand either that the shipbuilder repairs the damages or provides expenses for the necessary repairs.

If the shipbuilder limits his or her liability in the terms of the shipbuilding contract, then he or she can only be held responsible to the extent provided in those limits. In a court order a shipowner can demand either the reduction of the contract price or cancellation of the contract if there are sustained damages.

A purchaser from the original shipowner or a third party that has sustained damages in the vessel can claim against the shipbuilder if the shipbuilder expressly provided such possibility in the newbuilding contract, on the basis of assignment from the owner.

Ship registration and mortgages

5 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?

In order to register a vessel in the Ship Register, her technical condition and equipment shall conform to the requirements of the norms of international law binding on Latvia and Latvian regulatory enactments in relation to navigation safety and the protection of human life, health and the environment.

The following ships may be registered in the Latvian Ship Register (LSR) (with an age limit of 23 years):

• cargo, passenger and pleasure craft (for fewer than 12 passengers);

• tugs, ice breakers and auxiliary fleet;

• fishing vessels if they are used for commercial activities within Latvian territorial waters;

• ships in state service; and

• yachts and pleasure craft.

It is also possible to register vessels under construction.

6 Who may apply to register a ship in your jurisdiction?

Latvian citizens, citizens of countries other than Latvia, companies incorporated in Latvia and abroad and bareboat charterers.

7 What are the documentary requirements for registration?

General provisions of company registration are set out in the Latvian Commercial Code. There are no specific limitations – a company may be established by Latvian or foreign shareholders. The minimum equity capital is €2,845.

The equity capital of a company may be less than €2,845 if the company conforms to all of the following criteria:

• the founders of the company are natural persons, and there are not more than five of them;

• the shareholders of the company are natural persons, and there are not more than five of them;

• the board of directors of the company consists of one or several members, and they all are shareholders of the company; and

• each shareholder of the company is a shareholder of only one such company, the equity capital of which is less than €2,845.

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

Registration of vessels in Latvia is performed by the LSR. The following types of registration are recognised:

• registration of vessels owned by Latvian residents;

• registration of vessels owned by parties not resident in Latvia on the basis of a management agreement; and

• registration of vessels owned by parties not resident in Latvia on the basis of a bareboat charter agreement

• registration of vessels owned by parties not resident in Latvia if they have an authorised representative in Latvia.

A foreign-registered ship may be registered in Latvia in accordance with a bareboat charter contract. Registration of a ship in the LSR on the basis of a bareboat charter contract gives a ship the right to sail under the Latvian flag.

In respect of compliance with the norms of international law, the ship’s flag, home port, crew, technical supervision, navigational safety and other issues associated with the operational management of the ship, Latvian regulatory enactments shall be applied to a foreign ship registered in the LSR on the basis of a bareboat charter contract. In turn, the regulatory enactments of the relevant foreign state will apply to a Latvian ship registered in a foreign ship register on the basis of a bareboat charter contract. The exception to both situations concerns ownership rights, where the regulatory enactments of the original flag state shall be applied.

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

The LSR may register ship mortgages only for vessels registered (even partially) in the LSR. The general rules regarding mortgaging are contained in the LMC.

The ship’s mortgages shall be recorded in the order they are presented. The priority of the mortgages is established by the order of their registration in the register book.

There are no restrictions on registration for vessels of non-residents with existing mortgages, if the mortgagee’s permission has been granted. A certificate of registration of such vessel contains the place, date and time of registration and by whom the mortgage was registered.

The required documents are the ship’s mortgage bond (notarised) and proof of the consent of all owners, if there is more than one (also notarised).

The mortgage has to be novated:

• if there is a change of legal base of secured liability or priority of claim;

• if the amount of the secured claim is increased; or

• if there is a change of mortgagor or mortgagee.

Other changes of the conditions of a mortgage are possible to register without novation.

Cession is also available.

Limitation of liability

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

The regime that applies to limitation of liability is regulated by the LMC. Claims subject to limitation are:

(i) claims associated with loss of human life or harm caused to his or her health, or destruction of property or occasioning damage to property (including damage to port structures and equipment, bodies of water, waterways and means of navigation) if it has occurred on board ship or is directly connected with the operation of the ship or salvage operations, and losses arising from this;

(ii) claims associated with losses that have arisen due to delay in the carriage of passengers or their luggage;

(iii) claims associated with losses that have arisen due to wrongful acts (delicts) if these have occurred in direct connection with the operation of the ship or salvage operations;

(iv) claims associated with the raising, removal, destruction or rendering harmless of a ship (including everything that is located or was located on the ship) if the ship is sunk, damaged in an accident, run aground or abandoned;

(v) claims associated with the removal, destruction or rendering harmless of the ship’s cargo; and

(vi) any other claims associated with losses that are the basis for the claims referred to in clauses (i) to (v) of this list and in relation to which the persons liable for the losses may limit their liability.

The limiting of liability in relation to the claims referred above shall also be applied if they are brought by way of a subrogation procedure or in order to receive compensation in accordance with a contract or otherwise. The limiting of liability in relation to claims (iv), (v) and (vi) shall not be applied if they relate to compensation arising from a contract entered into with the person liable for the losses.

Under the LMC, parties that can limit their liability are shipowners (charterer, manager or operator) and salvors in accordance with the provisions of Latvian Maritime Code Liability Limitation Chapter and the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC). The above-mentioned parties may limit their liability in relation to claims that are stated above.

11 What is the procedure for establishing limitation?

The LMC defines the procedure for establishing limitation. A court shall adopt an adjudication regarding establishment of the limitation fund pursuant to the application of a person against whom an action has been brought in the relevant court. The limitation fund shall be established taking into account the amount specified in the clause on general limitations of liability and the clause on limitations of liability in relation to claims of passengers of the LMC, as well as interest in connection with it which shall be calculated for the period from the date when the event occurred that gave rise to the liability until the date when the limitation fund was established. Any fund that has been established in such a way shall be utilised solely for the satisfaction of those claims to which limitation of liability may be applied.

Persons willing to open a limitation fund shall pay an amount into a bailiff’s office deposit account or provide such security as shall be determined by the court taking into account the possibility of the enforcement of the court judgment.

12 In what circumstances can the limit be broken?

The LMC states that a person who is liable for losses is not entitled to limit his or her liability if it is proven that the losses were caused due to the action or failure to act of this person, the purpose of which was to cause such loss, or this person, being aware of the probability of such losses, nevertheless acted negligently.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention 1974 and its 2002 protocol have been in force in Latvia since 23 April 2014.

Clause 239 of the LMC also refers to EU Regulation No. 392/2009 of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents.

Port state control

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

The Latvian Maritime Administration (LMA) is responsible for the port state control.

The LMA is a constituent part of the Maritime Department of the Latvian Ministry of Communication.

15 What sanctions may the port state control inspector impose?

Port state control inspectors are entitled to detain a vessel until the vessel’s deficiencies have been rectified. Vessel owners will be charged for a second inspection.

In the case of multiple detentions, the vessel can be banned from Latvian ports.

16 What is the appeal process against detention orders or fines?

Since 1 July 2005 Latvia has been a member of the Paris Memorandum of Understanding on Port State Control, 1982 (the Paris MoU).

If detention is a result of the Paris MoU regulations, the shipowner can appeal through an appropriate review panel.

Detention of a vessel is the act of an administrative institution. Consequently the common chain of appeal is:

• to the head of the LMA;

• if the owner or master is not then satisfied – to the head of the Maritime Department of the Communication Ministry; and

• if still not satisfied – to the Administrative Court.

Classification societies

17 Which are the approved classification societies?

The following classification societies are authorised by the Latvian Maritime Administration:

• Bureau Veritas;

• DNV GL;

• Lloyd’s Register;

• the Russian Maritime Register of Shipping; and

• the American Bureau of Shipping.

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

There is no specific legislation in Latvia concerning liability of a classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

If a wreck located in Latvian waters is hazardous, the LMA shall proclaim the area of the location of the wreck as closed to navigation and mark the wreck. Information regarding the wreck and a description of the marking thereof shall be published in the LMA’s bulletin titled ‘Notices to Mariners’.

If the owner of the wreck is unknown, the wreck shall be deemed to be found property and the LMA shall publish in a week’s time in the newspaper Latvijas Vēstnesis, a notice regarding the wreck and an invitation to the owners of the wreck to apply within a period of six months.

If a wreck is hazardous, the LMA shall set a date when the owner of the wreck must commence the removal thereof. If the owner of the wreck does not commence removal of the wreck by that date, the LMA shall organise the removal of the wreck behalf of its owner.

If the LMA has removed the wreck, it is entitled to sell any of the property so acquired by auction in order to cover the expenses incurred in the removal of the wreck.

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

• the Convention for the Unification of Certain Rules of Law with respect to Collisions between vessels 1910;

• the Convention on the International Regulations for Preventing Collisions at Sea 1972;

• the International Convention of Salvage 1989;

• the International Convention on Civil Liability for Oil Pollution 1969;

• the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage;

• the International Convention for the Prevention of Pollution from Ships 1973;

• the International Convention Relating to Intervention on the High Seas in cases of Oil Pollution Casualties 1969; and

• the International Convention on Oil Pollution Preparedness, Response and Cooperation 1990.

21 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 form of salvage agreement and Lloyd’s standard form is commonly acceptable. The LMC permits anyone to perform salvage operations, however, provisions of the LMC shall also be applied if the owner of the ship to be salvaged and the owner of the ship carrying out the salvage operations are one and the same person or if the ship conducting salvage operations is owned by the state of Latvia.

The provisions of the LMC shall not affect the application of those regulations concerning salvage operations performed by state institutions. Salvors who have participated in such salvage operations have the right to a salvage reward or special compensation.

Ship arrest

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

Both the 1952 and the 1999 ship arrest conventions are now in force in Latvia.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Maritime claims are listed in the LMC in conformity with article 1 of the 1999 Ship Arrest Convention. A vessel flying any flag can be arrested in Latvia, regardless of the law governing the claim.

A sister ship or a ship in associate ownership can also be arrested in Latvia if at the time of arrest they are owned by a person liable for the maritime claim and at the time the claim arose this person was the owner of the ship in relation to which the maritime claim arose, or the bareboat, time, or voyage charterer of such ship.

24 What is the test for wrongful arrest?

Both bad faith (for example, the use of false documents as ground for arrest) and the ultimate failure of the claim will cause an arrest to be considered wrongful. In practice, there have been no claims for wrongful arrest in Latvia. A claim for a wrongful arrest can be brought before the courts in the same way as a common civil process.

25 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?

Such arrest in Latvia seems to be unlikely.

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

The court can require security to be put down in the form of a cash deposit to a court bailiff’s bank account or in the form of a bank guarantee. Letters of undertaking from P&I clubs may also be accepted. The amount of security cannot be less than the amount of the claim.

27 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?

The arrested party may be required to put down security in the same forms as mentioned above (see question 26). The amount of security cannot be less than the amount of the claim.

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

The shipowner, manager or another party who was responsible for the vessel just before the arrest is responsible for the maintenance of the arrested vessel.

29 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 not obligatory to pursue the claim on its merits in the courts of Latvia; a vessel may be simply arrested to obtain security.

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

Other forms to obtain security in respect of a vessel are mentioned in Latvian Civil Proceeding Code and they are: prohibiting the defendant from performing certain actions; and entering a ‘prohibition note’ (injunction) in the Latvian Ship Register. Several forms of attachment order may be used at the same time.

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

Usually the debtor is responsible for the preservation of an arrested vessel. Orders for delivery up in respect of an arrested vessel are compulsory at the forced sale stage. The court bailiff must issue such orders.

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

It is possible both in theory and in practice to arrest bunkers.

Technical problems may occur if it is necessary to arrange storage of an arrested bunker.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The winning claimant may apply for judicial sale of an arrested vessel.

34 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?

Before the forced sale (by auction) of a ship, a bailiff shall prepare a notice regarding the forced sale of the ship and send it to the following persons:

• the ship registrar;

• the holders of all ship mortgages or other registered rights that are not formed as bearer obligations;

• the holders of all those ship mortgages or other registered rights that are formed as bearer obligations, as well as the holders of maritime liens specified in the LMC, if such persons have informed the bailiff of their claims; and

• shipowners.

The notice shall be sent 30 days prior to the date of the forced sale of a ship and the following information shall be included therein:

• the time and place of the sale of the ship and other information that is necessary in order that the persons referred to in in the list above may defend their interests; and

• if the time and place of the sale of the ship cannot be specified precisely, notice shall be given of the approximate time and the intended place of the sale of the ship.

In practice it will usually take between three to six months for the judicial sale to be concluded. Court costs will usually be about €1,000. Costs include the state fee, remuneration for the bailiff according to the tariff and expenditures required for the performance of judicial sale activities. These are as follows:

• costs associated with the delivery and issue of summonses and other documents;

• costs relating to the receipt of necessary information in a matter for execution;

• costs relating to bank and other institution services;

• travel costs to the place of execution of the judgment;

• payment to experts;

• payment for the publication of advertisements regarding forced sale; and

• other necessary costs.

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

Claims will be satisfied from the income from the sale by auction of a ship, in the following order:

• claims regarding expenditures that are associated with the arrest of the ship and the sale, including the costs of the maintenance of the ship and the ship’s crew, wages and other costs referred to in section 33, paragraph one, clause 1 of the LMC (costs associated with employment on the ship of the master of the ship, officers and other members of the crew of the ship, including cost of repatriation and social insurance contributions payable on their behalf);

• claims regarding expenditures that have arisen for a competent institution in the raising of a sunk ship or relocating of a ship damaged due to an accident, in order to ensure safety of navigation or to protect the marine environment;

• claims associated with payments of taxes and debts;

• claims associated with ship salvage, observing the provisions of section 34, paragraphs 2 and 3 of the LMC (a maritime lien associated with the reward for salvage of a ship shall take priority over those maritime liens that were created before the operations occurred that gave rise to claims associated with reward for salvage of the ship. Claims that are secured by maritime liens that are associated with a reward for ship salvage shall be satisfied in reverse order taking into account the time when such maritime liens were created. Such maritime liens are created on the date when each salvage measure (operation) is completed);

• claims secured by maritime liens, except for claims associated with ship salvage;

• the claims of shipbuilders and ship repairers if they have utilised their rights of retention prior to the forced sale (auction) of the ship;

• claims associated with pledges, mortgages and other registered encumbrances;

• other maritime claims; and

• other claims.

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

The LMC states that in the case of a judicial sale of a ship, the court shall approve a statement of auction and take a decision regarding registration of the ownership rights to the sold ship in the name of the buyer, as well as regarding deletion of ship mortgages, encumbrances, other claims registered in the Ship Register and maritime liens, except for those assumed by the buyer. On the basis of the court decision, the ship registrar shall delete all ship mortgages, encumbrances and other claims registered in the Ship Register, as well as register the ownership rights of the buyer to the ship or issue a certificate of deletion of the ship.

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

Yes. All maritime liens, registered mortgages and other encumbrances on a ship shall cease to be in effect after the forced sale of a ship in a foreign state if at the time of sale the ship was in the territory of the relevant state and the sale took place in accordance with the regulatory enactments of such state.

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

No.

Carriage of goods by sea and bills of lading

39 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-Visby Rules have been implemented into the LMC.

Although The United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (The Rotterdam Rules) has been open for signature from September 2009, the Ministry of Transport of Latvia in cooperation with the Ministry of Justice of Latvia are still in the process of evaluating whether to ratify it or not.

The Hamburg Rules are not in any variation in force in Latvia.

40 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?

The Convention on the Contract for the International Carriage of Goods by Road (CMR) (Geneva 1956) is in force.

Also, the following domestic laws and regulations apply:

• the Law on Carriage by Road of 23 August 1995;

• the Carriage by Rail Law of 21 December 2000;

• the Law on Aviation of 5 October 1994 with amendments; and

• Cabinet Regulation No. 218 Regarding Carriage by Air of Passengers, Baggage and Cargo of 21 March 2006.

41 Who has title to sue on a bill of lading?

The LMC does not regulate this question. Basically, a bill of lading is considered to be a document of title, so a legal possessor of a bill of lading has a right to sue on it.

42 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?

Although the LMC does not regulate this question directly, it is possible to presume that the terms of a charter party may be incorporated into the bill of lading as long as they do not contravene the Hague-Visby Rules. Nevertheless, arbitration clauses of a charter party, the terms of which are incorporated into the bill of lading, are not binding on a third party. These provisions are stated in the Latvian Civil Procedure Code.

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

‘Demise’ clauses and indemnity clauses are not recognised.

44 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, in accordance with a carriage contract, part of the carriage is performed by another carrier (a sub-carrier), the parties to the carriage contract may agree that a sub-carrier with his or her own means of transport shall be deemed to be a forwarding agent. In such case, the carrier shall prove that the losses were caused during the time period when the cargo was in the actual custody of the sub-carrier.

For the part of the carriage when the cargo is located in the custody of a sub-carrier, he or she shall be liable in accordance with the LMC provisions applicable for liability of a carrier.

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

The usual scheduled route may be deviated from only to rescue people, or owing to another reason that is justified and coordinated with the charterer or operator of the ship.

46 What liens can be exercised?

As per the Latvian Civil Code a person who is in possession of certain property may keep it until his or her own claim is satisfied. A detention right may be exercised only when the person detaining has gained possession of a property by lawful means, when his or her claim against the opposite party concerns the detained property, and also when the obligation is already due to have been performed and is neither restricted by a contractual condition or term.

As per the provisions of the Latvian Maritime Code, if the carrier has a claim for payment of freight against the receiver, the carrier is entitled to not issue the cargo before the receiver has paid freight or given sufficient security.

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

Cargo shall be delivered:

• against a named bill of lading – to the receiver who is referred to in the bill of lading or to a person to whom the bill of lading has been transferred along with a named endorsement or in another way complying with the provisions provided for endorsement of debt claims;

• against an order bill of lading:

• to the sender or receiver (depending on whether the bill of lading has been issued pursuant to the order of a sender or a receiver);

• if the bill of lading is endorsed, to the person who is referred to last in a continuous chain of endorsement notations; or

• the presenter of the bill of lading if the last notation in the chain is a blank endorsement; and

• against a bearer bill of lading – to the presenter of the bill of lading.

The carrier or his or her authorised person may issue cargo to the receiver only if he or she has presented the original of the appropriately endorsed bill of lading.

If the carrier delivers cargo without production of the bill of lading, he or she is acting at his or her own risk, violating provisions of the LMC.

48 What are the responsibilities and liabilities of the shipper?

The LMC does not contain any definite provisions governing responsibilities and liabilities of the shipper. Still, it is worth saying that such obligations may vary depending on the text of the bill of lading.

Shipping emissions

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

There is an ECA in force in Latvian waters in full conformity with MARPOL. There is also a special fixed prohibition on burning garbage in Latvian territorial waters.

50 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 maximum sulphur content is limited to 0.1 per cent m/m for diesel oil and 1 per cent for heavy fuel oil.

The authorities are entitled to check the quality of fuel oil from time to time. Sanctions for non-compliance (monetary penalties) are inserted into Latvian Administrative Violations Code.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There are no courts or judges specialising in maritime cases in Latvia. Maritime disputes are heard in the courts of common jurisdiction.

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

The Latvian Civil Procedure Law.

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

No, there is no special domestic maritime arbitral institution in Latvia. However, there are some arbitration institutions with arbitrators specialising in maritime law.

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

The Latvian Civil Procedure Law governs recognition and enforcement of foreign judgments and awards in accordance with international documents that Latvia has ratified:

• Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation); and

• New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

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

As per clause 132 of the Latvian Civil Procedure Law, a court cannot accept an application that provides for a foreign court or arbitral tribunal to have jurisdiction. If a court accepts it, the defendant must draw a grounded objection and the court shall terminate proceedings on the basis of clause 223 of the Latvian Civil Procedure Law.

56 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?

See question 55.

Limitation periods for liability

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

The time limits applying to claims are:

• for breach of contract: 10 years;

• for liability in tort: 10 years; and

• for insurance claims: 10 years for matters concerning life insurance and one year for all other insurance matters, excepting matters of compulsory insurance as enacted by law.

The LMC also states the following time limits:

• cargo claims: one year;

• collision claims: two years;

• pollution claims: three years;

• general average claims: one year;

• passenger claims: two years;

• claims in the case of salvage: two years;

• shipbuilding, ship repair claims: one year;

• disbursements accounts claim: one year;

• claims associated with employment on the ship of the master of the ship, officers and other members of the crew of the ship, including cost of repatriation and social insurance contributions payable on their behalf: one year;

• claims in relation to loss of human life or harm caused to human health (including claims regarding recovery of means of support) on water or on land in connection with the operation of the ship: one year;

• claims associated with payments for the use of ports, canals and other waterways and pilotage services: one year; and

• claims arising out of loss of or damage to property or destruction thereof caused by the operation of the ship other than loss of or damage to cargo, containers and passenger belongings carried on the ship: one year.

Parties can agree to an extension of these limits in their bilateral agreement.

58 May courts or arbitral tribunals extend the time limits?

Courts and arbitral tribunals cannot extend the time limits.

Miscellaneous

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

The Maritime Labour Convention 2006 has been ratified by Latvia and entered into force in Latvia on 20 August 2013. It applies to all Latvian shipowners, crewing agencies, seafarers and vessels flying the flag of Latvia.

60 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?

A court may be asked to order that a contract be amended or cancelled if economic circumstances have changed so substantially that the original shipping contract places an unfair burden on a party to the contract.

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

No.

Edward Kuznetsov

ek@mlb.lv

2 Elizabetes Street, Office 210

Riga 1010

Latvia

Tel: +371 673 99985

Fax: +371 292 71166

office@mlb.lv

www.mlb.lv

Malta

Kevin F Dingli and Suzanne Shaw

Dingli & Dingli Law Firm

Newbuilding contracts

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

The contents of the shipbuilding contract (including passage of title) will depend on what the shipbuilder and the shipowner have agreed. Very often, a standard form contract in international use will be adopted as the basis of the shipbuilding contract, with the parties making the necessary modifications to suit their needs.

The parties may and often do agree that title to the vessel passes to the shipowner with the physical delivery of the vessel and supporting documentation, including the builder’s certificate, the bill of sale, or both, to the shipowner. Otherwise, the parties may agree that the shipowner acquires ownership as the work progresses or as instalments of the price are paid.

Maltese law does not contain any specific provisions regulating shipbuilding contracts.

If a shipbuilding contract is taken as being similar to a contract of works, where the builder supplies the materials and in the event that the thing had to perish before it is delivered, the loss is borne by the builder unless the employer has been in default in delay for receipt of the thing (article 1634 of the Civil Code). Thus, title to the ship would only pass once the thing is complete. In the case of a work consisting of several pieces, the work shall remain at the risk of the builder until the employer has examined the whole work, unless the parties have agreed that each part be examined as soon it is completed (article 1637 of the Civil Code). This reinforces the theory that title (together with risk) would pass upon delivery of the thing.

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

In terms of Maltese law, any suretyship shall on pain of nullity be expressed in a public deed or a private writing (article 1233(1) of the Civil Code).

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

It is possible for the shipowner to request the local courts to order specific performance under the shipbuilding contract.

Under the general provisions of sale, if the seller fails to make delivery at the time agreed upon, the buyer may demand that he or she be placed in possession of the thing sold, provided the delay has been caused solely by the seller (article 1385 of the Civil Code).

4 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?

Maltese law provisions relating to liability for defective goods do not automatically apply in a newbuilding contract regulated by Maltese law although the contracting parties are free to agree and insert provisions as to product liability in case of defects in the ship in the shipbuilding contract.

Under general principles of civil law, the seller is bound to warrant the thing sold against latent defects that render it unfit for the use for which it is intended or that diminish its value to such an extent that the buyer would not have bought it or would have tendered a lesser price had he or she been aware of them (article 1424 of the Civil Code). By mutual agreement of the contracting parties, any of the above warranties may be excluded in the shipbuilding contract.

Furthermore, in terms of the law of tort, every person is responsible for the damages that occur through his or her fault (article 1031 of the Civil Code). The shipowner and any third party that has sustained damage are protected by Maltese law.

Ship registration and mortgages

5 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?

Pleasure boats, commercial yachts, merchant ships, pontoons, barges, floating establishments, installations or structures and oil rigs are all eligible for registration as Maltese vessels. A ship of less than six metres in length is not eligible for registration under the Maltese flag.

As a rule, merchant ships of 25 years old and over are not eligible for registration under the Maltese flag. Merchant ships of 20 years of age and over but less then 25 years may be registered under the Maltese flag following the satisfactory outcome of a pre-registration inspection by an authorised flag inspector. The registration of ships of 15 years and over but less than 20 years is subject to a satisfactory inspection by an authorised flag inspector within one month before registration (Merchant Shipping Notice No. 90 – Guidelines for the ascertainment of seaworthiness of vessels being registered as Maltese ships).

It is possible to register a vessel under construction under the Maltese flag. In such case, the requirements relating to surveying of the vessel and the declaration of ownership when the builders have not yet effected delivery to the owners are suspended until construction of the vessel or until delivery of the vessel is complete. It is also possible to register a Maltese mortgage over a ship that has been registered under the Maltese flag as a ship under construction, as long as the declaration of ownership requirement has been satisfied.

6 Who may apply to register a ship in your jurisdiction?

In order to be eligible for registration under the Maltese flag, according to article 4 of the Merchant Shipping Act, a vessel is to be wholly-owned by:

• citizens of Malta;

• bodies corporate established under and subject to the laws of Malta, having their principal place of business in Malta or having a place of business in Malta and satisfying the minister responsible for shipping that they can and will ensure due observance of the laws of Malta relating to merchant shipping; and

• such other persons as the minister may by regulations prescribe.

By virtue of the Ships Eligible for Registration Regulations, 2003 (SL 234.23), a citizen of the European Union residing in Malta, as well as an international owner, was declared as qualified to own a Maltese ship or a share therein. An international owner is any citizen of the European Union not residing in Malta or non-Maltese body corporate or other entity enjoying legal personality in terms of the law under which it has been established or constituted who has appointed a resident agent in Malta. The resident agent acts as the channel of communication between the international owner and the Maltese authorities and also acts as the shipowner’s judicial representative in Malta.

A ship may also be bareboat registered under Maltese flag when it is chartered to a citizen of Malta, or to Maltese bodies corporate or other persons qualified to own a Maltese ship (as explained above).

7 What are the documentary requirements for registration?

Entry to the Maltese flag is through provisional registration, eventually followed by permanent registration when all the necessary requirements would have been satisfied.

An applicant must submit an application for registration as well as a declaration of ownership wherein the owner declares that the ship is free from registered encumbrances. A copy of the present international tonnage certificate would be required as well as a confirmation that there is no halon aboard the vessel.

The Malta Transport Authority would require evidence of seaworthiness in the form of a confirmation from an approved classification society.

In order to obtain the operational certificate with which the vessel can trade, one would have to provide proof of liability insurance referring to, in particular, bunker pollution and oil pollution (as applicable), copies of valid safety statutory certificates, valid safety management certificates and a valid maritime labour certificate, as well as a copy of the long-range identification and tracking of ships conformity report. Applications must also be submitted in order to receive the relative minimum safe manning certificate and radio licence.

Permanent registration is attained by submitting the original builder’s certificate or bill of sale, the original deletion certificate, the certificate of survey and international tonnage certificate issued under the authority of Malta as well a duly endorsed carving and marking note.

Depending on the age of the vessel, a satisfactory flag state inspection may be required as a condition for registration of the vessel under the Maltese flag.

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

The Merchant Shipping Act allows for both the bareboat charter registration of foreign ships in the Maltese bareboat charter ship registry, as well as for the bareboat charter registration of Maltese ships in a foreign bareboat charter ship registry.

It is essential for the country that is to be the underlying registry or the bareboat registry for any given case to be declared to be a compatible registry with the Maltese registry by the minister responsible for shipping. To date, around 46 countries have been declared to be compatible registers with the Maltese Ship Registry.

In case of bareboat registry, questions as to title and ownership are regulated by the underlying registry, whereas operational matters of the vessel are regulated by the bareboat registry.

In case of a vessel that is bareboat registered in Malta, the vessel is to be bareboat chartered to a person qualified to own a Maltese ship (as per question 5).

Apart from the usual requirements for the registration of a ship under the Maltese flag, there are additional requirements for registering a ship in the Maltese Bareboat Charter Ship Registry, such as a transcript of register from the underlying registry and the consent of the underlying registry and of any registered mortgagee. Within a period of 30 days following the issuance of the bareboat registry certificate of the ship under the Maltese flag, the charterer shall deliver a declaration to the Maltese ship registrar confirming that all the certificates issued by the underlying registry have been surrendered to the underlying registry.

The duration of the bareboat charter registration shall not exceed the duration of the bareboat charter or the expiry date of the underlying registration, whichever is the shorter period, but in no case for more than two years. This period of bareboat registration may be extended further for subsequent periods of a maximum of two years at a time.

Bareboat charter registration of a Maltese-registered ship in a foreign bareboat charter ship registry may be effected on obtaining the consent of the registrar of shipping to that effect. Such consent will be forthcoming upon the satisfaction of certain conditions, including an application to the Maltese registrar of shipping by the shipowner for permission to bareboat charter register the ship in a foreign registry, consent of any registered mortgagee and an undertaking by bareboat charterers in favour of the Maltese registrar of shipping confirming that the Maltese maritime flag will not be hoisted on the ship for the duration of the bareboat charter registration of the ship in the foreign registry.

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

The Registrar of Shipping maintains the register of vessels with all entries required to be made in terms of the Merchant Shipping Act.

The date and time of the recording of the mortgage would result from the vessel’s register. The vessel’s register would also indicate the name and address of the mortgagee as well as a synopsis of the mortgage deed.

Any prohibition in the mortgage deed on the mortgagor from creating any further mortgages or from transferring the vessel or any share therein without the prior written consent of the mortgagee is recorded in the vessel’s register (article 39 of the Merchant Shipping Act).

When any mandate or power of attorney has been granted by the mortgagor to the mortgagee by way of security, granting powers relating to the exercise of rights relating to the vessel or the closure of register on behalf of the registered owner, it is possible to submit such power of attorney to the registrar of shipping for registration and the vessel’s register would indicate the details of such mandate or power of attorney (article 17 of the Merchant Shipping Act).

Limitation of liability

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

The Limitation of Liability for Maritime Claims Regulations, 2004 (SL 234.16) provide a regime of limitation of liability for maritime claims and give effect to the Convention on Limitation of Liability for Maritime Claims 1976 as amended by the Protocol of 1996.

The following claims, whatever the basis of liability may be, are subject to limitation of liability:

• claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;

• claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

• claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;

• claims in respect of the raising, removal, destruction or the rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been onboard such ship;

• claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; and

• claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with this Convention, and further loss caused by such measures.

The following persons are entitled to limit liability:

• shipowners, meaning the owner, charterer, manager and operator of a seagoing ship. The liability of a shipowner shall include liability in an action brought against the vessel herself;

• salvors, meaning any person rendering services in direct connection with salvage operations;

• any person for whose act, neglect or default the shipowner or salvor is responsible; and

• an insurer of liability for claims subject to limitation in accordance with the rules of the Convention, to the same extent as the assured himself.

The act of invoking limitation of liability shall not constitute an admission of liability.

11 What is the procedure for establishing limitation?

The procedure for establishing limitation, where liability is alleged to have been incurred by a person entitled to limitation in respect of a claim giving rise to limitation, is for that person to make an application to the First Hall of the Civil Court for the determination of the amount of his or her liability and, where several claims are made or apprehended in respect of that liability, for the distribution of that amount rateably among the claimants.

A person claiming limitation may constitute a limitation fund by paying to the court the equivalent in euros of the number of special drawing rights to which he or she claims to be entitled to limit his or her liability in terms of the Convention, together with 8 per cent interest thereon from the date of the occurrence giving rise to liability up to the date of payment to the court.

Limitation of liability may be invoked under the Convention even if a limitation fund has not been constituted.

12 In what circumstances can the limit be broken?

A person shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed with the intent to cause such loss, or recklessly and with the knowledge that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The applicable limitation regime in Malta for passenger and baggage claims is the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the Protocol of 2002 on the carriage of passengers.

The Merchant Shipping (Carriage of Passengers by Sea) Regulations 2014 (SL 234.52) have been made pursuant to EC Regulation No. 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents, which, in turn, is based on the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the Protocol of 2002 on the carriage of passengers, as well as the International Maritime Organization guidelines for implementation of the Athens Convention, adopted in 2006.

Port state control

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

The Port State Control Section within the Technical Department of the Authority for Transport in Malta is responsible for the inspection of ships calling at Maltese ports or in territorial waters.

Directive 2009/16/EC on Port State Control has been implemented in Malta by the Merchant Shipping (Port State Control) Regulations (SL 234.38).

15 What sanctions may the port state control inspector impose?

If during the inspection, the port state control inspector discovers deficiencies that are clearly a hazard to safety, health or the environment, the port state control inspector shall order the detention of the ship or shall order the stoppage of the operation during which the deficiencies are revealed.

Any detention order or order stopping a particular operation shall not be lifted until the hazard is removed or until the Malta Transport Authority has established that the ship can proceed to sea or the operation be resumed without risk to the health and safety of passengers or crew, or risk to other ships, or without there being an unreasonable threat of harm to the marine environment.

In exceptional circumstances where the overall condition is evidently substandard, the Malta Transport Authority may also suspend the inspection of that ship until steps have been taken to bring the ship in line with international conventions. In the meantime, such ship shall be considered as detained.

Where deficiencies cannot be rectified in Malta, the Malta Transport Authority may allow the ship concerned to proceed without undue delay to the appropriate repair yard nearest to the port of detention as chosen by the master and the authorities concerned, subject to any conditions determined by the flag state and the Malta Transport Authority being complied with.

The Malta Transport Authority is responsible for ensuring that no access to any port in Malta shall be granted if a particular ship has been detained for a third time within a specified period of time and where a refusal of access has been issued by a state signatory to the Paris Memorandum of Understanding.

A ship runs the risk of being permanently refused access to any port and anchorage within the Community in case of a subsequent detention in a port or anchorage within the Community after the third refusal of access.

16 What is the appeal process against detention orders or fines?

The owner or operator of a ship or his or her representative in Malta may appeal against a decision for detention or refusal of access taken by the Malta Transport Authority by means of an application before the Court of Appeal (Inferior Jurisdiction). Such appeal is to be filed within 20 days of the service of the detention order or stoppage of operation or the day of refusal of access, as applicable, and shall be served on the Malta Transport Authority, which shall file a reply within 10 days of notification. The Court may award the owner compensation in respect of actual loss suffered by him or her in consequence of the detention or refusal of access. It is up to the owner or the operator to satisfy the Court that the matter did not constitute a valid basis for the relevant inspector’s opinion and that there were no reasonable grounds for the inspector to form that opinion. The Court is to state whether there existed a valid basis or otherwise for the detention order or refusal of access. Where the Court concludes that the matter in question did not constitute a valid basis for the inspector’s opinion, the Court shall either cancel the detention order or refusal of access or shall affirm the order with any modifications that it deems fit.

Classification societies

17 Which are the approved classification societies?

In virtue of Merchant Shipping (Ship Inspection and Survey Organisations) Regulations, SL 234.37, the criteria in accordance with which classification societies may be authorised for the purpose of implementation of Directive 2009/15/EC are prescribed.

The following are all recognised classification societies by the Malta Transport Authority:

• American Bureau of Shipping;

• Bureau Veritas;

• China Classification Society;

• Class NK;

• Den Norske Veritas;

• Germanischer Lloyd;

• Korean Register of Shipping;

• Lloyds Register of Shipping;

• Polish Register of Shipping;

• Registro Italiano Navale; and

• Russian Maritime Register of Shipping.

The Croatian Register of Shipping is approved by the Malta Transport Authority on a case-by-case basis, with the principal place of business of the ship operators of the vessel and the classification society of the vessel during the previous 12 months being important but not the final determining factors in deciding whether the Croatian Register of Shipping is to be an authorised classification society in any given case.

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

A classification society may be held liable in tort or contractually (assuming that the contract provisions do not seek to limit or exclude liability).

In the absence of any agreement between the parties and in the event that Maltese law had to apply, the principle insofar as tort is concerned is that every person shall be liable for damage that occurs through his or her fault (article 1031 of the Civil Code). The standard used in assessing whether a person is at fault is the prudence, attention and diligence of a bonus paterfamilias.

A person may also be held liable when he or she, with or without intent to cause injury, voluntarily or through negligence, imprudence or lack of attention, is guilty of an act or omission constituting a breach of the duty imposed by law.

Any classification society that is recognised by the Maltese administration is to have its working relationship with the Maltese administration set out in writing, listing the specific duties and functions assumed by that particular organisation. This agreement must include at least the provisions of financial liability laid down in Directive 2009/15/EC concerning liability from a marine casualty where:

• the Malta Transport Authority as a flag administration had to be held liable by a court of law or through arbitration procedures and had to be ordered to compensate any injured parties for loss of or damage to property or for personal injury or death; and

• the court had to find that the loss, damage, injury or death was caused by the recognised organisation carrying out inspection or survey duties on behalf of the flag administration.

In such case, the recognised classification society is liable to pay financial compensation to the flag administration for any wilful act of omission or gross negligence or negligent or reckless act or omission of the recognised classification society or its employees or agents or persons acting on its behalf giving rise to such loss, damage, injury or death.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Where there is any wreck on or near the coasts within the territorial jurisdiction of Malta that the minister responsible for shipping believes is or is likely to become an obstruction or danger to navigation, then the minister may take possession of, remove or destroy the wreck, as well as sell the wreck and any property recovered from it in order to be reimbursed for the expenses related to wreck removal, subject to any surplus of funds being held for the benefit of those persons entitled thereto (article 339 of the Merchant Shipping Act).

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

The Convention on the International Regulations for Preventing Collisions at Sea, 1972, is given force of law in Malta through the Merchant Shipping (Prevention of Collisions) Regulations, SL 234.20. The aforesaid Collisions Convention shall apply to all Maltese ships and to all other ships while they are in Maltese waters as determined by the Convention.

Malta is not a party to the International Convention on Salvage 1989. There are some salvage provisions in the Merchant Shipping Act, 1973 (Chapter 234).

The International Convention for Pollution from Ships, 1973 (MARPOL), as amended by the 1978 protocol, is part of Maltese law through the Merchant Shipping (Prevention of Pollution from Ships) Regulations, 2004 (SL 234.32). MARPOL Annex IV relating to prevention of pollution by sewage and MARPOL annex VI relating to prevention by air pollution have been implemented in Malta (SL 234.47 and SL 234.33) with effect from 30 June 2011.

Malta has acceded to the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended by the 1992 Protocol, as well as the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971, as amended by the 1992 Protocol through the enactment of the Oil Pollution (Liability and Compensation) Act, 1999, Chapter 412.

The Bunkers Convention 2001 has been implemented in Maltese law through the Merchant Shipping (Liability for Bunker Oil Pollution Damage) Regulations, 2009 (SL 234.46).

Maltese registered vessels as well as any vessels that enter a Maltese port are required to comply with anti-fouling legislation in terms of EU law.

21 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 applicable in Malta, and the parties are at liberty to employ any form of contract, including the Lloyd’s standard form, which would be the approach in practice. Neither is there any requirement for a contract to be entered into in order to give rise to a legitimate claim for customary or traditional salvage, although a contract would of course have evidentiary value, leaving open only the issue of quantum. There is no restriction under law as to who may carry out salvage operations.

Ship arrest

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

Malta is not a signatory to either of the 1952 and 1999 Arrest Conventions. Ships are arrested in Malta by a warrant of arrest issued on any one of the grounds listed in article 742B of the Code of Organisation and Civil Procedure giving rise to the in rem jurisdiction of the Maltese courts. These include all maritime claims recognised under the Arrest Conventions.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A total number of 25 maritime claims giving rise to in rem jurisdiction are provided for under paragraphs (i) to (xxv) of article 742B of the Code of Organisation and Civil Procedure. These closely follow the British Supreme Court Act 1981, but also incorporate both Arrest Conventions of 1952 and 1999. The basic claims may be summarised as follows:

(i) claims to possession, ownership or title to a ship;

(ii) questions arising between co-owners as to the ownership, possession, employment or earnings of a ship;

(iii) claims in respect of a mortgage or hypothec or charge on a ship;

(iv) claims arising out of a contract of sale;

(v) claims for damages received by a ship;

(vi) claims for damage caused by a ship;

(vii) claims for loss of life or personal injury caused by ship;

(viii) claims for loss or damage to goods carried in a ship;

(ix) claims arising out of an agreement for the carriage of goods or use or hire of a ship;

(x) claims for salvage;

(xi) claims for damage to environment by a ship;

(xii) claims relating to wrecks;

(xiii) claims for towage;

(xiv) claims for pilotage;

(xv) claims for supplies or services rendered to a ship;

(xvi) claims for construction, repair, conversion or equipping of a ship;

(xvii) claims for port, dock or harbour dues;

(xviii) claims by crew for wages or repatriation;

(xix) claims for disbursements made;

(xx) claims for commissions, brokerage or agency fees;

(xxi) claims arising out of an act of general average;

(xxii) claims arising out of bottomry;

(xxiii) claims for forfeiture of a ship;

(xxiv) claims for insurance premiums; and

(xxv) claims for fees due to the registrar or tonnage dues.

No warrant of arrest may be issued if the monetary value of the claim is less than €7,000.

Because ship arrest is exclusively a lex fori issue, the vessel’s flag and the law governing the merits of the claim have no relevance whatsoever in regard to the grounds on which a vessel can be arrested. However, this only holds true with regard to ship arrest taken out in the context where proceedings on the merits of the claim are to be brought before the Maltese courts. In cases where arrest is possible in security of foreign process (see question 28), then the in rem jurisdiction of the Maltese courts is not a relevant factor and the law governing the merits of the claim would assume relevance.

In cases concerning any one of the maritime claims listed in (i), (ii) and (iii) above, an action in rem may only be brought against that ship in connection with which the claim arises.

In all other cases concerning the remaining maritime claims listed in (iv) to (xxv), an action in rem may be brought against that ship, where the person who would be liable on the claim for an action in personam (the relevant person) is, when the cause of action arose, an owner or charterer of, or is in possession or in control of, the ship and if, at the time when the action is brought, the relevant person is either an owner or beneficial owner of that ship or the bareboat charterer of it. In such cases, an action in rem may also be brought against any other ship of which, at the time when the action is brought, the relevant person is the owner or beneficial owner as respects all shares in it.

In these cases, therefore, sister ship and associated ship arrest is possible.

The requirement that the relevant person is the owner or beneficial owner of the particular ship or the bareboat charterer of it at the time when the action is brought does not apply in regard to those maritime claims secured by a special privilege in accordance with article 50 of the Merchant Shipping Act, which survive the voluntary sale of the vessel by up to one year.

24 What is the test for wrongful arrest?

Maltese law acknowledges, and penalises, wrongful arrest. The test for wrongful arrest is whether it is subsequently ascertained by the court that the request for the issuance of a warrant of arrest was based upon a demand maliciously made or unjustly obtained. Essentially this will be the case where the underlying claim on the basis of which the warrant of arrest is issued is malicious, frivolous or vexatious; or where the arresting party fails to bring the action on the merits within the time established by law without valid reason. In such eventuality, the court may condemn the arresting party to pay a penalty of not less than €11,600 in favour of the person against whom the warrant of arrest was issued.

25 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?

Owing to the requirement of underlying in personam liability, this would only be possible in the event that the charterer who contracted the bunkers happens to be the bareboat charterer of the vessel, and then always provided the vessel is arrested whilst still under bareboat charter.

However, if at the time the action is brought the charterer were to have become the owner or beneficial owner of that same vessel or the bareboat charterer of it, then it would become possible for the bunker suppliers to arrest that vessel.

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

The arresting party is not required to provide security in conjunction with the arrest. However, the person whose vessel has been arrested may request the court, on good cause being shown, to order that the party requesting the warrant of arrest puts up sufficient security for the payment of the penalty, damages and interest, in an amount being not less than €11,600 within a time to be fixed by the court; and in default to rescind the warrant. Security must be provided either in cash or by local bank guarantee.

27 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?

For the vessel to be released, the arrested party would have to deposit the amount of the claim as security. Such amount would only be available (partially or in full) to the arresting party in case of a successful outcome of the case on the merits. Security must be provided either in cash or by local bank guarantee. There is no subsequent review of the security put up by the arrested party.

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

The Malta Transport Authority is deemed by law to be the authority having in its control the arrested vessel, and therefore it is to be considered as the official consignee responsible for the maintenance of the vessel while under arrest.

Having said that, from the moment that the warrant of arrest is served on the Authority, all expenses as may be necessary for the preservation of the arrested vessel are to be borne by the person issuing the warrant of arrest, saving his or her right to recover such expenses together with his or her claim.

29 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?

Ships that are physically present within the territorial jurisdiction of the Maltese courts may be arrested in Malta both in security of maritime in rem claims (see question 23), as well as in security of in personam claims in those instances where the shipowner may be personally subject to the ordinary jurisdiction of the Maltese courts. In such instances, the arresting party must pursue the claim on its merits before the Maltese courts.

It is to be noted here that ship mortgages constitute executive titles under Maltese law, so that in cases concerning the enforcement of a mortgage, the mortgagee need only proceed to render such executive title enforceable according to law. This is achieved by the filing of a judicial demand in the form of an official letter accompanied by an affidavit confirming the amount due under and secured by the mortgage.

Finally, ships may also be arrested in Malta pursuant to the provisions of article 31 of Council Regulation (EC) No. 44/2001, dealing with provisional including protective measures, in cases where the courts of another member state have jurisdiction as to the substance of the matter; and the law also allows for ship arrest as a security measure in all cases where an arbitration clause has been stipulated in the underlying contract giving rise to the claim. However, in all these cases, the ship must always be arrested in virtue of the warrant of arrest, which remains the only way in which a ship may be arrested in Malta; and proceedings on the merits whether before the competent foreign court or arbitration must be initiated within 20 days of the date on which the warrant of arrest is issued.

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

It is possible for any person claiming a right in or over a ship to apply for an order to the Maltese Court prohibiting any dealing with a Maltese-registered ship or any share therein for a specified time. Such order would be entered in the vessel’s register by the registrar of shipping. Any claim based on: a right of ownership; or that is secured by a mortgage; a registered encumbrance; or a privilege or a lien over the ship arising by operation of Maltese law or the law applicable to the claim; or any other claim which gives rise to a claim in rem against a vessel under Maltese law, would give the claimant the right to apply for this caveat on the ship’s register. Such order only effects the register of the ship and does not effect the commercial operation of the vessel. This order, which is akin to a caveat, is precautionary in nature and is not to be confused with a warrant of arrest. Such order may be revoked by the respondent depositing in court the amount of the claim in the currency indicated therein or by giving satisfactory security to the court.

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

No such orders are specifically available, although a witness may be subpoenaed to produce evidence in court during the course of a hearing or a suit.

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

Pursuant to the provisions of section 2009(d) of the Civil Code, the unpaid seller of bunkers would enjoy a privilege over the bunkers themselves. Accordingly, it is possible to seize bunkers in Malta, as well as to obtain an injunction in respect thereof. There will, however, be practical difficulties in carrying this out. For instance, in connection with storage and the appointment of a consignatory to take physical possession of the seized bunkers. The claimant’s position would be stronger in the event that a reservation of ownership clause is included in the bunkers supply agreement. In appropriate cases, such warrant of seizure of bunkers could possibly be coupled with an arrest of the vessel.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Any creditor being in possession of an executive title, namely final judgment (res judicata) creditors and creditors enjoying any other executive title (see question 29) may apply for the judicial sale of an arrested vessel. The law provides for both a precautionary as well as for an executive warrant of arrest. Creditors seeking to arrest a ship in security of a claim which is not yet judicially acknowledged must have recourse to the precautionary warrant. Creditors in possession of an executive title may immediately proceed to issue an executive warrant and this is then followed up by an application for the judicial sale by auction of the arrested vessel.

34 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?

Any creditor in possession of an executive title may apply to the court for the judicial sale by auction of the arrested ship, judicial sale by auction being one of the executive acts recognised by law. Bids are made orally. The procedure for the judicial sale could be concluded within six to eight weeks from the application for sale being filed. Following the judicial sale and the deposit of the proceeds in court, proceedings are then initiated for the ranking of creditors upon the conclusion of which the fund is distributed accordingly. Court costs associated with the judicial sale result from the Code of Organisation and Civil Procedure and are taxed by the court registrar accordingly.

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

The order of priority of claims is as follows:

(i) judicial costs incurred in respect of the sale of the ship and the distribution of the proceeds thereof;

(ii) fees and other charges due to the registrar of Maltese ships arising under the MSA;

(iii) any debt secured by a possessory lien or privilege (according to article 54 of the MSA) over a ship, provided that such debt arose prior to the debts of the creditors enjoying any one of the special privileges listed in (iv) to (xi) hereunder; in the event that such debt as secured by a possessory lien or privilege arose after any of the debts of the creditors enjoying any one of the special privileges listed in paragraphs (iv) to (xi) hereunder, then such debt as secured by a possessory lien or privilege would rank immediately after such special privilege;

(iv) tonnage dues;

(v) wages and expenses for assistance, recovery of salvage, and for pilotage;

(vi) the wages of watchmen, and the expenses of watching the ship from the time of her entry into port up to the time of her sale;

(vii) rent of the warehouses in which the ship’s tackle and apparel are stored;

(viii) the expenses incurred for the preservation of the ship and of her tackle including supplies and provisions to her crew incurred after her last entry into port;

(ix) wages and other sums due to the master, officers and other members of the vessel’s complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;

(x) damages and interest due to any seaman for death or personal injury and expenses attendant on the illness, hurt or injury of any seaman;

(xi) monies due to creditors for labour, work and repairs previously to the departure of the ship on her last voyage, provided the debt has been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;

(xii) ship agency fees due for the ship after her last entry into port, in accordance with port tariffs, and any disbursements incurred during such period not enjoying a privilege in paragraphs (i), (ii), (iv), (v), (vi), (vii), (viii), (ix) and (x) above, although in any case for a sum in the aggregate not exceeding 4,000 units;

(xiii) debts secured by a registered mortgage;

(xiv) monies lent to the master for the necessary expenses of the vessel during her last voyage, and the reimbursement of the price of goods sold by him for the same purpose;

(xv) monies due to creditors for provisions, victuals, outfit and apparel, previously to the departure of the ship on her last voyage: provided that such privilege shall not be competent where the debt has not been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;

(xvi) damages and interest due to the freighters for non-delivery of the goods shipped, and for injuries sustained by such goods through the fault of the master or the crew;

(xvii) damages and interest due to another vessel or to her cargo in cases of collision of vessels; and

(xviii) the debt specified in article 2009(d) of the Civil Code for the balance of the price from the sale of a ship.

The debts secured by a possessory lien or privilege as referred to under (iii) are the debts due to any ship repairer, shipbuilder or other creditor into whose care and authority a ship has been placed for the execution of works or other purposes.

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

The legal effects of an adjudication of the arrested vessel in a judicial sale by auction are to the effect that the successful bidder obtains legal title to the vessel free of all liens and encumbrances.

The same legal effect is obtained pursuant to a court-approved private sale of an arrested vessel.

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

The judicial sale, or any other court-approved sale, of a vessel in a foreign jurisdiction will be recognised. If the vessel concerned happens to be a Maltese-registered vessel, then a consequence of this will be to the effect that the vessel’s Maltese registry will be closed in case of a reflagging by the new owner, or transferred in favour of the new owner should it be decided to retain the vessel’s Maltese registry.

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

Malta is not a signatory to the International Convention on Maritime Liens and Mortgages. Although the concept of a maritime lien is not recognised as such under Maltese law, yet the Merchant Shipping Act recognises a number of special privileges on vessels. These survive for one year following the voluntary sale of the vessel concerned (thereby assuming the character of maritime liens), and are also relevant in the context of ranking of creditors. The Act also accords recognition to foreign mortgages, extending under principles of reciprocity equal treatment thereto as to a Maltese mortgage.

Carriage of goods by sea and bills of lading

39 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?

Malta has ratified the Hague Rules, and these are in force in Malta, incorporated into domestic law in virtue of the Carriage of Goods by Sea Act, 1954. The Maltese courts do however apply the Hague-Visby Rules when dealing with a dispute relating to a bill of lading incorporating those Rules. Malta has not yet ratified, accepted, approved or acceded to the Rotterdam Rules.

For the purpose of the application of the Hague Rules, ‘carriage of goods’ covers the period from the time when the goods are loaded to the time when they are discharged from the ship.

40 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?

With regard to road transport, the provisions of the Convention on the contract for the international carriage of goods by road (CMR), (Geneva, 19 May 1956) apply by virtue of the International Carriage of Goods by Road Act, 2006, if the carriage is subject to the CMR Convention. Where air transport is concerned, the Carriage by Air (International and non-International Carriage) Regulations 2003, SL 499.24, as subsequently amended, apply the provisions of the Warsaw Convention and the Montreal Convention.

41 Who has title to sue on a bill of lading?

The holder or endorsee of a bill of lading has title to sue thereon for damages in respect of the short delivery or the non-delivery of the goods covered by the bill of lading.

42 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 terms in a charter party can be incorporated into the bill of lading by means of an appropriate generic incorporation clause inserted therein. However, the scope of application of such incorporation clause will not extend to any arbitration clause as may be contained in the charter party, as an arbitration clause requires specific agreement. Such arbitration clause only binds the owner and the charterer as parties to the charter party, and not the third-party holder or endorsee of the bill of lading.

Where a bill of lading is issued to the charterer in respect of goods shipped by him pursuant to a charter party, the bill of lading in such a scenario merely functions as a receipt in respect of such goods and not as the contract whose terms remain contained in the charter party.

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

There is no relevant provision in Maltese domestic law recognising or rejecting demise or identity of carrier clauses in bills of lading; and Malta does not embrace the doctrine of binding judicial precedent. The only Maltese case that we are aware of where the Court of Appeal considered, but did not apply, the demise clause or identity of carrier clause was Advocate Dr Philip Manduca nomine v Sun Maritime Limited, decided on the 26 June 2009. The Court held that the ruling of the House of Lords in The Starsin (2003) was substantially compatible with the system of Maltese mercantile law.

44 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?

In a chartering scenario where shipowners are not the contractual carriers, their only liability would arise in the event that they have not exercised due diligence to make the vessel in all respects seaworthy.

Where a vessel has been subcontracted by the contractual carrier, the shipowner of the subcontracted vessel may rely on the terms of the bill of lading, as appropriate, and may raise the same defences as a contractual carrier would be able to raise.

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

Unless the carrier is in a position to demonstrate that any deviation from a vessel’s route was a permissible one, then such a deviation will be deemed to be an infringement or breach of the contract of carriage and the carrier will be liable for any loss or damage resulting therefrom.

Deviation is permissible for the purpose of saving or attempting to save life or property at sea, as is also any reasonable deviation.

46 What liens can be exercised?

In terms of article 2009(c) of the Civil Code, the debt due to the carrier for the carriage of goods is a privileged debt giving rise to a special lien or privilege over the particular goods. The Commercial Code extends this special privilege or lien also to average contributions and other charges. Such special privilege or lien ceases on the expiration of 15 days from the day of delivery of the goods notwithstanding that such goods have not yet passed into the hands of third parties.

Article 50(m) of the Merchant Shipping Act considers damages and interest due to freighters for non-delivery of the goods shipped, and injuries sustained by such goods through the fault of the master or the crew, as giving rise to a special privilege over the ship.

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

Delivery of cargo unless against production of the relevant bill of lading would be tantamount to misdelivery. In such a scenario the holder of the bill of lading could sue the carrier for breach of contract and the carrier would be held wholly responsible for all damages incurred without any possibility of limiting liability.

48 What are the responsibilities and liabilities of the shipper?

If the shipper, following the receipt of the goods, exercises his or her right to demand the issuance of a bill of lading from the carrier or master or agent of the carrier, then he or she is deemed to have guaranteed in favour of the carrier as at the time of shipment the accuracy of the marks, number, quantity and weight as furnished by him; and the shipper will be obliged to indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars.

The shipper is also responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause with the act, fault or neglect of the shipper himself, his or her agents or his or her servants.

Shipping emissions

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

Although there is no emission control area (ECA) in force in Maltese territorial waters, Malta imposes strict requirements for bunker fuel in Maltese territorial waters in accordance with Malta’s obligations under the Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EC .

50 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 use of marine fuels with a sulphur content exceeding 0.1 per cent m/m by ships at berth in ports in Malta is prohibited. Furthermore, the placing on the market of marine gas oils with a sulphur content exceeding 0.1 per cent m/m is prohibited.

The Malta Resources Authority is obliged and empowered to obtain samples and analyse the sulphur content of marine fuel for onboard consumption while being delivered to ships and in tanks, where feasible, as well as in sealed bunker samples onboard ships. The Malta Resources Authority can also inspect ships’ logs and bunker delivery notes to check the documentation of the sulphur content of marine fuels. Sampling is to take place with sufficient frequency and in sufficient quantities in order that the samples will be truly representative of the fuel examined and of the fuel being used by ships while in relevant sea areas and ports.

Non-compliance with the Quality of Fuels Regulations, SL 423.29 is tantamount to a criminal offence. The offender may be sentenced to a fine or imprisonment or to both fine and imprisonment. Where any person is found guilty of committing an offence in terms of the aforesaid regulations by means of a vehicle, the owner of the vehicle is held liable in the same manner and degree, with the added possibility of such person being ordered to pay for the expenses incurred by the public entities and having the relevant permit issued by the public entity revoked and furthermore there is the risk of the vessel, as the corpus delicti, being confiscated.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Malta does not have a specialised admiralty court, so the ordinary civil courts exercise jurisdiction over maritime disputes. Typically the competent court would be the First Hall of the Civil Court, which is vested with jurisdiction to entertain claims whose monetary value exceeds €11,646.87. Lesser claims would fall within the competence of the Court of Magistrates, but it is to be noted that no warrant of arrest may be sued for, and hence no action in rem may be instituted, for any claim being less than €7,000. In recent times the incidence of ship arrests and maritime disputes has risen considerably, so that the courts have become much more familiar with such cases.

The Malta Arbitration Centre also handles international arbitrations, including maritime disputes.

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

Maritime claims, which are usually brought forward by an action in rem against the vessel being physically present within the territorial jurisdiction of the Maltese courts, do not present any particular problem with regard to service of process. All relevant warrants and judicial acts may be served either upon the master of the vessel or its local agents.

Service of process in claims which might be advanced by an action in personam against the owners of the vessel would depend upon whether the owners are be resident in an EU member state or not. If resident in an EU member state, then service is effected through the Office of the Attorney General in Malta (as the receiving or transmitting agency) pursuant to Council Regulation (EC) No. 1348/2000 of 20 May 2000 on the Service in the Member States of Judicial and Extrajudicial Documents in Civil or Commercial Matters. If resident outside the EU, then service is effected upon curators appointed by the court to represent the interests of the foreign non-resident owners.

In all cases, warrants of arrest are always served upon the master representing the vessel, and in his or her absence upon the local agent of the vessel. The Malta Transport Authority, which functions as official consignee in such cases, is also always under pain of nullity to be indicated as such in the warrant of arrest, and is also to be notified therewith.

In case of proceedings initiated in Malta against an EU citizen (other than a Maltese citizen) not resident in Malta or a non-Maltese company in whose name a vessel is or was registered under the Maltese flag (an international owner), such international owner shall be deemed to have submitted to the jurisdiction of the Maltese courts for any action in connection with the ship while it is or was so registered. In terms of Maltese law, the resident agent acts as the judicial representative of the international owner for proceedings in Malta.

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

There is an established Malta Arbitration Centre, which also handles international arbitrations, has a panel of maritime arbitrators specialising in maritime arbitration.

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

In regard to foreign judgments, once again the answer to this question depends entirely upon whether the foreign judgment concerned was delivered by a court within an EU member state or not. In the former instance, Council Regulation (EC) No. 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, being the applicable EU Regulation, will apply. In the latter case, the ordinary procedural rules for the recognition and enforcement of foreign judgments enshrined in article 826 of the Code of Organisation and Civil Procedure will apply. Essentially, an application is required to be made to the competent court in Malta containing a demand that the enforcement of such judgment be ordered, and this is acceded to following certain judicial inquiries.

Foreign arbitration awards, being awards to which any of the following treaties, namely the Protocol on Arbitration Clauses (Geneva 1923), the Convention on the Execution of Foreign Arbitral Awards (Geneva 1927) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958), are applicable, shall upon their registration by the Malta Arbitration Centre, be enforced by the courts of Malta in the same manner as if such awards were delivered in domestic arbitration. Such awards, therefore, when registered, are enforceable as an executive title, thereby allowing the award creditor to issue any executive acts against the award debtor including an executive warrant of arrest against a vessel and an application for judicial sale by auction in respect of an arrested vessel.

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

The defendant would have to raise as part of their defence in the foreign jurisdiction the fact that proceedings have been instituted in a foreign jurisdiction in breach of a jurisdiction clause. Ultimately, it would be up to the lex fori as to whether to uphold such defence.

56 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 would bring to the attention of the court that there exists between the parties a clause providing for a foreign court or arbitral tribunal to have jurisdiction. It is expected that the court would stay proceedings and give any order or direction which it deems fit.

Limitation periods for liability

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

Prescription is generally regulated by the Civil Code, as well as by the Commercial Code, which contains provisions dealing with prescription in certain commercial matters, although particular prescriptive periods are also stipulated in other special laws such as the Carriage of Goods by Sea Act. As a general rule, unless a specific period of prescription applies to any specific category of claim, contractual claims are time-barred after five years, whereas claims in tort not arising from a criminal offence are time-barred after two years from the date on which the relevant action could be exercised.

The law does, however, provide for a number of particular periods of prescription. Thus, by way of example, under the Commercial Code the following actions are barred after one year:

• for payment of freight, from the completion of the voyage;

• for the payment of victuals supplied to seamen by order of the master, from the date of such supply;

• for the payment of timber and other things necessary for the construction, equipment and provisions of a ship, from the date on which such timber or other things have been supplied;

• for the payment of wages of workmen and for work done, from the completion of their work or the delivery of the work; and

• for the delivery of goods, from the arrival of the vessel.

The Carriage of Goods by Sea Act imposes a time limit of one year from the discharge of the cargo for the consignee to file a claim against the issuer of a bill of lading.

It is generally possible to interrupt prescription by the filing of a judicial act, unless the prescriptive period concerned be a peremptory one, as is the case for instance in regard to the particular prescriptive periods applicable under the Commercial Code and the Carriage of Goods by Sea Act.

It is not possible to extend time limits specified by law for the bringing forward of an action by agreement. However, once a precautionary warrant of arrest is filed, it is possible for the arrested party to concede in favour of the arresting party further time for the bringing forward of the action on the merits by filing an appropriate minute in the records of the warrant.

58 May courts or arbitral tribunals extend the time limits?

Courts or arbitral tribunals cannot extend the time limits prescribed by law for the filing of a claim, although upon good cause being shown a court may allow further time to a contumacious defendant to file defence pleas in contestation of a claim.

Miscellaneous

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

The Maritime Labour Convention has been implemented in Malta through the publication of Merchant Shipping (Maritime Labour Convention) Rules, 2013 [Rules] – Legal Notice 145 of 2013.

The Rules apply to all Maltese seagoing ships wherever they may be and to all other ships as determined by the Maritime Labour Convention while they are in Maltese ports and to all seafarers serving onboard such ships.

The Rules do not apply to Maltese-flagged vessels which are fishing vessels, ships of traditional build, small ships that navigate exclusively in internal waters or waters closely adjacent to Malta, yachts in non-commercial use and warships or naval auxiliaries.

60 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?

No, it is not possible. The courts have consistently applied the law and contractual provisions irrespective of any economic or financial consideration.

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

Any creditor with an executive title may apply to the Maltese courts for the private sale of an arrested ship which is within the Maltese jurisdiction in favour of an identified buyer and for a determined price. The sale of any ship in terms of this procedure gives the buyer a title which is free from all privileges and encumbrances.

Kevin F Dingli

kevin@dingli.com.mt

Suzanne Shaw

suzanne@dingli.com.mt

West End Buildings

18/2 South Street

Valletta VLT 1102

Malta

Tel: +356 2123 6206 / 2123 8256

Fax: +356 2124 0321

www.dingli.com.mt

Mozambique

José Camilo Mate

CGA Couto, Graça & Associados

Newbuilding contracts

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

It is important to note that, at this point in time, Mozambique does not have up-to-date legislation dealing specifically with shipbuilding contracts. The existing legislation, apart from being out of date as it was enacted before Mozambique’s independence from Portugal in 1975, does not reflect the current international situation in the sector. The government of Mozambique is considering adopting updated legislation to reflect current international trends in the shipbuilding industry. Currently, shipbuilding contracts are regarded as mere sale and purchase agreements. Pursuant to the relevant provisions of sale and purchase agreements under Mozambican law, the principle of the private autonomy of the contracting parties is prevalent, by which the contracting parties are sovereign to negotiate and agree any provisions in the sale and purchase agreement, in conformity with the applicable laws. However, despite the principle of the private autonomy of the contracting parties, in shipbuilding contracts the title in the ship normally passes from the shipbuilder to the shipowner upon full payment.

Following the principle of the private autonomy of the contracting parties (pursuant to article 405 of the Mozambican Civil Code), parties are free to agree when the title in a ship may be transferred from the shipbuilder to shipowner.

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

In the normal course of a shipbuilding contract, a provision is made to deal specifically with the formalities to be complied with by the shipbuilder for granting the shipowner a valid refund guarantee. Furthermore, under the principle of the private autonomy of the contracting parties, the parties are sovereign to negotiate and agree whatever they may wish in that respect. Although the shipbuilding contract does not contain any provisions dealing with this particular issue, it is worth noting that, pursuant to article 921 of the Mozambican Civil Code, the guarantee is valid for a period of six months from the date of its issuance.

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

Article 756 of the Mozambican Civil Code states that any retention of a vessel without good reason is unlawful. The shipowner is legally entitled to draft and file at court a court action against the shipbuilder to claim compensation for losses sustained as a result of such unlawful refusal to deliver the vessel.

4 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?

First, it is important to distinguish the relationship that exists between the shipbuilder and shipowner. Under Mozambican law, when the shipowner receives a vessel from the shipbuilder that has recently been built or repaired, he or she has 30 days from the date of its delivery to notify the shipbuilder to remedy any detected defects on the vessel. In the event that the shipowner fails to do so, he or she is in agreement with the shipbuilding or repairing. If the shipbuilder, after being duly notified by the shipowner to remedy detected defects on the vessel, fails to remedy such defects, then the shipowner is entitled to request a reduction of the agreed price or to terminate the shipbuilding or repairing contract.

Within three years from the date of detection of reported defects on the vessel, the shipowner must draft and file at court a respective court claim against the shipbuilder.

Taking into account that the relationship is established solely between the shipbuilder and the shipowner, the situation described above is the normal course of proceedings in Mozambique. Therefore, outside the contractual agreement between the shipbuilder and the shipowner, we cannot imagine a third party bringing a direct claim against either the shipbuilder or shipowner.

Ship registration and mortgages

5 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?

Only vessels owned by nationals of the Republic of Mozambique (either individuals or corporate entities where 51 per cent of the shareholding structure is held by nationals) are permitted to be registered under the Mozambican flag. It is not common practice to register a vessel under construction. However, as the situation may arise and upon any specific application or request in this regard, we believe that the relevant Mozambican maritime authority may evaluate the application and decide as it deems appropriate.

6 Who may apply to register a ship in your jurisdiction?

Only vessels owned by nationals of the Republic of Mozambique (either individuals or corporate entities where 51 per cent of the shareholding structure is held by nationals) are permitted to be registered under the Mozambican flag.

7 What are the documentary requirements for registration?

In Mozambique we have a complex system of registration of vessels, comprising: (i) inscription of the vessel at the local maritime authority (namely, Maputo city and province, Gaza, Inhambane, Sofala, Nampula and Cabo Delgado provinces) in order to obtain the respective certificate or title of ownership of the vessel; and (ii) after the applicant obtains the certificate or title of the vessel, he or she must register the vessel at the Legal Entities Registrar’s Office.

It is important to note that both the inscription and registration of the vessel are made through the submission at the corresponding authority of an application signed by the shipowner or his or her legal representative or power of attorney. The application must contain, inter alia, the name, place and date of construction and propulsion system of the vessel or apparatus, the activity and area where the vessel is to be engaged and the supporting documents, as set out below:

• document proving the Mozambican nationality of the shipowner;

• certificate or title of ownership of the vessel; and

• shipbuilding or purchase and sale agreement of the vessel, including the particulars of the vessel (eg, tonnage certificate, survey completion certificate, certificate of incorporation of the company and certificate of registration of the company at the Legal Entities Registrar’s Office).

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

Dual registration and flagging out are not permitted.

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

Any mortgages or maritime liens over the vessel must be registered at the respective local maritime authority and at the Legal Entities Registrar’s Office. The registration must identify the parties (eg, the mortgagor and mortgagee), the nature of the mortgage or maritime lien and the amount of such mortgage or maritime lien.

Limitation of liability

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

Concerning the limitation of liability relating to the carriage of goods by sea, Mozambique is a contracting party of the Hague Rules Convention of 25 August 1924. The carrier (in its capacity as the shipowner or charterer of the vessel) is legally entitled to limit its liability.

11 What is the procedure for establishing limitation?

It is not necessary to provide a cash deposit. In maritime claims proceedings, it is common for the claimant to submit a formal claim to the party liable for the damages or losses sustained. After the wrongdoer assess whether the reasons for the claim are fair, he or she may determine the final settlement amount payable. Subsequently, the wrongdoer issues a cheque and notifies the claimant to collect it. If the claimant is in disagreement with the final settlement amount, he or she may draft and file at court a court action against the wrongdoer.

12 In what circumstances can the limit be broken?

In the event that the claimed damages or losses result from the neglect, fault, omission or an act practised by the wrongdoer or his or her agents, servants or other persons hired by him or her, the wrongdoer is not entitled to limit his or her liability.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Mozambique is not yet party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. We do not have clear rules dealing with this matter.

Port state control

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

In Mozambique, the Maritime Authority is the public entity that exercises the power of port state control. It is under the authority of the Ministry of Transport and Communications.

15 What sanctions may the port state control inspector impose?

Depending on the gravity of the offences committed, the Maritime Authority may impose fines or sanctions for minor offences and heavy fines for more serious offences, with the possibility of imprisonment.

16 What is the appeal process against detention orders or fines?

In the event that the wrongdoer is in disagreement with the fines or sanctions imposed, he or she may submit a formal complaint to the person who imposed such fines or sanctions. If the fines or sanctions are upheld, the wrongdoer may submit an appeal to the boss of the person who imposed such fines or sanctions. If the fines or sanctions are still upheld, the wrongdoer may lodge an appeal at the Administrative Court.

Classification societies

17 Which are the approved classification societies?

Although Mozambique has approximately 2,700 kilometres of coastline, it does not currently possess any merchant vessels for carriage of goods by sea. There are currently no approved classification societies in Mozambique.

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

Not applicable, since there are no approved classification societies in Mozambique. There is also no approved legislation dealing with the liability of classification societies. However, we are of the opinion that the general principles of civil liability must be applied.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes, whenever the wrecked ship represents an obstacle or a risk to the safety of navigation at sea or to the marine environment. Wreck removal on the initiative of the Maritime Authority always occurs in the event that the shipowner does not comply with the relevant provisions of the Port Regulation.

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

Mozambique is not a party to the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910, or the International Convention on Salvage 1989.

In relation to marine pollution, the international conventions and protocols in force in Mozambique include:

• the Protocol of 1978 relating to the International Convention for the Prevention of Pollution from Ships, 1973, as amended (MARPOL 73/78);

• Annexes III, IV and V to MARPOL 73/78;

• the Protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution Damage, 1969;

• the Protocol of 1992 to amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971; and

• the International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990.

Concerning collision, the only international convention in force is the Convention on the International Regulations for Preventing Collisions at Sea, 1972, as amended.

21 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. The Lloyd’s standard form of salvage agreement is acceptable. Terms and conditions may be agreed under the specific salvage agreement.

Ship arrest

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

The International Convention Relating to the Arrest of Sea-Going Ships 1952.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

It is common in arrest proceedings for the court to grant the arrest to the applicant whenever he or she gives evidence of: his or her credit over the vessel in question; and his or her justifiable concern that the debtor is about to the leave the country without paying the outstanding amount.

24 What is the test for wrongful arrest?

It is important to note that an arrest granted by a court is valid for a period of 30 days from the date when the court order is served to the applicant. Within this period, the applicant must draft and file at court the main court action against the shipowner. In the event that the applicant fails to do so, the arrest shall be shifted. Pursuant to article 621 of the Mozambican Civil Code, if an arrest is unfounded or expires for reasons attributable to the applicant, he or she will be held liable for damages or losses caused to the shipowner by his or her misleading behaviour.

25 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.

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

It is common in arrest proceedings that, when the defendant presents an opposition at court, he or she simultaneously applies for the submission of a bond as security for the payment of the outstanding amounts due by the charterer. If the judge considers the bond adequate and enough to secure the payment of outstanding amounts due by the charterer, he or she may shift the arrest granted to the applicant.

27 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?

It is common in arrest proceedings for applicants to indicate the amount claimed in their application submitted at court. Therefore, the amount of security should be adequate and enough for payment of the claimed amount. Although the judge is sovereign to decide in this regard, before he or she makes a decision the applicant will be notified to respond as to the form in which the security should be provided.

The final amount can be reduced if the claimed amount does not reflect the amount effectively due by the charterer.

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

It is common practice, while the arrest is pending at court, for the judge to appoint someone who will be responsible for the custody and maintenance of the vessel.

29 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 not possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere.

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

Apart from ship arrest, the following forms of attachment order or injunction are also available: seizure or attachment of any other property owned by the debtor, other than ships; and non-specified injunctions.

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

Yes.

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

Yes.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The potential creditors of an arrested vessel.

34 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?

If a creditor has a judgment or any valid mortgage or maritime lien, he or she can initiate a proper process of execution of such judgment, mortgage or maritime lien at court. We are not in a position to estimate the time that it may take to conclude the judicial sale. However, in our experience it may take between one and two years.

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

The order of priority is established under article 578 of the Mozambican Commercial Code, and is as follows:

• court fees made in the common interest of the creditors;

• salvage rewards;

• claims secured by mortgages or pledges over ships;

• pilotage and towing expenses for entry into port;

• tonnage, anchorage, public health, light and other harbour dues;

• expenses for the keeping of the vessel and storage of her appurtenances;

• master and crew wages;

• repair costs of the vessel, her appurtenances and equipment;

• reimbursement of the price of the cargo that the master was forced to sell;

• insurance premiums;

• the outstanding price of the last purchase of the vessel;

• repair costs of the vessel, her appurtenances and equipment, in the three years previous to the voyage at issue and counted from the date of termination of the repairs;

• costs related to shipbuilding contracts;

• the insurances premiums over the ship, if entirely covered, or over the covered part or her appurtenances not mentioned in paragraph (xi) of article 578 of the Commercial Code; and

• indemnities due to the shippers for shortage or damage of goods.

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

In principle, the judicial sale of a vessel gives the purchaser clean title.

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

Any judgment or arbitration awarded by a foreign court or arbitration is subject to a proper process of recognition by the Supreme Court of Mozambique.

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

No.

Carriage of goods by sea and bills of lading

39 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?

Only the Hague Rules Convention is in force. Pursuant to subparagraph (e) of article 1 of the Hague Rules Convention, the carriage of goods covers the period from the time when the goods are loaded at a certain port and shipped on board the vessel until their discharge at the port of discharge.

40 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?

There are currently no multimodal legal instruments in force in Mozambique.

41 Who has title to sue on a bill of lading?

Pursuant to article 3 of the Hague Rules Convention, the cargo owner, shipowner, master or captain of the vessel or shipowner’s agent are entitled to sue on the bill of lading.

42 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?

Pursuant to the principle of the private autonomy of the contracting parties, they are free and sovereign to negotiate and agree the incorporation of any terms of the charter party into a bill of lading that they may wish, without any limitation or restriction.

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

Yes.

44 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?

A shipper whose cargo sustained any damages or losses may bring a direct court action separately or jointly against the shipowner and the carrier. However, the shipowner can deny such liability.

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

Pursuant to paragraph 4 of article 4 of the Hague Rules Convention, deviation is allowed and is not subject to any punishment.

46 What liens can be exercised?

All maritime liens legally vested to the carrier, purchaser or lien creditor.

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

The bill of lading has three functions: it is proof of the contractual agreement between the carrier and the shipper; it is a receipt that the cargo therein described was or was not effectively received on board the vessel; and finally, it is a title of credit. If the carrier delivers the cargo without producing the bill of lading, anyone can collect the cargo without any valid title, in which case the carrier will not be entitled to limit his or her liability.

48 What are the responsibilities and liabilities of the shipper?

The Hague Rules Convention sets out the contractual obligations of the shipper in relation to the shipment (please refer to paragraph 5 of article 3 of the Hague Rules Convention), and states that the shipper may provide the carrier with accurate data or information concerning the shipment and shall compensate the carrier for any damages or losses that may occur due to inaccurate data or information provided by the shipper. However, pursuant to paragraph 3 of article 4 of the Hague Rules Convention, the shipper will not be liable for any damages or losses sustained by the carrier or ship due to any act, omission or neglect not attributable to the shipper, his or her agents or employees, or any third party hired by him or her.

Shipping emissions

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

No.

50 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?

There is currently no specific legislation dealing with this matter.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

It is important to note that, in Mozambique, maritime courts were formally created by Law No. 5/96 of 4 January 1996, but were not formally installed. The process of their installation is underway. Therefore, currently, maritime disputes are dealt with by the civil courts.

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

When the defendant is located out of the jurisdiction, court summons are served through a precatory letter.

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

No.

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

Pursuant to article 1094 of the Mozambican Civil Code of Procedure, any judgment or arbitration awarded by a foreign court or arbitration is subject to a process of recognition by the Supreme Court of Mozambique.

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

No remedies are available.

56 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 raise the heading argument that the domestic court is incompetent to handle the proceedings, since the conflicting parties elected a foreign court or arbitral tribunal to settle any disputes that may arise.

Limitation periods for liability

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

Depending on the particular case we have time bars of three, five and 20 years. The time period granted by the Mozambican courts cannot be extended.

58 May courts or arbitral tribunals extend the time limits?

No, see question 57.

Miscellaneous

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

Mozambique is not party to the Maritime Labour Convention.

60 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?

There are two potential scenarios:

By contract

All contracts are to be strictly complied with, clause by clause or point by point, under the principle of pacta sunt servanta contained in article 406 of the Mozambican Civil Code. However, according to the Civil Code, the parties are free to stipulate what they want to be in the contract, so they can agree that external factors, such as economic conditions, can affect the legal rights and liabilities of the parties.

By law

Under article 437 of the Mozambican Civil Code, a party that feels damaged may elect to terminate the contract or have it modified under equity, if the circumstances on which the parties based their decision to contract suffer an abnormal change and as long as compliance with its contractual duties breaches the principles of good faith and is not covered by the inherent risks of the contract. If the other party does not agree, it may oppose the valid termination of the contract by accepting the contract’s modification.

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

No.

CGA Couto, Graça & Associados

José Camilo Mate

jmate@cga.cga.mz

Av. 24 de Julho, No. 7

7th Floor, CIMPOR Building (Polana Shopping)

Maputo City

Mozambique

Tel: + 258 21 48 64 38/39/40 / + 258 21 49 69 00

Fax: + 258 21 48 64 41 / + 258 21 49 68 02

www.cga.co.mz

Netherlands

Arnold J van Steenderen, Charlotte J van Steenderen and Sebastiaan H Barten

Van Steenderen MainportLawyers BV

Newbuilding contracts

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

A shipbuilder constructing a vessel out of raw materials, components and equipment will acquire title to the vessel under construction, provided it owned the raw materials, components and equipment. However, if the shipbuilder does not already own all of the chattels it uses to build the vessel, it nevertheless becomes the owner of the vessel constructed by it, unless the costs of the value added by it are so modest as not to justify this result. If the shipowner owns the raw materials, components and equipment with which the shipbuilder is constructing a vessel, then the shipowner will become the owner of the vessel built. In practice the parties to a shipbuilding contract will contemplate what time suits them best to let title pass. From the keel laying of the vessel, a vessel under construction qualifies to be registered in the Dutch Ship Register as a vessel under construction in the name of the owner or the shipbuilder, as the case may be. By registering the vessel as a vessel under construction it will be possible, but not compulsory, to record a vessel’s mortgage. Upon its completion the vessel can be deleted from the Dutch Ship Register to register it abroad provided the mortgagee, if any, consents to this.

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

The parties are at liberty to draft the wording of a refund guarantee, which may vary from an irrevocable first-written-demand type of guarantee to a guarantee whereby the beneficiary will have to submit an enforceable judgment or arbitration award before being allowed to claim under the guarantee. A refund guarantee issued by financial institutions and banks will usually have to be signed by two persons authorised to do so. Proof of authority to bind the guarantor for the maximum amount of the refund guarantee can be requested by SWIFT. This request should be made to the issuing bank by the beneficiary’s bank. If refund guarantees are issued by, for example, parent companies, the beneficiary should ensure that the company’s articles (or memorandum) of association allow the issuance of guarantees and that the parent company is creditworthy. Issuance of a guarantee may be considered to be ultra vires, if the memorandum of association does not allow it or the transaction is not ratified by all shareholders. In such a case the issuance of the refund guarantee will be voidable.

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

Under article 35 of Council Regulation (EC) No. 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, application may be made to the Dutch Court of competent jurisdiction (where the vessel under construction is located) for provisional measures to be taken, including a court order for the release of a vessel over which a yard exercises a lien (also referred to as a right of retention). This also applies if, under this Regulation, the court of another member state or arbitrators have jurisdiction as to the substance of the matter. Shipbuilders are granted a statutory right of retention (article 6:52 of the Dutch Civil Code and article 3:290 of the Dutch Civil Code). The right of retention is the power a creditor has to suspend the performance of an obligation to surrender goods to the debtor until payment of the outstanding debt is made. If the shipowner requests delivery of the vessel, and the yard relies on its right of retention, the local court will have to test whether under the circumstances of the case the shipyard is justified to do so. The test applied here will be the reasonableness and fairness of the yard’s standpoint taking into account all circumstances.

4 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?

Where the vessel is defective and damage results, a claim by the shipowner will be delimited by the warranty provisions of the shipbuilding contract. The warranty provisions to which only the parties to the contract will be bound, customarily exclude liability of the shipbuilder for all indirect and consequential losses. Although section 3, Title 3 of the sixth book of the Dutch Civil Code implements the provisions of the Council Directive (EC) No. 85/374/EEC of 25 July 1985 (OJEC No. L 210) concerning liability for defective products, this section 3 is supplemental to the first section of Title 3, containing general provisions in respect of tort. Claims made by a purchaser from the original shipowner can only be made if the original shipowner has transferred any residual rights for warranty it may have had under the building contract to the purchaser. Without such a transfer of rights a purchaser can only claim in tort, provided the defect in the vessel was of such a serious nature that a court would consider it to be a tort to the general public at the time the product was put into circulation. Product liability is limited to ‘damage’, namely damage caused by death or personal injury and damage to an item of property intended for private use or consumption, with a lower threshold of €500. The Dutch Act to implement the European Directive on Product Liability entered into force on 1 November 1990 and the relevant provisions can be found in articles 6:185–193 of the Dutch Civil Code. In cases of pure economic loss and of damage to commercial goods caused by a product the rule of law developed by the Dutch Supreme Court is that it is unlawful to put into circulation a product that causes damage during its normal operation in accordance with its purpose. The differences between the liability regime of the Directive as also contained in Dutch law and the liability regime of the Dutch general tort law is that the latter regime requires that the unlawful act can be attributed to the manufacturer of the goods (fault).

Ship registration and mortgages

5 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?

The law on the registration of vessels is mainly contained in the Dutch Civil Code, whereas the nationality of seagoing vessels is dealt with in accordance with the provisions of the Commercial Code. The regulatory provisions are found in the Act on the Public Registers and the Royal Decree on Registered Vessels 1992. Vessels eligible for registration under the Dutch flag are seagoing vessels and inland barges (inland waterway vessels).

A ‘vessel’ is defined as any object, with the exclusion of an aircraft, constructed to float in or on water, either actually floating, or having been afloat. As a consequence, the definition includes all floating equipment, such as dry docks, pontoons, cranes, tunnel caissons, drilling rigs and elevators. However, if a tunnel caisson or a drilling rig becomes permanently anchored to the seabed it loses the status of ‘vessel’.

‘Seagoing vessels’ are those vessels registered as such and, if not registered, the vessels that by their construction are intended to float or sail exclusively or mainly in or on the sea (article 8:2(i) of the Dutch Civil Code).

‘Inland barges’ are vessels registered as such, or, if not registered, vessels that by their construction are neither exclusively nor mainly intended to float in or on the sea (article 8:3(i) of the Dutch Civil Code). Owners of inland barges are obliged to register their vessel within three months after the vessel in question complies with the provisions of article 8:784 of the Dutch Civil Code. There is no statutory registration for inland barges with a carrying capacity of less than 20 tons and for other inland barges if they are under 10m3 dead weight.

The Netherlands is a party to the Convention on Registration of Inland Navigation Vessels with protocols (Geneva, 25 January 1965). An inland barge is eligible for registration under the following conditions:

(i) the barge is operated from the Netherlands, irrespective of the nationality of its owner;

(ii) the barge is owned by a Dutch individual or the individual has domicile in the Netherlands; or

(iii) the barge is owned by a legal entity or a company that has its corporate seat or principal place of business in the Netherlands.

If joint owners own a barge, the majority of these owners have to comply with either (ii) or (iii).

Further to the definition of a vessel, a vessel under construction is constructed to float on water, but neither floats nor has been afloat. In order to enable registration of a mortgage on a vessel under construction or reservation of title of machinery and vessel ancillaries, the Dutch legislator decided that a vessel under construction should be considered a ‘vessel’ as well. Hence, registration of a vessel under construction in the Dutch Ship Register is possible. However, registration of a vessel under construction in the Dutch Ship Register does require the vessel to be constructed in the Netherlands. The Dutch Supreme Court recently decided that it is not possible to register a barge hull built abroad that has already floated abroad in the Dutch Ship Register as a vessel, in the event this hull still needs completion by a yard either abroad or in the Netherlands and ruled that a registration to that effect is null and void (Dutch Supreme Court 28 February 2014).

6 Who may apply to register a ship in your jurisdiction?

The owner of a seagoing vessel, or its representative, may apply for registration in the Dutch Ship Register. However, such request will only be granted if the vessel qualifies as a Dutch vessel. This is the case if:

(i) the vessel is owned by one or more nationals of a member state of the European Union, or of a member state of the European Economic Area, Switzerland or persons who are equated with EU citizens, or the vessel is owned by one or more partnerships or legal entities established in accordance with the law of a member state of the European Union, one of the countries, islands or areas referred to in article 299, paragraphs 2 to 5 and 6c of the Treaty establishing the European Community, a member state of the European Economic Area, or Switzerland, or the vessel is owned by other individuals, companies or legal entities, who can invoke the freedom of establishment rules by virtue of an agreement between the EU and a third state; and

(ii) the owner or ship manager has a head or branch office established in the Netherlands under Dutch law.

If it concerns an inland barge, registration may be applied for by the owner if one of the following requirements are met:

(i) the barge is operated from the Netherlands, irrespective of the nationality of its owner;

(ii) the barge is owned by a Dutch individual or the individual has domicile in the Netherlands; or

(iii) the barge is owned by a legal entity or a company that has its corporate seat or principle place of business in the Netherlands.

If it concerns a seagoing vessel or inland barge under construction, the owner must show that the vessel or barge is indeed under construction in the Netherlands. This can be demonstrated by submitting a letter from the shipyard confirming the construction on behalf of the applicant.

In all cases, the owner of the vessel applying for registration must choose domicile in the Netherlands, for example at the office of a Dutch lawyer.

7 What are the documentary requirements for registration?

Before applying for registration of the vessel in the Dutch Ship Register, the following documents are required in order to obtain the necessary certificate of nationality and the provisional certificate of registry from the Netherlands Shipping Inspectorate (an agency of the Ministry of Infrastructure and the Environment):

• power of attorney, if the owner does not apply for the registration itself;

• if the owner is a company or legal entity, a copy of the extract from the trade register and a copy of the articles of association;

• if a ship manager is appointed and this is a company or legal entity, a copy of the extract from the trade register and a copy of the articles of association;

• if the vessel is already registered abroad, a copy of the foreign registration;

• copy of the certificate of tonnage;

• copy of the class certificate; and

• copy of a certificate which includes details on the motor of the vessel (ie, a machinery certificate or an air pollution prevention certificate).

After obtaining the certificate of nationality and the provisional certificate of registry, the Dutch Ship Register requires the following documents:

• original bill of sale or other original proof of ownership;

• certificate of nationality;

• provisional certificate of registry (to be replaced by a definite certificate of registry in due course); and

• if the vessel was previously registered abroad, the original certificate of deletion (to be submitted within 30 days after the provisional registration in the Dutch Ship Register).

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

Flagging in of seagoing vessels in the Bareboat Register kept by the Dutch Ministry of Infrastructure and the Environment is possible, provided the seagoing vessel in question remains registered in another country. The Act on the Nationality of Seagoing Vessels in Bareboat Charter (Act of 8 October 1992, as amended) sets out the requirements. According to article 3 of this Act a seagoing vessel registered abroad can be bareboat registered in the Netherlands if:

(i) the vessel has been let under a bareboat charter to one or more:

(a) individuals who have the nationality of a member state of the EU, European Economic Area (EEA) or Switzerland or who are equated with EU citizens;

(b) companies that are incorporated in accordance with the law of an EU or EEA member state or Switzerland; or

(c) individuals, companies or legal entities, other than those mentioned under (a) who can invoke the freedom of establishment rules by virtue of an agreement between the EU and a third state;

(ii) the bareboat charterer has its main office or branch office in the Netherlands;

(iii) one or more individuals who have their management office in the Netherlands are responsible on behalf of the bareboat charterer for the vessel, the master, the other crew members, as well as for all related matters, and who, either alone or together, have the power of decision and the power to represent;

(iv) one or more individuals as mentioned under (iii) or, in the case of absence, if a deputy is permanently available and has the powers to act without delay if so required;

(v) the owner and the bareboat charterer – if another person or entity than the owner approves in writing of the acquiring of the status of a Dutch vessel;

(vi) the bareboat charterer accepts the responsibility for the vessel and those on board, which arises from status of a Dutch flag vessel; and

(vii) pursuant to the laws of the state in which the vessel has been registered, there are no impediments to acquiring the status of a Dutch vessel in connection with entering into the bareboat charter agreement with a bareboat charterer located in the Netherlands.

By registration in the Bareboat Register the bareboat charterer qualifies for the tonnage tax system. Upon registration a bareboat chartered vessel loses Dutch nationality and flagging out is therefore only possible if the vessel is removed from the Dutch Ship Register. In that event there is no residual right to fly the Dutch flag. The president of the district court of the place of registration of the vessel will have to authorise the deletion of such vessel from the Dutch Ship Register. After having received such authorisation from the court, the Dutch Ship Register will complete the deletion.

It is not possible to register a seagoing vessel that is already registered in public registers, either as a seagoing vessel or as an inland waterway vessel, or in any similar foreign register.

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

The register of mortgage entries concerning the judicial status of a registered property are made in public registers kept for that purpose at the Dutch Land Registry Office. The law provides which public registers will be kept, the manner and place of making an entry, the kind and contents of the documents to be filed with the registrar, the organisation of the registers, the manner of registration and the consultation procedure. Registers are maintained in Rotterdam, Amsterdam and Groningen, but the Dutch Ship Register in Rotterdam also operates as a central register in which all other registries are duplicated ex officio. The following particulars in respect of a mortgage will be recorded:

• the name and address of the mortgagee;

• the original principle sum or the maximum sum secured; and

• the date of the mortgage deed and the date and time the mortgage deed was recorded against the vessel.

The rank of entries pertaining to the same registered property is determined by the order in which they have been registered, unless a different order results from the law. Where two entries are made at the same time, and where they would lead to mutually incompatible rights of different persons to the same property, the precedence shall be determined thus: in the event that the deeds presented for registration have been executed on different days, in order of the day the deeds were presented; and in the event that both deeds, being notarial deeds and including notarial declarations, have been executed on the same day, in order of the time of execution of those deeds or declarations (article 3:21 of the Dutch Civil Code).

Limitation of liability

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

The Convention on Limitation of Liability for Maritime Claims 1976 (London Convention) with the following reservations:

• exclusion of articles 2(i)(d) and (e), which apply to the London Convention to claims in respect of raising, removal, destruction or rendering harmless of vessel or cargo that is sunk, wrecked, stranded or abandoned;

• application of national law of limitation to vessels intended for navigation on internal waterways, including provision that the limitation of liability for claims for loss of life or personal injury (other than those claims in respect of passengers of a vessel) on any distinct occasion shall in no case be less than 200,000 units of account;

• the limitation of liability for claims in respect of loss of life or personal injury on inland navigation vessels will (in general) be 60,000 units of account multiplied by the number of passengers the vessel is authorised to carry – but in no case will it be less than 720,000 units of account. Maximum limits of liability are also stated as 3 million units of account for a vessel with a maximum capacity of 100 passengers, 6 million units for 180 passengers, and 12 million units for vessels carrying more than 180 passengers; and

• the limit for passenger vessels under 300 tons for other than claims for loss of life or personal injury is 100,000 SDR. The 1996 Protocol, which entered into force on 13 May 2004, has been accepted.

The London Convention shall apply in cases described in article 15 of the London Convention. Claims subject to limitation are:

• loss of life or personal injury, or loss or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connection with the operation of the vessel or with salvage operations, and consequential loss resulting therefrom;

• claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

• claims in respect of other loss, resulting from infringement of rights, other than contractual rights, occurring in direct connection with the operation of the vessel or salvage operations;

• claims in respect of the raising, removal, destruction or the rendering harmless of a seagoing vessel or an inland navigation vessel that is sunk, wrecked, stranded, or abandoned, including anything that is or has been on board such vessel;

• claims in respect of the removal, destruction or the rendering harmless of the cargo of the vessel; and

• claims of a person in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with title 7, book 8 of the Dutch Civil Code, and further loss caused by such measures, but with exception of such claims of the person liable.

For inland navigation the Strasbourg Convention on Limitation of Liability in Inland Navigation (CLNI) shall apply. The Netherlands has incorporated the provisions of CLNI in the Dutch Civil Code in Articles 8:1060 to 1066. In November 2012 the Netherlands signed the CLNI 2012. To date Belgium, France, Germany, Luxembourg and Serbia have also signed the CLNI 2012. The CLNI 2012 will, in time, replace the current CLNI, but has not yet entered into force. Liability may be limited for claims set out before, even if brought by way of recourse or for indemnity under a contract or otherwise. Persons entitled to limit liability by constituting one or more limitation funds are the shipowner (including the charterer, the hirer, or any other user of the vessel including the operator and the salvor). Under the CLNI persons entitled to limit liability are also the vessel owner, including the hirer, charterer, manager and operator, and salvors.

11 What is the procedure for establishing limitation?

Provided legal proceedings are instituted in the Netherlands the person entitled to limit liability can file a petition with the district court of competent jurisdiction requesting limitation of liability. This petition shall be heard in a session of the court and it will result in a court order ordering the petitioners to constitute one or more limitation funds by either making a cash deposit, or submitting a letter of undertaking in favour of all creditors from a guarantor reasonably acceptable, such as a reputable bank or P&I club. By the same court order a delegated judge and a fund liquidator will be appointed to deal with the limitation proceedings. There is no separate right to plead limitation without setting up a fund. The limits of liability for other claims than those mentioned in article 7 of the London Convention (carriage of passengers) must be calculated as follows.

In respect of claims for loss of life or personal injury:

• 2 million SDR for a vessel with a tonnage not exceeding 2,000 tons;

• for a vessel with a tonnage exceeding 2,000 tons the number of SDR to be added to the basic 2 million SDR:

• 2,001–30,000 tons, 800 SDR;

• 30,001–70,000 tons, 600 SDR; and

• 70,000 tons upwards, 400 SDR.

In respect of all other claims:

• 1 million SDR for a vessel with a tonnage not exceeding 2,000 tons;

• for a vessel with a tonnage exceeding 2,000 tons the amount of 1 million SDR will be increased as follows:

• 2,001–30,000 tons, 400 SDR;

• 30,001–70,000 tons, 300 SDR; and

• 70,000 tons upwards, 200 SDR.

Property damage that arises in connection with wreck removal or salvage of cargo and other chattel will not be compensated from the property fund but from the wreck removal fund.

12 In what circumstances can the limit be broken?

No one shall be entitled to limit his or her liability if it is proven that the loss resulted from the personal act or omission of said person, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. It is clear from the words ‘intent to cause such loss’ that in order to deprive the person liable of the right to limit, it must be proved that the person liable has the subjective intent (mens rea) to cause the loss. Therefore, it is not sufficient if the parties suffering the loss prove that a reasonably competent person could not have failed to conclude that his or her act or omission would cause the loss. The test to be applied to understand the consequences of the words ‘or recklessly and with knowledge that such loss would probably result’ was the subject of two cases of the Dutch Supreme Court on 5 January 2001. In these cases the Dutch Supreme Court ruled that conduct is to be regarded as reckless and with knowledge that the loss would probably result therefrom, if the person conducting him or herself in this way knew the risks connected to that conduct and was conscious of the fact that the probability that the risk would materialise was considerably greater than that it would not, but all this did not restrain said person from behaving the way he or she actually did. This very strict test has meanwhile been applied by lower courts in cases in respect of limitation of liability of shipowners (Court of Appeal of The Hague, 22 February 2002, The Pioner Onegi and Amsterdam District Court 12 May 2004, The Arcturis).

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Regulation (EC) 392/2009 implements the provisions of the Athens Convention and entered into force on 31 December 2012. The provisions of the Regulation are nearly identical to the Convention, but some provisions do offer more protection to passengers. Article 6 of the Regulation provides for an advance payment to passengers, without constituting liability, within 15 days after the shipping incident causing death or personal injury. In the event of death, the minimum advance payment is €21,000. Additionally, article 7 stipulates that carriers shall ensure that passengers are provided with appropriate and comprehensible information regarding their rights under this Regulation. Not surprisingly, some articles related to jurisdiction, recognition and enforcement are excluded, as other European instruments already exist in this field.

The 2002 Protocol amending the Athens Convention was ratified by the Dutch legislator on 26 September 2012 and entered into force on 23 April 2014. The Athens Convention 2002 is subsequently implemented in articles 8:500 to 8:529k of the Dutch Civil Code. The Netherlands reserved the right to limit the liability in respect of death and personal injury caused by any of the risks (eg, war, terrorism and expropriation) mentioned in section 2.2 of the IMO Guidelines for implementation to 250,000 SDR in respect of each passenger or 340 million units of account overall per ship on each distinct occasion, whichever amount is the lowest. For other risks and categories of damage, the regular limits of the Athens Convention 2002 apply. The abovementioned means that, even when the Athens Convention is not applicable (eg, for national carriage of passengers), similar or identical provisions to those of the Athens Convention will apply, provided that Dutch law or the Regulation is applicable to the claim.

The Athens Convention 2002 system entails a two-tier liability system:

• strict liability in respect of claims for loss of life or personal injury up to 250,000 SDR, unless the incident was intentionally caused by a third party, or resulted from an act of war, hostilities, civil war, insurrection or force majeure; and

• in respect of claims above this limit, there is a further limit of 400,000 SDR, unless the incident occurred without the fault or neglect of the carrier.

With regard to luggage the following limits apply:

• cabin luggage claims are limited to 2,250 SDR per passenger;

• vehicle claims including all luggage carried in or on the vehicle are limited to 12,700 SDR per vehicle; and

• other luggage claims are limited to 3,375 SDR per passenger.

Thus, the Athens Convention 2002 limits the liability with regard to individual claims, whereas the London Convention offers possibilities to limit the liability for a particular incident.

Port state control

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

Vessels flying a foreign flag and calling at a Dutch port are regulated on the basis of the Paris Memorandum of Understanding on Port State Control (the Paris MoU). One of the agencies of the Ministry of Infrastructure and the Environment, the Netherlands Shipping Inspectorate, performs inspections on vessels focusing on safety, construction, environmental items and quality and number of crew. Moreover, the living and working conditions on board are inspected. These inspections take place unannounced. They aim to inspect a quarter of all foreign vessels visiting a Dutch port. Compliance with the ISPS Code is also verified by this body. As of 1 January 2011, vessels flying the flag of states participating in the Paris MoU are required to issue the following notifications:

• notification 72 hours before arrival at the port or anchorage if vessels are eligible for an expanded inspection;

• notification 24 hours before arrival at port; and

• notification of hazardous materials on board.

The vessels eligible for an expanded inspection are:

• vessels that have a high-risk profile and have not been inspected in the last five months;

• oil, gas and chemical tankers, bulk carriers or passenger vessels more than 12 years old with a standard-risk profile that have not been inspected in the last 10 months; and

• oil, gas and chemical tankers, bulk carriers or passenger vessels more than 12 years old with a low-risk profile that have not been inspected in the last 24 months.

The master or the vessel’s agent must report that the vessel is eligible for a mandatory expanded inspection. The information to be provided is listed in Directive 2009/16/EC. The vessel’s risk profile is calculated according to article 10 of Directive 2009/16/EC and an online calculator is available on the website of the Paris MoU.

15 What sanctions may the port state control inspector impose?

The sanctions that may be imposed for substandard vessels are:

• to order rectification of deficiencies without detention;

• to detain the vessel: the violation should be rectified before the vessel is allowed to leave; or

• to ban the vessel: after multiple detentions the vessel will not be allowed to enter into ports of states that have adopted the Paris MoU.

Notorious examples of vessels, berthed in Dutch ports, that were posing an unreasonable risk to the environment (asbestos) and were therefore detained before being scrapped, are The Otapan and The Sandrien.

16 What is the appeal process against detention orders or fines?

In the case of detention on account of the Port State Control Act or the Pollution Prevention by Ships Act, an appeal can be made by any party interested to the Minister of Infrastructure and the Environment. The appeal shall be made within six weeks after the date of notification of the detention and shall be sent to the inspector-general of the Netherlands Shipping Inspectorate. Appeals have to be duly signed and at least comprise the following information:

• name, address and interest of appellant;

• date of appeal;

• date of detention and details of the case against which the appeal is directed; and

• the reason for lodging the appeal against the decision.

It is possible to draft the appeal in English and if the appeal is sent by fax a signature may be omitted. An appeal shall not cause the detention to be suspended. The detention shall not be lifted until, according to the professional judgement of an officer of the Netherlands Shipping Inspectorate, all deficiencies notified in the detention order have been rectified and until full payment has been made or an authorised payment guarantee has been given for the reimbursement of the costs (if applicable).

Classification societies

17 Which are the approved classification societies?

The Dutch Ministry of Infrastructure and the Environment has authorised a number of classification societies (recognised organisations) to act on behalf of the Netherlands Shipping Inspectorate, who has a delegated public task as laid down by law of performing statutory surveys, verifications and certification as required in the International Conventions (such as Solas, MARPOL and EU Directive No. 96/98/EC). Seven authorised, recognised organisations carry out surveys of vessels applying to transfer to the Dutch Ship Register and issue the certificates required. The seven authorised organisations are:

• the American Bureau of Shipping represented by ABS Europe Ltd, Rotterdam;

• Bureau Veritas represented by Bureau Veritas, Rotterdam;

• DNV GL, Barendrecht;

• Lloyd’s Register represented by Lloyd’s Register, Rotterdam;

• Nippon Kaiji Kyokai represented by Nippon Kaiji Kyokai, Rotterdam; and

• Registro Italiano Navale represented by Registro Italiano Navale, Rotterdam.

Register Holland, a foundation with its office in Enkhuizen, the Netherlands, is a national classification society recognised by the Netherlands Shipping Inspectorate. Register Holland was founded in 1984 as an independent and highly specialised organisation, mainly focused on surveying sailing passenger vessels. As of April 2011 Register Holland also received a designation by the Netherlands Shipping Inspectorate allowing it to classify all kinds of inland vessels, such as tugs, barges and passenger vessels for non-Convention and non-European legislation. Its knowledge of both traditional and modern rigging is quite unique and surveys for Dutch certificates are conducted by Register Holland in accordance with their own classification rules. There are special rules for:

• seagoing sailing vessels with up to 36 passengers and a maximum of 500 GT and seagoing motorvessels with a power greater than or equal to 750 kW and a maximum of 12 passengers (the White Rules);

• inland navigation sailing vessels with more than 12 passengers (the Yellow Rules);

• inland navigation sailing vessels with up to 12 passengers (the Red Rules);

• non-commercial seagoing sailing vessels (the Green Rules); and

• seagoing sailing vessels taken into service prior to 1996 (the Blue Rules).

In respect of inland cargo vessels, the respective surveyors are:

• EFM Onderlinge Schepenverzekering UA and EFM Expertise BV (Meppel);

• VOF Expertise- en Taxatiebureau A Middelkoop (Nieuwendijk);

• Stichting Nederlands Bureau Keuringen Binnenvaart (Rotterdam); and

• Noord Nederland Maritiem Expertisebureau Heerenveen BV (Heerenveen).

In respect of sailing vessels, the surveyors are:

• EFM Onderlinge Schepenverzekering UA and EFM Expertise BV (Meppel);

• Nederlands Keuringsinstituut voor Pleziervaartuigen (Leeuwarden); and

• Stichting Register Holland (Enkhuizen).

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

Supervisors can only be held liable if they have caused damage by an imputable, unlawful act. In this connection courts will take as a starting point that a supervisor is exercising a public task and thus enjoys a certain amount of policy freedom. The policy freedom is limited by the fact that supervisors have to comply with general principles of good governance and with obligations arising from the ECHR and European law. Despite this certain amount of policy freedom, supervisors run the risk of being held liable both by supervisees and by third parties who have incurred damage as a result of inadequate enforcement supervision. If a supervisor fails in the performance of a general supervisory task, for example, the failure to recognise dangerous situations, it will largely be a matter of the policy freedom of the supervisor. However, if a supervisor fails to recognise and address a particular dangerous situation, it will be easier for a court to establish a causal link between the failure of the supervisor and the damage which has occurred.

The responsibility and liability for statutory certification as a public task was addressed by the Dutch Supreme Court in the Duwbak Linda case (Dutch Supreme Court 7 May 2004, NJ 2006/281, RvdW 2004/67). Although none of the well-known classification societies were involved, the considerations and grounds for this judgment are illustrative of the reluctance of the Dutch legislature to hold supervising authorities’ inspection or certification institutes liable for the (non)-performance of a delegated public task. In this leading case the Dutch Supreme Court expressed its opinion that, under Dutch law, an owner of a vessel is not entitled to rely on a statutory certificate as a guarantee to the owner that the vessel has been soundly constructed, and, moreover, that it is not the purpose of the certificate to guarantee safety, but merely to provide a vessel’s certificate (in order to comply with port entry requirements, obtain insurance coverage or liability covers, or comply with carriage of goods by sea. Under charters, sales, shipbuilding contracts or towing contracts, it is a warranty or even a condition that the subject vessel is a classed and class maintained vessel or meets a standard classification standard).

Moreover, the Dutch Supreme Court decided that, although the Dutch government has chosen to take care of safety within its territorial waters and has introduced a certification system for that purpose supervised by classification societies, neither the government’s intention for introducing a liability for damages of these supervisors towards third parties can be derived from that choice, nor is such a liability caused by operation of law. Although in the Duwbak Linda case, the supervisor had acted in an imputable unlawful manner, it did not automatically mean that this supervisor was liable for the damage. In the first place, the legal norm infringed by the supervisor must be intended to protect against the damage as suffered by the injured party. This is the relativity requirement, and in Duwbak Linda, the Dutch Supreme Court suggested that this requirement can serve as a barrier to extensive liability on the part of the supervisor. The Court of Appeal Den Bosch followed the Dutch Supreme Court in a more recent decision (20 March 2012) in respect of the sudden sinking of the brand new inland barge No Limit.

The above does not mean that classification societies cannot be held liable on the basis of a private contract, instead of a delegated public task (to which in most situations general conditions of the classification societies, excluding liability clauses, shall apply) or in tort by third parties when not performing a public task (the Blue Danube case, Rotterdam District Court, 11 July 2002, S&S 2003/18). It is worthwhile mentioning that, in the Netherlands, other private entities with a delegated public task have been held liable for failing supervision when using their own developed rules and standards exceeding a statutory minimum for supervision. These stronger requirements will then have to be fulfilled. Therefore, assuming for the sake of argument that classification societies make use of their own developed rules and standards, liability of classification societies may be at stake when they do not meet their own standards. Third parties can rely on legitimate expectations that requirements and standards have been met. This may be suitable for analogous application, but for now there is still no case law on the liability of classification societies to be reported. However, the most important and unanswered question still remains whether the Dutch Courts will follow the recent French decision in the Erika case (judgment of January 2008 as upheld in appeal on 30 March 2010) in such a way that classification societies do not have a blanket immunity from a public law perspective nor can they be qualified as ‘any person’ as stipulated in article III, subsection 4 under (b), Civil Liability Convention, from a private law perspective. The Erika verdict is, from a public law perspective, diametrically opposed to the decision of the Dutch Supreme Court in Duwbak Linda.

The conclusion of the above seems to be that a supervisor who acts reasonably in performing a public delegated task does not run any real risk of becoming liable. The injured party will have to overcome a considerable number of hurdles in order to be able to establish a imputable unlawful act on the part of the supervisor with regard to supervision and enforcement. Even in cases where such an imputable unlawful act has been established, a lack of relativity and causality can ultimately result in denial of a claim for damages.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes, pursuant to article 1 of the Dutch Wrecks Act 1934, the Dutch state and the operator of waterways are entitled to remove or have removed any vessel or its remains wrecked or beached in public national and territorial waters, without being liable to the parties with interest in such vessels for the damage caused by such removal. It has been held by the Dutch Supreme Court that even for international waters the Dutch state shall have the power to have vessels, cargo or their remains removed at the expense of the party liable, provided the wreck’s location is in the approach to one of the main Dutch ports.

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

In the Netherlands, the International Convention on Salvage 1989 is in force in relation to salvage. The Convention has been incorporated into national statute, by means of provisions in book 8 of the Dutch Civil Code. In 2008, the Netherlands signed the Nairobi International Convention on the Removal of Wrecks, 2007. This Convention will enter into force on 14 April 2015, since ten states have ratified the convention. The Dutch government indicated that it will seek ratification by Parliament in 2014.

The Netherlands is party to two conventions on vessel collisions. The first, the 1910 Brussels Convention (the Convention for the Unification of Certain Rules of Law relating to Assistance and Salvage at Sea, 23 September 1910) applies to collisions between seagoing vessels or between seagoing vessels and inland navigation vessels. The second, the 1960 Geneva Convention, applies to collisions between inland navigation vessels only. The 1910 and 1960 Conventions have force of law in the Netherlands and may therefore apply in their own right. Nevertheless, the Conventions have also been incorporated into national statutory law, by means of provisions in book 8 of the Dutch Civil Code. However, the legislature has taken the liberty of extending the application of the Conventions to all events where ‘damage is caused by a ship’.

In the area of pollution many international, multilateral and bilateral Conventions apply, such as, inter alia, the Agreement for Cooperation in dealing with pollution on the North Sea by oil and other harmful substances (Bonn, 13 September 1983); the OSPAR Convention, which was adopted by the Netherlands on 22 September 1992 and entered into force in the Netherlands on 25 March 1998; the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the protocol of 1978; and the International Convention on oil pollution preparedness, response and cooperation (30 November 1990) ratified on 13 May 1995, but not yet in force. Also included are:

• the International Convention on Civil Liability for oil pollution damage (Brussels, 29 November 1969) (Trb 1970, 196), as ratified by the Netherlands in the Act of 11 June 1975 and again adopted by a Protocol of 27 November 1992 (Trb 1994, 228-229) (which came into force in the Netherlands on 18 September 1996);

• the International Convention on the establishment of an International Fund for Compensation for oil pollution damage (Brussels, 18 December 1971) (Trb 1973, 101) (CLC), as ratified by the Netherlands and again adopted by the Protocol of 29 November 1992 (Trb 1994, 228-229). This Convention, also known as the International Fund Convention, came into force on 18 September 1996;

• the International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea (London, 3 May 1996. The Netherlands has signed the Convention, but it is subject to ratification and has not entered into force yet. If this Convention comes into force, Dutch law will have to be amended accordingly;

• the Convention on Civil Liability for Damage Caused during Carriage of Dangerous Goods by Road, Rail and Inland Navigation Vessels (Geneva 10 October 1989, which closely resembles the CLC;

• EU Directive No. 2005/35/EC on vessel source pollution and on the introduction of penalties for related infringements is implemented in the Dutch Act on the Prevention of Pollution by Vessels; and

• the International Convention for the Prevention of Pollution from Ships (MARPOL, supplement 1, IMO, 2 November 1973), as ratified by the Netherlands, adopted on 2 November 1973, and which came into force in the Netherlands on 2 October 1983.

21 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 Dutch form of salvage agreement and Dutch law does not require that a salvage agreement is concluded in writing. In practice, Lloyd’s Standard Form of Salvage Agreement (LOF 2000 or LOF 2011) is frequently agreed upon in the Netherlands. In case parties do not agree upon salvage under applicability of LOF 2000 or LOF 2011, salvors often carry out salvage operations under the Salvage Conditions 1958. Operators of floating sheerlegs use the general terms and conditions of the Sheerlegs Conditions 1976.

Ship arrest

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

The International Convention relating to the Arrest of Seagoing Ships (Brussels, 10 May 1952) (the Brussels Convention) is in force in the Netherlands.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

The Brussels Convention only applies to vessels flying the flag of a state party to this Convention. If an arrest is made in the Netherlands in respect of a vessel flying the flag of a non-member state, the Convention does not apply and consequently Dutch law applies, which means that an arrest can be made for any claim against the shipowner, or non-maritime claims within the meaning of the Brussels Convention. This exception also applies if the vessel flying the Dutch flag is arrested in the Netherlands by a Dutch arresting party. Article 1 of the Brussels Convention provides for a definition of the concept of ‘maritime claim’ and in article 1 of the Brussels Convention, 17 different types of maritime claims are mentioned. Claims for which an arrest is not possible under the Brussels Convention include outstanding insurance premiums, including calls of P&I clubs, claims in respect of a sale and purchase agreement regarding a vessel, oil pollution claims, broker’s commission and probably also claims of stevedores. In the River Jimini case the Rotterdam District Court decided (29 June 1984) that the claim for payment of container hire due by the shipowner falls within the scope of ‘goods or materials wherever supplied to a vessel for her operation or maintenance’. The Rotterdam District Court has also decided (as upheld by the Court of Appeal in The Hague) in the IBN Badis case that advance payments to the Algerian company CNAN to cover disbursements also fall within the scope of article 1 of the Brussels Convention. The Brussels Convention does not apply to an attachment of bunkers (the Gabion case, Rotterdam District Court, 24 February 2010).

Article 3 of the Brussels Convention provides for the possibility to arrest a sister vessel and such vessels shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons. It has been held that this does not allow the possibility to pierce the corporate veil since article 3(ii) of the Brussels Convention refers to shares in the vessel, not shares in the company which owns the vessel.

In another judgment the Dutch Supreme Court (9 December 2011) ruled that article 3 of the Brussels Convention does not prevent the arrest of a vessel of a debtor, not being the owner of the vessel to which the maritime claim is related. This would mean, for instance, that an arrest of vessels owned by a time charterer based on a claim of charter hire is possible, provided the Brussels Convention is applicable and other legal requirements for an arrest can be met.

24 What is the test for wrongful arrest?

The test to be met by the alleged debtor to prove an arrest was wrongful is the test of proving an unlawful act under article 6:162 of the Dutch Civil Code. If the claim for which the arrest was made ultimately fails in the court or arbitral proceedings on the merits, the arrest was wrongful and the arresting party can be held liable for any and all damages and losses.

25 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?

In general, a claim can only be recovered from the assets of the debtor, unless that claim has ‘droit de suite’. Dutch law does not provide for droit de suite in respect of a bunker claim. Such claim is therefore not considered a bunker claim against the vessel that received the bunkers. Consequently, the vessel cannot be arrested for a claim for bunker supplies against the charterer, since it is no claim against the owner and the vessel is no asset of the charterer.

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

The president of the district court granting permission for arrest has discretionary power to order the arresting party to provide counter-security to secure any claims for wrongful arrest. In practice this discretionary power is hardly ever exercised. The amount of security is also discretionary and to be determined by the president in the arrest order. The form of the security shall be agreed upon between the seizer and the debtor, failing which the president shall decide. The Rotterdam guarantee form is a wording for a bank guarantee regularly used and accepted in the Netherlands (in case both the arresting party and the debtor are of Dutch nationality, the NVB form is a wording for a bank guarantee to be issued).

27 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?

If the arrested party makes an offer to the arresting party to put up sufficient security, the arresting party is obliged to lift the arrest, attachments, or both. In general, the amount of security that needs to be provided by the arrested party will be equal to the amount for which the court has granted permission to make the arrest or attachments in the arrest order (the principal amount claimed by the arresting party + 10 – 30 per cent relating to interest and costs). The form of the security shall be agreed upon between the arresting party and the debtor, failing which the president of the court shall decide.

The Rotterdam guarantee form is a wording for a bank guarantee regularly used and accepted in the Netherlands (where both the arresting party and the debtor are of Dutch nationality, the NVB form is a wording for a bank guarantee to be issued).

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

The shipowner remains responsible for the maintenance of the arrested vessel. However, if an arrest is made in enforcement of a vessel’s mortgage, the mortgagees, although not under the obligation to do so, will normally ensure the vessel is safe and properly maintained during the time of arrest. Any amounts spent in that connection will usually be recoverable under the mortgage, ranking above other claims.

29 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?

The arresting creditor does not have to pursue the claim on its merits in the Dutch Court. An arrest to obtain security for a claim will be allowed, provided this creditor initiates proceedings on the merits before the court of competent jurisdiction or the arbitration panel within the number of weeks or months set by the president of the district court granting permission for the arrest. Authoritative writers have also argued that even initiation of a third-party ruling (binding advice) meets the requirement to initiate the claim on the merits.

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

A creditor is allowed to seek recourse against all assets of its debtor. Consequently, other forms of attachment, for instance a third-party attachment of bank accounts, claims of the debtor on third parties but also attachment of chattels (for example: bunkers or real estate owned by the debtor) are possible. Next to that, security for a claim can be asked for in summary injunction proceedings provided that the president of the district court applied to is competent and that there is an urgent interest. From a time and costs perspective, however, attachment may be a more attractive option, provided that there are assets.

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

In general, the Dutch Code of Civil Procedure provides for the possibility of a pre-judgment attachment for the purpose of delivery or surrender of assets and evidence. However, it is questionable whether under Dutch law attachment to preserve evidence is allowed except for evidence in intellectual property law cases. Dutch case law and literature are still not consistent with regard to whether the Dutch Code of Civil Procedure provides for a sufficient legal basis to grant leave for attachment of assets in order to preserve evidence in non-intellectual property law-cases. Recently, the Court of Amsterdam raised a prejudicial question to this end to the Dutch Supreme Court, and it is expected the answer will bring more clarity.

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

It is possible to attach bunkers within the Dutch territory provided that the arresting party has a claim against the owner of the bunkers. In most cases, this will be the time-charterer. The effect of an attachment of bunkers is similar to a ship arrest: the vessel is not allowed to sail since the attached bunkers would have to be used, which violates the attachment and is considered to be a crime. Debunkering is not always allowed since bunkers may be considered as waste under the European Waste Regulation (1013/2006) and a permit may be required. However, recently the European Court of Justice (ECJ) ruled that contaminated fuel does not have to be classified as waste (Shell/Netherlands, joint cases C-241/12 and C-242/12). The ECJ recalled the fact that, in accordance with settled case law, the concept of ‘waste’ must not be understood as excluding substances and objects that have commercial value and that are capable of economic reutilisation (Palin Granit Oy/Vehmassalon, C-9/00). Having regard to the requirement to interpret the concept of ‘waste’ widely, the reasoning should be confined to situations in which the reuse of the goods or substance in question is not a mere possibility but a certainty (eg, when the holder of the consignment intends to place the consignment back on the market).

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

A creditor who has an enforceable legal title (enforcement order) against the owner of the vessel as debtor is entitled to apply for a judicial sale of an arrested vessel. Such legal titles are:

• a money judgment from a court in the Netherlands;

• a notarial deed from a notary public holding offices in the Netherlands (including the Dutch Antilles);

• a money judgment by a foreign court, if enforceable in the Netherlands;

• a notarial deed by a foreign notary, if enforceable in the Netherlands;

• an arbitral award from a Dutch domestic arbitral tribunal;

• a foreign arbitral award, if enforceable in the Netherlands (New York Convention 1958); and

• a European enforcement order (pursuant to EU Regulation (EC) No. 805/2004 of 21 April 2004).

One of the above-mentioned legal titles enables the creditor to apply for a judicial sale of a vessel under arrest (even though this creditor is not the arresting party).

34 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?

In order to initiate and effect a judicial sale of a vessel, the debtor should be served an order to comply with a judicial order for payment within 24 hours. If the debtor fails to do so, a public civil notary (or alternatively a Dutch Court in the case of a vessel flying a foreign flag) should be instructed to conduct the judicial sale. A judicial sale by auction can only take place 14 days after proper announcement and publication in a local daily newspaper is made of the same. If the creditor decides to organise a judicial sale before a Dutch court regarding a vessel flying a foreign flag, the court will determine in which newspaper of the state of the vessel’s flag the judicial sale should be announced and also which period has to be taken into account before the judicial sale actually takes place. The creditor enforcing its title has to give notice of the sale to the owners, to any creditors registered in the Dutch Ship Register and to creditors that have arrested the vessel. The auction will be conducted in the Dutch language. Prospective buyers are invited by the public civil notary or the court to verbally tender higher bids. The amount of the higher bid can be determined by the party tendering the bid. If no higher bids are made, the identity of the highest bidder and his or her bid will be recorded. After a short break, the second part will be commenced with the intention to offer the vessel for sale at diminishing prices. The intervals between prices are announced. The first person to shout ‘It is mine’ will be awarded the vessel.

If a foreign legal title is already available and enforceable in the Netherlands, the estimated time frame for a judicial sale is six to eight weeks. The Court registration fee amounts to approximately to €350. The executing parties’ costs will be assessed by the court on the basis of a draft invoice. The costs are calculated on a time-spent basis and in addition the disbursements for costs of the bailiff, publications, etc, will be added.

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

The order of priority of claims on vessels according to Dutch law is the following, from highest priority to lowest:

• costs of execution and wreck removal, costs of preservation made after the arrest of the vessel, claims in respect of labour agreements, claims in respect of salvage and contribution of the vessel in general average;

• claims secured by mortgage or pledge;

• claims relating to the operation of the vessel and claims against the carrier under a bill of lading;

• collision claims;

• claims in respect of which the shipowner may limit his or her liability (overall limitation) (these claims are equal in rank); and

• all other claims (no preference).

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

The statutory effects of a judicial sale can be summarised as follows. First, all arrests of the vessel, whether conservatory or in enforcement of a title will cease to exist. The purchase price paid by the buyer in the public auction replaces the vessel. Second, the restricted rights that cannot be invoked against the purchaser will cease to exist, although article 578 of the Dutch Code of Civil Procedure, paragraph 1, intends to provide the buyer with a ‘clean’ vessel, that is, without any (restricted) rights or limitation thereon. Some rights amount to an action in rem and have droit de suite: they can also be invoked against the vessel after the ownership has transferred in title to a third party. Consequently, a judicial sale of vessel does not release the vessel from these specific claims. Moreover, a vessel might be encumbered with the right of retention, in which case a creditor that has possession of the vessel postpones delivery of the vessel until his or her claim is settled. A right of retention can be enforced, even if the vessel is to be judicially sold. The party entitled to exercise the right of retention against a vessel does not have a preferential claim that can be recovered from the sale proceeds or the vessel, but should recover his or her claim from the purchaser. As a consequence, the potential buyer shall have to redeem the right of retention before he or she can take possession of the vessel. The judicial sale will extinguish the previous ownership.

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

The purchaser of a vessel through a judicial sale in our jurisdiction acquires a clean title over the vessel, which should be recognised throughout the world. However, recognition of a judicial sale is based on International Convention or reciprocity. The EU Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters is applicable in the Netherlands and all other member states of the EU. However, a foreign registration within the EU is not automatically cancelled or deleted on the basis of a court order issued by the court of another member state and may sometimes only be obtained by commencing separate acknowledgement and enforcement proceedings. It may be difficult to have a court order from foreign jurisdictions outside the EU and member states of other conventions recognised and to cause (deletion of) registration.

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

The Netherlands is not a signatory to the International Convention on Maritime Liens and Mortgages 1993.

Carriage of goods by sea and bills of lading

39 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-Visby Rules are in direct force in the Netherlands. Pursuant to article 8:371, paragraph 3 of the Dutch Civil Code, articles 1 to 9 inclusive of the modified Convention of 25 August 1924 for the unification of certain rules relating to bills of lading (Trb 1953, 109) apply to each bill of lading pertaining to the carriage of goods between ports in two different states, if the bill of lading has been issued in a contracting state, or the carriage takes place from a port in a contracting state, or the contract embodied in the bill of lading or if the bill of lading evidencing the contract provides that the contract is governed by the provisions of the modified Convention or of any legislation that declares those treaty provisions to be in force, irrespective of the nationality of the vessel, the carrier, the consignor, the consignee or any other person involved. The Hague-Visby Rules apply to the period from the time the goods are loaded on to the time they discharged from the vessel. However, the exact moment may differ depending on the nature of the goods. In Dutch case law it is generally decided that the rules apply from the time the goods are hooked to be loaded on board to the time they are actually discharged from the vessel (and released from the crane).

The Netherlands has made active contributions to the development of the Rotterdam Rules and Rotterdam was appointed by UNCITRAL to host the signing ceremony of the new convention. On 23 September 2009, 16 countries officially expressed their support for the new convention during the official signing ceremony. To date, the convention has been signed by 24 countries and ratified by three countries; by Spain on 19 January 2011, by Togo on 17 July 2012 and by the Republic of the Congo on 28 January 2014. The Netherlands has signed the Rotterdam Rules.

40 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?

If the (combined) carrier and the consignor have agreed upon a contract of combined carriage, the Dutch Civil Code applies the ‘chameleon system’ or ‘network system’ pursuant to which each part of the carriage is governed by the juridical rules applicable to that part. The uniform system as laid down in the United Nation Convention on International Multimodal Transport of Goods (Geneva, 1980) has explicitly been rejected by the Dutch administration. In respect of international carriage by road, the Convention on Carriage by Road (Geneva, 1956) is mandatorily applicable. The Convention for the Unification of Certain Rules for International Carriage by Air (Montreal, 1999) is mandatorily applicable to international carriage by air. Regarding international carriage by rail, the Convention concerning International Carriage by Rail, 1980 Berne, and its 1999 Protocol are applicable.

41 Who has title to sue on a bill of lading?

Pursuant to article 8:441 of the Dutch Civil Code excluding any other party, only the rightful and regular holder of a bill of lading has the right to demand delivery of the goods from the carrier under the bill of lading according to the obligations resting upon the carrier or to claim damages for loss of or damage to the goods, unless he or she has not become a holder lawfully.

42 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?

Generally the terms of a charter party, including a jurisdiction or arbitration clause, are allowed to be incorporated into a bill of lading. Such terms must be referred to in a sufficiently clear manner in the document itself before they can be validly invoked towards a third-party bill of lading holder. If a contract of carriage has been entered into and furthermore if a bill of lading has been issued, the judicial relationship between the original consignor and the carrier is governed by the stipulations of a contract of carriage, which prevail over those of the bill of lading.

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

Under Dutch law the carrier under a bill of lading is generally considered to be the person who has signed the bill of lading or on whose behalf it was signed, as well as the person whose form has been used. If a bill of lading is signed by the master, or on behalf of the master, the shipowner or the charterer last in the chain of contracts shall be bound as carrier, in addition to the persons mentioned in the first sentence. Much will depend on the actual wording of such clause, but it can be said that the basis to assess the validity of a demise or identity of carrier clause is laid down in article 8:461, paragraph 3 of the Dutch Civil Code. This article provides that only the last bareboat charterer or the shipowner is deemed to be the carrier under the bill of lading, if the bill explicitly designates the bareboat charterer as such or, as the case may be, the shipowner, and in addition, in the case of designation of the bareboat charterer, if his or her identity is clearly apparent from the bill of lading. If a demise or identity of carrier clause is not sufficiently clear, this cannot be held against the holder of the bill of lading.

44 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 sued extra-contractually by his or her co-contracting party with respect to damage that has occurred in the operation of the vessel, the shipowner shall be liable towards the latter no further than he or she would be pursuant to the contract they have entered into (article 8:362 of the Dutch Civil Code). Article 8:363 of the Dutch Civil Code states that if the shipowner is sued extra-contractually in respect of damage that has occurred in the operation of the vessel by another party to such a contract, the shipowner shall be liable towards the latter no further than he or she would be, as if he or she were a co-contracting party to the contract of operation which has been entered into by the party that sues him and that, in the chain of contracts of operation, lies between him and the latter. According to article 8:364, paragraph 1 of the Dutch Civil Code, the shipowner, sued extra-contractually in respect of the death or bodily injury to a person, or in respect of damage to goods by a person who is not a party to a contract of operation, shall be liable no further than he or she would be pursuant to the contract.

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

Notwithstanding any specific provisions contained in the contract of carriage or bill of lading on the basis of which the carrier may be entitled indeed to limit or exclude its responsibility in this regard, pursuant to article 8:379 of the Dutch Civil Code, the carrier is under the obligation to conduct the transportation without delay. In the case of a non-permissible delay, the compensation owed must be calculated by taking into account what value the goods would have had at the time and place they should have been delivered, and the time and place they have actually been delivered.

46 What liens can be exercised?

Dutch law does not recognise a maritime lien as such. First one must determine any contractual rights of retention or liens and the extent thereof or limits or conditions thereto under the law applicable to such contract (of carriage), and then determine – under article 10:163 of the Dutch Civil Code – to what extent such rights fit into the Dutch legal system, and in particular the concept of the right of retention and the right to withhold the goods. Article 8:30, paragraph 1 of the Dutch Civil Code stipulates that the carrier is entitled to refuse to hand over the goods that he or she holds in connection with the contract of carriage, to any person who has a right to the delivery of those goods pursuant to a title other than the contract of carriage, unless the goods have been attached and the continuation of this attachment results in an obligation to hand over the goods to the attachor. In addition, article 8:30, paragraph 2 of the Dutch Civil Code stipulates that the carrier shall be entitled to exercise the right of retention on the goods that he or she holds in connection with the contract of carriage for what the recipient owes or will owe the carrier for the carriage of those goods. The carrier may also exercise this right for the charge due for those goods by way of cost on delivery.

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

Normally a carrier will be liable no further than he or she would be under the provisions of the contract of carriage or bill of lading. However, a carrier generally loses the right to rely on the contractual exclusions and limitations of liability in case of his or her gross negligence or wilful misconduct. Not necessarily, but should cargo be (intentionally) delivered without requesting the submittal of the original bill of lading involved, such act pertaining to gross negligence or wilful misconduct could give rise to unlimited liability of the carrier.

48 What are the responsibilities and liabilities of the shipper?

According to article 8:383, paragraph 3 of the Dutch Civil Code, in a contract of carriage under a bill of lading, the shipper shall not be liable for any loss or damage suffered by the carrier or the vessel and which result or arise from whatever cause, without there being an act, fault or omission on the part of the shipper, his or her agents or servants.

Pursuant to article 8:394 of the Dutch Civil Code, the shipper must promptly provide the carrier with all those indications regarding the goods, as well the handling thereof, that he or she is or ought to be able to provide, and of which he or she knows or ought to know are of importance to the carrier, unless he or she may assume that the carrier knows of these data. According to article 8:395 paragraph 1 of the Dutch Civil Code, the shipper must compensate the carrier for the loss the latter suffers because, for whatever reason, the documents and information that are required from the shipper for carriage, or for the fulfilment of customs and other formalities before the delivery of the goods, are not adequately available. Article 8:397, paragraph 1 of the Dutch Civil Code stipulates that the shipper must compensate the carrier for the loss the latter has suffered from equipment that the former has made available to the carrier or from goods that the carrier has received for carriage or from the handling thereof, except to the extent that this loss has been caused by a fact that a prudent shipper of the goods received for carriage has been unable to avoid and the consequences of which such a shipper has not been able to prevent.

Pursuant to article 8:398, paragraph 1 of the Dutch Civil Code, the carrier may at any time and at any place unload, destroy or otherwise render harmless goods received for carriage that a prudent carrier would not have wanted to receive for carriage, had he or she known that, after taking receipt thereof, they could constitute a risk. The same applies to goods received for carriage that the carrier knew to be dangerous, but only when they present an imminent risk. The carrier does not owe any damages in respect hereof and the shipper is liable for all costs and any damage that result for the carrier from the presentation for carriage, from the carriage or from the measures themselves.

Based on article 8:411 of the Dutch Civil Code, the shipper is deemed to warrant the carrier as to the accuracy, at the time of receipt, of the marks, number, quantity and weight that he or she has declared, and he or she shall indemnify the carrier for all losses, damage and costs resulting from inaccuracies in the declaration of these particulars. Article 8:423, paragraph 1 of the Dutch Civil Code stipulates that in a contract of carriage under a bill of lading, goods of an inflammable, explosive or dangerous nature that the carrier, captain or agent of the carrier would not have consented to be loaded had he or she known the nature or condition thereof, may be unloaded at any place, destroyed or rendered harmless at any time before unloading by the carrier and this without compensation, and the shipper of these goods shall be liable for all damage and costs that have directly or indirectly resulted or arisen from the loading thereof.

In addition to the general obligations to pay freight and other charges, or make a contribution in general average, only these last obligations for costs, etc, can be imputed to the third-party consignee as receiver of the cargo together with any other obligation that shows for the bill of lading document itself, which includes the obligation to take delivery against presentation of the bill of lading to the carrier and under full compliance with all conditions set thereto.

Shipping emissions

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

Yes, two examples of ECAs in force in Dutch territorial waters are the North Sea Area and the adjacent Baltic Sea Area.

50 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?

Until 2010, annex VI to MARPOL 73/78 limited the sulphur content of marine fuel oil to 1.5 per cent m/m and applied in designated SOx Emission Control Areas (SECA). A new provision for the further reduction of sulphur content of marine fuels specifies a maximum sulphur content of 1 per cent by 2010 and 0.1 per cent by 2015. In line with the International Conventions, the Dutch Authorities prescribe that the sulphur concentration of the fuel may not exceed 3.5 per cent and that the sulphur concentration of fuel for use in an ECA may not exceed 1 per cent. During inspections (Port State and Flag State Control), samples of fuel may be taken to determine the sulphur content of the fuel in use. If the sample indicates a sulphur content exceeding 1 per cent, this is deemed a ‘deficiency’ and the vessel may be detained until fuel is on board with a sulphur percentage of less than 1 per cent.

According to Directive 2005/33/EC of the European Parliament and the council, ships at berth in all ports of the European Community shall not use marine fuels with a sulphur content exceeding 0.1 per cent m/m, beginning from 1 January 2010. Following the Directive, ships at berth in Dutch ports are not allowed to use marine fuels with a sulphur content exceeding 0.1 per cent m/m. This fuel requirement only applies to ships at berth, meaning securely moored or anchored in a port. The requirement does not apply to ships manoeuvring or on their way to enter or leave the port.

Following the European directive, the Dutch Regulation on Prevention of Pollution from Ships has been amended to include the new provisions.

In short, the following rules apply for ships lying at berth in Dutch ports:

• when at berth, seagoing ships irrespective of flag (including non-EU ships) shall not use any marine fuel with a sulphur content exceeding 0.1 per cent m/m;

• in case fuel changeover is necessary this operation shall commence as soon as possible after berthing of the ship. The time of change over shall be recorded on board the ship;

• if the required fuel is not on board, appropriate fuel shall be taken on by the ship immediately after berthing. The arrival of the ship shall be so planned and coordinated to ensure the immediate supply of the fuel;

• ships staying at a berth for less than two hours are exempted from above provisions; and

• the Port State Control Authority is entitled to control on board the ship documents and the fuel delivery notes. Upon request of the Port State Control Authority the ship’s crew assist in taking a sample of the fuel actually used at berth.

The above rules do not apply to inland waterway vessels as referred to in article 2 of Directive 1999/32/EC, with a certificate which shows that they comply with the requirements from the SOLAS convention, when the ships are at sea and to ships which shut down all engines and use land-based power supply while they are in a port at their berths.

Non-compliance with the new provisions might result in a fine against the shipmaster.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Dutch judicial system can be divided into the general system and the administrative law system. For the past 200 years, the territory of the Netherlands was divided into 19 districts. The 19 district courts are the general courts of first instance, whereas there are 62 sub-district courts dealing with petty offences and cases with a monetary value not exceeding €25,000, agency disputes, leasehold cases and employment matters. On 12 July 2012, the Dutch government adopted the Act for the Revision of the Judicial Map. Pursuant to this Act, as of 1 January 2013 the territory of the Netherlands is divided into 11 districts.

There are no specialised district courts exercising jurisdiction over maritime disputes, but on a more informal basis the Rotterdam District Court and the Court of Appeal at The Hague each have a specialised chamber dealing with maritime and insurance cases.

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

If a defendant has no known domicile or residence in the Netherlands, but does have a known address abroad, a distinction must be made between a defendant who resides in:

• a state to which the EC Council Regulation on the Service in the Member States of Judicial and Extrajudicial documents in Civil or Commercial Matters (the EC Service Regulation) applies;

• a state that is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 1965 (the Hague Service Convention) or the Hague Convention on Civil Procedure of 1954 (the 1954 Hague Convention); or

• another state.

While the EC Service Regulation contains mandatory and exclusive rules for service to be completed in EU member states, the Hague Service Convention and the 1954 Hague Convention contain rules that are additional to the service requirements for foreign defendants in the Dutch Code of Civil Procedure. Under the Dutch Code of Civil Procedure, service on defendants residing abroad is completed if a bailiff serves the writ at the office of the public prosecutor of the court that is competent to hear the case and at the same time mails a copy of the writ to the defendant’s address outside the Netherlands.

Although neither the EC Service Regulation nor the Hague Service Convention prescribes a translation of the writ of summons, it is nevertheless advisable to provide one as, under the EC Service Regulation, a defendant may otherwise refuse to accept the writ and under the Hague Service Convention, the Central Authority has the power to require such a translation if it deems this necessary. For service under the 1954 Hague Convention, a translation is compulsory.

If the defendant has no known address in the Netherlands or abroad, the above-mentioned Conventions and Regulation do not apply and the writ must be served at the office of the public prosecutor. In addition, an abstract of the writ must be published in a Dutch national newspaper.

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

Since its establishment in 1988 by the major maritime law firms in the Netherlands, the TAMARA Institute (Transport and Maritime Arbitration Rotterdam-Amsterdam) has offered a platform for conducting professional arbitration in the areas of shipping, shipbuilding, transport, storage, logistics and international trade. The TAMARA Institute is organised in the form of a foundation with the major Dutch shipping firms as founding members.

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

Although a distinction must be made between recognition and enforcement of a foreign judgment, recognition will generally lead to enforcement. In practice, foreign judgments will be recognised by a Dutch court if the following three conditions are met:

• the judgment is a result of proceedings compatible with Dutch concepts of due process;

• the judgment does not contravene public policy; and

• the non-domestic court must have found itself competent on grounds that are internationally accepted (for example, a forum chosen by the parties).

As regards enforcement, judgments delivered outside the Netherlands can only be directly enforced within the Netherlands on the basis of an enforcement treaty or EC instrument. The most important enforcement and recognition ‘treaties’ are the EC Regulation and the Lugano Convention. On the basis of these Community instruments, judgments delivered in the member states of the European Union and in Norway, Switzerland and Iceland are enforceable in the Netherlands once leave to do so has been obtained from the preliminary relief judge of the District Court. In addition to these treaties, the Netherlands has concluded bilateral treaties regarding enforcement with European countries as well as Suriname and the United States (the latter only as regards maintenance obligations).

Foreign judgments to which no treaty applies must, in principle, be enforced by commencing a new cause of action before the Dutch courts, but if the three above-mentioned criteria for recognition are met, no litigation on the merits will be required.

The Netherlands is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Arbitral awards made in countries that are a party to the New York Convention are enforceable in the

Netherlands in accordance with the provisions of the New York Convention. Foreign arbitral awards made in countries that are not a party to the New York Convention can also be enforced in the Netherlands. Pursuant to article 1076 of the Dutch Code of Civil Procedure, the preliminary relief judge may only refuse to enforce an award on grounds which are exhaustively enumerated in the Arbitration Act.

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

In the Netherlands, no remedies are available should the claimants commence proceedings elsewhere, in breach of a contractual jurisdiction clause stipulating that the Dutch courts or arbitral tribunals have exclusive jurisdiction. The defendants should file a motion to dismiss the proceedings for lack of jurisdiction in these proceedings abroad.

56 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?

If a court does not have international, absolute or relative jurisdiction over a dispute, a defendant may file a motion to dismiss for lack of jurisdiction, either prior to or in his or her statement of defence (articles 11, 110 and 1022 of the Dutch Code of Civil Procedure). Such a formal defence should first be dealt with by the Dutch court, before the case can continue on the merits.

Limitation periods for liability

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

The time limits applying to claims are:

• for breach of contract – five years;

• for liability for an unlawful act – five years;

• for collision damage – two years;

• for cargo claims – one year; and

• for claims based on a forwarding contract – nine months.

It should be noted that claims for breach of contract and for liability for an unlawful act are also subject to a time limit of 20 years, which period starts running the day after the event giving rise to the damages. The shorter prescription period of five years starts running the day after the party suffering loss or damage became aware, not only of the loss or damage, but also of the identity of the person liable. It is possible to extend the time limit by agreement. However, such agreement should be concluded after the event giving rise to the claim.

58 May courts or arbitral tribunals extend the time limits?

Courts shall only apply a time limit if it is being relied upon by the defendant. In the event of a cargo claim where the defendant becomes in default, the court will verify whether the plaintiff has claimed that the 12-month time limit has been extended by mutual agreement or has been suspended by writing a notice to the defendant before the time ran out, reminding the defendant that he or she should still be prepared to answer a claim by the plaintiff.

Miscellaneous

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

The Netherlands has ratified the Maritime Labour Convention (MLC) on 13 December 2011. The MLC entered into force on 20 August 2013 and has been designed to improve the labour conditions of seafarers worldwide. The most important effect on Dutch legislation was the modernisation and modification of legislation governing maritime shipping and employment in the Netherlands (including the Dutch Commercial Code, the Ships’ Manning Act, Book 7 of the Dutch Civil Code and the Occupational Safety and Health Act). The MLC is primarily a confirmation of existing maritime standards, with several new components. These include the certification of living and working conditions of seafarers on board, the Maritime Labour Certificate. This certificate is proof that a shipowner and his or her ship meet the requirements of the MLC. The Netherlands Shipping Inspectorate has mandated the issuing of these certificates in the Netherlands to accredited classification societies.

60 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?

As the parties to a shipping contract have the freedom of contract, the rights and liabilities provided for in that contract are in principle upheld, meaning that if the contractual provisions do not offer relief from the strict enforcement thereof, in principle no relief is possible. Having said that, article 6:248 of the Dutch Civil Code provides that the consequences of a contract between parties can be set aside if these consequences, in light of the circumstances of the case and the principle of reasonableness and fairness, would be deemed unacceptable. This abridging effect reasonableness and fairness must, however, be limitedly applied by the courts.

In addition, Dutch law contains a specific provision (article 6:258 of the Dutch Civil Code) for unforeseen circumstances which cause hardship in a given situation. The provision provides that the court may, at the request of one of the parties, amend the consequences of the contract, or even partly or wholly rescind the contract on basis of unforeseen circumstances of such nature that the contractual counter party may not reasonably expect the continuous and unaltered existence of the contract. The test is not whether the circumstances were foreseeable at the time the contract came into existence, but rather which presumptions the parties based the contract on. Again, this possibility must be limitedly applied.

Finally, article 6:94 of the Dutch Civil Code provides the possibility for the court to reduce contractual penalties, should the principle of fairness require such reduction.

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

No.

Arnold J van Steenderen

arnold.vansteenderen@mainportlawyers.com

Charlotte J van Steenderen

charlotte.vansteenderen@mainportlawyers.com

Sebastiaan H Barten

sebastiaan.barten@mainportlawyers.com

Zeemansstraat 13

3016 CN Rotterdam

Netherlands

Tel: +31 10 266 78 66

Fax: +31 10 266 78 68

www.mainportlawyers.com

Nigeria

Funke Agbor and Chisa Uba

Adepetun Caxton-Martins Agbor & Segun

Newbuilding contracts

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

As a shipbuilding contract is basically an agreement to sell future goods, title generally passes from the shipbuilder to the shipowner upon delivery and the vessel’s acceptance by the buyer. This is, however, subject to the express agreement of the parties. The parties can agree to change when title will pass.

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

In order to be valid:

• the refund guarantee must be in writing;

• it should be by deed unless the buyer has furnished consideration for it; and

• the extent of the refund guaranteed should be clearly stated.

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

Delivery of the vessel is an express duty of the yard under the contract. Failure to perform this duty will amount to a breach of contract for which the buyer can seek redress in court. The buyer can bring an action in court to compel the yard to deliver the ship in specific performance of the contract.

4 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?

Where the vessel is defective and damage results, the shipowner’s claim can lie in breach of contract if the defect is a result of the shipbuilder’s failure to comply strictly with the agreed specifications and general arrangement plan.

The shipowner’s claim may also lie under product liability where the defect is as a result of negligent workmanship by the shipbuilder, notwithstanding full compliance with agreed specifications and general arrangement.

The claim of a purchaser from the original shipowner against the shipbuilder would lie under product liability.

A third party who has sustained damage as a result of the defect in the vessel can maintain an action in tort against the current owner of the vessel.

Ship registration and mortgages

5 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?

The vessels eligible for registration under the Nigerian flag are as follows:

• merchant ships;

• fishing vessels;

• ships under construction;

• ships on bareboat charter to Nigerians or to a Nigerian company beneficially owned in all its shares by Nigerians;

• licensed ships of less than 15 GT; and

• floating production storage and offloading and floating production storage.

Separate registers are maintained for the different categories of vessels listed above.

It is possible to register vessels under construction under the Nigerian flag.

6 Who may apply to register a ship in your jurisdiction?

The persons who may register a vessel in Nigeria are:

• Nigerian citizens;

• corporate bodies and partnerships established under and subject to Nigerian law, with their principal place of business in Nigeria; and

• such other persons as the Minister of Transport may prescribe.

There has been no prescription by the Minister pursuant to this last category and thus only Nigerian citizens and Nigerian corporate bodies/partnerships are entitled to register vessels in Nigeria.

7 What are the documentary requirements for registration?

The Merchant Shipping Act 2007 and the Nigerian Maritime Administration and Safety Agency guidelines provide that the documents required for full registration of vessels are as follows:

• a formal application by owners or their agents with a letter of authority to act on behalf of the owners;

• certified copies of the company’s incorporation documents;

• a copy of the company’s current tax clearance certificate;

• a copy of the company’s bank statement or a bank reference letter;

• a completed declaration of ownership form, issued by the Nigerian Ship Registry (the Registry);

• the vessel documents evidencing:

• the name of the vessel;

• the time and place of purchase of the vessel;

• the name of the master of the vessel;

• the tonnage of the vessel;

• the year of build of the vessel

• the description of the vessel; and

• the carving or marking of the vessel;

• the bill of sale or the builder’s certificate (evidence of title);

• deletion certificate issued by the original registry (this is required if the vessel is flagging in from a foreign flag registry;

• evidence of P&I insurance cover of the vessel;

• certificate of an approved plan for a newly built vessel in Nigeria, issued by the Nigerian Maritime Administration and Safety Agency (NIMASA) or approved by a classification society on behalf of NIMASA;

• copies of the vessel’s certificates;

• copies of the receipts issued by NIMASA evidencing payment of registration fees;

• the requisite forms to be obtained from the Registry for completion;

• documents showing the name and address of the ship managers and the full names, addresses and occupation of the purchasers of the vessel;

• the ship’s log, to be inspected by the registrar of ships; and

• evidence of the ability or experience of the purchasers to operate and maintain the vessel.

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

Dual registration is prohibited under Nigerian law.

However, the registration in Nigeria of foreign bareboat vessels chartered in by Nigerian citizens for cabotage purposes is permitted. Under that arrangement foreign bareboat vessels chartered in by Nigerian citizens for use within the coastal area are required to be registered with the Registry and to fly the Nigerian flag for the period of the charter. The original registry of the vessel will be suspended for that period except with regard to private law considerations relating to the title, transfer, transmission and mortgage of the vessel.

Flagging out is not prohibited under Nigerian law as the Merchant Shipping Act 2007 (MSA) allows the registration of Nigerian-owned vessels outside Nigeria. To deregister the vessel from the Nigerian Ship Register for the purpose of flagging out, written consent of all registered holders of mortgages on the ship must be obtained.

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

Mortgages are registered in the Nigerian Ship’s Register, which is maintained by the registrar of ships in the Registry and will contain the particulars of the mortgagee and details of the mortgage debt.

Copies of the following will be placed in the vessel’s file:

• the mortgage deed;

• the certificate of mortgage; and

• the ‘mortgage to secure account current’ form.

Where the mortgagor is a corporate body, the mortgage is also registered at the Nigerian companies’ registry known as the Corporate Affairs Commission (CAC). The information contained in the CAC register is as follows:

• a description and date of creation of the instrument creating the mortgage;

• the amount secured under the mortgage;

• particulars of the mortgagee;

• short particulars of the vessel mortgaged; and

• the date of acquisition of the vessel mortgaged.

Limitation of liability

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

The limitation regime that applies is the Convention on Limitation of Liability for Maritime Claims, 1976 and the 1996 protocol which was made applicable by the Merchant Shipping Act (MSA) 2007.

Claims subject to limitation of liability are:

(i) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring onboard or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;

(ii) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

(iii) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;

(iv) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;

(v) claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with the MSA, and further loss caused by such measures;

(vi) claims in respect of floating platforms constructed for the purpose of exploring or exploiting the natural resources of the seabed or the subsoil thereof; and

(vii) claims in respect of raising, removal, destruction or rendering harmless of a ship which is sunk, wrecked stranded or abandoned, including anything that is or has been onboard such ship.

Claims falling under (iv) to (vi) above are not to be subject to limitation to the extent that they relate to remuneration under a contract with the person liable.

The parties who can limit their liability are the shipowner and salvors. ‘Shipowner’ includes the owner, charterer, manager and operator of a ship.

11 What is the procedure for establishing limitation?

Limitation is established by way of limitation proceedings at the Federal High Court. A party who learns that claims that are subject to limitation of liability under any convention or law are likely to be made against him by any party may apply to the courts for a determination of whether or not its liability should be so limited.

The proceedings to establish limitation would be commenced by originating summons, which is to be served on persons who have or may have maritime claims against the applicant in respect of matters for which limitation is sought to be established. The originating summons may also be served on one person as the representative of a class. Where the court establishes that the applicant is entitled to limit his or her liability, it may:

• determine the limit of liability;

• order the constitution of a limitation fund for the payment of claims in respect of which the applicant is entitled to limit his or her liability; and

• make such orders as are just for the administration and distribution of the fund.

Where all persons identified as having or likely to have maritime claims against the applicant were not served with the summons, the court may order advertisement of the order determining liability and give all such parties a period of at least one month to bring such a claim or apply for the limit of liability to be set aside or varied. Any application to set aside or vary the limit of liability must be served on all other persons named as respondents in the summons commencing the proceedings. Where no such application is made within the stipulated period, the limit as determined shall be binding on all. Where the order determining the limit is not advertised, it shall be binding only on the parties served with the summons.

It is not necessary to provide a cash deposit.

If the court orders the constitution of a limitation fund, such order will specify the method of calculation.

The Admiralty Jurisdiction Act 1991 empowers the Federal High Court to entertain a defence of limitation of liability notwithstanding non commencement of limitation proceedings from which a fund is set up, so there exists a separate right to plead limitation without setting up a fund.

12 In what circumstances can the limit be broken?

The limit will be broken where it is proved that the loss or damage was due to the act or omission of the person liable or due to the act or omission of his or her agent or servant while acting within the scope of their employment and with the intent to cause such loss or damage or recklessly with the knowledge that such damage would result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The limitation regime that applies is the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 and its Protocol of 1990, which is made applicable by virtue of the Merchant Shipping Act 2007. The Convention on Limitation of Liability for Maritime Claims, 1976 and the 1996 protocol (see question 10) also applies to claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage.

Port state control

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

The port state control agency is the NIMASA, which is also the maritime regulatory authority in Nigeria.

It operates on the authority of the NIMASA Act 2007 and the Merchant Shipping Act 2007.

15 What sanctions may the port state control inspector impose?

The sanctions are detention of the offending ship, imprisonment upon conviction for a maximum period of six months or a fine to be determined by NIMASA for the owner or the demise charterer or manager who is in operation of the vessel.

16 What is the appeal process against detention orders or fines?

Where a ship is detained as unsafe, the detaining officer is required to immediately report the detention to the minister of transportation (the minister). The master or owner of the ship can appeal to the minister, who may appoint a surveyor to survey the ship in determination of whether or not it is unsafe. Depending on the result of the survey, the minister may order the vessel to be released or endorse the detention. The shipowner or master can appeal against the survey report to a board of survey.

Generally the shipowner or master can commence action at the Federal High Court to contest the detention order or fine if the appeal fails.

Classification societies

17 Which are the approved classification societies?

The classification societies currently approved by the maritime regulatory authority are:

• the American Bureau of Shipping;

• the International Register of Shipping;

• Lloyd’s Register;

• Bureau Veritas;

• Registro Italiano Navale;

• the International Naval Survey Bureau;

• DNV GL;

• the China Classification Society;

• the Croatian Register of Ships;

• the Indian Register of Ships;

• the Korean Register of Ships;

• Nippon Kaiji Kyokai;

• the Polish Register of Ships; and

• the Russian Register of Ships.

The list is not exhaustive and may change from time to time.

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

Though this is not a common occurrence in Nigeria, generally a classification society should be held liable under the rules of contract if it breaches a term of its agreement with the shipowner.

It may also be held liable in tort to a third party who relies on its assertions in a class certificate to act to its detriment.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes, the NIMASA is empowered by the MSA 2007 and NIMASA Act to order wreck removal.

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

The International Regulations for Preventing of Collisions at Sea 1972 are in force in Nigeria.

The International Convention on Salvage 1989 is in force in Nigeria by virtue of section 387 of the MSA.

The pollution conventions in force in Nigeria by virtue of section 335, MSA are:

• the International Convention for the Prevention of Pollution from Ships 1973/1978 and the annexes thereto;

• the Convention Relating to Intervention on the High Seas in cases of Threatened Oil Pollution Casualties 1969;

• the International Convention on Prevention of Marine Pollution by Dumping of Wastes and Other Matters 1972;

• the International Convention on Oil Pollution Preparedness, Response and Co-operation 1990;

• the International Convention on Civil Liability for Oil Pollution Damage 1992;

• the Convention on Limitation of Liability for Maritime Claims, 1976 and the 1996 protocol thereto;

• the Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 and its protocol of 1992; and

• the Basel Convention on the Control of Transboundary Movement of Wastes and their Disposal 1989.

21 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.

Salvage operations may be carried out by any vessel; however, by virtue of the Coastal and Inland Shipping (Cabotage) Act 2003, where the salvage operation is within the coastal and inland waters of Nigeria, only a Nigerian-built vessel, wholly-owned and manned by Nigerian citizens, can carry out the salvage operations except in cases of emergency or upon a determination by the minister of transportation that the salvage operation is beyond the capacity of Nigerian-owned and operated salvage vessels and companies.

Ship arrest

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

There is no international convention on the arrest of ships in force in Nigeria.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel can be arrested in respect of claims classified as maritime claims by the Admiralty Jurisdiction Act 1991, which is the main legislation governing the arrest of ships in Nigeria. Maritime claims include claims relating to ownership, possession or title, mortgage, mortgage of freight, salvage, damage done by it, wages of the master and crew, master’s disbursements, carriage of goods by ship and use or hire of a ship.

A sister ship may be arrested in the following circumstances:

• the claim must have arisen in connection with a ship;

• the person who would be liable in the claim if brought in personam must have been the owner or charterer or in possession or control of the ship when the cause of action arose; and

• at the time when the claim is brought the person who would be liable in personam must be the beneficial owner of all the shares in the (sister) ship against which the claim is brought.

Associated ships cannot be arrested in Nigeria

24 What is the test for wrongful arrest?

The test for wrongful arrest under the Admiralty Jurisdiction Act is obtaining the arrest of a ship or other property unreasonably and without good cause.

25 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?

If the charter is a demise charter and the charterer was in possession and control of the vessel at the time the cause of action arose and at the time action is brought, then the vessel can be arrested for the claim; otherwise, the vessel cannot be arrested for the claim.

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

The arresting party generally does not have to provide security before the vessel can be arrested.

In certain circumstances the arresting party may on the application of the defendants be ordered to provide security for costs, failing which the vessel will be released. The circumstances include where the claim is more than 5 million naira, or its equivalent in any currency, or where the court is satisfied that the arresting party has no assets in Nigeria.

The security for costs can be in form of a deposit of the sum in court or a guarantee to be provided by a bank, insurance company or a P&I club.

27 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?

The Admiralty Jurisdiction Procedure Rules 2011 (AJPR) provide for security to be supplied by the arrested party in the amount claimed or the value of the ship or property under arrest. In practice the security is, very often based on the claims of the arresting party and as requested in the application for arrest. There is no provision for revision of the security amount.

The AJPR provides for payment of cash into court or a bail bond in the same value to be filed in court. In practice, the form of security is usually according to the application of the arresting party, which, is most of the time, a bank guarantee from a Nigerian bank.

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

The Admiralty Marshal, who is the chief registrar of the Federal High Court, is responsible for maintenance of a vessel under arrest; all expenses of the Admiralty Marshal are required to be paid by the arresting party. The court, upon the grant of an arrest order, would generally order the arresting party to pay an amount not less than 100,000 naira and no more than 500,000 naira towards the Admiralty Marshal’s expenses. The Admiralty Marshal may make further demands fortnightly for payment on account of those expenses while the ship remains under arrest.

29 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 suit by way of an action in rem must be commenced for the claim in the Nigerian Federal High Court and the vessel will be arrested in the suit. It is not possible to commence a suit simply to obtain security through the arrest of the vessel and then pursue proceedings elsewhere.

In certain circumstances, where there is an arbitration agreement, the court may, on application of an interested party who is party to the arbitration agreement, stay proceedings in the suit in Nigeria and order that the claims be referred to arbitration in accordance with the agreement. In such a situation the vessel arrested or the bank guarantee furnished as security for release of the same will be retained by the court as security for the arbitration award.

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

A claimant may also apply to the court for an order of interim attachment of property, otherwise known as a Mareva injunction. This is where it is anticipated that the defendant intends to dispose of his or her property or any part thereof or to remove any such property from jurisdiction. The claimant will apply to the court either at the time of the institution of the suit or at any time thereafter to such defendant to furnish sufficient security to fulfil any decree that may be made against him in the suit.

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

Generally, orders of injunction are available to restrain the performance of an act or to preserve evidence or property that is or is likely to become the subject of a dispute. The rules of court also allow for interim attachment of property.

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

It is possible to arrest bunkers and to obtain injunctions or attachment orders in respect of bunkers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The arrestor or any other party interested in the ship can apply for sale of the vessel where the owners fail to provide bail to secure its release for a period of more than six months from the date of arrest.

The court can also, on its own initiative, but with notice to the parties and subject to valuation, order a sale of the vessel where it is deteriorating in value.

34 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 sale of vessels is conducted by the admiralty marshal and unless the court otherwise directs, will be by public auction. The admiralty marshal, upon receipt of the order to sell the vessel, will advertise the impending sale in two national newspapers for 21 days and at the expiration of that period the vessel will be sold by public auction. The court is not precluded from ordering a sale by private agreement where the parties agree to this.

Section 73 of the MSA requires that written notice of the date, time and venue of the sale be given to: holders of mortgages and other preferential rights that have not been issued to the bearer; holders of mortgages and preferential rights that have been issued to the bearer; and holders of maritime liens specified under section 66, MSA whose claims have been notified to the officers and the registrar of ships at least 30 days before the sale.

After the sale the admiralty marshal shall, as soon as possible, file a return of the sale, pay the proceeds into court and file an account of sale and the vouchers of the account.

On average, it can take about two months to conclude the sale from the date of the order.

The costs associated with judicial sale are mainly the expenses of the admiralty marshal.

The Admiralty Jurisdiction Procedure Rules 2011 provide that the Admiralty Marshal’s expenses shall be 2 per cent of the proceeds of sale.

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

Section 75 of the MSA provides that the costs awarded by the court and costs of the arrest and sale shall first be deducted from the proceeds of sale and thereafter the balance shall be distributed among holders of:

• maritime liens under section 66 of the MSA; these include the master and seamen’s wages, master’s disbursements, claims in respect of loss of life or personal injury, salvage and wreck removal claims, port and pilotage dues. These maritime liens shall, however, be extinguished after one year from the time the claims secured by such liens arise;

• preferential rights under section 69 of the MSA which includes a shipbuilder or ship repairer’s lien or right of retention; and

• mortgages and other preferential rights registered under the MSA.

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

By virtue of section 74 of the MSA, upon the judicial sale of a vessel all liens and encumbrances on the vessel will cease to exist, except those assumed by the purchaser with the consent of the holders. No charter party or contract for the use of the ship shall be deemed a lien or encumbrance for this purpose.

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

Yes, judicial sale in a foreign jurisdiction will be recognised.

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

No.

Carriage of goods by sea and bills of lading

39 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?

International conventions come into force in Nigeria when they have been enacted into law by the National Assembly. The Hague Rules were enacted into law in 1926 without variation by the Carriage of Goods by Sea Act and more recently the Hamburg Rules were also enacted into law without variation by the United Nations Convention on Carriage of Goods by Sea (Ratification and Enforcement) Act 2005.

Nigeria has ratified the Rotterdam Rules but they do not yet have the force of law.

For the purpose of application of the Rules, carriage of goods commences when the carrier receives the goods for carriage and ends when he or she delivers to the receiver in accordance with the contract of carriage or the law of the discharge port.

40 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?

The only other means of carriage under a combined transport or multimodal bill of lading regulated by domestic legislation and international convention is air transport, which is governed by the Civil Aviation Act and the Warsaw Convention.

41 Who has title to sue on a bill of lading?

The carrier, shipper, consignee and endorsee of the bill of lading.

42 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 terms of a charter party can be wholly incorporated into the bill of lading as express terms of the same. All the terms of the incorporated charter party being express terms of the bill of lading shall be binding on a third-party holder or endorsee of the bill. Where, however, the bill of lading is issued pursuant to the charter party without an express incorporation of the terms, the arbitration clause will not be enforceable against a third-party holder who has acquired the bill in good faith, unless an annotation is inserted in the bill of lading to the effect that the arbitration clause is so binding.

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

The demise clause or identity of carrier clause is no longer recognised or binding in Nigeria in view of the provisions of the Hamburg Rules, which are in force in Nigeria.

44 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?

Shipowners are not liable for cargo damage where they are not the contractual carriers.

Generally, only parties to a contract can rely on the terms of the contract and thus the shipowner cannot rely on the terms of the bill of lading if he or she is not a contracting party. Where, however, the shipowner acts as an agent of the contractual carrier and acted pursuant to the agency employment, the shipowner could be entitled to rely on the terms of the bill of lading if the bill provides that agents may do so.

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

Where the deviation is not for a justifiable reason such as to save life or property, the carrier shall be liable for losses or damage that result from such deviation. The deviation should, however, not affect defences for loss or damage that occur independently of the deviation.

The carrier may lose its right to limit its liability if it is shown that the deviation was reckless and with knowledge that loss or damage would occur as a result.

46 What liens can be exercised?

The liens that can be exercised include a carrier’s possessory lien on cargo for unpaid freight; and statutory liens prescribed in the Admiralty Jurisdiction Act for a maritime claim against the vessel, where the party personally liable on the claim is, both at the time the cause of action arose and at the time action is brought, the owner or demise charterer in possession and control of the vessel. In the absence of the particular vessel, the lien can be exercised on any other vessel beneficially owned by the liable party at the time action is brought.

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

Where the carrier delivers the cargo without production of the bill of lading, he or she will be liable for any loss or damage that results and such liability cannot be limited.

48 What are the responsibilities and liabilities of the shipper?

The shipper is liable for loss suffered by the carrier, the actual carrier or damage sustained by the ship if the loss or damage was caused by the fault or neglect of the shipper, his or her servants or agents.

The shipper has the responsibility to suitably label dangerous goods as such and to inform the carrier of the dangerous nature of the goods and the precautions it may be necessary to take.

If the shipper fails to properly label dangerous goods or to inform the carrier about them, the shipper shall be liable to the carrier and any actual carrier for loss resulting from the shipment of such goods.

Shipping emissions

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

The International Convention for the Prevention of Pollution from Ships 1973 has been domesticated and thus has the force of law in Nigeria. However, regulations designating emission control areas are yet to be issued.

50 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 maximum level of sulphur content in fuel used in Nigerian domestic waters is 0.5 per cent m/m. The Department of Petroleum Resources (the DPR) is the regulator of petroleum products in Nigeria and they inspect all cargoes that enter or leave the shores of Nigeria. Where fuel does not conform with the above standard, the DPR will not grant entry or permit discharge of that cargo in Nigeria.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Federal High Court is the admiralty court in Nigeria.

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

The rules governing service of court proceedings on a defendant outside the jurisdiction are the Sheriffs and Civil Process Act, the Federal High Court (Civil Procedure) Rules 2009 and the Admiralty Jurisdiction Procedure Rules 2011.

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

Yes, the Maritime Arbitrators Association of Nigeria is mainly made up of arbitrators and lawyers specialising in maritime arbitration. The Chartered Institute of Arbitrators, Nigeria Branch, can also constitute a panel of specialist maritime arbitrators.

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

Recognition and enforcement of foreign judgments and awards are governed by the Foreign Judgments (Reciprocal Enforcement) Act and the Reciprocal Enforcement of Judgments Act.

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

Under section 20 of the Admiralty Jurisdiction Act 1991, a foreign jurisdiction clause is null and void in Nigeria. A Nigerian claimant can litigate his or her claims in Nigeria even where the agreement provides that only a foreign court can exercise jurisdiction; this provision is particularly applicable in the case of the bill of lading, which is usually a standard form contract, the terms of which the Nigerian consignee is generally obliged to accept. The claimant will have to show among other things that the claim is more closely connected to Nigeria than elsewhere.

A foreign arbitration clause is enforceable In Nigeria.

56 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?

Where there is a foreign arbitration clause, the defendant upon entering appearance and before filing a statement of defence can apply to the court for a stay of the Nigerian proceedings pending reference to arbitration in accordance with the agreement. The court may stay proceedings after considering certain factors, including the justice of referring the matter to arbitration, particularly with reference to the effect on the claimant and the readiness and willingness of the defendant or applicant to do everything necessary for the proper conduct of the arbitration. A foreign court jurisdiction clause will be considered null and void.

Limitation periods for liability

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

The time limit for maritime claims brought under the Admiralty Jurisdiction Act is three years except where a different time limit has been stipulated under other laws. For instance, the Nigerian enactment of the Hamburg rules stipulates a two-year time limit for claims under a bill of lading. Parties are at liberty to extend the time limit by agreement but it is not usual and the court is not bound to uphold such agreement.

58 May courts or arbitral tribunals extend the time limits?

An arbitral tribunal is likely to extend time limits if the parties so agree. See question 57.

Miscellaneous

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

Nigeria has ratified the Maritime Labour Convention (MLC) but the Convention has not been incorporated into Nigerian municipal laws and is, therefore, not yet in force in Nigeria.

NIMASA recently stated that it has commenced implementation of the MLC in Nigeria. However, the MLC has not been incorporated into municipal laws so implementation would be through Marine Notices and other measures to be determined by NIMASA, pending enactment of the MLC Into law by the Nigerian National Assembly.

60 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?

Ordinarily, the court will always give effect to the intentions of the parties to a contract. It is possible to seek relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract where it can be established or proven that the contract has become impossible to perform by reason of forces beyond the control of the parties thereto (force majeure) or in view of any other vitiating elements of the contract. Unfavourable economic conditions are, however, not a factor for which relief from strict enforcement of the rights and liabilities of the parties in a shipping contract can be granted. The position of the law is that the courts do not rewrite contracts for parties where the terms are clear. In the absence of, inter alia, fraud, duress, undue influence and misrepresentation the parties are bound by their contract.

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

A noteworthy point relating to shipping in Nigeria not covered by the above is the cabotage regime introduced by the Coastal and Inland Shipping (Cabotage) Act 2003. Under that Act, only Nigerian-built vessels wholly owned and manned by Nigerian citizens are allowed to operate within Nigerian waters. The Cabotage Act, however, acknowledges that there may be a dearth of vessels to provide the required capacity for the domestic trade and so provides for a system of waivers from the three requirements (ownership, manning and building). These waivers are granted by the minister for transportation upon an application where he or she is satisfied that there is no Nigerian-built vessel wholly owned and manned by Nigerians available to perform the particular service described in the application.

The Cabotage Act also provides for the establishment of the Cabotage Vessel Financing Fund (the Fund). Any vessel in Nigeria that is engaged in the coastal trade is mandated to pay a surcharge of 2 per cent of the contract sum performed into the Fund. Also of note is the recent introduction of 12 new regulations mainly introducing levies relating to the management of the marine environment, intended to ensure the safety, cleanliness and general protection from pollution of the Nigerian territorial waters. The regulations were made pursuant to powers conferred on the minister by the Merchant Shipping Act 2007.

Update and trends

The emerging trend or hot topic currently affecting (and expected to continue affecting) shipping laws and regulations in Nigeria is the drive for an increase in local content. The drive to increase Nigerian presence in the Nigerian shipping industry led to the enactment of the Coastal and Inland Shipping (Cabotage) Act 2003. It is expected that most of the regulations for the industry in the foreseeable future will be affected by the desire to increase Nigerian presence in the industry.

Funke Agbor

fagbor@acas-law.com

Chisa Uba

cuba@acas-law.com

9th floor, St Nicholas House

Catholic Mission Street

Lagos

Nigeria

Tel: +234 1 462 2094 / 462 2480

Fax: +234 1 461 3140

www.acas-law.com

Norway

Christian Bjørtuft Ellingsen and Lars Musæus

Advokatfirmaet Simonsen Vogt Wiig AS

Newbuilding contracts

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

Unless otherwise agreed, ownership and title will pass from the shipbuilder to the shipowner upon delivery of the ship according to the Sale of Goods Act 1988. Legal title and transfer of the same will in general be evidenced by a builder’s certificate, a bill of sale, or both and supported by a protocol of delivery and acceptance. Transfer of title upon delivery of acceptance is the arrangement normally agreed in Norwegian shipbuilding contracts, and is also the system adopted in the Norwegian Standard Form Shipbuilding Contract 2000 (Ship 2000) article XI.

The parties are free to agree on when title shall pass to the shipowner and title may pass during construction, either progressively or in stages. Transfer of title during construction is a practical alternative form of security if the shipbuilder is unable to provide a refund guarantee to secure repayment of the shipowner’s pre-delivery instalments, and is commonly agreed in Norwegian offshore construction contracts. Title to the ship under construction, including identifiable materials at the yard, may be secured by registration in the Norwegian Shipbuilding Register.

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

A refund guarantee issued by a Norwegian bank to the shipowner under Norwegian law is not subject to specific formalities in order to be valid. There are in principle no legal requirements as to the format of the guarantee, but to be accepted as a guarantee and enforceable as such, the guarantee wording must be clear both in respect of the promise to guarantee and under what conditions it becomes due. As to the latter, the wording of the guarantee is critical for ascertaining whether it is an on-demand guarantee (demand bond) or an ancillary guarantee. The Supreme Court judgment of 22 August 2012 (Norsk Tillitsmann ASA v Silvercoin Industries AS) sets out the principles that will be applied when considering whether a guarantee is to be considered an on-demand guarantee. The general principles of Norwegian non-statutory contract law and guarantee law apply to the refund guarantee.

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

Local courts and enforcement authorities have authority to enforce physical delivery of the vessel, but in general only on the basis of an enforceable judgment or arbitration award ordering such performance. Sanctions may be daily fines. It is in principle possible to file a petition with the local courts for a preliminary order to compel delivery of the vessel, however, there would have to be very particular circumstances present in order for such an order to be rendered.

The alternative for the shipowner will be a claim for damages, which may be secured by an arrest of the vessel, and, when the enforceable judgment or award is ready, to move for an enforcement lien and subsequent judicial sale of the vessel.

4 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?

Claims from the shipowner will in general be subject to the provisions of the shipbuilding contract, under which the shipbuilder’s liability for damage caused after delivery by defects in the vessel will invariably be limited to the period and scope of the guarantee. Ship 2000, article X provides that, if the defect itself is remedied within a reasonable time, the shipbuilder shall have no other liability for damage or loss caused as a consequence of the defect, except for repair or renewal of the vessel’s part or parts that have been damaged as a direct and immediate consequence of the defect without any intermediate cause, and provided such part or parts can be considered to form a part of the same equipment or system.

A purchaser of the vessel from the original shipowner, who has not taken an assignment of the shipbuilding contract, will in principle be in the same position as a third party, but may under certain conditions make direct claims against the shipbuilder on the basis of general principles of Norwegian contract law.

A claim against the shipbuilder from a third party that has sustained damage would lie either in product liability, in general negligence based tort law or, based on a narrow line of older court cases, in quasi-tort or strict liability for products with inherent special risks that may be called product liability in a wider sense. The enacted product liability in Norway is based on the EC Council Directive 85/374/EEA and is thus limited to personal injury and death and to damage to property ordinarily intended and used for private use, namely, it is essentially a consumer protection.

Ship registration and mortgages

5 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?

The traditional Norwegian ship register is called the Norwegian Ordinary Ship Register (NOR). All Norwegian vessels of 15 metres overall length or more must be registered here, unless they are entered in the registry of another country or in the Norwegian International Ship Register (NIS – see below). Voluntary registration applies more broadly.

The NIS was established in 1987 and is open also to foreign shipping companies. Vessels registered in the NIS fly the Norwegian flag, but their trading areas are restricted. They are not permitted to carry cargo or passengers between Norwegian ports or to engage in regular scheduled passenger transport between Norwegian and foreign ports.

Vessels under construction at Norwegian shipyards with a minimum length of 10 metres may be registered in the Norwegian Shipbuilding Register (BYGG), which is administered as a division of NOR. The shipowner may also register in the BYGG his or her conditional rights under the shipbuilding contract, irrespective of how the title has been arranged.

6 Who may apply to register a ship in your jurisdiction?

The owner of an NOR-registered vessel must comply with the ownership requirements set out in the Maritime Code (1994) section 1, which for a company are, in short, that the head office must be in Norway, that 60 per cent of the shares and their voting rights must be held by Norwegian nationals and that the majority of the directors, including the chairman, must be Norwegian nationals who are resident in Norway and have been so for the past two years. Companies and nationals within the European Economic Area (EEA) receive, however, equal treatment to Norwegian companies and nationals with regard to the place of their head office, nationality and residency, provided that the vessel is a part of the owner’s economic activities established in Norway and that the vessel is operated from Norway. The Ministry may grant dispensations. If the owner does not have its main office in Norway, a Norwegian representative must be appointed.

The NIS is open for foreign shipping companies, but if the shipowner does not comply with the requirements set out in the Maritime Code (1994), section 1, it is a requirement that the vessel must be operated (either technically or commercially) by a Norwegian shipping company with its head office in Norway and a Norwegian representative must be appointed.

Registration in the Shipbuilding Register is open to buyers of all nationalities.

7 What are the documentary requirements for registration?

The documentary requirements for new registration in the NIS are:

• notification form for the NIS;

• certificate of name;

• tonnage certificate – issued by an approved classification society for vessels over 500 GT and by the Norwegian Maritime Authority for vessels under 500 GT;

• seaworthiness certificate – issued as for the tonnage certificate;

• builder’s certificate, bill of sale or other title document – overseas title documents must be notarised and legalised;

• certificate of deletion or non-registration from previous register – duly legalised; and

• guarantee for wages and repatriation of crew in the event of bankruptcy.

For a vessel not previously registered, succession of title back to the shipbuilder must be documented. If the vessel is transferred from another register, succession of title back to the last registered owner in the former register must be documented. If the vessel is a new build, the builder’s certificate and protocol of delivery and acceptance must be submitted. Particular documentary requirements apply depending on ownership.

The documentary requirements for new mandatory registrations in NOR are, in general, as for registration in the NIS apart from:

• notification form for the NOR; and

• declaration of nationality.

The requirements as to the format of the documents to be submitted for registration in the NOR, may vary somewhat from the requirements relating to the documents to be submitted for registration in the NIS.

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

No, Norwegian law does not provide for any form of dual registration or for registration of bareboat or other charters. If the vessel is entered in a foreign ship register, it loses its right to be registered in any of the Norwegian ship registers and to fly the Norwegian flag.

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

Ship mortgages are registered as encumbrances on the relevant vessels in the ship registers (NOR, NIS or BYGG). The ship registers contain details of the vessel’s ownership, ship mortgages and other encumbrances (such as enforcement liens) and their respective priorities. Ship mortgages may contain restrictions on further mortgaging of the vessel without the mortgagee’s written consent, which will be noted in the register and observed by the registrar.

In January 2012 the ship registers came under the administrative control of the Norwegian Maritime Authority, but have maintained their separate offices in Bergen.

Limitation of liability

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

Norway is a signatory to the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC), and the amendments in the 1996 protocol. The rules of the convention are incorporated into the Norwegian Maritime Code, but the limitation amounts were increased by the Act of 12 June 2009. The right to limitation is available to the shipowner, the ultimate owner (in relation to ships on bareboat), charterers and operators as well as any person offering services in direct connection with salvage and wreck removal. Furthermore, any person whose act, neglect or default the shipowner is responsible for. Finally, the Maritime Code specifies that the limitations shall also be available to the liability insurers of the insured.

The type of vessels that may limit their claims will follow the common Norwegian definition of ships. Floating cranes, floating docks, dredgers and Norwegian-owned hovercraft fall outside this definition.

According to the Maritime Code sections 172 and 172(a) the right to limitation shall, regardless of the basis for the claim, be available for the following losses and damages:

• loss of life or personal injury, or loss or damage to property arising on board or in direct connection with the use of the vessel or salvage;

• damage resulting from delay in the carriage by sea of goods, passengers, or their luggage;

• other damage of non-contractual nature that arises in direct connection with the use of the vessel or with salvage;

• measures taken to avoid or reduce the above costs or damages; and

• certain claims in connection with clean-up efforts relating to maritime accidents, etc.

Claims that are excepted from limitation are listed in section 173:

• salvage claims, including a salvor’s special compensation provided by the law in situations where the operation entailed a risk of environmental damage, contributions in general average and contractual claims for wreck removal and agreed remuneration for measures taken to avoid or reduce costs or damages as set out in sections 172 and 172(a);

• claims relating to oil spills, as this is regulated elsewhere;

• claims relating to nuclear vessels or activity;

• damages or injury caused to employees engaged in relation to the operation of the ship or salvage; and

• claims for interest or legal costs.

Special limitation rules apply to liability for oil pollution.

11 What is the procedure for establishing limitation?

The right to limit follows from the law, and does not require the establishment of a fund. Claims may be dealt with directly and informally between the debtor and creditors. However, should new creditors come forward after such a process, the debtor will remain liable. A fund can only be established in response to an arrest or commencement of legal action for a claim, and then the fund must be established by paying in the amount or providing other security (eg, P&I club undertaking) at the court where such action or arrest is pursued. Once the fund is established there will be a deadline for notification of claims.

12 In what circumstances can the limit be broken?

The Norwegian Maritime Code reflects the rules of the Convention in this regard, so that there is no right to limit if the responsible party caused the loss or damage with intent or gross misconduct and with an understanding that such loss was likely to occur.

The principle has been tested in a Finnish Supreme Court case where a ship capsized and lost the deck cargo. The court held that the accident was a result of gross negligence with respect to making the vessel seaworthy prior to departure, but maintained the right to limit on the grounds that the responsible party had not understood that such loss was likely to occur (ND 1993.57 FH).

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The limitation regime in Norway relating to the carriage of passengers and their luggage by sea is based on the Athens Convention (as amended by the 2002 Protocol), which was ratified by Norway in 2013, and EU Regulation 392/2009. The Convention was ratified with the IMO 2006 Reservation, allowing limitation of liability in respect of claims relating to war or terrorism. The Convention was implemented into Norwegian law by amending the Norwegian Maritime Code with effect from 1 April 2014.

Port state control

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

The port state control agency is the Norwegian Maritime Authority, which is an executive agency under the Ministry of Trade and Industry. The Norwegian regulation of port state control is based on the Paris Memorandum of Understanding on Joint Port State Control and the EU Council Directive on Port State Control (95/21/EC) with amendments.

Norway has adopted, with effect from January 2011 (as part of the EEA Agreement), and implemented in Norwegian law, the European Parliament Directive on Port State Control (2009/16/EC). Vessels calling at Norwegian ports are now required to submit reports using the national reporting system SafeSeaNet.

15 What sanctions may the port state control inspector impose?

The following sanctions may be imposed:

• an order that the shipowner remedy non-compliance with a relevant regulation within a certain period of time;

• in the event of non-compliance with such an order, relevant certificates may be withdrawn;

• a fine, a penalty fee, or both may be imposed on the shipowner for intentionally or negligently infringing relevant regulations. A penalty fee may also be imposed on other persons who on behalf of the shipowner intentionally or negligently infringe relevant regulations;

• a vessel may be detained, ordered to proceed to a certain harbour, denied access to Norwegian territorial waters or given other orders. These orders may be enforced with necessary force within the limitations set out in international law. When there is reason to believe that a vessel has infringed certain regulations, such force may also be exercised in order to investigate the matters; and

• the public prosecutor may indict the shipowner, or other persons who have acted on behalf of the shipowner, and who have intentionally or negligently infringed certain regulations, and the court may give judgment on imprisonment or impose a fine.

16 What is the appeal process against detention orders or fines?

Sanctions can be appealed to the Maritime Authority within three weeks from the time of which the decision has been delivered to the complainant. The Authority may reverse its decision or forward the appeal to the relevant appeal authority (which is the Ministry of Trade and Industry or the Ministry of Environment, depending on the area of law). A decision made by the appeal authority is final, and may only be challenged through legal proceedings.

Criminal proceedings can be appealed to the court of appeals.

Classification societies

17 Which are the approved classification societies?

The Maritime Authority has appointed several classification societies as recognised organisations (RO) to which it has delegated tasks such as pre-registration surveys. The authority delegated is set out in individual agreements with the respective RO. The classification societies appointed as ROs are:

• DNV GL (succeeding Det Norske Veritas and Germanischer Lloyd as RO);

• Lloyd’s Register of Shipping;

• Bureau Veritas;

• the American Bureau of Shipping;

• RINA SpA; and

• Nippon Kaiji Kyokai.

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

The classification society can operate both as provider of services, ensuring compliance with class rules, and as agent for the government ensuring compliance with public statutory legislation. The classification society may be held liable by the government or by the shipbuilder or shipowner under the contract entered for the services provided. As for a possible contractual claim by a shipbuilder or shipowner, the classification society will generally have excluded or limited its liability in the contract. Such exclusion will not be effective for wilful misconduct and gross negligence. Beyond that, there is authority in Norwegian law for the courts to set aside, in whole or in part, contract terms that are deemed unreasonable or contrary to good business practice to enforce.

The buyer or other affected third parties may, in principle, hold the classification society liable in tort for negligence. Whether such a right exists depends on the specific circumstances present, inter alia, the type of claim made and the basis on which the classification society has performed its services. Traditionally, Norwegian legal scholars have been reluctant to accept that classification societies can be held liable by third parties, not least in respect of defects. However, in more recent legal theory it has been argued that there is no reason for adopting a sui generis approach to third-party claims against classification societies, and that the question of liability should be resolved in accordance with general contract and tort law. It has been argued that a claim in tort should be available to information recipients that ‘in course of business rely and act upon the certification made by the society’. There is limited Norwegian case law regarding claims against classification societies, both in respect to contractually based claims and legal action in tort. Notwithstanding the fact that the limited case law available indicates that it is, in principle, possible for both the builder and the buyer to hold a classification society liable for negligence, it may be difficult in practice to succeed in claims against classification societies (see, for example, the Court of Appeal judgment of 4 November 1997 (Swire Southern Limited v DNV)).

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The government (represented by the Norwegian Coastal Administration) or the local authority may order wreck removal in accordance with the Harbours and Naval Fairways Act of 2009 or the Pollution Control Act of 1981. An order for wreck removal pursuant to the Harbours and Naval Fairways Act can be directed to the person registered as owner at the time the vessel became a wreck or at the time the order is given. An order under the Pollution Control Act can be directed at the ‘responsible’ party, a term which may also cover other entities than the registered owner. If the wreck is not removed within a given time limit, the government or local authority can remove the wreck. In such a case, the shipowner is liable for the removal costs and related compensatory damage. The shipowner may limit incurred liability in accordance with LLMC 1996. However, in accordance with LLMC 1996 article 18, the Norwegian Maritime Code imposes increased economic liability for wreck removal on the shipowner.

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

The Norwegian Maritime Code incorporates:

• the Collision Convention 1910;

• the International Convention on Salvage 1989;

• the International Convention on Civil Liability for Oil Pollution Damage and the Fund Convention 1992 and the Supplemental Fund Protocol 2003; and

• the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001.

Furthermore, the Ship Safety and Security Act incorporates the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78).

21 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?

The Norwegian Maritime Code incorporates the International Convention on Salvage 1989. There is no mandatory form of salvage agreement. Lloyd’s standard form of salvage is commonly used, but the parties are free to agree their own terms.

Any person or entity can in principle carry out salvage operations. However, a shipowner or a master may on a reasonable basis expressly prohibit a person from carrying out a salvage operation. The fact that the salvor is a professional will be taken into account when calculating the award.

Ship arrest

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

Norway is a party to the International Convention Relating to the Arrest of Seagoing Ships 1952, which has been incorporated into the Maritime Code and is thus in force in Norway. The 1999 Arrest Convention has also been signed by Norway, but has so far not been ratified.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

An arrest of a seagoing ship can only be obtained as security for maritime claims as provided for in the Norwegian Maritime Code section 92. The list of maritime claims contained therein reflects the definition of maritime claims in the 1952 Arrest Convention, with the exception that claims arising out of wreck removals are also included.

The vessel’s flag or the law governing the claim does not matter, provided the vessel can serve as an object for enforcement of the claim according to the general provisions of the Norwegian Enforcement of Claims Act.

Under Norwegian law, the debtor must be the owner of the vessel that is being arrested. Claims against time or bareboat charterers do not give a right to arrest a ship. The right of sister ship arrest is recognised in the sense that if the owner of the ship to which the maritime claim relates is liable as an entity or a person for the claim, the arrest may be directed at other ships owned by that legal entity or person at the time the claim arose. The right to arrest other ships belonging to the owners does not apply to disputes as to ownership of a ship, or to a dispute between co-owners of a ship as to the ownership, possession, employment or earnings of that ship, where the arrest can only be effected against the ship to which the claim relates.

The claimant must also prove on the balance of probability that he or she has sufficient cause for arresting the ship, namely, that the debtor’s conduct gives reasons to assume that enforcement of the claim will either be impossible or significantly more burdensome if the arrest is not granted, or that enforcement will otherwise have to be made abroad. Norwegian law consequently adds another requirement that is not found in the Arrest Convention. The requirement of sufficient cause does not apply to claims secured by a mortgage or lien on the vessel.

24 What is the test for wrongful arrest?

If the claim ultimately fails, Norwegian law provides for strict liability for wrongful arrest.

Bad faith or negligence by the claimant in regard to the asserted cause for arresting the ship may also form the basis for liability for wrongful arrest.

25 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?

The bunker supplier may not arrest the vessel unless the bunker compensation claim is against the owner of the vessel. The bunker supplier may have the option to arrest the bunkers, see question 32.

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

The court may order that the arresting party, as a condition for the arrest, shall put up security for port dues during the arrest period, counter security for wrongful arrest, or both. Counter-security for wrongful arrest is ordered at the courts’ discretion in a fixed amount covering probable costs relating to a wrongful arrest, and is in general calculated on the basis of loss of hire over a stipulated number of days. In practice, the courts normally do not order counter-security to be put up. Security for port dues must be put up for a minimum of 14 days, failing which the arrest may be lifted upon the request of the port authorities.

The form of the security must be either a cash deposit in a Norwegian bank with appropriate declaration by the bank to the enforcement authority or a bank guarantee from a Norwegian bank or other financial institution to the enforcement authority, with no time bar. A security may be replaced by another security in acceptable form.

27 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?

The shipowner (the arrested party) can always avoid effectuation of the ship arrest by establishing with the court adequate security for the arresting party’s claim. In the same manner the arrested party can have a ship arrest lifted. The amount of the security shall correspond to the amount for which the court has granted the arrest. The form of the security shall be the same as for security provided by the arresting party (see question 26).

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

The shipowner is generally responsible for the maintenance of the vessel while under arrest. The arresting party is by statute made responsible for payment of port dues that may accrue during the arrest.

29 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 for security only and to pursue proceedings on the merits elsewhere.

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

It is possible to obtain attachment (in the law called arrest) in most types of assets owned by the debtor, as security for monetary claims. An injunction order, for interim security measures, may be obtained for non-monetary claims. In all of these cases a sufficient cause for the arrest or other security measure must be shown. Note that the measures are discretionary and may be denied by the court.

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

Orders for securing and getting access to evidence are available pursuant to the Dispute Act Chapter 28. It is also possible, pursuant to the conditions of the Dispute Act Chapter 34, to obtain an interim measure in the form of an order for delivery of property.

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

Bunkers may be arrested provided that the claim is against the owner of the bunkers. A sufficient cause for the arrest must be shown. Since arrest is a discretionary measure it may be denied by the court due to practical difficulties and inconvenience caused to the ship or other third parties.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

In order to be entitled to apply for judicial sale of a vessel arrested in Norway, one must be the beneficiary under a registered mortgage or other registered lien in the vessel and one’s claim must be ‘qualified’ for enforcement under the Enforcement Act 1992 and due for payment. The claims that are qualified for enforcement under the Enforcement Act are typically, in addition to registered mortgages, final and binding judgments and arbitration awards.

The normal procedure in enforcing a judgment or arbitration award through to judicial sale of the vessel is to first petition for an enforcement lien on the basis of the judgment or award, and by that to obtain priority for the claim in the subsequent sale. Foreign judgments are subject to recognition and enforceability according to a treaty or convention (see question 54). For foreign arbitral awards, the Norwegian Arbitration Act 2004 accepts recognition and enforcement on much the same terms as the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

If the judgment or award orders that the vessel be sold, a judicial sale may be petitioned for directly, without the need first to obtain an enforcement lien.

If the vessel arrested in Norway is a foreign-flagged vessel, the Norwegian court and execution officer must involve in the process the registrar of the flag state, which may cause extra procedural steps and delay.

34 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?

The judicial sales process, after the registered lien is in place, consists of two stages. At the first stage the claimant files a petition for judicial sale of the vessel. The court will then give the owner an opportunity to present its case where after it will grant or reject the petition for judicial sale. The second stage consists of the sales process, which will either be by auction or by ordinary (judicial) sale through a court-appointed administrator (normally a shipbroker). The claimant decides whether the final offer is to be petitioned affirmed by the court, upon which the court will affirm or refuse the bid. Finally, the court will distribute the sales proceeds.

The time needed for the judicial sale process depends on several factors, most importantly the court’s workload, appeal of court decisions and the vessel’s market. A fair general assessment suggests that the first stage should be completed between one and three months and the second stage between two to six months.

The court fees for 2014 are:

• arrest petition: 2,150 kroner;

• enforcement petition (judicial sale): 1,806 kroner;

• appeal to the district court: 860 kroner; and

• appeal to the appeal court: 5,160 kroner.

Furthermore, proceedings in court trigger a daily fee and a judicial sale may also incur harbour fees and administrator’s (normally ship broker’s) remuneration.

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

First, the court will not affirm a bid for the vessel that does not cover all encumbrances in the vessel with higher-ranking priority than the claimant’s security.

The proceeds of the sale shall be distributed in accordance with the following order, from highest to lowest priority:

• court fees and the court appointed administrator’s remuneration;

• maritime liens;

• mortgages and similar registered encumbrances based in contract; and

• unsecured debt.

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

A judicial sale in Norway extinguishes all prior liens and encumbrances on the vessel including maritime liens, and gives thereby the purchaser a clean title. Exception applies for non-pecuniary rights registered in the vessel, which as a main rule follow the vessel. However, non-pecuniary rights with the same priority as the claimant or behind may be discharged by the court if necessary for the sale of the vessel.

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

A judicial sale in a foreign jurisdiction will be recognised provided the vessel is within the jurisdiction at the time of sale and that the judicial sale is performed in accordance with the national law of that jurisdiction and the provisions of the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages 1967.

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

Yes, but the 1993 Convention has not been ratified and is not in force in Norway.

Carriage of goods by sea and bills of lading

39 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?

Norway is a signatory to the Hague-Visby Rules, which are incorporated into the Maritime Code, with certain modifications.

The Hamburg Rules were signed, but not ratified by Norway. Instead, the Maritime Code has been given certain elements from the Hamburg Rules that are considered compatible with Norway’s obligations under the Hague-Visby Rules.

From the outset Norway varied the rules so that the rights were more favourable for the cargo owner than the Hague-Visby rules stipulated, unless expressly waived by the cargo owner. This continues to relate particularly to the following two categories:

• the tackle-to-tackle principle of the Hague-Visby Rules was replaced with general rule that the owner shall be responsible for the goods from such time and place as he or she is placed in charge of the goods; and

• livestock and deck cargo are made subject to special liability provisions that cannot be contracted out of.

Norway is a signatory to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (widely known as the Rotterdam Rules), but has not yet ratified the convention so as to make it applicable. The Norwegian Maritime Law Commission recommends that ratification should take place when the US or the larger EU states ratify the Convention.

40 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?

Norway is a party to the Convention on the Contract for the International Carriage of Goods by Road (CMR) 1956, the Convention concerning International Carriage by Rail (COTIF) 1980 (as amended by a protocol of 1999) and the Convention for the Unification of Certain Rules for International Carriage by Air 1999, all of which are incorporated into national legislation by special acts on each of these areas.

41 Who has title to sue on a bill of lading?

The Norwegian Disputes Act provides any person with a legal claim based in law, contract or tort, with access to sue a person with an adequate relation to the dispute, provided a resolution by the courts is deemed to be reasonably required. The lawful holder of the bill of lading will normally be entitled to bring a claim against the owner. This may be the shipper, the consignee or the endorsee depending on the circumstances of the case.

42 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 charter party may be incorporated into the bill of lading by reference. Such a provision will generally be applicable with regard to a shipper who is also the charterer. If the bill of lading is issued or transferred to a third party, the legislation becomes prescriptive so that the rights of the lawful holder of the bill of lading under the Maritime Code may not be waived by contract.

The Maritime Code severely restricts the enforceability of jurisdiction clauses in the bill of lading. Section 310 stipulates that any provision on jurisdiction shall be void to the extent that it limits the cargo owner’s right to bring a claim in either of the following jurisdictions:

• the principal place of business or dwelling of the party being sued;

• the place where the transport agreement is entered into insofar as the party being sued has a place of business or an agent through whom the agreement has been reached;

• the agreed place of loading; or

• the agreed place of discharge, or the actual place of discharge.

Arbitration provisions will similarly only be applicable to the extent that they do not limit the cargo owner’s right to bring a claim in any of the aforementioned places.

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

The starting point in the Maritime Code is that the carrier and subcontractor are jointly and severally liable. If, however, it is made clear that a part of the transport will be executed by a named carrier then the first carrier has the right to limit his or her liability for the carriage executed by the named carrier. In the event that there subsequently is a dispute over which carrier was responsible for the loss or damage or delay, then the principal carrier shall have the burden of proof.

44 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?

Under Norwegian law the shipowner and named carrier are jointly liable towards the cargo owner for loss or damage or delay caused during the carriage of the goods. There is very limited possibility to vary these principles, as described above.

Both parties may rely on the defences in the Maritime Code, or incorporated into the bill of lading, unless the bill of lading terms reduce the rights of the cargo owner.

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

The Maritime Code has intentionally softened the provisions relating to deviation. Previously, the provision was negatively constructed; deviations could only be made in order to save lives or salvage vessels or goods or other reasonable grounds. All other deviations were unlawful. The new provisions now expressly state that deviations to save lives or to salvage vessels or goods are lawful deviations.

While the change seems minor, it now seems to confirm more affirmatively that the shipowner will not be liable for loss or damage or delay caused by the deviation.

46 What liens can be exercised?

Pursuant to the Maritime Code, the carrier has the right to retain the goods as security for:

• freight due;

• the cargo owner’s contribution to general average and salvage claim;

• any costs incurred to protect the goods where this is founded in legislation; and

• any other claims for which it is agreed that the carrier may detain the cargo as security.

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

Where the carrier delivers the goods without the presentation of the bill of lading, and there subsequently comes forward a lawful holder of the bill of lading, the carrier will be liable to the holder of the bill of lading. Under Norwegian law there will in such circumstances be no defences available to the carrier.

In the event that the carrier secured a letter of indemnity from the party that received the goods, the carrier will be able to bring a claim for indemnity under the letter of indemnity.

48 What are the responsibilities and liabilities of the shipper?

The Maritime Code contains several provisions describing the liability of the shipper. First, the shipper is responsible for delivering the goods to the carrier within the time period agreed with the carrier, and the goods needs to then be delivered in a state and in such a manner as to allow for safe and easy loading, stowage, transport and discharge. The shipper also has a responsibility to ensure that the goods are adequately packed, and cannot cause damage to other goods. The general provision stipulates that it is the responsibility of the shipper to ensure no dangerous goods is shipped.

In the event that the shipper cancels the shipment prior to loading he or she shall be liable for freight loss and other losses. If the transport agreement is cancelled after loading and delivery is to be made at a place other than the agreed discharge port the shipper shall similarly be liable for freight loss and other losses.

And, naturally, unless something else is agreed, the shipper will be liable to pay freight, which falls due upon delivery of the goods.

Shipping emissions

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

MARPOL Annex VI is incorporated into Norwegian law and applies as a regulation. The North Sea is defined as an ECA.

50 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 caps contained in MARPOL Annex VI are generally applicable:

• fuel oil used in the EEA must have a sulphur content below 3.5 per cent m/m (to be adjusted to 0.5 per cent from 2020);

• fuel oil used in the North Sea (S)ECA must have a sulphur content below 1 per cent m/m (to be adjusted to 0.1 per cent from 2015); and

• marine gas oil is subject to an overall limit of sulphur content of 0.1 per cent.

In addition to this, particular EU requirements in respect of sulphur contents are applicable, namely:

• for ships at port or port area, the limit is 0.1 per cent m/m; and

• for passenger ships sailing routes within, or to or from, the EEA, there is a limit of 1.5 per cent m/m.

Norway operates an additional sulphur dioxide tax for all mineral oils with more than 0.05 per cent sulphur content.

The provisions relating to compliance, enforcement and sanctions are set out in the Ships Security Act of 2007 and the Regulation Concerning Environmental Security for Ships and Other Moveable Installations of 2012 into which MARPOL Annex VI is incorporated. The possible sanctions include, inter alia, penalties, withdrawal of certificates, detention of the vessel and for substantial breaches, fines or incarceration.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Unless otherwise agreed between the parties, maritime disputes fall under the jurisdiction of the ordinary courts, namely, the district courts in the first instance and on appeal the regional courts of appeal. On certain conditions a judgment may be further appealed to the Supreme Court, but the Supreme Court’s Appeals Selection Committee will often deny such further appeal to be heard.

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

Norway is a party to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965. The Ministry of Justice is the central authority in Norway.

Service on Norwegian citizens abroad may be made through Norwegian consular authorities.

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

No, there is no such arbitral institution in Norway with a panel of maritime arbitrators. Arbitrations in maritime disputes are established ad hoc by the parties or their counsel, based on provisions of contract and the Norwegian Arbitration Act 2004. Trained maritime arbitrators are found among scholars, judges and practising lawyers. The Scandinavian Institute of Maritime Law in Oslo has greatly contributed to the quality of the maritime law community and to the traditions of Norwegian maritime arbitrations, which are well respected and widely used.

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

Norwegian recognition and enforcement of foreign judgments requires convention or treaty. The most important convention is the 2007 Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters entered into between the member states of the EU and Norway, which replaced the 1993 Lugano Convention and entered into force on 1 January 2010.

Norway is a party to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In addition, the Norwegian Arbitration Act 2004, which is based on the UNCITRAL Model Law, provides in sections 45 and 46 that an arbitral award shall be recognised and enforceable pursuant to the requirements of the Act, irrespective of the country in which the award was made. The requirements are fairly similar to those of the 1958 Convention and apply, accordingly, also to awards made in non-Convention countries.

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

Such proceedings will not make the case lis pendens and prohibit the Norwegian courts from accepting jurisdiction in Norway for the same dispute. A foreign judgment rendered in breach of a jurisdiction clause under circumstances where Norway has not, by convention or treaty, accepted the foreign jurisdiction, may be challenged as not being enforceable in Norway. If proceedings are brought in breach of a jurisdiction clause before the courts of an EU/EEA member state, the issue is partly regulated by the 2007 Lugano Convention; if the other court is seized before the Norwegian court, the Norwegian court is bound to stay its proceedings until the court first seized has decided whether it has jurisdiction.

56 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 jurisdiction of the domestic court may be challenged before the court at the initial stages. Any decision by the domestic court to seize jurisdiction may be subject to appeal to the courts of appeals and, ultimately, to the Supreme Court.

Limitation periods for liability

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

The general limitation period for claims, as enacted in the Limitation Period for Claims Act 1979, is three years. For contractual claims, the period commences at the due date for satisfaction of the claim or from the date of a breach. For tort claims, the period commences on the date on which the injured party obtained, or should have obtained, the necessary knowledge of the damage and the person responsible. Under this Act, certain claims are subject to a longer limitation period and certain hindrances trigger supplementary periods.

For international sales of goods, the New York Convention of 14 June 1974 applies, where the general limitation period is four years.

Special legislation may contain shorter limitation periods than three years. The Maritime Code contains shorter limitation periods, inter alia, for maritime liens, one year; for various passenger claims, two years; for claims for damages for loss of or damage to cargo or for incorrect or incomplete statements in a bill of lading, one year; and for claims for damages for loss suffered by cargo being delivered without presentation of a bill of lading or to the wrong person, one year.

The debtor may extend the time limit by an acknowledgement of the debt or by a specific extension not exceeding three years and addressed to the creditor after the debt has arisen.

58 May courts or arbitral tribunals extend the time limits?

No, but the normal way of interrupting the limitation period is to file suit or to commence arbitration proceedings.

Miscellaneous

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

The new Ships Employment Act 2013, which came into effect on 20 August 2013, implements the provisions of the Maritime Labour Convention. The Ships Employment Act applies to seamen working onboard Norwegian vessels.

The Norwegian Maritime Authority (NMA) issues DMLC part I upon the shipowner’s application. After the shipowner has issued the DMLC part II he or she may ask the NMA, or one of the ROs (see question 17), for an MLC inspection. The MLC Certificate is issued either by the NMA or an RO.

60 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 Contracts Act section 36 it is in principle possible for the courts to set aside, in whole or in part, contract terms that the court deems to be unreasonable or contrary to good business practice to enforce. However, there would in general have to be extraordinary circumstances present in order for the courts to apply section 36 to a commercial contract between professional parties.

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

Norway is not a member of the EU, but as a member of the European Economic Area, much of the EU commercial legislation has been adopted. As a traditional shipping nation, Norway is also a party to the leading international conventions that relate to shipping.

Christian Bjørtuft Ellingsen

cbe@svw.no

Lars Musæus

lmu@svw.no

Filipstad Brygge 1

PO Box 2043 Vika

0125 Oslo

Norway

Tel: +47 21 95 55 00

Fax: +47 21 95 55 01

www.svw.no

Panama

Gabriel R Sosa, Eduardo A Real and Alberto Lopez Tom

De Castro & Robles

Newbuilding contracts

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

As between a shipbuilder and shipowner, the ownership, risks and responsibilities associated with ownership pass as agreed to in the contract. With respect to third parties and authorities, ownership title only passes when the sales contract is recorded in the Panama Public Registry.

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

Under Panamanian law, the contract would need to be in writing and specifically provide the events that would trigger the obligation to refund the guarantee.

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

This is not relevant in Panama as there are no building yards in Panama; but if there were, such a remedy would be available under Panamanian law.

4 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 shipowner, original purchaser and a third party would have a claim in either contract or tort against the yard. Such remedy, however, could be limited by the terms of the building contract.

Ship registration and mortgages

5 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?

All vessels are eligible to be registered in Panama regardless of the nationality of the owners or shareholders of owning company. Vessels must meet the technical and safety demands of the Panama Maritime Authority (PMA), the entity responsible for the registration of vessels in Panama. A vessel under construction can be registered in Panama and an ownership title and mortgage can also be recorded on such a vessel.

6 Who may apply to register a ship in your jurisdiction?

Persons or companies of any nationality may register a ship in Panama and the companies or persons can be based in any country.

7 What are the documentary requirements for registration?

The shipowner will have to provide the vessel’s particulars and a power of attorney to an attorney in Panama who will apply for a provisional registration, which is valid for six months. In addition, the shipowner will have to present a bill of sale, deletion certificate and closing continuous synopsis records from the vessel’s previous registry. The shipowner may also be required to present technical certificates of the vessel in order to permanently register the vessel in Panama.

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

Yes, it is possible to have dual registration and to flag out of Panama. If Panama is the primary (mother) flag, the PMA will grant a consent authorising the vessel to flag in another country for up to two years, which is renewable. If Panama is the secondary flag, the PMA will require consent from the primary flag authority, technical documents of the vessel and the bareboat charter party. The owners of the vessel must grant their consent.

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

The register of mortgages and ownership titles has recently been transferred to the Ship and Mortgage Public Registry Directorate of the Panama Maritime Authority. The Directorate contains the following information:

• name and domicile of mortgagee and mortgagor;

• maximum amount guaranteed by the mortgage;

• interest rate or how it is calculated, if an interest rate is applicable. It is possible to register a mortgage that does not provide for payment of interest;

• payment dates or how such dates are established; and

• particulars of the ship.

It also possible to register a mortgage for obligations other than a loan, such as a mortgage to guarantee performance of a future obligation. Ownership titles and mortgages can be recorded preliminarily through any Panama Merchant Marine Consulate.

Limitation of liability

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

While Panama is not a signatory to the 1976 Limitation Convention, its text was largely incorporated in the Panamanian Code of Maritime Procedure. The articles are compiled under a special title, ‘Substantive provisions that regulate the limitation of liability of the vessel owner’. Therefore, from the outset, it is clear that the intention of the legislature was to include ‘substantive’ law in the Code of Maritime Procedure. The articles in this title provide rights and remedies to the plaintiff in the limitation procedure and thus the courts would have to apply these provisions as the substantive law.

A peculiarity of Panama’s Limitation of Liability Law (which was borrowed from US law) is that the person seeking to limit liability must do so within six months of receiving a written claim.

One difference between the Panamanian Limitation of Liability Provisions and the 1976 Convention is that the Panamanian limitation provisions changed the word ‘including’ to ‘excluding’ when referring to limitation of liability for damages to ‘harbour works’. The term ‘harbour works’ was translated into Spanish as ‘obras portuarias’, which literally means ‘port works’ and seems to be intended to be broad in its application. We opine that this may have been done because all the ports at the time were operated by the government and the intention could have been to protect government property and interests, especially the Panama Canal.

Salvors and the owners, charterers, managers and operators of oceangoing vessels may limit their liability arising from claims in respect of:

• loss of life or personal injury or loss of or damage to property (excluding damage to harbour works, waterways, bridges, canals, aids to navigation and installations of the Panama Canal);

• loss resulting from delay in the carriage of cargo, passengers or their luggage by sea;

• other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the vessel or salvage operations;

• the raising, removal, destruction or the rendering harmless of a vessel that has sunk or been wrecked, stranded or abandoned, including anything that is or has been on board such vessel;

• the removal, destruction or the rendering harmless of the cargo of the vessel; and

• a person, other than the person liable, in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with the provisions of the present law, and further loss caused by such measures.

11 What is the procedure for establishing limitation?

The action for limitation must be filed within six months of the receipt of a claim (a letter from someone claiming damages). The limitation request must be filed in writing before the Maritime Court. Such request must contain the exoneration from liability and the amount of limitation in case the court finds liability. The motion or complaint must contain:

• a description of the voyage giving rise to the claim, including the date and place of its termination;

• the amounts of all claims filed, including pending claims, whether or not they arise from a contract; and

• a statement as to whether the vessel has been damaged, lost or abandoned and, if so, where and when.

The motion or complaint must be accompanied by the following documents:

• the deposit of the total amount that constitutes the limitation fund;

• the title of ownership of the vessel;

• a copy of the admeasurements certificate;

• a list of the known creditors and their claimed amounts; and

• designation of the evidence that shall be offered in due course.

12 In what circumstances can the limit be broken?

The person liable shall not be entitled to limit his or her liability if it is proven that the loss resulted from his or her personal act or omission, committed with the intent to cause damage, or recklessly or with knowledge that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Panama has incorporated into law the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 2002.

Port state control

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

Port state control functions are carried out by the PMA, which is responsible for regulating Panama-flagged vessels around the world as well as foreign-flagged vessels in Panamanian waters. The Panama Canal Authority is also empowered to verify the seaworthiness of and compliance with safety regulations of vessels transiting the Panama Canal.

15 What sanctions may the port state control inspector impose?

The PMA inspectors can detain or prohibit the movement of any vessel in Panamanian waters found to have serious deficiencies. The PMA can remove from the Registry or impose monetary fines up to US$10,000 on any Panama-flagged vessel that is found by foreign port state control units to have safety deficiencies or to have violated international law.

16 What is the appeal process against detention orders or fines?

Any detention order or fine imposed by the PMA can be appealed to the administrator of the PMA and thereafter to the board of directors of the PMA. Additionally, the decision of the board of directors can be appealed to the Supreme Court of Panama.

Classification societies

17 Which are the approved classification societies?

The PMA has approved numerous classification societies as recognised organisations and recognised security organisations that can issue documents on behalf of the PMA. All classifications societies that are members of the International Association of Classifications Societies (www.iacs.org.uk) have been approved by the PMA. Additionally, the PMA has approved other companies to act as recognised organisations. A full list can be seen under the circular at www.segumar.com.

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

There are no decisions from Panama’s maritime courts on this issue of law but, in general terms, Panamanian law establishes the obligation of any party that through negligence or fault causes damages to another to indemnify such person. The issue of privity of contract may not be a bar to action for damages by a third party against the classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Both the PMA and the Panama Canal Authority can order wreck removal.

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

• The Convention on the International Regulations for Preventing Collisions at Sea, 1972;

• the Protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution Damage, 1969; and

• the Protocol of 1992 to amend the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage.

21 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 for salvage. The parties are free to contract the terms and salvage award, including the Lloyd’s standard form. However, a party to the salvage agreement may move the court to void the contract and the court may do so if, under the circumstances, it considers the agreement to be inequitable.

The judge would set the salvage compensation based on:

• the circumstances of the salvage: the results, efforts, risk posed by the assisted vessel, passengers, crew and cargo, risk taken by salvors, time, expenses, and the like; and

• the value of the salvaged property.

Ship arrest

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

Panama is not a signatory to any arrest conventions.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Vessels can be arrested for purposes of founding jurisdiction or obtaining security in any claim brought in personam against its owner. This extends to all vessels under the same ownership, which can be arrested as property of the defendant.

Actions in rem may be filed when the applicable substantive law provides for a maritime lien, privileged maritime credit or statutory right in rem. In general terms, the law applicable to a controversy is as follows:

Crew injury

Law of the flag

Stevedore injury

Law of the country where the accident occurred

Contract of affreightment

As agreed or place of shipment

Charter party

As agreed or law of the flag

Supplies

As agreed or place where services rendered

There is no sister ship arrest under Panamanian law. However, the Code of Maritime Procedure states that if the substantive law applicable to the dispute allows for arrest of a sister ship, such action can be brought in Panama.

24 What is the test for wrongful arrest?

Arrest of a vessel can be challenged:

• if it was executed against a vessel not belonging to the defendant;

• if the maritime lien is extinguished or non-existent under applicable law; or

• if there is a written agreement between the parties not to arrest the vessel.

25 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, the vessel can be arrested provided that the applicable law confers a lien or an in rem action against the vessel on the bunker supplier.

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

If the arrest is petitioned to enforce a maritime lien (in rem) against the vessel or for purposes of founding jurisdiction over a foreign defendant not domiciled in Panama or over a case arising outside the jurisdiction of local courts, security required is US$1,000. If the court has jurisdiction and the arrest is for the sole purpose of obtaining security, the counter-security required for the arrest to be ordered shall be between 20 and 30 per cent of the amount of the complaint.

27 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?

The amount of security the court will order the arrested party to post is equal to the amount of the claim, plus the court-calculated attorneys fees, plus arrest expenses, plus three years of interest (between 6 and 10 per cent depending on the type of claim – civil/tort or commercial). The bond to be posted must be either in the form of cash, a surety bond, a bank guarantee, or whatever is agreed by the parties.

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

The marshal of the court is in charge of maintenance of the vessel, but the arresting party shall cover expenses incurred while the vessel remains under arrest. These expenses are recoverable if the arresting party prevails in trial.

29 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?

There is no procedure specifically aimed at arrest in order to obtain security; however, the defendant can petition the court to decline jurisdiction in favour of a previously agreed tribunal or arbitration panel, or the parties can jointly petition the court to do so.

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

A plaintiff may file for injunctions to stop the sale of a vessel or the recording of mortgages, but this is not considered an arrest to obtain security. The court may require posting of bonds of up to US$50,000 to guarantee against damages.

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

A plaintiff may move the court to secure evidence or information before filing a lawsuit. The court may require posting of bonds of up to US$50,000 to guarantee against damages.

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

Yes. Bunkers may be arrested through in personam actions against the owner of the bunkers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

After the vessel has remained under arrest for more than 30 days the arresting party may apply for judicial sale of the arrested vessel. The defendant or owner may also make such an application at any time after the arrest. The court or the marshal of the court can proceed with the sale at any time if the asset is in danger of suffering substantial damages or deterioration.

34 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?

Following the petition or if the vessel has been abandoned or severely neglected by its owners, to the point where it represents a physical or financial risk for the marshal or the court, a judicial sale is ordered. The court then appoints a surveyor or expert appraiser, who will inspect the vessel and determine its market value, either as a ship or as scrap, and a notice shall be published in a local newspaper in Panama announcing the date of the sale, value of the vessel and particulars. The arresting party shall pay for the above expenses, which are recoverable from the proceeds of the sale.

The sale takes place in three rounds of bidding; the first only admits bids for 75 per cent of the appraisal value, and if the vessel is not sold due to lack of bidders, then a second round is set for one week later. At the second round, valid bids are for a minimum of 50 per cent of the appraisal value. If the vessel, cargo or asset is not sold, then third and successive rounds will take place in which any bid is admitted. In order to qualify as a valid bidder, a deposit of 5 per cent of the appraisal value shall be made, and it is credited towards the amount of the winning bid, or reimbursed immediately if the bid is unsuccessful.

If there is more than one bid, then upon reception of the last bid, an opportunity will be given to the bidders to increase their offers until a final bidder prevails.

The whole process, between the arrest and the first round of the judicial sale, can take around three months.

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

In rem claims get paid first ahead of in personam claims; with the order of priority as follows:

• judicial and arrest expenses incurred to the benefit of maritime claimants;

• expenses, salaries and compensation for assistance or salvage rendered during the last voyage;

• crew wages for the last voyage;

• naval mortgage;

• registration fees and taxes;

• wages of stevedores or port workers for services rendered in connection with loading or unloading operations done during the vessel’s last arrival;

• compensation for tort claims;

• general average;

• supplies or necessities;

• bottomry and insurance premiums for the last six months;

• expenses in connection with piloting or watchkeeping of the vessel, its maintenance or custody after the last voyage and its entry into port;

• compensation to shippers or passengers for non-delivery of cargo or damage to the same during the last voyage; and

• unpaid purchase price of the vessel’s last acquisition and interests for the past two years.

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

The judicial sale clears and extinguishes all previous liens and grants the buyer clear title over the vessel.

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

Yes, as long as the buyer in a foreign judicial sale has previously registered his or her title at the appropriate ship registry of the vessel’s flag at the time it is arrested in Panama or at the time of the facts in dispute in a judicial proceeding.

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

No.

Carriage of goods by sea and bills of lading

39 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?

Panama is not a party to the Hague Rules, Hague-Visby Rules or Hamburg Rules; however, many principles and provisions of the Hague-Visby Rules have been adopted through internal legislation, including exemptions, liabilities and package limitation.

Carriage of goods by sea and multimodal transport are regulated by separate chapters of Law No. 55 of 2008. The former is deemed to commence at the port of loading, from the time the master received the cargo, and ends upon delivery at port of discharge.

Panama is not a signatory to the Rotterdam Rules.

40 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?

Domestic carriage of goods by sea or land is governed by the Code of Commerce, and provides for a time frame of six months instead of one year for international carriage.

41 Who has title to sue on a bill of lading?

It depends on the type of bill of lading; if it is to order, the holder of the bill has title to sue; and if the bill is nominative, the person named as consignee will have title to sue.

42 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?

Bills of lading issued under or as per a charter party can incorporate the terms and conditions of the charter party, provided that it is expressly mentioned in the bills of lading, and that reference is made to the proper identification of the charter party, for example, using the date or other form of reference.

As the bill of lading is negotiated and endorsed by third parties, so are the terms and provisions of the charter party mentioned therein.

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

Demise clauses are usually recognised for purposes of identifying the contractual carrier, but they do not limit the potential in personam liability of actual or effective carriers and the in rem liability of vessels involved in the carriage.

44 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?

Panamanian law distinguishes between the contractual carrier and the effective carrier, meaning by the latter the person that actually performs the carriage or part of it, including owners or disponent owners that make use of a ship for such purposes.

The actual or effective carrier has the same duty of care and obligations as the contractual carrier and can benefit from any exceptions of defences granted by Panamanian law to the contractual carrier.

When the contract provides for an effective carrier different to the contractual carrier, and the shipper is aware of such identities, it can be agreed that the contractual carrier is not responsible for damages arising during the custody or performance of the carriage by the effective or actual carrier.

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

Deviation is not allowed, except for justified causes such as assisting other vessels or persons. The law, however, allows for ‘reasonable’ deviations without defining what is to be understood or considered by that, therefore it is usually referred to common causes such as avoiding bad weather or perils of the sea. Carriers and vessels are responsible for damages arising from unjustified deviation.

46 What liens can be exercised?

Possessory or maritime liens can be exercised against the vessel, cargo or freight, provided that they arise by virtue of the applicable substantive law.

Maritime liens against vessels, cargo or freight are provided for by Panamanian Commercial Law, which does not allow for contractual liens agreed between the parties.

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

A carrier that delivers the cargo without the production of the bill of lading does so at his or her own risk and therefore liability cannot be limited. Usually carriers in Panama only accept such cargo in exchange for a letter of indemnity from the consignee or other form of guarantee acceptable to them.

48 What are the responsibilities and liabilities of the shipper?

The main obligation of the shipper is to pay freight when he or she undertakes to do so, in the date, place, amount and method agreed with the carrier.

The shipper is under the obligation to pack the goods adequately and guarantees the accuracy of their description, markings, number of packages or pieces, the weight and quantity of the cargo and shall compensate the carrier for any loss or damage resulting as a consequence of failure to comply with the above.

The shipper shall also carry out all of the procedures required by the port, customs, quarantine, inspection and other competent authorities in connection with the loading of cargo, and shall provide the carrier with all relevant documentation required by him. The shipper shall be liable for any damage caused to the carrier arising from the inadequate, inaccurate or delayed delivery of such documents.

When dangerous goods are being loaded, the shipper shall pack, mark, and label them accordingly in order to distinguish them, and the shipper shall give the carrier a correct description of them, and shall notify the carrier of the dangerous nature of the goods and of any precautions to be taken. If the shipper fails to notify the carrier or does not notify him properly, the shipper shall be liable to the carrier for any damage sustained by the carrier, the vessel or the cargo shipped on board.

Shipping emissions

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

There is no emission control area in force in Panamanian waters.

50 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?

There is no cap on the sulphur content of fuel in force in Panamanian waters.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

There are two maritime courts in Panama with jurisdiction over all of the country’s territory. These two courts are of equal rank and alternate the issuance of arrest motions and distribute the number of cases filed in Panama. Although a special Court of Appeals was created by law in 2009, it has not yet been established and appeals are currently heard by the civil bench of the Supreme Court.

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

When an arrest is petitioned for and ordered by the court, the Code of Maritime Procedure provides that service on a foreign defendant is effective upon the seizure of the vessel or other asset belonging to him by the marshal of the court. In cases where there is no arrest, service is made through service of the complaint and attachments made by an attorney admitted to practice at the place where the defendant is domiciled.

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

The Panama Maritime Law Association and Panama’s Chamber of Shipping are working on the establishment of a centre specialising in maritime arbitration. Rules have already been drafted and approved and are mostly based on LMAA rules. The centre is pending issuing the requirements for arbiters and arbitrators. This should take place imminently.

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

The Code of Civil Procedure and the Code of Maritime Procedure.

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

If there is a jurisdiction clause providing for Panamanian courts, and the claimant brings proceedings abroad, then local courts would stay proceedings initiated in Panama if these were commenced after the proceedings at a foreign court. Local courts cannot challenge the validity of proceedings brought elsewhere.

56 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?

If a claimant commences legal proceedings in Panama in breach of an arbitration or jurisdiction clause, the defendant can move the court to decline its jurisdiction in favour of the agreed forum or arbitration panel. Any security posted before Panamanian courts – to lift an arrest, for example – will remain, pending the outcome of the proceedings brought at the agreed forum.

The jurisdiction or arbitration clause has to be contained in a contract negotiated and agreed between the parties; therefore clauses contained in pro forma contracts such as bills of lading are not considered valid agreements by local courts.

Limitation periods for liability

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

The statute of limitations for claims arising from the following is one year:

• contracts for the international carriage of goods by sea or land, including charter parties;

• marine or cargo insurance;

• services rendered to vessels such as repairs, discharge of cargo, surveys, etc;

• supplies, bunkers or other necessities given to vessels;

• wages;

• compensation arising from tort, such as personal injury cases, for example;

• collision; and

• contribution to general average.

Panamanian law does not recognise extensions agreed by the parties as valid.

58 May courts or arbitral tribunals extend the time limits?

Time limits are provided for in substantive laws that are matters of public policy and therefore cannot be extended by courts, arbitral tribunals or by agreement of the parties. Depending on the type of claim, there are different mechanisms to interrupt the statute of limitations, for example, by commencing proceedings and publishing in a local newspaper a certificate of filing, as issued by the clerk of the court.

Miscellaneous

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

The Maritime Labour Convention was signed by Panama and enters into force in August 2013.

60 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?

The party affected by the non-fulfilment of a contract can either petition the court for the enforcement and fulfilment of the same by the party in breach, or for the termination of the contract on the grounds of a substantial change in the economic conditions, but this has to be proven and declared by the judge.

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

Due to a mistake when amending the Code of Maritime Procedure, the National Congress eliminated surety bonds and bank guarantees as valid means to unilaterally lift and arrest. Therefore, since the end of 2011 local courts were only accepting cash as security to release a vessel from arrest. Letters of undertaking issued by P&I clubs have to be agreed and accepted by the claimant. This mistake has since been amended and now other means detailed in question 27 are accepted.

The Panama Administration for Aquatic Resources requires merchant ships registered in Panama and engaged in fishing support activities (carrying of frozen fish, fuel and bunkers for fishing fleets, etc) to have a special licence issued for such purpose, even if occupying such business in international waters. Failing to have this licence can result in severe fines and the inclusion of the vessel in blacklists.

Gabriel R Sosa

sosa@decastro-robles.com

Eduardo A Real

real@decastro-robles.com

Alberto Lopez Tom

lopez@decastro-robles.com

7th Floor, Scotia Plaza Building

Federico Boyd Avenue and 51 Street

Panama City

Panama

Tel: +507 263 6622

Fax: +507 263 6594

mail@decastro-robles.com

www.decastro-robles.com

Poland

Marek Czernis and Rafał Czyżyk

Marek Czernis & Co Law Office

Newbuilding contracts

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

First it is necessary to explain that, in accordance with Polish law, the parties are free to draft the contract according to their requirements. On the other hand, at the moment of the signing of the shipbuilding contract the vessel is the subject of the contract and will only exist in the future. Therefore, to transfer the ownership of a vessel the shipbuilder must deliver the vessel to the shipowner.

In addition, the parties can agree that the title to the vessel under construction will pass from the builder to the buyer during construction, along with everything affixed to the vessel. The earliest stage at which the buyer can obtain the title to the vessel under construction is after the keel has been laid.

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

In general, from the perspective of Polish law the guarantee should be unconditional, irrevocable and on first demand, and provide a maximum amount of liability of the refund guarantor. In Poland, usually, even if a shipbuilding contract is to be governed by Polish law, the refund guarantee will not be, as it would most likely be based on English law. Generally, the builder does not require permission to have the refund guarantee issued.

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

Generally, under Polish law, if the shipyard refuses to deliver the vessel the remedies of the shipowner (buyer) would depend on the nature of the contract and its wording. However, in all cases the shipowner (buyer) would, in principle, be entitled to claim for damages.

4 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?

As mentioned in question 1, the parties are free to draft the contract in accordance with their requirements. This means that the contract may contain a contractual penalty, but if the provisions of the contract do not provide for such kinds of penalty, the party would be entitled to a claim for damages.

Ship registration and mortgages

5 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?

Only vessels with Polish nationality are authorised to perform shipping under the flag of the Republic of Poland. Vessels under construction obtain a certificate of a ship under construction and are not entitled to hoist the Polish flag.

6 Who may apply to register a ship in your jurisdiction?

Only vessels with Polish nationality are authorised to perform shipping under the flag of the Republic of Poland. Generally, vessels with Polish nationality are under Polish ownership (ie, owned by the State Treasury of the Republic of Poland, a Polish legal person or a Polish citizen with his or her residential address in Poland). In addition, Polish nationality accrues to vessels that are considered as being under Polish ownership.

Vessels considered to be under Polish ownership are those that are:

• no less than half-owned by the State Treasury of the Republic of Poland, a Polish legal person or a Polish citizen with his or her residential address in Poland, if the operator of the vessel has its registered office, branch office or residential address in the territory of the Republic of Poland and, based on the application of all its co-owners, has been entered into the Polish ship register; or

• owned by a company with its registered office abroad, if no less than one of the shareholders of this company is the State Treasury of Republic of Poland, a Polish legal person or a Polish citizen with his or her residential address in Poland, if the operator of the vessel has its registered office, branch office or residential address in the territory of the Republic of Poland and, based on the application of all its co-owners, has been entered into the Polish ship register.

7 What are the documentary requirements for registration?

Applications for registration should be made in writing and contain the following information:

• features of the vessel (ie, name, former names and, if necessary, the IMO (International Maritime Organization) number);

• international call sign of the vessel;

• port of registry of the vessel; and

• date of building and information about the builder (shipyard), the main material of the hull, the type of engines and the purpose of the vessel.

Applicants must also enclose the following documents:

• document confirming the name of the ship and, if possible, documents stating the previous names of the ship;

• document proving the international call sign and IMO number of the vessel;

• original certificate of measurement, with a copy of this certificate, authenticated by the issuing authority;

• document proving the year the vessel was built and the shipyard where it was built (if the applicant has such a document);

• extract from the Register of Entreprises (if the shipowner is an enterprise);

• copy of the document that is the basis for purchasing ownership, or a share in the ownership, of the vessel;

• copy of the document containing the acceptance of the owner of the vessel to perform shipping with the usage of the vessel (if the applicant is not the owner of the vessel);

• document proving the registered office, branch office or residence of the applicant in the Republic of Poland (if the co-owner of the vessel is: (i) the State Treasury of the Republic of Poland, (ii) a Polish legal person, or (iii) a Polish citizen with his or her residential address in Poland);

• evidence of removal of the vessel from the foreign register (if necessary); and

• written declaration of the shipowner of the creation of the maritime mortgage on the vessel.

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

According to Polish law, dual registration is forbidden – a vessel flying the Polish flag must not fly the flag of another state.

Flagging out the vessel from the Polish registry is possible if the vessel:

• sunk or was destroyed;

• disappeared;

• lost Polish nationality; or

• lost the status of a ship.

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

The register of mortgages is maintained by the Marine Chamber. In practice, the information about the mortgages is contained in section 3 of the Polish ship register. The register of mortgages contains information about the amount of the mortgage and its currency, and mentions changes in this information.

Limitation of liability

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

Poland is a party to the Convention on Limitation of Liability for Maritime Claims, concluded in London on 19 November 1976. Poland has also ratified the 1996 protocol to the Convention. Based on these regulations, the claims that can be limited by shipowners are:

• claims for death, personal injury or loss of or damage to property, occurring on board or in direct connection with the operation of the ship or rescue actions, and for other damages arising as a consequence;

• claims for damage caused by delay in the carriage of goods, passengers or their luggage by the sea;

• claims for other damages caused by the violation of rights other than contractual rights, arising as a direct result of the operation of the ship or rescue actions;

• claims in respect of the raising, removal, destruction or rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board;

• claims in respect of the removal, destruction or rendering harmless of the cargo of the ship; and

• claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with this Convention, and further loss caused by such measures.

The limit of liability for claims for loss of life or personal injury on ships not exceeding 2,000 GT is 2 million SDR. For larger ships, the following additional amounts are used in calculating the limitation amount:

• for each ton from 2,001 to 30,000 GT – 800 SDR;

• for each ton from 30,001 to 70,000 GT – 600 SDR; and

• for each ton in excess of 70,000 GT – 400 SDR.

The limit of liability for property claims for ships not exceeding 2,000 GT is 1 million SDR.

For larger ships, the following additional amounts are used in calculating the limitation amount:

• for each ton from 2,001 to 30,000 GT – 400 SDR;

• for each ton from 30,001 to 70,000 GT – 300 SDR; and

• for each ton in excess of 70,000 GT – 200 SDR.

11 What is the procedure for establishing limitation?

Establishment of a limitation fund shall be performed in accordance with the procedure provided in article 11 of the Convention.

12 In what circumstances can the limit be broken?

The debtor may invoke the limitation of liability, regardless of the establishment of a liability limitation fund, as defined in article 11 of the Convention on Limitation of Liability.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Poland is party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974.

Port state control

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

Generally, the Director of the Marine Board is the body of the port state control, but it must be noted that inspection activities are performed by the Inspectorate of the Port State, which acts in the name and on behalf of the Director of the Marine Board.

The Director of the Marine Board is under the authority of the minister responsible for maritime affairs.

15 What sanctions may the port state control inspector impose?

The Inspectorate of the Port State (acting in the name and on behalf of the Director of the Marine Board) may render an immediately enforceable decision on detention of a ship. If the deficiencies found during the inspection cannot be repaired in the port of detention, the Inspectorate of the Port State may decide to allow the ship to leave the port for repairs in the nearest repair yard, with the agreement of the captain or shipowner. The voyage from the port to the shipyard should be agreed with the competent authorities of the flag state and it should be guaranteed that the ship will not pose a threat to maritime safety or other vessels, its occupants or the marine environment.

16 What is the appeal process against detention orders or fines?

The shipowner or master of the vessel has the right to appeal against a detention decision, the suspension of operations, restrictions on the use of the ship or the prohibition of entry into port. Under Polish law, a party may only bring an appeal against a decision given at first instance at one further instance. The proper body for dealing with an appeal is a higher-level public administration body, except where a different appeal body is provided for by law (ie, the minister responsible for maritime affairs). It is not necessary to provide a detailed justification with an appeal; evidence from the appeal that the party is dissatisfied with the decision issued is sufficient.

Classification societies

17 Which are the approved classification societies?

The Polish Ship Registry is the approved classification society in Poland.

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

The issue of the liability of the Polish Ship Registry has not yet been regulated in Polish law. In our opinion, the general rules of law shall be applicable.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The owner of a ship, cargo or other object that has sunk within Polish waters or its territorial sea shall, within six months from the date of the sinking, report the intention to remove the shipwreck, cargo or other object to the Director of the Marine Board and set a date by which he or she intends to complete the extraction.

The Director of the Marine Board may request a change of the date of removal or notify the owner of the date by which removal must be completed. The above-mentioned request shall be directed to the owner within three months from the date of reporting the intention to remove the shipwreck by the owner. The date of removal changed by the Director of the Marine Board should be set for at least one year following the delivery of the request of the Director of the Marine Board to the owner.

If, within a period of six months, the owner of the ship, cargo or other object has not reported his or her intention to extract the ship, cargo or other object, or the extraction is not completed within the period specified by the owner or designated by the Director of the Marine Board, the director may order the extraction at the expense of the owner.

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

Poland is, in particular, a party to the following conventions:

• the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels, 1910 (the Brussels Collision Convention);

• the International Convention for the Prevention of Pollution from Ships, 1973 (the MARPOL Convention);

• the United Nations Convention on the Law of the Sea, 1982 (the UNCLOS Convention);

• the International Convention for the Safety of Life at Sea, 1974 (the SOLAS Convention);

• the International Convention on Maritime Search and Rescue, 1979 (the SAR Convention), 1979;

• the International Convention on Salvage, 1989 (the Salvage Convention);

• the Convention on Limitation of Liability for Maritime Claims, 1976 (the LLMC Convention);

• the Convention on the International Regulations for Preventing Collisions at Sea (the COLREG Convention), 1972;

• the Convention on the Protection of the Marine Environment of the Baltic Sea Area, 1992;

• the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972; and

• the International Convention on Civil Liability for Bunker Oil Pollution Damage, (the Bunker Convention), 2001.

21 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?

The regulations of the Salvage Convention shall apply to the issue of the salvage agreements as well as to carrying out salvage operations. Every master of a vessel is bound, insofar as he or she can do so without serious danger to the vessel and the persons thereon, to render assistance to any person in danger of being lost at sea.

Ship arrest

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

Poland is a party to the International Convention Relating to the Arrest of Sea-Going Ships, signed in Brussels on 10 May 1952 (acceded to the Convention in 1976).

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Poland is a party to the 1952 Arrest Convention. As a consequence, vessels flying flags of states parties to the Convention can only be arrested in Poland under maritime claims that fall within the scope the Convention. Other vessels can be arrested in respect of maritime claims and any other claims. Moreover, sister ship arrest is also permissible under the provisions of the Convention.

24 What is the test for wrongful arrest?

The arrested party is entitled to claim from the arresting party redress of damages caused by the enforcement of arrest if: the arresting party did not file the first pleading within a determined time limit or withdrew a complaint or petition; if its complaint or petition was returned or rejected; if an action or petition was dismissed, or proceedings were terminated; in the case of cancellation of security, if it was granted before the commencement of proceedings; and if the arresting party did not pursue the entire claim or pursued a claim other than the claim which was secured. A claim for damages expires if it is not pursued within one year from the date it arose.

25 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?

It is unlikely that this will be possible.

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

The court may make the enforcement of a ship arrest conditional on the arresting party providing bail to secure the claims arising from the enforcement of ship arrest. The arrested party’s claims shall be satisfied from this bail after settlement of the costs of enforcement but before settlement of other amounts due. The court may require a bail ex officio as well as at the request of the arrested party. The court should order the bail if there is a real danger that the arrested party may be exposed to the potential damage suffered by ship arrest and there are serious doubts as to the possibility of obtaining compensation from the arresting party due to its financial situation. The decision of the court regarding bail (as well as its amount) shall also depend on the credibility of the claim. However, bail in connection with ship arrest is not a frequent occurrence.

27 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?

If a vessel is arrested following a court decision and there is no amicable agreement as to alternative security between the parties, the only security for which the court will consider releasing the vessel is a cash deposit to the court’s bank account, in the amount of the claim.

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

Generally, the arresting party is responsible for the maintenance of the vessel under arrest, but afterwards has the right to demand compensation.

29 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?

There is no obligation to pursue a claim on its merits in Polish courts. It is possible to pursue court proceedings in another jurisdiction. Lack of domestic jurisdiction for a claim does not preclude the recognition of an application for ship arrest.

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

Generally, any form of security that has been amicably agreed by all parties involved in such claims is acceptable. Aside from arrest, there is the possibility of establishing a mortgage over a vessel entered into the Polish ship register. Moreover, in Polish law more general security measures are available, inter alia: (i) seizure of moveable properties, funds in a bank account and other claims or rights; (ii) mortgage over a real property; and (iii) compulsory administration of an enterprise. The condition for obtaining these general security measures is that the assets, claims or rights against which the security is sought are under Polish jurisdiction. However, if a vessel is arrested following a court decision and there is no amicable agreement as to alternative security between the parties, cash is the only security that the court will accept to consider releasing or release the vessel.

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

Evidence may be secured if requested before the commencement of proceedings or ex officio in the course of proceedings, where there is a risk that obtaining evidence may become impossible or excessively difficult, or where it is necessary to determine the current state of affairs for other reasons. Moreover, whenever possible, given the nature of the object of inspection and provided that this would not involve excessive costs, an object of inspection should be delivered to the court.

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

No.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The judicial sale of vessels shall be initiated in accordance with general principles: ex officio, at the request of a competent authority and, above all, at the request of the creditor.

34 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?

The enforcement officer of the court in whose area a vessel is located upon commencement of execution is generally competent to conduct the judicial sale of the vessel. The enforcement officer shall order that the vessel be detained and appoint a custodian while serving a request for payment on the debtor. An announcement of the judicial sale of the vessel shall be displayed and, upon expiry of the time limit determined for the debtor to repay his or her debt, the enforcement officer shall promptly, without the creditor’s request, describe and evaluate an attached foreign vessel. Additionally, there is an obligation to notify a competent foreign registration authority of the attachment of a vessel. Moreover, it is necessary to make an announcement prior to conducting the auction of the ship.

The costs of judicial sale of a vessel are 15 per cent of the value of an enforced contribution, but not less than one tenth and not more than thirty times the average monthly salary. Other costs will include, among others, fixed costs that depend on the type of actions undertaken and the reimbursement of expenses incurred during the judicial sale of the vessel.

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

According to article 1025 of the Polish Code of Civil Procedure, money generated from the judicial sale of a vessel shall be used to satisfy the following claims, in the order in which they are listed:

(i) the costs of judicial sale of the vessel;

(ii) maintenance obligations;

(iii) compensation due for three months of work, up to the minimum value of remuneration for work specified in separate regulations, and pension due as compensation for illness, inability to work, disability or death, and the costs of the debtor’s regular funeral;

(iv) receivables secured with a marine mortgage or privilege related to a seagoing vessel;

(v) receivables secured with a mortgage, pledge, registered pledge or tax pledge, or receivables with statutory priority and rights incumbent on immoveable property before the commencement of execution was reported in the land and mortgage registry or before a creditor applies for reporting of the commencement of execution in the land and mortgage registry or pledge registry;

(vi) compensation for work not covered by (iii);

(vii) receivables to which the provisions of section III of the Tax Ordinance Act apply, unless they are satisfied under (v);

(viii) receivables due to creditors who conducted the judicial sale of vessel; and

(ix) other receivables.

After all the receivables have been satisfied, financial penalties and court and administrative fines are satisfied. Interest and costs of proceedings are satisfied on a par with receivables.

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

A final and non-appealable decision to award ownership transfers ownership to the purchaser and forms a basis for reporting the purchaser’s right of ownership. It also constitutes an enforceable title enabling the purchaser to take possession of the vessel. Moreover, generally as soon as the decision to award ownership becomes non-appealable, any rights and the effects of reporting those rights and personal claims to a vessel expire. Those rights are replaced by the right to be satisfied from the purchase price, according to the priority provided for in the provisions regulating the allocation of the price obtained in execution.

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

Generally, yes.

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

No.

Carriage of goods by sea and bills of lading

39 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?

Only the Hague-Visby Rules are in force in Poland. The carrier is bound to take care of the cargo from its reception to delivery and to take care of the interests of persons interested in the cargo.

40 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?

Poland is a party to the Convention on the Contract for the International Carriage of Goods by Road (Geneva, 1956), the Convention concerning International Carriage by Rail (Berne, 1980) and the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention). There are also domestic laws such as the Carriage Law, the Road Transport Law and the Rail Transport Law.

41 Who has title to sue on a bill of lading?

The bill of lading constitutes evidence of the receipt on board, for carriage, of the cargo specified therein, and is a document of title for disposing of the cargo and for taking delivery thereof. Every legitimate holder of the bill of lading has title to sue on the bill of lading and is entitled to dispose and take delivery of the cargo. At the same time, the carrier is bound to follow his or her instructions only upon surrender of all copies of the bill of lading issued.

42 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?

In general, it is possible to incorporate the terms of a charter party into a bill of lading, including jurisdiction and arbitration clauses. Legal doctrine suggests that these clauses can also be binding on a third party or endorsee of the bill. However, it is better to indicate these clauses directly and clearly.

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

Yes, both are recognised and binding under Polish law.

44 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 carrier has not been named on the bill of lading, it is assumed that the shipowner is the carrier. If the carrier has been named inaccurately or falsely, the shipowner is liable to the consignee of the cargo for losses resulting therefrom. However, in such a situation the shipowner has a recourse claim against the carrier.

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

The vessel should perform the carriage with due dispatch, by the contractually determined route or, in the absence of an agreement, by the usual route. However, deviation from the route in order to save or attempt to save a life or property at sea or for any other justified reason does not constitute a breach of the contract of carriage. The carrier is not liable for resulting damage. Parties may also freely agree on different terms regarding permissible deviation. Moreover, if the vessel cannot reach the port of destination due to insurmountable obstacles, which cannot be expected within a reasonable time, the carrier shall direct the vessel to the nearest safe port.

46 What liens can be exercised?

Generally, in accordance with article 90 of the Maritime Code, creditors have the benefit of a statutory lien against a vessel to secure privileged claims. Moreover, the carrier may refuse to deliver the cargo and retain it until the consignee has paid or secured the amounts resulting from carriage of the cargo as well as the contribution of the cargo in general average and salvage remuneration. The carrier who has delivered the cargo to the consignee loses the right to pursue any aforesaid claims against the affreighter. At the same time, no freight is due on cargo lost during carriage through any accident and freight paid in advance is subject to refund.

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

The carrier is bound to deliver the cargo at the port of destination to a legitimate holder of even a single copy of the bill of lading. However, if no bill of lading has been issued, the cargo is delivered at the place of destination to the person indicated by the affreighter or a person authorised by him or her. Otherwise, the carrier acts on his own responsibility.

48 What are the responsibilities and liabilities of the shipper?

Generally, the shipper is responsible for damages resulting from the loss of or damage to cargo if this is a result of his or her act or omission (depending on the specifics of each individual case). The shipper is liable to the carrier for damages and expenses resulting from inaccuracies or misrepresentation in the declaration of the measure, volume, number of pieces and weight of the cargo and its main marks. On the other hand, the shipper is entitled to request from the carrier the bill of lading in as many copies as are demanded. Furthermore, placing the cargo on board the vessel generally requires the consent of the shipper (with exceptions).

Shipping emissions

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

Yes, the Baltic Sea is designated as an ECA.

50 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 the sulphur content of fuel oil will be reduced from 1 per cent to 0.1 per cent by January 2015 (according to Directive 2012/33/EU of the European Parliament and of the Council of 21 November 2012 amending Council Directive 1999/32/EC as regards the sulphur content of marine fuels). The process to implement the Directive into the Polish legal system is under way.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Maritime Chambers are considered a quasi-judicial body and deal with matters of maritime accidents and other cases provided for in separate regulations. The district courts and regional courts are generally the first instance courts for smaller claims of up to 75,000 zlotys. In cases involving claims for pollution damages, the Regional Court in Gdańsk has exclusive jurisdiction.

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

If the defendant is located out of the jurisdiction, provisions of the Polish Code of Civil Procedure are applied, with special provisions relating to, inter alia, legal aid and securing of evidence.

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

The International Court of Arbitration at the National Chamber of Maritime Commerce is a permanent court of arbitration established in Gdynia. However, there is also the possibility of organising trials at a place agreed by the parties. The jurisdiction of the Court includes disputes of civil law arising in connection with international trade, maritime economy and shipping. Jurisdiction occurs when the parties agree in writing or if the defendant, at the request of the court, gives written consent.

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

Poland is a party to numerous bilateral and multilateral international agreements and conventions that regulate the recognition and enforcement of foreign judgments in Poland, including the 1905 and 1954 Hague Conventions on Civil Procedure, and the 2007 Lugano Convention (which replaced the 2000 Lugano Convention). Moreover, the most significant act in EU law that governs the recognition and enforcement of foreign judgments is Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. In Poland, recognition and enforcement of foreign judgments is regulated by the Polish Code of Civil Procedure.

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

Domestic jurisdiction that applied upon commencement of proceedings shall continue to apply even if the grounds for jurisdiction cease to exist during the course of proceedings. However, the court may not decide that domestic jurisdiction does not apply if grounds for that jurisdiction arose in the course of proceedings. Moreover, cases involving property rights may also be subjected to the jurisdiction of Polish courts by defending on the merits of the case if the defendant does not claim lack of domestic jurisdiction, although this shall not apply in cases that, according to the Polish legislation, fall under the exclusive jurisdiction of a foreign state.

56 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?

There is a possibility of a plea of lack of jurisdiction by a party. The court takes into consideration the lack of jurisdiction ex officio and is obliged to act on its own initiative. The court also takes into consideration the lack of jurisdiction in each state of the case (ie, from the initiation of proceedings to their final completion). Lack of domestic jurisdiction constitutes grounds for the nullity of proceedings.

Limitation periods for liability

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

The general rule is that, unless a specific provision provides otherwise, the period of limitation shall amount to 10 years, and three years for periodical payment claims and claims connected with conducting economic activity. At the same time, claims for redress of damage inflicted by a delict shall be subject to limitation upon the lapse of three years from the day when the injured party learned about the damage and about the person liable to redress it. Such a time limit may not be longer than 10 years from the day when the event causing the damage occurred. However, there are special rules that determine the other terms of limitation of liabilities. Moreover, periods of limitation may not be shortened or prolonged by agreement.

58 May courts or arbitral tribunals extend the time limits?

No, courts or arbitral tribunals have no right to extend the time limits.

Miscellaneous

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

Poland has ratified the Maritime Labour Convention 2006 and is obliged to apply its provisions.

60 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?

On the basis of general rules of Polish Civil Law, it is possible that, owing to an extraordinary change of circumstances, the performance of an obligation would entail excessive difficulties or would threaten one of the parties with a significant loss, which the parties did not predict at the moment of the conclusion of the contract. A court of law may, having weighed the parties’ interests and respecting the rules of social coexistence, determine the manner of the obligation’s performance, the amount of the obligation and may even rule on termination of the contract.

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

No.

Update and trends

The Prime Minister of Poland has appointed a Codification Committee for Maritime Law, which is currently working on the draft of the new Polish Maritime Code. However, the new law is not expected to be introduced for two to three years, if at all.

Marek Czernis

kancelaria@czernis.pl

Rafał Czyżyk

r.czyzyk@czernis.pl

Plac Rodła 8

70-419 Szczecin

Poland

Tel: +48 91 359 44 30

Fax: +48 91 359 44 32

www.czernis.pl

Russia

Mikhail Sokolov, Anna Arkhipova and Sergey Seliverstov

Sokolov, Maslov and Partners

Newbuilding contracts

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

The parties are free to determine the time when the title passes from the shipbuilder to the shipowner. Under the Civil Code, unless otherwise provided by the contract, the risk of incidental loss of the new building passes from the shipbuilder to the shipowner at the time of acceptance.

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

The guarantee must be made in writing and signed by the duly authorised signatory (general director of the guarantor or other persons authorised to sign on the basis of the corporate documents). Depending on the guarantor’s corporate structure, approval of the board of directors or shareholders may be required. It is recommended to state the term of validity of the refund guarantee. In the absence of such a term, the guarantee would be valid within one year after the main obligation secured by the guarantee became due, or within two years after the guarantee was issued.

It should be noted that a guarantee is ancillary to the secured obligation. It must be made in the same form as the shipbuilding contract. Termination or invalidity of the shipbuilding contract leads to the termination or invalidity of the guarantee.

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

The shipowner may file a claim to oblige the yard to deliver the vessel. If the claim is granted by the court, it may be enforced with the assistance of bailiffs. In addition, the yard may be obliged to pay damages incurred as a result of unlawful detention of the vessel.

4 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 initial customer (party to the shipbuilding contract) will have a claim against the shipbuilder pursuant to the shipbuilding contract. A purchaser from the original shipowner has a claim against the seller, and may have a claim against the yard but only by way of assignment from the seller. As for the third party that has sustained damages, such party may claim recovery from the owner (bareboat charterer, operator) of the vessel.

Ship registration and mortgages

5 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?

The vessel is allowed to fly the Russian flag if she is registered in any of the following registers: the State Ships Register (SSR); the International Ships Register (ISR); the Bareboat Charter Register (BCR); or the Small Vessels Register (SVR). To be registered in the SSR the vessel has to be owned by a Russian legal entity or individual, or to be a state or municipal property. Registration in the BCR is temporary. The requirement for the BCR is that the vessel should be bareboat chartered by a Russian legal entity or individual for a period of at least one year. The ISR registration grants some tax, customs and similar exemptions but requires payment of annual fees for the confirmation of registration. The vessel is eligible for registration in the SVR if her length does not exceed 20 metres and the number of people she may take on board does not exceed 12. A vessel registered in the SVR may not be used for commercial purposes.

Vessels under construction are subject to registration in the register of ships under construction.

6 Who may apply to register a ship in your jurisdiction?

To be eligible for registration in a Russian ship register, a ship should be either owned or bareboat chartered by a Russian citizen or a Russian company. Such owners or bareboat charterers would normally act as applicants in the process of ship registration.

There are no restrictions for a ship registration by Russian companies which are partly or solely owned by a non-Russian investor. Specific regulations are however provided for acquisition of more than 50 per cent of shares in fishing companies by a foreign investor. In the latter case a foreign investor should obtain consent from the Federal Anti-Monopoly Service of the Russian Federation.

7 What are the documentary requirements for registration?

Russian ship registers have different documentary requirements. The SSR registration requires a completed application form, ship documents, foundation documents of the company which applies, documents of title with regard to a ship, certificate confirming that a ship was deleted from any previous register.

The BCR registration requires a decision on provisional granting to a ship of the right to fly the Russian flag. The decision is provided by the Federal Service of Supervision in the Sphere of Transport (FSSST) of the Ministry of Transport, or, in the case of fishing vessels, by the Federal Fishing Agency of the Russian Federation. After the decision is obtained, the bareboat charterer should collect and submit for BCR registration the documents as mentioned for the SSR registration and certain additional documents. These documents are:

• the bareboat charterer’s foundation documents, state registration certificates;

• written consent from the owner and mortgagee(s), if any, to the bareboat charter registration; and

• a written confirmation from the underlying flag country that the ship’s right to fly their flag has been suspended for the period of bareboat charter registration.

The ISR registration may be applied either by the owner or the bareboat charterer. If the ISR registration is required by the owner then the documentary requirements will be the same as for the SSR registration. If the ISR registration is required by the bareboat charterer then the applicant should collect and submit the same documents as mentioned with regard to the BCR registration.

The SVR registration requires a completed application form, owner identification documents (with regard to a person), or foundation documents of a company, documents confirming the title to a ship, certificate confirming the deletion of a ship from any previous register, and the ship’s technical documents.

It should be noted that registration authority may request additional documents and information if necessary. All the documents and information should be submitted in Russian or with a certified translation into Russian. If they originate from abroad, such documents should be legalised or apostilled.

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

Bareboat registration is allowed provided that the underlying registration is suspended. Permission to fly the Russian flag is issued by the harbour master to each particular vessel. Simultaneously with the issuance of permission, registration of the vessel in BCR is carried out by the harbour master of the maritime port chosen by the bareboat charterer. The list of documents required for registration includes a transcript from the underlying register and a confirmation that the underlying registration was suspended, written consent from the owner and any registered mortgagees, bareboat charter, certificates of tonnage, etc.

Temporary flagging out requires a permission issued by the Ministry of Transport. The list of required documents includes an application from the owner and written consents from all registered mortgagees.

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

Mortgages are registered in the SSR and may also be registered in the ISR or the SVR. The existence of a mortgage may also be mentioned in the BCR, but unlike the first two cases, it would have no binding consequences and would be included for informational purposes only. All these registers are kept by the harbour masters of Russia’s maritime ports.

Mortgages are registered in a separate section of the register, which contains information on the mortgagor and mortgagee, a description of the document on the basis of which the mortgage was registered, the term of the mortgage, and the maximum amount of obligations secured by the mortgage.

Limitation of liability

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

Russia is a party to the Convention on Limitation of Liability for Maritime Claims 1976, as amended by the protocol of 1996 (the Convention). The limitation of liability is also governed by the Merchant Shipping Code. As follows from the respective articles of the Merchant Shipping Code, the limitation can be applied by a shipowner or salvor to the same claims as those established by the Convention except for:

• claims excepted by the Convention;

• claims provided in article 2, paragraphs 1(d) and 1(e) of the Convention (claims in respect of the raising, removal, destruction or the rendering harmless of a ship and in respect of the removal, destruction or the rendering harmless of the cargo of the ship), since Russia made reservation to exclude these claims from limitation in the national legislation; and

• claims for loss of life or personal injury claims if the injured person and the shipowner or salvor are Russian nationals.

11 What is the procedure for establishing limitation?

Any person alleged to be liable may constitute a fund with the court or state commercial court in which legal proceedings are instituted in respect of claims subject to limitation. The fund shall be constituted in the sum of the amounts set out in the Convention as amended by the 1996 protocol applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. For ships with a tonnage not exceeding 300 GT, the limit is one-sixth of the limit established for ships with a tonnage not exceeding 2,000 GT (except for personal injury claims).

The fund can be set up either by a cash deposit or by a bank guarantee or other kind of financial security, such as a P&I club letter of guarantee, if the court finds it acceptable.

Limitation of liability may also be invoked notwithstanding that a limitation fund has not been constituted. Upon the claimant’s request, the shipowner or salvor shall be obliged to lodge security with the court. The sum of the security shall be distributed on the same principles as the limitation fund.

12 In what circumstances can the limit be broken?

A person liable shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed intentionally or through gross negligence.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Russia is a party to the Athens Convention. The Merchant Shipping Code of the Russian Federation incorporates provisions similar to the Athens Convention, but establishes higher liability limits: 175,000 units of account for liability of the carrier for death and personal injury, 1,800 units of account for cabin luggage, 10,000 units of account for vehicles and 2,700 units of account for other luggage. The amounts of deductibles are also increased.

Port state control

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

The functions of the port state control are exercised by the harbour masters of sea ports. The status and functions of the port administration as a port state control authority are laid down in the Merchant Shipping Code, the Law on Maritime Ports in the Russian Federation and in the Regulations of the Ministry of Transport. Amendments recently introduced into the Merchant Shipping Code imply that a centralised system of port state control will be established.

15 What sanctions may the port state control inspector impose?

Harbour masters are authorised to impose administrative sanctions in accordance with the Code on Administrative Offences. These sanctions are fines of different amounts established for various kinds of offences. Among them are violation of rules of navigation, operation of a vessel without required documents, violation of rules of carriage of harmful substances, damage to navigation equipment and other port constructions, etc.

The harbour master can prevent any vessel from exiting a port in the following circumstances:

• unseaworthiness of the vessel, or other deficiencies in the vessel leading to violation of safety of navigation requirements or causing threat to the environment or health or life of people on board;

• inconsistency in the vessel’s documents;

• by the order of the sanitary, migration, customs or other competent authorities; and

• non-payment of port fees.

The port authorities have a right to detain the vessel for up to 72 hours at the request of a person having certain types of claims. These are claims connected with salvage, collision, damage to property of the port or other harm caused by the vessel. From a legal point of view such detention is not a sanction but rather a measure intended to secure interests of injured persons before they can obtain an attachment order from the court. Unless such order is obtained within 72 hours the ship must be released.

16 What is the appeal process against detention orders or fines?

A harbour master’s rulings that impose penalties for administrative offences may be appealed either in a superior agency or in court. The superior agency is the FSSST whose decision on the appeal can be further appealed in court. Disciplinary measures against a harbour master can be taken by the Federal Agency of Sea and River Transport, which is responsible for the appointment of harbour masters.

The rulings against companies should be appealed in state commercial courts and the rulings against individuals should be appealed in district courts of common jurisdiction within 10 days from the service of the ruling. The appeal is heard by the court in the presence of both parties in the order similar to that in contentious proceedings. The court decisions can be appealed in superior courts.

Any other acts or actions of the port authorities, including detention of the vessel or prohibition to exit the port, can be appealed by interested parties within three months in state commercial courts, or if such actions do not affect commercial activity, in district courts of common jurisdiction.

Classification societies

17 Which are the approved classification societies?

According to the Merchant Shipping Code, inspection and classification are carried out by the Russian classification body, that is, the Russian Maritime Register of Shipping (RMRS). Owners of vessels registered in the International Ships Register may choose between the RMRS or foreign classification societies approved by the Russian government. At present, Bureau Veritas is the only approved foreign classification society, as DNV GL is awaiting approval following its creation via the merger of Det Norske Veritas and Germanischer Lloyd.

In practice, however, Russian authorities in some cases allow vessels registered in either the SSR or the BCR to preserve the class of a foreign classification society. All conventional documents are in any case issued by RMRS.

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

RMRS is not exempt from liability and can be liable for breach of contract or in tort. However, general terms applied by RMRS limit their contractual liability to the amount payable under the contract and to the cases of RMRS’s fault only.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

A harbour master of a sea port may order wreck removal if there is a threat to the environment, safety of navigation or fishing activities, or if the wreck hampers activities in the port, including dredging activities.

The Law on the Internal Seawaters, Territorial Sea and Contiguous Zone provides general powers of the Russian government to take any measures necessary to protect the environment and ensure safety of navigation in the course of wreck removal.

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

Russia is a party to the International Convention on Salvage, 1989, and the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels, 1910. The provisions of these conventions are implemented in the corresponding chapters of the Merchant Shipping Code. Russia is also a party to a major part of the IMO conventions on pollution, including the International Convention on Civil Liability for Oil Pollution, 1969, as amended by the protocol of 1992. In December 2008 Russia became a party to the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001.

21 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 form of salvage agreement. The parties are free to conclude an agreement on Lloyd’s standard form. There are two recommended forms of salvage agreement in Russia. The first was drafted by the Maritime Arbitration Commission at the Chamber of Commerce and Industry of Russia, but this form has not been updated for a significant period of time and does not take into account the provisions of International Convention on Salvage, 1989 and the Merchant Shipping Code. The second was prepared by the Arbitration Court at the Central Agency for Transport, Moscow in 2001 in light of the latest developments in salvage law.

Pursuant to article 16 of the Law on the Internal Seawaters, Territorial Sea and Contiguous Zones, all salvage operations in Russian internal waters and territorial seas should be carried out by ships and equipment of the Russian Federation. However, in accordance with Regulation No. 654, enacted by the Russian government on 4 September 2000, foreign salvors may be admitted to the Russian territory in exceptional cases with the approval of the Russian State Salvage Coordination Centre, unless otherwise provided by an international treaty.

Ship arrest

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

The Russian Federation is a party to the International Convention Relating to the Arrest of Seagoing Ships 1952 (Arrest Convention 1952). At the same time Russia’s internal law – the Merchant Shipping Code of the Russian Federation – incorporates certain novelties introduced by the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel can be arrested only if the party requesting arrest has a maritime claim. The vessel’s flag or the law governing the merits of the claim do not make a difference. Likewise, a vessel can be arrested in Russia even if the claim on the merits is subject to consideration – by virtue of a jurisdiction clause (jurisdiction agreement) or an arbitration clause (arbitration agreement) – in a court or arbitration outside the territory of the Russian Federation.

An associated ship or ships may be arrested if, at the moment of the beginning of the arrest procedure, the ships were in the ownership of the person who is liable for the maritime claim and who was, when the claim arose, the owner of the ship in respect of which the maritime claim arose, or the bareboat charterer of this vessel. Pursuant to article 3(4) of the Arrest Convention 1952, the same rules apply where the party liable under the maritime claim is not the owner of the ship. This results in incoherent judicial practice on the issue of the legal connection between the vessel and the party liable under the maritime claim that may give rise to an arrest of the vessel.

24 What is the test for wrongful arrest?

Russian law, inter alia, operates on the notions of ‘unlawful’ and ‘unjustified’ arrest. There are no definite tests provided by the law for either unlawful or unjustified arrest. Generally, it can be said that an arrest would be considered unjustified if it is later found to be unlawful by an act of the courts (for instance, by way of appeal). Arrest may also be found to have been wrongful in the case of the ultimate failure of the claim. If an arrest is effected in bad faith, for example, with the mere intention to disrupt the activity of the ship for the purpose of causing cash-flow problems for the shipowner, such arrest would be unlawful.

25 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. According to the Merchant Shipping Code, a vessel can be arrested if the party requesting arrest (ie, the bunker supplier) has a maritime claim for the price of bunkers supplied (article 389 of the Merchant Shipping Code). In respect to the bunker supply contract, the bunker supplier can arrest a vessel not only pursuant to a contract with the owner, but also pursuant to a contract with the bareboat or time charterer, operator, etc, provided that this person was liable under the claim both at the time when it arose and at the time the arrest was claimed. This, inter alia, follows from the provisions of the Arrest Convention 1952. However, the judicial practice on the issue of the legal connection between the vessel and the party liable under the maritime claim that may give rise to an arrest of the vessel is incoherent (see question 23).

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

There are two types of arrest procedures.

A provisional security arrest

The claimant has a right to commence the provisional arrest procedure before filing a claim on the merits. Where a vessel calls at any Russian port, the Russian courts would have jurisdiction to grant an arrest order on the vessel, provided that the claim is prima facie proven.

A counter-security in cash or in the form of guarantee or in any other acceptable form deposited at the court represents a strong ‘argument’ for the positive decision of the court. The amount of counter-security shall be equal to the amount of claim. In the event that the counter-security is not provided, the court may ask the claimant to provide it. In such case the consideration of the arrest application can be suspended until the documents proving lodging of security are produced.

A security arrest within the scope of litigation (state commercial court proceedings)

Security measures may be granted at any stage of the proceedings, provided that the underlying claim can be qualified as a maritime claim. The court may, at the shipowner’s request or in its own discretion, oblige the arresting party to provide counter-security in the form of bank guarantee, surety or deposit in money. The amount of counter-security is at the discretion of the court but it cannot be less than 50 per cent of the amount of the claim.

In both cases counter-security may be changed at the claimant’s motion and if the court considers such change possible and reasonable.

27 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?

Counter-security can be provided by the arrested party by way of depositing into the account of a commercial court funds in the amount stated by the plaintiff. Subsequently, that sum can be reviewed in the event that the claims change.

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

There is no obligation on the arresting party to maintain the arrested vessel.

29 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 a vessel in the Russian Federation to obtain security and thereafter to pursue proceedings on the merits in other jurisdictions. See also questions 23 and 26.

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

The claimant may apply to the court with regard to other security measures apart from a ship arrest. The claimant may apply before the proceedings on the merits have started or during the proceedings. The security measures may include, inter alia, the arrest of monetary funds or other property owned by the defendant. The court may impose any other security measure or several measures at the same time with regard to the defendant.

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

If the party to the court proceedings cannot obtain the required evidence it may apply to the court with the respective motion. Based on the motion the court may issue a ruling and oblige the other party to provide the requested evidence. The claimant may likewise apply to the court and request the other party to perform certain actions or refrain from performing certain actions.

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

Bunkers may be arrested like any other property. The party asking for the arrest should provide the evidence to the effect that the bunkers belong to the liable party.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

One peculiarity of Russian law is that the rules on judicial sale are contained in the chapter of the Merchant Shipping Code dedicated to liens and mortgages, and not to ship arrest. Interpreted literally, the respective rule may be understood that in order to be able to apply for judicial sale of an arrested vessel, the claimant must have obtained a court judgment confirming that the mortgagor failed to perform its obligations secured by mortgage. The court practice, however, has allowed claimants to claim judicial sale and recovery of secured obligation simultaneously.

34 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?

The court must notify the registration authority, all known mortgagees and the owner of the vessel at least 30 days prior to the judicial sale. The sale itself takes place according to the general legislation on enforcement procedures. The vessel is sold at a public auction. The court will appoint the organiser of such auction.

The time frames may be estimated at several months, but in some cases may be reduced – this largely depends on the discretion of the court and the cooperation of various state authorities involved in the process. The costs are also determined at the discretion of the court, but on the basis of the confirming documents provided by interested parties (ie, the organiser of auction and others).

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

Costs incurred in connection with the arrest and the judicial sale of the vessel shall be reimbursed at the first place. Then the priority, in brief, is as follows:

• claims secured by maritime lien;

• costs for removal of shipwreck;

• claims by shipyards secured by a lien;

• claims secured by mortgage; and

• any other claims.

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

Following a judicial sale all registered mortgages, except such mortgages as were accepted by the purchaser with the consent of the mortgagees, all liens and other encumbrances are terminated.

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

Judicial sale of a vessel in a foreign jurisdiction is recognised by an express provision of law. The harbour master is obliged to delete the vessel from the registry upon presentation of satisfactory evidence of the vessel’s judicial sale abroad. Nevertheless, deletion of the vessel is sometimes problematic because of the uncertainty as to the requirements to the evidence of judicial sale that needs to be provided.

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

Yes. Russia became a member of this Convention in 1999.

Carriage of goods by sea and bills of lading

39 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 Russian Federation has ratified the Hague-Visby Rules as amended by the protocol of 1979. The Hamburg Rules were not ratified. As for the Rotterdam Rules, there is little sign that Russia intends to ratify them in the near future. According to the Merchant Shipping Code, the carrier is liable for the cargo from the moment of its acceptance and until the cargo is released to the consignee.

40 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?

There are a number of domestic laws that regulate these issues. The Code of Internal Waterways Transport contains a chapter on multimodal carriage, as does the Charter of the Railroad Transport. Rules governing multimodal carriage are also contained in the Merchant Shipping Code and a number of other acts. There is also a draft of a law on multimodal carriage, which has not yet been adopted or entered into legal force.

41 Who has title to sue on a bill of lading?

In line with the international custom, in Russia a bill of lading represents a negotiable document of title. Therefore, a holder of title under a bill of lading may validly bring a claim, and the relationship between a carrier and a consignee, who is not a party to the charter, is governed by the bill of lading.

42 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 terms and conditions of a charter party are obligatory if the bill of lading contains reference to them. The terms and conditions of a long-term agreement on the carriage of goods by sea, which are not included into the bill of lading, are not obligatory for a third party if the third party is not the charterer.

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

If the cargo should be carried on the vessel that is specified by the parties, the said cargo may only be loaded onto another vessel upon consent of the charterer or the shipper, except for a transhipment resulting from a technical necessity that may arise after the beginning of the loading of the cargo.

44 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?

At the outset it should be noted that Russian maritime law distinguishes the owner of the ship and the shipowner. The owner of the ship is a person having ownership rights on the vessel, whereas the shipowner is a person operating the vessel in his or her own name on a legitimate ground of any nature.

If the shipowner is not a party to the contract of carriage of goods by sea, he or she will not be liable under such contract. The carrier, however, may raise a recourse claim to the shipowner, which should logically be done under the contract between the carrier and the respective shipowner.

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

Under the Merchant Shipping Code the carrier is obliged to deliver the cargo within the time frames and in accordance with the route set up by the agreement between the parties to a contract. In the absence of the express provisions thereon the carrier is obliged to deliver it within the time frames, which can be reasonably expected from the careful carrier bearing in mind the circumstances given, and in accordance with the usual route. However, the legislation does not provide for any specific consequences of deviation on the contractual defences. In terms of relationship between the parties to the shipping contract the deviation may be qualified as a simple non-fulfilment of one of the obligations of the carrier. Under the general provisions of the Russian Civil Code, such non-fulfilment would result in a right to claim damages.

The insurance consequences of deviation are more detailed. The insured person or the beneficiary is obliged to inform the insurer on the deviation. Any type of deviation other than for the purposes of salvage or safe continuation of the voyage entitles the insurer to review the terms and conditions of the insurance contract or to claim additional insurance premium. If the insured person or the beneficiary fails to inform the insurer on the deviation, the insurer shall not be obliged to pay under the insurance contract, starting from the moment when the deviation began.

46 What liens can be exercised?

The consignee is under an obligation to remunerate the carrier for the expenses made by the carrier for the account of the cargo, to compensate for the delay in the port of discharge and, if provided for in the bill of lading or other document of carriage, to pay the charter hire and compensate the carrier for the delay in the port of loading, as well as to pay average contribution or security in the case of general average. At the port of discharge, the carrier has a lien on the cargo until he receives all the above payments in full.

A shipyard has a lien on the vessel for the cost of construction works or repairs. However, the lien is terminated as soon as the vessel leaves the yard. The law also provides a number of maritime claims that give rise to a lien on the vessel, such as salvage, wreck removal, wages of crew members, etc.

An operator of a marine transhipment terminal can exercise a lien on the cargo in case of failure to make payments provided by the transhipment agreement.

47 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 delivers the cargo without presentation of the bill of lading made by the consignee, the carrier may be liable to compensate the true holder of the bill of lading for the full value of the cargo. No limitations of the carrier’s liability are applicable in such situations.

If the bill of lading is not issued and the terms and conditions are set out in a document that is not a document of title, the carrier is entitled to enter into agreement limiting its liability or excluding him from the liability. The conclusion of such agreement needs to be justified by the type of cargo or the time frames for delivery or by specific conditions of carriage.

48 What are the responsibilities and liabilities of the shipper?

The main responsibility of the shipper is to pay the freight, unless it is fully or partly payable by the consignee. The shipper is obliged to mark the cargo and provide true and accurate information on its type and special characteristics to the carrier. The shipper must also provide the carrier with all documents necessary for customs, police, sanitary and other controls. The shipper has a right to dispose of the cargo until it is released to the consignee, including the right to claim that the cargo is delivered back to the shipper.

In the case of a hazardous cargo, the shipper can be liable for damages if he fails to disclose all necessary information related to the type of cargo. There is also a general rule whereby the shipper is liable for damages incurred by the carrier, unless the shipper proves that the damages were not due to the fault of the shipper or persons for whom shipper is liable.

Shipping emissions

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

There is no ECA applicable within Russia.

50 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?

As per Russian technical regulations, the cap on the sulphur content in fuel oil is 1.5 per cent m/m. The cap has been applied from 1 January 2013. It is permitted, however, to use fuel oil with 3.5 per cent m/m sulphur content until 30 October 2017.

The regulatory requirements with regard to low-sulphur fuel are enforced by the port state control inspectorate. The port state control inspectorate is accountable to the harbour master of the respective port. Non-compliance with the regulatory requirements is punished with administrative fines.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Maritime disputes are subject to consideration by the commercial or ‘arbitration’ courts in the Russian Federation. The name of the courts is misleading since they have nothing to do with commercial arbitration, but are in fact state commercial courts having jurisdiction to consider, inter alia, commercial disputes.

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

As a general rule, court proceedings are served through the Ministry of Justice of the Russian Federation. A different procedure may be provided by international treaties to which Russia is a member. There are a number of bilateral treaties between Russia and other countries providing different procedures for serving court proceedings abroad. Besides, Russia is a signatory to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

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

Yes, there is the Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation and the Arbitration Court at the Central Agency for Transport, both located in Moscow.

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

Russian Federation is a party to, inter alia, the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and a number of bilateral treaties on mutual recognition and enforcement of judgments. As for internal legislation, the Arbitral Procedural Code (which generally governs proceedings in the commercial courts), as well as the Law on International Commercial Arbitration, should be mentioned first and foremost.

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

If the proceedings in breach of a jurisdiction clause are commenced in the Russian Federation, such proceedings should be terminated by the respective court or arbitration by virtue of law.

If such proceedings are issued abroad, it would be a matter for the foreign court or arbitration to decide whether it has jurisdiction. Also, the defendant can, of course, institute proceedings in Russia on the basis of the jurisdiction clause.

56 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?

See question 55.

Limitation periods for liability

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

The general limitation period under Russian law is three years. For many claims related to shipping the limitation period is shorter; for example, for marine insurance claims and claims arising out of collision, salvage or carriage of passengers on international voyages, the limitation period is two years. For claims arising out of towage, agency and brokerage agreements, voyage, time and bareboat charters and general average the limitation period is one year. The parties cannot extend or otherwise amend the limitation period by their agreement. However, the law provides for some cases in which the limitation period is suspended.

In addition, the court only applies limitation period at the request of a party to the proceedings. Therefore, if neither of the parties declares that the time limit has expired, the court would consider the case on the merits and render the judgment.

58 May courts or arbitral tribunals extend the time limits?

No.

Miscellaneous

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

The Maritime Labour Convention (MLC) was ratified by the Russian Federation on 5 June 2012. Since the MLC came into force on 20 August 2013, the Russian Federation has become responsible for compliance with the MLC with regard to vessels flying the flag of the Russian Federation.

60 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 Russian law, the contract may be amended or terminated if there has been any substantial change of the circumstances related to the contract. The parties may amend or terminate the contract by the mutual agreement or through the court.

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

The vessel registration regime in Russia has certain traditional peculiarities. In accordance with the Civil Code marine vessels are included into the legal category of ‘immoveable property’, which means that stricto sensu they should be registered in accordance with the Law on State Registration of Immoveable Property. However, all the ships registers (see question 5) function in accordance with the Merchant Shipping Code and the registration is made by harbour masters, which is not in line with the said Law.

Update and trends

We are witnessing a gradual introduction of more detailed regulations regarding shipping and offshore activities to be applied in the Russian part of the Arctic. This includes, inter alia, specific criminal law provisions regarding transport security.

Mikhail Sokolov

ms@smplawyers.ru

Anna Arkhipova

anna.arkhipova@smplawyers.ru

Sergey Seliverstov

sergey.seliverstov@smplawyers.ru

17 Ulitsa Barklaya

121309 Moscow

Russia

Tel: +7 499 145 2130 / +7 499 145 3379

Fax: +7 495 956 2245

www.smplawyers.ru

Singapore

Ajaib Haridass, Thomas Tan and V Hariharan

Haridass Ho & Partners

Newbuilding contracts

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

It is usual for title to remain with the builder until delivery. On delivery title and risk pass to the purchaser. While the vessel is being built, the builder will take out an appropriate builder’s risk insurance to protect its investment. The builder will also be able to raise finance by giving a charge or debenture over the vessel being built. The purchaser will secure his or her milestone payments through refund guarantees issued by the builder’s bank. The purchaser can raise construction finance by giving an assignment of the shipbuilding contract in favour of its bankers or financiers. This will include an assignment of the refund guarantees issued by the builder’s bank.

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

A refund guarantee issued by the builder’s bank need only comply with the corporate requirements of the builder’s bank. Usually the builder’s bank and the purchaser’s bank verify the authenticity of the refund guarantee by establishing the document by telex.

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

If the title to the vessel remains with the builder until delivery of the vessel and is transferred to the purchaser in exchange for the final milestone payment, then a refusal by the builder to deliver the vessel will only entitle the purchaser to claim damages for breach of the shipbuilding contract.

The purchaser cannot compel the builder to deliver the vessel unless under the shipbuilding contract, the title to the vessel belongs to the purchaser. If the purchaser attempts to take delivery of the vessel then no claim can be brought under the refund guarantee.

4 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?

Under the shipbuilding contract the builder’s responsibility for defective work is limited to correcting the defect. Such an obligation is contractual and is available during the warranty period, usually for 12 months from delivery under the shipbuilding contract. The builder usually limits its liability to direct expenses to remedy the defect from bad workmanship or materials, and not for indirect or consequential losses.

A purchaser from the original shipowner would usually request an assignment of the shipbuilder’s warranty if the purchase is completed during the validity of the warranty period.

The above legal position is concluded upon analysis of the governing terms of the respective underlying contacts (shipbuilding contract and, for example, the Singapore Ship Sale Form) and the Sale of Goods Act. This may necessitate the application of the conflicts rules. Remedies of the purchaser may lie against the original shipowner (as the immediate seller) for breach of the express or implied terms of the contract of sale. For there exists a contractual relationship.

The builder will in turn be liable to any subsequent purchaser or third party if these third parties can bring themselves within the principle of Donoghue v Stevenson, as explained and expanded by subsequent case law. The claim is in tort under product liability against the shipbuilder as the manufacturer of the ship for construction of an unsafe ship (for example, error in design or defective equipment). The legal principles in this regard are similar to those applied by Commonwealth courts.

Ship registration and mortgages

5 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?

Any kind of vessel used in navigation, however propelled or moored, including a barge, lighter, air cushion vehicle and offshore industry mobile unit.

It is possible to register vessels under construction at a certain stage of construction provided that certain requisite certificates have been issued, for example, the builder’s certificate, classification certificate and the tonnage certificate.

6 Who may apply to register a ship in your jurisdiction?

Only Singapore citizens or Singapore-incorporated companies whose paid-up capital is at least S$50,000 and in which 51 per cent of the issued shares are owned by a Singapore citizen or a Singapore permanent resident may register a vessel whose tonnage is less than 1,600 GT, or a vessel which is not self-propelled, at the Maritime and Port Authority of Singapore (MPA). Save as stated, vessels may be registered with the MPA by Singapore citizens, or Singapore-incorporated companies whose paid-up capital is at least S$50,000.

7 What are the documentary requirements for registration?

The documentary requirements for registration are the reservation of the name with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore, and filing of application forms and draft memoranda and articles of association at ACRA and payment of an incorporation fee. The company must have a minimum of one shareholder (who can be an individual or a company) and one Singapore-resident director.

The first step for any vessel registration in Singapore would be to apply to the MPA to reserve a name for the vessel and for MPA to allocate the official number and call sign for the vessel. Thereafter, the applicant may apply for the carving and marking note for the vessel from MPA and forward the same to the classification surveyor of the vessel. Once this is done, the applicant may proceed with the registration of the vessel as follows.

Provisional registration of newbuilding

The applicant must submit copies of the builder’s certificate of the vessel duly notarised and legalised by the Singapore Consulate; the builder’s power of attorney duly notarised and legalised by the Singapore Consulate (in the event that the builder’s certificate is signed by the builder’s attorney); the classification certificate or class attestation and the tonnage certificate or tonnage attestation together with the originals of the application form for registration; the MPA’s appointment of manager form; the MPA’s appointment of agent form (in the event the applicant is a company and the application for registration is being signed by a person other than a director or the company secretary of the applicant); the cheque in favour of the MPA for the registration fee and annual tonnage tax; the carving and marking note duly endorsed by the classification surveyor; and the company registry profile on the applicant (where the applicant is a company). In the event the carving and marking note is not ready, the applicant may issue a letter of undertaking to the MPA to submit the same within one month from the provisional registration. The provisional registration will be for one year.

Provisional registration of second-hand vessel

The applicant must submit copies of the bill of sale of the vessel duly notarised and legalised by the Singapore Consulate; the seller’s power of attorney duly notarised and legalised by the Singapore Consulate (in the event the bill of sale is signed by the seller’s attorney) the free-from-encumbrance certificate from the vessel’s existing registry; the classification certificate; the class confirmation certificate free from conditions or recommendations, dated not less than 72 hours before to the date of submission for registration or such other longer period as the MPA shall permit; the tonnage certificate together with the original application form for registration; the MPA’s appointment of manager form; the MPA’s appointment of agent form (in the event the applicant is a company and application form for the registration is being signed by a person other than the director or a company secretary of the applicant); the cheque for the registration fee and tonnage tax; the carving and marking note duly executed by the classification surveyor; and the companies registry profile on the applicant (in the event that the applicant is a company). If the carving and marking note is not ready, the applicant may issue a letter of undertaking to the MPA to submit the same within one month from the provisional registration. The provisional registration will be for one year.

Final registration of newbuilding

The applicant must submit the originals of the notarised and legalised builder’s certificate; the notarised and legalised builder’s power of attorney (if applicable); the carving and marking note (if not submitted earlier); copies of the full-term classification and trading certificates; ISM declarations and ISM certificates; and CSR (for which the applicant will have to apply to the MPA); all within the time limit specified by MPA.

Final registration of second hand vessel

The applicant must submit the original notarised and legalised bill of sale; the notarised and legalised seller’s power of attorney; the carving and marking note (if not submitted earlier); the deletion certificate and closed CSR of the vessel from the previous registry; copies of the full-term classification and trading certificates issued under the new ownership and flag of the vessel; and the new CSR (for which the applicant will have to apply to the MPA); all within the time limit specified by the MPA.

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

Dual registration or flagging out of a Singapore-registered vessel is possible, to enable the vessel to be registered in a bareboat charter registry by the bareboat charterer, provided that the Singapore registration of the vessel is suspended during the period of flagging out.

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

The register of mortgages is maintained by the MPA. It contains the date of the mortgage, the date of registration of the mortgage at the MPA, the name and address of the mortgagee, and the priority of the mortgage.

Limitation of liability

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

‘Package’ limitation

The Hague-Visby Rules regime

As per article IV, rules 5(a) and (d), the carrier’s and the ship’s liability for any loss or damage to or in connection with the cargo is limited to S$1,563.65 per package or unit, or S$4.69 per kilogram of gross weight of the goods lost or damaged, whichever is the higher.

The Hague Rules regime

The basic limitation for the same claims is at £100 gold value per package or unit.

‘Tonnage’ limitation

Incidents occurring before 1 May 2005

The regime under the Convention on the Limitation of Liability of Owners of Seagoing Ships 1957, which was brought into the municipal law of Singapore in 1968 and is at present contained in section 136 of the Merchant Shipping Act.

Incidents occurring after 30 April 2005

The Convention on Limitation of Liability for Maritime Claims 1976 regime, with the (new) sections 134 to 144 in Part VIII of the Merchant Shipping Act (1996 edition as amended by the Merchant Shipping (Amendment) Act 2004).

Claims, whatever the basis of liability, that can be limited are:

• claims for loss of life or injury or damage to or loss of property (eg, harbour works, basins, waterways and navigational aids) occurring on board or ‘in direct connection with the operation of the ship’ or with ‘salvage operations’ and consequential damages;

• loss resulting from delay in the carriage of passengers, luggage and cargo;

• ‘other loss’ resulting from infringement of non-contractual rights, occurring ‘in direct connection with the operation of the ship’ or ‘salvage operations’;

• expenses for removal or rendering harmless of wreck or of cargo of the ship; and

• third parties’ claims in respect of measures taken to avert or minimise loss, except where there is a contractual relationship.

Parties entitled to limit are:

• the shipowner;

• the charterer;

• any person with an interest in or in possession of the ship;

• the manager or operator of the ship;

• the salvor;

• any person for whose act or default the shipowner or salvor is responsible; and

• an insurer.

Carriage by air

The applicable conventions are the Warsaw Convention, the Warsaw-Hague Convention and the Warsaw-Hague-Montreal Convention, implemented by the Carriage By Air Act (2001 edition) and the Carriage By Air (Montreal Convention, 1999) Act.

These conventions set out the bases for the carriers’ liability for:

• death or injury of passengers sustained during the carriage by air;

• loss of or damage to baggage or cargo; and

• damage occasioned by delay in the carriage by air of passengers, baggage or cargo.

Parties affected are:

• carriers;

• carriers’ employees and agents;

• passengers;

• consignors and consignees; and

• other persons.

11 What is the procedure for establishing limitation?

Limitation fund under the Convention on Limitation of Liability for Maritime Claims 1976

Any eligible party potentially liable may constitute a limitation fund with the court, either by depositing the sum or by furnishing an acceptable guarantee. Upon the occurrence envisaged in the Convention and claims being apprehended, the liable party may apply to limit its liability, and the court may, inter alia, determine and distribute the limitation amount, and may stay any related proceedings pending in other court.

The calculation of the limitation fund is divided into two groups: firstly personal ‘injury’ claims, which includes death; and secondly ‘other’ claims, with the former ranking higher in priority. The result is that where the total fund is insufficient to satisfy all the injury claims, the shortfall shall rank alongside the other claims.

The Convention sets out a sliding scale with the amount expressed in special drawing rights (SDR) working in inverse order to the ship’s tonnage, and modified for its applicability to Singapore.

Ship licensed as a harbour craft

For injury claims and other claims, the limit of liability is the same for each category, namely equivalent to ‘the sum insured under the insurance policy for the time being required by the Port Master under [the Maritime and Port Authority of Singapore Act] to be in force in relation to that harbour craft in respect of third-party risks.’

Any other ship with a tonnage less than 300 GT

• for injury claims: 166,667 SDR; and

• for other claims: 83,333 SDR.

Tonnage in excess of 300 GT

Injury claims

• 301 to 3,000 GT – 500 SDR per ton plus 333,000 SDR;

• 3,001 to 30,000 GT – 333 SDR per ton plus 333,000 SDR;

• 30,001 to 70,000 GT – 250 SDR per ton plus 333,000 SDR and

• 70,001 GT and above – 167 SDR per ton plus 333,000 SDR.

Other claims

• 301 to 30,000 GT – 167 SDR per ton plus 167,000 SDR;

• 30,001 to 70,000 GT – 125 SDR per ton plus 167,000 SDR; and

• 70,001 GT and above – 83 SDR per ton plus 167,000 SDR.

For injury claims relating to passengers, instead of the above amounts, liability is limited for each distinct occasion to a sum of 46,666 SDR multiplied by the authorised passenger-carrying capacity of the ship, up to a maximum of 25 million SDR.

The equivalent for the sums in SDR shall be the amounts set by the Maritime and Port Authority of Singapore for a particular day.

Limitation of liability

Limitation of liability may be invoked even though a limitation fund has not been constituted. Claims and counter claims of the prescribed types and arising out of the same occurrence must be offset against each other, and limitation applies only to the balance payable.

Invocation of limitation may be achieved by one of two methods:

• the party can plead limitation as a form of defence, so that where damages would have exceeded the limit of liability, judgment would be given for such limit. This obviates the constitution of the limitation fund; or

• the party can commence limitation proceedings to establish its right to such limit, but it is not necessary to constitute a fund until the right to limit has been decided.

12 In what circumstances can the limit be broken?

A claim to limit liability would be defeated if the loss was occasioned by a ‘personal act or omission committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result’.

It is incumbent upon those seeking to deny limitation to prove that the ‘person liable’ definitely intended to cause such loss. The alternative criterion is ‘recklessly’ – the recklessness is coupled with that person’s knowledge that such loss would probably result.

The same test applies to package limitation and tonnage limitation.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Singapore has not ratified the Athens Convention relating to Carriage of Passengers and their Luggage by Sea. The limitation regime applicable in respect of air carriage has already been discussed in question 10. There is no limitation regime operating in Singapore in respect of carriage of passengers and their luggage by sea. Limitation, if any, will have to be covered by the terms of the contract entered into between the carrier and the passenger.

Port state control

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

The Maritime and Port Authority of Singapore is the body that represents the Singapore government and exercises powers as the port state control agency. The port master has wide powers to regulate, restrict or prohibit movement of vessels in the port and approaches to the port and can direct the berthing and removal of any vessel in the territorial waters of Singapore under the Maritime and Port Authority of Singapore Act. The Authority exercises regulatory functions in respect of merchant shipping and particularly in respect of safety at sea, the manning of vessels and prevention of pollution at sea. The Authority acts internationally as the national body representative of Singapore in respect of sea transport, marine and port matters.

15 What sanctions may the port state control inspector impose?

The MPA can refuse to grant port clearance to a vessel that does not comply with its orders or directions. It has wide powers under section 8 of the Act and may exercise powers given to it under the second schedule of the Act. The powers under this schedule include powers to levy such charges and fees for the granting of licences, approvals, permits, consents and for services and facilities that the Authority is required or empowered to provide under the Act.

16 What is the appeal process against detention orders or fines?

Under section 101 of the Act, a magistrate’s court or a district court shall have jurisdiction to hear and determine all offences under the Act or the regulations.

An appeal from these subordinate courts will go to the Supreme Court of Singapore.

Classification societies

17 Which are the approved classification societies?

To be registered at the Singapore Registry of Ships (the Shipping Division of the Maritime and Port Authority of Singapore), the candidate vessel must possess statutory certificates issued by its shipping division or alternatively classification and statutory certificates issued by one of the nine recognised classification societies:

• American Bureau of Shipping;

• Bureau Veritas;

• China Classification Society;

• DNV GL;

• Korean Register of Shipping;

• Lloyds Register Of Shipping;

• Nippon Kaiji Kyokai; or

• Registro Italiano Navale.

All the above classification societies, with the exception of Registro Italiano Navale, have been appointed as recognised security organisations.

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

The general principles of the law of torts apply. If a duty of care is owed by the classification society not to cause pecuniary loss by negligent misstatement to the claimant, then liability may exist. Policy considerations as to whether the Singapore courts will be prepared to make inroads to include such duty situations in our Law of Negligence is the issue. There is no case in point in Singapore where a claimant has succeeded against a classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Under Part IX of the Maritime and Port Authority of Singapore Act, the MPA is empowered to require the owner or agent of any vessel, aircraft or other object to raise, remove or destroy the whole or any part of a vessel, aircraft or object, which in its opinion, is stranded, sunk or abandoned within the port of Singapore or the approaches thereto.

If the owner or agent fails to act, the MPA has powers to take possession of and raise, remove or destroy such vessel, aircraft or object. In that event the MPA can seek to reimburse its expenses from the owner.

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

Collision

• The Maritime Conventions Act 1911 (2004 Edition), giving effect to the Conventions as a result of the conference held at Brussels in 1910 dealing with collisions between vessels (the rule as to division of loss) and with salvage; and

• the Merchant Shipping (Prevention of Collisions at Sea) Regulations, incorporating the International Regulations for Preventing Collisions at Sea 1972 with the subsequent amendments.

Salvage

The International Convention of Salvage 1989 is not in force in Singapore. Thus the pre-existing law of salvage applies.

Pollution

• The International Convention for the Prevention of Pollution from Ships, 1973 and The Protocol of 1978 (carried into effect by the Prevention of Pollution of the Sea Act (chapter 243));

• the International Convention on Civil Liability for Oil Pollution Damage, 1992, and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992 implemented by the Merchant Shipping (Civil Liability and Compensation for Oil Pollution) Act (chapter 180); and

• the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, implemented by the Merchant Shipping (Civil Liability and Compensation for Bunker Oil Pollution) Act, 2008.

21 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.

Under section 80 of the Maritime and Port Authority of Singapore Act, no person can carry on the businesses of rendering salvage services in the territorial waters of Singapore without a valid licence granted by the Authority for that purpose.

Ship arrest

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

None. However, the Singapore statute in this respect, namely the High Court (Admiralty Jurisdiction) Act, reproduced the Administration of Justice Act 1956 of the United Kingdom, which was passed to implement the International Convention Relating to the Arrest of Seagoing Ships 1952 and also the International Convention on Certain Rules Concerning Civil Jurisdiction in Matters Of Collision 1952. The 1956 Act was re-enacted in the United Kingdom by the Supreme Court Act 1981, which was in turn followed in Singapore with the addition of certain words to section 4(4) of the Singapore statute.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A writ in rem endorsed with a claim of the type within the admiralty jurisdiction of the High Court may be served, and a vessel can be arrested in one of the circumstances prescribed by section 3(1) of the High Court (Admiralty Jurisdiction) Act.

The above may be performed only against the particular ship in connection with which the claim arose in case of:

• possession or ownership of a ship;

• employment and earnings of a ship, in the case of co-owners;

• mortgage or charge on a ship; or

• the forfeiture or condemnation of a ship as ‘prize’.

The above may be performed against the particular ship, or against a sister ship, in the case of:

• damage caused or received by a ship;

• loss of life or injury occurring in the course of the navigation or management of a ship;

• loss of or damage to goods carried in a ship;

• agreement for the carriage of goods, or hire of a ship;

• salvage services;

• towage;

• pilotage;

• goods or materials supplied for the ship’s operation or maintenance;

• construction or repair of a ship, or dock charges;

• master and crew wages;

• master’s or agent’s disbursements on account of a ship;

• general average act; or

• a claim arising out of bottomry.

The admiralty jurisdiction is also created by special statute to implement conventions for:

• a claim in respect of a liability under the oil pollution legislation; or

• limitation of liability.

The vessel’s flag or law governing the claim makes no difference to the claimant’s entitlement to invoke the admiralty jurisdiction of the court, so long as the claim is of the prescribed type and the criteria applicable to the mode of exercise of such jurisdiction are fulfilled.

The ascertainment of beneficial ownership of a vessel is a matter of Singapore law as it relates to the admiralty jurisdiction of the Singapore courts. However, the court would have regard to the governing (foreign) law, to the extent that it is applicable from the ‘conflict of laws’ viewpoint, for instance in relation to a foreign ship’s mortgage. The requisite formality for the creation of the maritime mortgage in accordance with the vessel’s flag, the nature of the right created by the mortgage in favour of the creditor or mortgagee and the extent of that right will be determined by the law of the (foreign) country.

The epithet ‘associated’ or ‘affiliated’ is usually employed only in relation to the shipowning entities in a group. For vessels, the juridical word is ‘sister’ or ‘sister ship’, that is, another ship in the same ownership as the particular ship. Section 4(4) deals with the beneficial ownership aspect that must be satisfied for a successful invocation of admiralty jurisdiction. The weight of authorities (originating from a Singapore decision and subsequently considered by the Hong Kong and English courts) suggests that a vessel owned by the charterer of the particular ship is also open to arrest by the owners of the particular ship. Although it was not stated in such terms in the decisions, the upshot is that such a vessel can to that extent be considered a sister ship, whereas the relationship between these vessels is nowhere near the natural meaning of the expression ‘sister ship’.

A ship owned by a wholly owned subsidiary company is not beneficially owned by the defendant holding company and thus is not amenable to an in rem action under section 4(4). Nor does the right to arrest extend to a ship owned by a sister company of the company owning the particular ship.

24 What is the test for wrongful arrest?

Where a ship is arrested when she ought not to have been, the question of whether the owner is entitled to recover the loss suffered would depend on whether the arresting party is guilty of bad faith or gross negligence, which implies malice.

Ultimate failure of the claim per se is not the test and would not entitle the shipowner to damages for wrongful arrest. Likewise damages are not recoverable in respect of a mere error of judgement in arresting the vessel where there was no bad faith.

On the other hand it is worth adding here that if at the conclusion of the trial it is apparent that the sum demanded by way of security for the release from arrest exceeds by a substantial margin the sum recovered then the plaintiffs will be ordered to pay the cost of providing that part of the security that the court regards as being unreasonably excessive.

25 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?

Section 4(4) of the High Court (Admiralty Jurisdiction) Act governs the outcome of the answer to this. The bunker supplier could have a right of arresting the particular ship if, and only if, the charterer, as ‘the relevant person’ liable in personam and as ‘the relevant person’ in the second limb of the test, is a bareboat or demise charterer at the time when the action in rem is brought. Thus, this test would not be satisfied if the bareboat charter had already come to an end when the writ in rem was issued at the request of the bunker supplier. Any challenge by a defendant shipowner to the bunker supplier’s reliance on the identity of the defendant shipowner as ‘the relevant person’ is not a jurisdictional matter to be dealt with at the interlocutory stage but is properly a dispute on the merits of the bunker supplier’s claim unless it is determined to be ‘hopeless’.

Since it is not uncommon in a shipping group to have the same entity operating ships both owned as well as chartered by it, it is possible to postulate this scenario on the authorities from Singapore, Hong Kong and the UK: the bunker supplier may arrest a ship owned by or chartered by demise to the charterer at time the writ in rem is issued.

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

The arresting party does not have to provide security in the sense of (reciprocally) securing its ability, to the advantage of the shipowner, to pay damages occasioned by, for example, what subsequently turns out to be a wrongful arrest or the ultimate failure of the claim.

27 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?

The usual practice of the court is only to order release, unless successfully negotiated by the parties, upon the provision of sufficient security to cover the amount of the claim calculated on the basis of the claimants’ reasonably best arguable case. The amount of the security, eg, for cargo claim, comprises the sound arrived value of the goods with interest (for two to three years at 5.33 per cent per annum of the claimed amount) and costs (S$150,000) added.

The security amount does not exceed the value of the ship. This amount can be reviewed subsequently by the court upon application. The claimants may be ordered to pay the additional costs incurred by the shipowner in putting up the security if the amount is determined to be excessive.

The security is by way of a bank guarantee or an acceptable P&I club’s letter of undertaking.

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

Such responsibility lies with the claimants (plaintiffs) at whose instance the ship is arrested, through their solicitors, who at the time of applying for the warrant of arrest must give an undertaking to indemnify the Sheriff in respect of the costs and disbursements in effecting and maintaining the arrest.

29 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?

The Singapore statute conferring admiralty jurisdiction on the Singapore High Court has not included in its provisions the power of the court to order retention of security obtained by arrest of a vessel in admiralty proceedings in Singapore to secure satisfaction of the judgment of some other court in another forum.

However, the Singapore court may find these English judicial observations particularly persuasive:

It seems to me that, by the maritime law of the world, the power of arrest should be, and is, available to a creditor – exercising it in good faith in respect of a maritime claim – wherever the ship is found – even though the merits of the dispute have to be decided by a Court in another country or by an arbitration in another country – and, I would add (contrary to The Golden Trader …), even though the arbitration is mandatory [...]

The Lisboa [1980] 2 Lloyd’s Rep. 546, per Lord Denning, MR, at pp 549–550.

[It] would not, I think, normally be wrong to allow a plaintiff to keep the benefit of security obtained by commencing proceedings here, while at the same time granting a stay of proceedings in this country to enable the action to proceed in the appropriate forum [...]

The Spiliada [1987] 1 Lloyd’s Rep. 1 per Lord Goff at p 15.

In the case of an arbitral award, the effect of the International Arbitration Act, sections 6 and 7, is that where the court has ordered a stay of the (admiralty) proceedings, it may order the vessel (the property) retained as security for the satisfaction of any award made by the tribunal.

Consideration of whether it is ‘possible to […] pursue proceedings on the merits elsewhere’ would also depend on the judicial approach of the particular forum ‘elsewhere’. For there must be reciprocity of jurisprudence and if that forum is, for instance, English, it is highly likely that the Singapore court would adopt the approach as that in the International Arbitration Act, mutatis mutandis.

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

One of the functions of the court is to assist creditors by its procedure to obtain satisfaction of their just claims. Except for ship arrest, there is a general proposition that the procedure of common law jurisdictions is less well equipped than many of the Continental counterparts to provide security.

A plaintiff in pending proceedings in the Singapore jurisdiction may, upon satisfying certain conditions, seek a Mareva injunction in respect of the defendants’ assets within the jurisdiction to prevent them from removing their assets from the jurisdiction. A Mareva injunction, which has been called ‘an injunction by way of foreign attachment’, results in the substitution of security (eg, a bank guarantee) for an asset.

The plaintiffs in appropriate cases may also apply for an injunction restraining the defendants from dealing with the asset in a manner calculated to defeat or render nugatory a judgment or court order which on the evidence appears irresistible.

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

On an application by a party to the proceedings under order 29 rr 2 and 3 of the Rules of Court, the court may make an order for the interim detention, custody or preservation of the subject property and for the obtaining of full information or evidence in the proceedings. The court also has jurisdiction, for the purpose of preserving the subject matter of the proceedings or of documents relating thereto, to grant an Anton Piller order, which in essence is a mandatory injunction requiring the defendant to permit the plaintiff to enter the defendant’s premises to inspect and remove materials into safe custody.

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

No procedure in rem is available to arrest bunkers in the same manner as the arrest of ships and aircraft. The only possible way is by the process of execution upon obtaining a judgment against the bunkers owner as with any other type of property within the jurisdiction. A Mareva injunction in respect of bunkers is possible if the prerequisites are satisfied, though such cases are quite rare, unlike, for example, proceeds of insurance on a vessel sunk after a casualty or other form of substantial assets with the bank.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The application is usually made by the arresting party, though it is equally open to any interveners, or even the owners of the vessel.

34 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?

Sale may be ordered upon judgment, or pendente lite. Upon the plaintiff’s request, the commission for appraisement and sale will be issued by the registrar and lodged with the Sheriff. The Sheriff engages surveyors for the appraisement and advertises the vessel for sale in the Singapore newspapers and other publications abroad. Prospective bidders may inspect the vessel. Sale is by sealed tenders and subject to the court’s standard terms.

The average length of the period between the application and the conclusion of the judicial sale is two to three months.

The court’s costs are:

• stamp fee on the commission for appraisement and sale (S$250 for a claimed amount of up to S$1 million, and S$500 if the amount is above S$1 million);

• Sheriff’s commission (at 5 per cent on the first S$1,000 of the sale proceeds, and 2.5 per cent on the amount in excess of that sum); and

• the auctioneer’s commission, if applicable.

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

The ranking for the purpose of priority in the distribution of a limited fund is based on the well-settled principles applied by the court, which are generally as follows:

• the Sheriff’s charges and expenses including expenses for preserving the ship or her value;

• costs of the plaintiffs in whose action the ship was arrested and in maintaining that arrest, up to the time of the order for appraisement and sale;

• salvage claim;

• collision damage claim;

• wages and disbursements of master and crew;

• possessory lien of shipyard;

• mortgage claim; and

• other claimant with the statutory right of action in rem under the High Court (Admiralty Jurisdiction) Act.

There are other determining factors affecting the ranking of priorities, for example some with relevance to sequentially different occasions for the same category of maritime liens, and between class and class, whether these should rank pari passu or in inverse order of the happenings.

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

The sale of a vessel by the court in admiralty proceedings in rem gives the purchaser title free of all maritime liens and other charges or encumbrances including a repairer’s common law possessory lien and a mortgagee’s right of sale.

The rights of the claimants are transferred to and preserved against the proceeds of sale in court. Thereafter all claims against the ship can only be enforced against the proceeds.

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

Such a judicial sale by a foreign court in admiralty proceedings is conclusive and will be recognised by the Singapore court provided that the vessel was within the lawful control of the state under the authority of which the foreign court sits and the foreign court has acted within its admiralty jurisdiction conferred by the state (as opposed to the case of a personal remedy against the owners or in the case of writ of fieri facias).

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

No.

Carriage of goods by sea and bills of lading

39 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?

Singapore acceded to the relevant 1924 Convention and gave effect to the Hague Rules, without variation.

The current Singapore statute is the Carriage Of Goods by Sea Act (1998 edition) enacted to give effect to the Hague-Visby Rules, as scheduled to the Act without variation.

The Hamburg Rules are not in force.

Singapore has not ratified accepted approved or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules).

For the purpose of the Hague Rules and the Hague-Visby Rules, sea carriage begins with the loading of the goods on, and ends with their discharge from, the carrying ship.

40 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?

A unimodal carriage by any of the respective modes is governed by individual conventions. One of these conventions is the Convention on the International Carriage of Goods by Road, which has not been ratified or adopted in Singapore. The liability of carriers of goods by road in Singapore is governed by the common law principles in contract, tort or bailment.

On the other hand, a carrier in a contract governed by Singaporean law with the goods owner may accept responsibility for the whole transit, even though he or she may actually perform only part of the carriage, or even none at all, and may choose to incorporate in his or her Multimodal Transport Document, for example, the United Nations Convention on International Multimodal Transport of Goods 1980, which does not need, for it to take effect, to include a sea carriage in its prerequisite of a minimum of two different modes of transport.

41 Who has title to sue on a bill of lading?

As bill of lading holder

Basically, a party who becomes the lawful holder of a transferable bill of lading thereby possesses all rights of suit under the bill of lading as if it had been a party to such bill.

In certain circumstances, the holder has the rights of suit only if it becomes the holder:

• pursuant to a (sale) agreement affording it a pre-existing right against the carrier to possession of the goods; or

• upon the rejection by another party of goods or shipping documents pursuant to the (sale) agreement.

For damage suffered

Where a party entitled to the goods covered by the bill of lading sustains loss or damage in consequence of a breach by the carrier but the relevant rights of suit are vested in another party, the latter may exercise those rights to like extent for the benefit of the first-mentioned party.

42 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?

Bills of lading issued under a charter party may contain general words of incorporation by which the charter party terms or clauses are incorporated into the bills.

The effect is that a clause in the charter party that is directly germane to the subject matter of the bill of lading (ie, germane to the shipment, carriage and discharge or delivery of goods) can be incorporated into the bill of lading contract by general words in the bill of lading, as only such a clause is reasonably applicable to the bill of lading. But if the clause is one that is not thus directly relevant (eg, an arbitration clause), it would not be incorporated into the bill of lading contract unless it is explicitly so stated in clear words either in the bill of lading or in the charter party. It could not otherwise be said with certainty whether, for example, the dispute between the parties is a dispute under the charter party or the bill of lading. Thus the charter party arbitration clause would not be binding on a third-party holder or endorsee of the bill.

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

The effect of the demise clause is to notify the bill of lading holder of the possibility of a charter, and therefore that the shipowner is the carrier and the bill of lading is a shipowner’s bill. However, the charterer might not go very far with the demise clause without more. Although the demise clause could be considered inconsistent with basic standards of commercial honesty, nevertheless it is recognised by the court and is binding, but only if none of the prerequisites is missing.

A ‘carrier’, as defined in the bill of lading identity of carrier clause, in order to be subject to the obligations and entitled to the rights and immunities conferred in the Hague-Visby Rules, must be a party to the contract of carriage covered by a bill of lading, or similar document of title relating to the sea carriage.

‘Carrier includes the owner or charterer who enters into a contract of carriage with the shipper’ (article I(a)).

44 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?

Under the Hague-Visby Rules, parties other than owners and charterers may be ‘carriers’.

In an appropriate arrangement, such as by means of a Himalaya clause, a shipowner may be an independent (sub)contractor of a charterer. Where a carrier has chartered a vessel to perform the sea carriage that that carrier has contracted with the shipper to perform, the carrier or charterer (in such case a ‘contracting carrier’) has in effect employed the shipowner (‘actual carrier’) to carry out the substantial part of its own contractual obligations. Such a carrier or charterer has therefore employed the shipowner as an independent contractor, just as if it had employed a stevedore to carry out the handling of the goods at the port.

The shipowner is thus enabled to rely on the bill of lading terms, including in the appropriate cases the carrier’s immunities under the Hague-Visby Rules. But having regard to article III, Rule 8 of the Rules, the Himalaya clause is to be read as limiting the protection of the shipowner (as independent contractor) against liability to the cargo owner in tort to the protection available to the carrier upon whom the positive obligations such as in article III, Rules 1 and 2 are laid. In other words, the complete exemption open to the shipowner is equally restricted by article III, Rule 8.

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

Breach by deviation is like any other breach of a fundamental condition (or, a fundamental breach) that constitutes the repudiation of a contract by the party, in this case the carrier; the innocent party may elect not to treat the repudiation as being final, but to treat the contract as subsisting, and to that extent may waive the breach, any right to damages being reserved. If the innocent party with full knowledge of the deviation affirms the contract, then it is bound by its provisions (ie, including the benefit to the carrier of the contract conditions). For example, the shipowner, as against the cargo owners, or, in the appropriate case, the charterers, could rely on the exception of perils of the sea in respect of events occurring after the affirmation, but waiver of the breach does not mean waiver of the right to damages for that breach unless the contractual defences upon their construction are held by the court to be effectual.

It has been remarked that if there is a breach by deviation accepted by the innocent party the contract is at an end; the guilty party cannot rely on any special terms in the contract. If not so accepted the clauses of exception remain in force like all other clauses of the contract and applicable to a casualty occurring before or after the deviation, and the shipowner will be liable only for damages resulting from the deviation itself.

46 What liens can be exercised?

The types of lien, within the context of contract of affreightment, are:

Liens for freight under bill of lading

On the back of the bill of lading are printed the carrier’s various standard terms and conditions. A lien clause allows the shipowner to retain the cargo until freight and any other charges (eg, general average contributions or for preservation of the goods) and dues are paid. In the Singapore context, the shipowner may notify the wharfinger or warehouseman of its right to lien at the time any goods are landed from the ship: section 127 of the Merchant Shipping Act. These latter parties are entitled by section 132 to exercise certain powers and have a lien on the goods for the rent and expenses.

Liens enumerated in charter party

These liens usually conferred by a lien clause (which may be followed by the cesser clause) are for freight, advance freight, dead freight, demurrage and general average. Some of these exist in common law but are nevertheless included in the charter party to avoid adverse inference. The shipowner’s lien on the cargo can only be enforced against the bill of lading holder if such charter party terms have been incorporated into the bill of lading’s terms.

Liens for sub-freights

The view in the preceding paragraph applies to sub-freights mutatis mutandis where, for example, the shipowner’s lien is contractually extended to cover time-charter hire.

Liens by operation of law on the vessel

Maritime lien; possessory lien; and statutory lien, that is, the claimant’s statutory right of action against the ship if the claim is of the type within one of the paragraphs enumerated in the High Court (Admiralty Jurisdiction) Act (see question 23).

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

Delivery of cargo otherwise than against a bill of lading would result in a claim by the consignees against the carrier and, if warranted by the circumstances, stevedores, for conversion of the goods or for breach of their duty (negligence), not to deliver goods except in exchange for shipping documents.

Whether or not the carriers are entitled to limitation is not entirely clear. Such an act has itself been regarded as analogous to ‘deviation’ for which the court (the Privy Council, on an appeal from the Singapore decision in Sze Hai Tong Bank Ltd v Rambler Cycle Company Ltd [1959]) once adopted the ‘fundamental breach’ approach and disallowed limitation.

However, this position needs to be reappraised in light of the subsequent House of Lords approach to the fundamental breach doctrine in their Suisse Atlantique [1966] and Photo Production [1980] decisions. The more sustainable view appears to be that adopted by the Australian court in P S Chellaram & Co Ltd v China Ocean Shipping Co [1989], following the Privy Council’s decision in The New York Star [1980], in which it was held, on the facts, that the misdelivery there without presentation of the bill of lading – the agents wrongly assumed that the shippers’ consent for the release had been obtained – was the result of mere negligence and nothing more, and that the Hague Rules limitation under article IV Rule 5 was applicable.

48 What are the responsibilities and liabilities of the shipper?

The shipper is liable for all damages and expenses directly and indirectly resulting from the shipment of dangerous goods (Hague-Visby Rules, article IV Rule 6), and this liability does not depend on their knowledge that the goods are dangerous. Goods of a nature that is inflammable, explosive or dangerous to the shipment to which the carrier has not consented with knowledge may be landed at any place or destroyed without compensation, and the shippers will be liable for the damage caused to the vessel or other cargo and expenses incurred by the carrier resulting from such shipment.

By Rule 5(h) the carrier shall not be responsible for loss of or damage to the goods if the nature or value thereof has been knowingly misstated by the shipper on the basis of which the bill of lading is drawn up.

Shipping emissions

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

There are no emission control areas in force in the Singapore domestic territorial waters.

50 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?

By the Prevention of Pollution of the Sea (Air) Regulations 2005, in which MARPOL Annex VI is incorporated in the first schedule, the sulphur content of any fuel oil used in Singapore – as well as foreign-flagged ships while they are in Singapore waters shall not exceed 3.50 per cent m/m.

A surveyor inspects ships in Singapore waters to verify that they possess a valid IAPP certificate. In the absence of a valid certificate, the ship shall not be permitted to sail until it can proceed to sea without presenting an unreasonable threat of harm to the atmosphere or sea. If there is evidence that a particular ship has violated the Regulations, the matter would be investigated and the ship may be inspected.

The owner and the master of any ship that fails to comply with any requirement of the Regulations shall on conviction each be liable to a fine not exceeding S$10,000 or to imprisonment for a term not exceeding two years or to both.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The High Court of Singapore exercises admiralty jurisdiction over maritime claims enumerated above (question 23) in admiralty actions in rem or in personam. Other (inferior) courts are not thereby deprived of non-admiralty jurisdiction to hear disputes, albeit of a maritime nature, for example in the sense of being on a charter party, which are more commercial.

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

The invocation of the admiralty jurisdiction by an action in personam and other non-admiralty claims might necessitate obtaining the court’s leave under order 11, rule 1 of the Rules of Court to serve a writ (process) on a defendant out of jurisdiction. There are, broadly speaking, 19 circumstances permitting service of the writ out of the jurisdiction, for example where the claim is brought to enforce a contract made within Singapore, or to enforce any judgment or arbitral award.

The application for leave is made ex parte on an affidavit setting out the relevant facts. Full disclosure is necessary, including the disclosure of facts that cast doubt on the plaintiff’s case. Thus the affidavit must be clear and frank and the plaintiff must establish a good arguable case.

There can be no service out of jurisdiction of a writ in an admiralty action in rem.

The question of which is the forum conveniens is also a matter to be considered by the court in exercising its discretion under this order.

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

The Singapore Chamber of Maritime Arbitration provides the international maritime community with an independent, efficient and reliable institution for dispute resolution. Its address is:

32 Maxwell Road

#02-13 Maxwell Chambers

Singapore 069115

Tel: +65 63240552

Fax: +65 63241565

www.scma.org.sg

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

Order 67 of the Rules of Court governs the registration and enforcement of foreign judgments pursuant to the Reciprocal Enforcement of Foreign Judgments Act and the Reciprocal Enforcement of Commonwealth Judgments Act. These acts provide for the reciprocal enforcement in Singapore of judgments and awards obtained respectively, as the titles suggest, in the courts of foreign and Commonwealth countries.

The acts deal with application by a judgment creditor in Singapore for registration of the foreign judgment (ie, procedural) and, conversely, also application by ‘any party against whom a registered judgment may be enforced’ to set aside the judgment under certain circumstances, such as on grounds of absence of jurisdiction of the foreign court or judgment being obtained by fraud (the substantive).

An award made by an arbitral tribunal, whether the place of arbitration is in Singapore or elsewhere, pursuant to an arbitration agreement may, with leave of the court, be enforced in the same manner as a judgment or order of the Singapore court, according to section 46 of the Arbitration Act.

Enforcement of a judgment or arbitral award may necessitate a judgment creditor’s application in Singapore under order 11 Rule 1(1) (m) of the Rules of Court for leave of court to effect service on the judgment debtor who is out of Singapore.

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

The legal position regarding a breach of Singapore jurisdiction clause would be the inverse of that laid out in question 56. Also, in appropriate and opportune circumstances, the defendant may apply to the Singapore court for an anti-suit injunction if, for example, the bill of lading contains an anti-suit clause.

56 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?

Foreign jurisdiction clause

The defendant may apply for a stay of proceedings. The Singapore court, assuming the claim to be otherwise within its jurisdiction, is not bound to order a stay but has discretion over whether to do so or not, regardless of whether it is an exclusive or non-exclusive jurisdiction clause.

Generally, the discretion should be exercised by granting a stay unless the plaintiff shows strong reasons why the court should not do so. In exercising its discretion, the court will take into account all the relevant circumstances.

The doctrine has been expressed thus: that in cases where jurisdiction has been founded as of right, that is, where in this country the defendant has been served with proceedings within the jurisdiction, the defendant may apply to the court to exercise its discretion to stay the proceedings on the ground that is usually called forum non conveniens, namely, that the domestic forum is inappropriate. The onus is on the defendant to satisfy the court that there is another forum to which jurisdiction he or she is amenable in which justice can be done between the parties at substantially less inconvenience and expense. In addition, the court must regard that granting a stay would not deprive of the plaintiff of a legitimate personal or juridical advantage that would be available to him or her if he or she invoked the jurisdiction of the domestic court.

The purpose is to identify the forum with which the action has the most real and substantial connection. The court must look for connecting factors; and these include not only factors affecting convenience or expense (such as availability of witnesses), but also others such as the law governing the relevant transaction and places where the parties respectively reside or carry on business.

Arbitration clause

Where the claim is within an arbitration agreement and the plaintiff nevertheless has resorted to litigation, the defendant may apply to the court for the proceedings to be stayed so that the matter can be referred to arbitration. The grant of a stay is mandatory unless the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred.

Limitation periods for liability

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

Collision claims

The basic limitation period under the Maritime Conventions Act 1911 is two years, applicable to a shipowner claiming against the other ship, or to claims in respect of damage or loss to cargo or property or loss of life or personal injury against the ‘other’ (ie, the non-carrying) vessel as a result of a collision.

The court has the discretionary power to extend the two-year period upon the plaintiffs showing exceptional or special circumstances or where there exists a good reason for doing so.

Salvage claims

Similarly, the basic limitation period is two years (which, incidentally, is also now contained in the International Convention on Salvage 1989, which has the force of law in certain other countries).

In regard to these categories the court has the discretionary power to extend the two-year period upon the plaintiffs showing exceptional or special circumstances or where there exists a good reason for doing so.

Claims for loss of or damage to cargo arising out of contracts of carriage subject to the Hague Rules or the Hague-Visby Rules

Within one year of delivery of the goods or of the date when they should have been delivered. This one-year period may be extended by the parties. Indemnity actions against a third party for such cargo claims may be brought even after the expiration of one year as prescribed by the lex fori.

Charter parties

Being a consensual agreement, these usually stipulate a shorter period than the normal six years, for example, within three months for the appointment of arbitrators.

Torts in general

Six years.

Contracts in general

Six years, with the exception of contracts under seal, for which the limitation period is 12 years.

58 May courts or arbitral tribunals extend the time limits?

As is often the case, a cargo claimant may be the endorsee of a bill of lading that incorporates appropriate clauses in effectual terms: a charter party; a particular statute that gives effect to the Hague Rules making it a ‘clause paramount’; and certain clauses, including arbitration clauses, of the ‘Centrocon’ charter party. In reality, it may be a charter-party chain. Thereby the cargo claim is subject to a one-year time limit.

The time limit for commencing arbitration proceedings is the same as for judicial proceedings; in a contract case, the relevant period is six years from the date of the breach if the relevant (eg, salvage) agreement, though it contains an arbitration clause, does not specify any special period within which an arbitration in respect of claims must be commenced. In many cases, where a contract contains an arbitration clause, that clause specifies a (special) time limit for commencing an arbitration that is much shorter than the statutory time limit that would otherwise be applicable.

The court has power to extend the time ‘previously fixed by agreement or by a previous [court] order’ for beginning arbitral proceedings. The court retains an overriding discretion. This provision is mandatory and its operation may not be excluded by agreement. One ground upon which the time limit can be extended relates to the conduct of the other party such as makes it ‘unjust to hold [the claimant] to the strict terms of the [time limitation] provision’. A standstill agreement, express or implied, justifies an application to extend.

When the claimant commences arbitration proceedings against the shipowners (respondents), it is open to the latter to contend that the claim is time barred under the Hague Rules (12 months). The claimant may then apply to the court: for a declaration that its claim against the respondent is not time barred; or alternatively, it may ask for an order under section 10 of the Arbitration Act that the time for commencing arbitration proceedings be extended. In exercising its discretion the court will consider: whether at the time of the commencement the claim was time-barred; if so, whether the claimant is entitled to invoke section 10; and if so, whether the discretion should be exercised in its favour.

Miscellaneous

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

By the Maritime Labour Convention 2006, in force internationally since 20 August 2013, all Singapore-flagged ships ordinarily engaged in commercial activities are required to comply with the Convention. Additionally, such ships of 500 GT and above which are engaged in international voyages must carry and maintain a maritime labour certificate and a declaration of maritime labour compliance. But ships below 500 GT need not be so certified, though they may at the request of their owners attain the Maritime Labour Convention certification.

60 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?

The scenarios in this situation are amenable to legal analysis through the doctrine of frustration. The possible applicability of the doctrine (‘frustrated adventure’ and ‘frustration of the commercial purpose’) depends on the true construction of the terms which are, in the shipping contract, to be read in the light of the nature of the contract and the surrounding circumstances when the contract was entered into. The court decides the issue ex post facto on the actual circumstances. If a consideration of the facts shows that the parties never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the shipping contract ceases to bind at that point.

By the basic principle of the law of contract, the prospect of a contract proving financially unprofitable, however certain the prospect may be, is not of itself prevention and is no ground for relief or release from the obligations of the contract. A shipowner, for instance, may have made an unwise bargain, or the shipping contract may have proved more expensive in performance than he or she had anticipated; but neither fact entitles him to claim that he or she is in a commercial sense prevented from carrying out his or her promise. The law says simply that if he or she has made what proves to be a bad bargain that is his or her misfortune, but that it does not afford him any excuse for non-performance; and that is because such a release would not be in accordance with the contract, correctly interpreted.

The question is whether the shipping contract which they made is, on its true construction, wide enough to apply to the new situation brought about by the adverse economic conditions (as opposed to, for instance, political conditions). It may also be relevant to consider whether the hire of a ship is a long-term tonnage, quantity or freight contract for a big volume. The supervention of, for example, emergency legislation requisitioning ships or shipbuilding materials may render the implementation of contracts illegal. But here, it is very difficult to formulate a condition, still more to imply it as a necessary, though unwritten, term of the contract, for example in regard to a change in the economic conditions affecting the profitability expected by either party. The supervening event must be such that the court will form the view that reasonable persons in the position of the parties would not have made that contract, or would not have made it without inserting another term, if they had known what was going to happen; that is to say, economic conditions of such a character and proportion that to hold the parties to their contract would be to impose upon them a new and different contract.

There may be included in the terms of the shipbuilding contract or charter party itself a stipulation that provides for the merely partial or temporary suspension of certain of the parties’ obligations, should some (economic) event so occur as to impede performance.

On these facts alone, where the performance of their contractual obligations is rendered more onerous, none of the afflicted parties in the various scenarios is entitled to relief by resorting to the doctrine of frustration. The shipping contract could not be said to be fundamentally or radically different. If a shipping contract for a long period (such as a long-term charter) or which otherwise involves a complex project (such as a shipbuilding contract) incorporates for example the ‘force majeure’ and ‘hardship’ clauses similar to those of the ICC publication, then the parties may adequately cover unforeseen eventualities such as credit restriction, or policies or restrictions of governments in the list of force majeure events.

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

No.

Update and trends

The MPA has introduced the Green Ship Programme to grant financial incentives to Singapore-flagged vessels that exceed the Energy Efficiency Design Index (EEDI) requirements of the International Maritime Organization. Vessels that exceed EEDI requirements have energy-efficient designs that reduce fuel consumption and carbon dioxide emissions. Vessels qualifying under the Green Ship Programme can enjoy a 50 per cent rebate on initial registration fees and a 20 per cent rebate on annual tonnage tax at the MPA. Such vessels can also qualify for the Green Ship of the Year Award, given out as part of the Singapore International Maritime Awards.

Haridass Ho & Partners

Ajaib Haridass

haridass@hhp.com.sg

Thomas Tan

thomas.tan@hhp.com.sg

V Hariharan

hariharan@hhp.com.sg

24 Raffles Place

No. 18-00 Clifford Centre

Singapore 048621

Tel: +65 6533 2323

Fax: +65 6533 7029

www.hhp.com.sg

South Africa

Tony Norton, Mike Tucker and Kate Pitman*

ENSafrica (Edward Nathan Sonnenbergs)

Newbuilding contracts

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

Usually shipbuilding contracts are negotiated on standard forms such as the SAJ form produced by the Shipbuilders’ Association of Japan and the AWES form produced by the Association of European Shipbuilders and Shiprepairers. South African law generally recognises freedom of contract and accordingly parties to a contract are entitled to vary the terms by agreement. However, the Ship Registration Act No. 58 of 1998 provides that a ship is ‘transferred by registration of a bill of sale in the prescribed form’ and, consequently, ownership can only be transferred at that time and in that manner if a vessel is to be registered.

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

There are no prescribed formalities for the validity of a refund guarantee. Care, however, should be taken to ensure that it is not structured as a suretyship, in which event the terms thereof must be embodied in a written document signed by or on behalf of the surety for it to be valid.

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

The court has discretion as to whether to grant a mandatory interdict or not. There are three requisites for the grant of a final interdict, all of which must be present: first, a clear right on the part of the applicant; second, an injury actually committed or reasonably apprehended; and third, an absence of any other satisfactory remedy available to the applicant. Being a drastic remedy from the yard’s point of view and in the court’s discretion, the court will not, in general, grant an interdict when the applicant can obtain adequate redress in some other form of ordinary relief. For that reason it is unlikely to order the building of the vessel but would be more likely to order the delivery of an already completed vessel.

4 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?

Section 61 of the Consumer Protection Act, No. 68 of 2008 imposes, subject to certain exceptions, liability for harm caused by or as a result of any defect, failure, hazard or unsafe goods, irrespective of whether the harm resulted from any fault on the part of the producer, importer, distributor or retailer, as the case may be. If, in a particular case, more than one person is liable, their liability is joint and several.

Product liability is also actionable under the South African equivalent of the tort of negligence (the lex Aquilia) and is subject to the principles of fault (intentional or negligent action or omission), causation and remoteness. In appropriate circumstances a purchaser from the original shipowner might be able to pursue a claim against a shipbuilder.

A claim in contract would only be available to the original shipowner who contracted with the shipbuilder, unless its rights under the shipbuilding contract were validly assigned to a third party.

Ship registration and mortgages

5 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?

The Ship Registration Act, No. 58 of 1998 provides for the registration of vessels on the South African Register.

In terms of the Act, vessels under construction are precluded from being registered on the South African register. However, it is arguable that once the vessel is ‘capable of navigation by water’ it will then meet the definition of a ‘ship’ as provided by the Act and be entitled to be registered.

6 Who may apply to register a ship in your jurisdiction?

The Act lists the categories of ships that are entitled to be registered on the South African register. These are:

• South African-owned ships (either wholly-owned by a South African national or owned as an undivided whole by three or more joint owners of whom the majority in number are South African nationals, or of which the majority of the 64 shares are owned by South African nationals as part or co-owners ‘in common’);

• small vessels, other than fishing vessels, that are:

• wholly-owned by South African residents or South African residents and South African nationals; or

• operated solely by South African residents or South African nationals or both such residents and such nationals; and

• ships on a bareboat charter to South African nationals.

The Act defines a South African national as:

• a citizen;

• a body corporate established with a place of business in South Africa;

• a trust controlled by a majority of South African nationals as trustees for a majority of South African beneficiaries; or

• the South African government.

7 What are the documentary requirements for registration?

In terms of the Ship Registration Regulations of 2002, the following documents must be provided to the registrar:

• an application for registration of the ship, made in writing;

• a description of the ship in accordance with the regulations;

• a description of the ownership of the ship;

• a copy of the charter party where the registration is necessitated by the bareboat charter to a South African national;

• a document establishing ownership and nationality;

• a written notice containing the name and address of the registered agent of the ship. This must be signed by both the agent and the owner; and

• evidence that the ship has been marked accordingly.

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

The Ship Registration Act No. 58 of 1998 prohibits dual registration unless the ship is owned by a South African national and it was acquired in terms of a judicially sanctioned sale or is bareboat chartered to a South African national and the written consent of the primary register has been obtained.

The Minister of Transport is empowered by the Act to make the necessary regulations regarding flagging out. However, these regulations have not yet been drafted or promulgated.

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

The Ship Registration Act No. 58 of 1998 established the South African Ship Registration Office, which is operated and maintained by the registrar of ships who is responsible for the maintenance of the Ships Register, subject to the directions of the South African Maritime Safety Authority (SAMSA).

The registrar is obliged to register all mortgages filed in the prescribed form and in the order of their lodgement. The details of the mortgage are entered by the registrar on the Ships Register. Where there is a prior registered mortgage, the registrar is required to obtain the prior registered mortgagee’s written consent before registering a subsequent mortgage.

Limitation of liability

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

South Africa is not a party to any of the Limitation Conventions. The South African tonnage limitation regime is embodied in sections 261 to 263 of the Merchant Act No. 57 of 1951. The provisions are modelled loosely on the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships 1957 as amended by the protocol amending that Convention of 1979.

The persons entitled to limit their liability include the owner of a vessel, any charterer, any person interested in or in possession of such ship, and a manager or operator of such ship. The provisions apply to any kind of vessel used in navigation by water, however propelled or moved.

In the event that the only damages incurred are for loss of life or personal injury, claims are limited to the rand equivalent of 206.67 special drawing rights (SDR) for each ton of the ship’s tonnage. In the event that the only damages incurred are for loss of or damage to property, claims are limited to the rand equivalent of 66.67 SDR for each ton of the ship’s tonnage. In the event that both types of damages are incurred, claims are limited to the rand equivalent of 206.67 SDR for each ton of the ship’s tonnage with claims in respect of loss of life and personal injury ranking ahead of property claims to the extent of 140 SDR for each ton of the ship’s tonnage and both types of loss of life and personal injury claims ranking equally with claims relating to property in respect of the balance of the fund.

Limitation probably does not apply to liability for the cost of wreck removal.

11 What is the procedure for establishing limitation?

The court has a wide discretion to give such directions as it deems fit with regard to the procedure in any claim for limitation, including the staying of any other proceedings and the conditions for the consideration of any such claim, which may include a condition that such amount as the court may order be paid to abide the result of the consideration of the said claim, or that the claimant be required to admit liability for all or any claims made against him or her, or any other condition that the court deems fit.

The appropriate method of dealing with limiting as against a number of claims appears to be by way of limitation action. Limitation may also be pleaded as a defence to a claim but this method of raising limitation will only establish the right to limit liability as against the claimant in that claim and not as against any other claimants. There is no need to establish a limitation fund when pleading limitation as a defence.

12 In what circumstances can the limit be broken?

Limitation can be broken in the event that the person seeking to limit is not able to show that the event that occurred was caused without its actual fault and privity. The South African courts have followed the later English decisions in holding that fault and privity on the part of management is sufficient to break limitation. The onus of proving a lack of fault and privity is on the person wishing to rely upon that exception.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

South Africa is not a signatory to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974. As a result of this, the liability of carriers is generally determined by the booking and passenger ticket terms and conditions. However, new consumer legislation, in the form of the Consumer Protection Act 68 of 2008, imposes significant limitations on this.

Port state control

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

South Africa is a party to the Indian Ocean Memorandum of Understanding (MoU) for Port State Control 1999 and carries out its port state control inspections with a view to advancing the objectives of that MoU which establishes an Indian Ocean Computerised Information System with the express purpose of sharing information derived from port state control inspection with other regional MoUs.

The SAMSA is the party responsible for exercising South Africa’s port state control obligations. Sections 7, 8 and 9 of the Merchant Shipping Act No. 57 of 1951 give the SAMSA’s proper officers and surveyors various rights of inspection of vessels and interrogation of their crews when, inter alia, within the ports of South Africa.

15 What sanctions may the port state control inspector impose?

Section 243 of the Merchant Shipping Act No. 57 of 1951 provides that if a proper officer has reason to believe that a ship at any port in the Republic is unseaworthy, he or she shall, whether or not the ship is registered in the Republic, detain her until he or she is satisfied that the ship is in a seaworthy state.

16 What is the appeal process against detention orders or fines?

In terms of section 274 of the Merchant Shipping Act No. 57 of 1951, if a surveyor who has inspected a vessel makes a statement in a report of an inspection with which the owner (or his or her agent) or the master of the vessel is dissatisfied, they may appeal to a court of survey established in terms of sections 275 to 279 of that Act. In addition, an act of a proper officer or surveyor would constitute an administrative act and be subject to review in terms of the Promotion of Administrative Justice Act No. 3 of 2000.

Classification societies

17 Which are the approved classification societies?

The South African government has not approved any classification societies. Any of the members of the International Association of Classification Societies Ltd are currently accepted by SAMSA for the purpose of the carrying out of surveys prior to registration.

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

The liability of classification societies in contract will depend entirely on the terms of the contract between the classification party and the other contracting party.

Claims against classification societies for negligent conduct (in delict in terms of the lex Aquilia, the South African equivalent of the tort of negligence) will be determined in terms of the general principles of the lex Aquilia subject to any agreement between the parties. To be liable, conduct must be wrongful and there must be fault (intentional or negligent conduct) causing damages.

Physical impact to persons or property is considered prima facie wrongful. However, conduct causing pure economic loss is not in itself, prima facie, wrongful unless other relevant factors favour liability. Similar considerations apply where the conduct concerned is in the nature of a statement or an omission.

For those reasons a categorical answer cannot be given concerning the liability of a classification society for negligent action, since it depends on all the facts of the case.

As to whether a classification society would be held liable to third parties in respect of their classification and certification duties, in most cases such duties would give rise to pure economic loss whether by way of a statement or otherwise. There is no authority in South Africa as to whether such duties would give rise to liability and it is unclear whether the factors that persuaded the House of Lords in Marc Rich & Co v Bishop Rock Marine (‘The Nicholas H’), 1995 2 Lloyds Rep 299 will persuade the South African courts or not.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Extensive wreck removal powers are conferred on SAMSA by the Wreck and Salvage Act No. 94 of 1996. In circumstances where a ship is ‘wrecked, stranded or in distress’ the Act provides, inter alia, that SAMSA:

may direct the master or owner of such ship, or both such master and such owner, either orally and in writing to move such ship to a place specified by [SAMSA] or to perform such acts in respect of such ship as may be specified by [SAMSA].

Wrecks situated within the jurisdiction of any South African port that is owned and operated by the National Ports Authority (NPA), are also governed by the provisions of the National Ports Act No. 12 of 2005. The NPA, ultimately through the harbour master’s office, has the authority to:

search for, raise, remove or destroy any sunken, stranded or abandoned vessel or wreck within the port limits, and recover the costs incurred in connection with such searching, raising, removal or destruction from the owner of the vessel or any other person who had the beneficial use of the vessel at the time it sank, became stranded or was abandoned

and to:

search for and remove any wreck or obstruction which may endanger the safety of any vessel entering or leaving the port, and recover the costs of such search and removal from the owner of the wreck or obstruction, or from any person responsible for the presence of such wreck or obstruction.

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

Collision

South Africa has not ratified the Unification of Certain Rules of Law with respect to Collisions between Vessels, 1910 but has incorporated certain concepts from it into the Merchant Shipping Act No. 57 of 1951. The International Regulations for Preventing Collisions at Sea, 1972, as amended, are enacted as an annex to the Merchant Shipping (Collision and Distress Signals) Regulations, 2005.

Salvage

The Wreck and Salvage Act No. 94 of 1996 has incorporated the International Convention on Salvage, 1989.

Pollution

The International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL), has been incorporated into South African domestic law, as has the Intervention Convention 1969 (including its 1973 protocol), both as South African Acts.

South Africa enacted the CLC limits of liability in 1971 into domestic legislation, but only much later, in June 2004, acceded to both the Fund Convention and the CLC and their updated limits; until recently, South Africa had failed to enact the required domestic legislation necessary to make these conventions and their updated limits part of national law.

However, South Africa now enjoys the protection of the compensation these conventions provide, following the enactment with effect from 31 May 2014 of the Merchant Shipping (Civil Liability Convention) Act and the Merchant Shipping (International Oil Pollution Compensation Fund) Act. These two acts complement the Merchant Shipping (International Oil Pollution Compensation Fund) Administration Act and the Merchant Shipping (International Oil Pollution Compensation Fund) Contribution Act, both of which came into effect on 1 May 2014.

21 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 is acceptable. Salvage services may be rendered by any person, although the services must be voluntary. In that respect it has been held that the harbour authority was entitled to a salvage reward in circumstances where harbour tugs were used for the operation, notwithstanding that the salved vessel was in danger and in close proximity to the port.

Ship arrest

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

South Africa is not a signatory to either the International Convention Relating to the Arrest of Seagoing Ships 1952 or the International Convention on the Arrest of Ships 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel may be arrested in circumstances where the claim is defined in the Admiralty Jurisdiction Regulation Act No. 105 of 1983, as amended (the Admiralty Act), as a maritime claim and the claimant is entitled to proceed in rem.

Section 1(1) of the Act defines the various maritime claims very widely and generally includes claims in the International Convention on the Arrest of Ships, 1999, as well as claims for, arising out of or relating to:

• any container and any agreement relating to any container;

• the rendering, by means of any aircraft, ship or other means, of services in connection with the carrying of persons or goods to or from a ship, or the provision of medical or other services to or in respect of the persons on being taken to or from a ship;

• the forfeiture of any ship or any goods carried therein or the restoration of any ship or any such goods forfeited;

• the limitation of liability of the owner of a ship or of any other person entitled to any similar limitation of liability;

• the distribution of a fund or any portion of a fund held or to be held by, or in accordance with the directions of, any court in the exercise of its admiralty jurisdiction, or any officer of any court exercising such jurisdiction;

• any judgment or arbitration award relating to a maritime claim, whether given or made in the Republic or elsewhere;

• wrongful or malicious proceedings;

• piracy, sabotage or terrorism relating to property mentioned in section 3(5), or to persons on any ship; and

• any other matter which by virtue of its nature or subject matter is a marine or maritime matter, the meaning of the expression ‘marine or maritime matter’ not being limited by reason of the matters set forth in the preceding paragraphs.

A claimant may bring in rem proceedings by arresting the ship, with or without its equipment, furniture, stores or bunkers; the whole or any part of the equipment, furniture, stores or bunkers; the whole or any part of the cargo; the freight; any container (if the claim arises out of or relates to the use of that container in or on a ship or the carriage of goods by sea or by water otherwise in that container) or a fund if that property is property against or in respect of which the claim lies in the following circumstances:

• where there is a maritime lien over the property to be arrested- section 3(4)(a). These are:

• seamen’s and the master’s wages;

• salvage;

• damage received by or done by a ship; and

• bottomry and respondentia bonds;

• where the present owner of the property against or in respect of which the claim lies and which is to be arrested would be liable to the claimant in an action in personam in respect of the cause of action concerned – section 3(4)(b);

• where the present bareboat charterer of the property against or in respect of which the claim lies and which is to be arrested would be liable to the claimant in an action in personam in respect of the cause of action concerned – section 3(4)(b) read with section 1(3); and

• by the arrest of an associated ship instead of the ship in respect of which the maritime claim arose (section 3(6) and (7)).

In terms of section 3(6) and (7) of the Admiralty Act associated ships may be arrested that are owned, at the time when the action is commenced:

• by the person who was the owner or charterer of the ship concerned at the time when the maritime claim arose;

• by a person who controlled the company that owned or chartered the ship concerned when the maritime claim arose;

• by a company that is controlled by a person who owned or chartered the ship concerned when the maritime claim arose; or

• by a company that is controlled by a person who controlled the company that owned or chartered the ship concerned, when the maritime claim arose.

In each case the association can only be established in the event of a claim against an owner, by tracing an association from the owner and in the event of a claim against a charterer, by tracing an association from the charterer.

In terms of section 3(7)(b)(ii) a person (natural or artificial) is deemed to control a company if it has the power, directly or indirectly, to control the company. Actual shareholding reflects the direct source of control over a company where voting rights are commensurate with shareholding. Indirect control can be exercised in a number of ways. For example, by a principal over a nominee shareholder or where ‘pyramiding’ takes place.

The test is factual and involves proof of the ability of the common component to steer the direction of the company. The onus is on the claimant to prove that on the balance of probabilities that is the case (Bocimar NV v Kotor Overseas Shipping Limited 1994 (2) SA 565 (AD)). Thus, if the evidence before the court is equally consistent with the power over the company or companies being in a source other than that alleged by the claimant and of such sources not being common the arrest will be set aside.

Allegations of common ownership or control that are not denied are sufficient to found an association as envisaged by the Act. Allegations of common ownership or control that are denied, but in respect of which no evidence is led to prove that denial, are sufficient to found an association as envisaged by the Act.

If it is not possible to obtain direct evidence of an association a claimant would then have to rely on circumstantial evidence to persuade a court that an association exists.

Circumstantial evidence that would generally assist in attempting to persuade a court that an association exists includes common directors and office bearers, published statements or financial results, shared addresses, financing documents, cross-mortgages, common signatories to important documents, fleet entries with P&I clubs, common managers or operators, and common ‘branding’.

24 What is the test for wrongful arrest?

Arresting ‘without reasonable and probable cause’ renders one liable in damages. The arrest will be wrongful if the arresting party did not have such information as would lead a reasonable person in its position to conclude that it was entitled to arrest or if the arresting party did not in fact believe that it was entitled to arrest.

25 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?

As no maritime lien is recognised for the supply of bunkers if there is no contract with the owners or demise charterer of the vessel, a supplier cannot proceed against a vessel in those circumstances.

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

The court has discretion as to whether to order that an arresting party provide security, but generally does not do so of its own accord. The owner of the arrested property may apply for security. Such application would have to establish prima facie proof of a claim and show a genuine and reasonable need for such security. Even then the court will weigh the strength of the claim against other relevant factors before ordering counter security. The amount ordered will generally be that proved by the owner of the arrested property in respect of its claim and first-class South African bank guarantees and International Group of P&I Clubs undertakings are acceptable security. Any other form of security will have to be negotiated between the parties or sanctioned by the court on application.

27 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?

Subject to what follows, the clamant is entitled to security in an amount determined on the basis of its reasonably arguable best case. The upper limit of security that can be ordered in an action for the arrest of maritime property is the value of the property arrested, while in an application for attachment, the security that can be claimed is the value of the claim. The court can, in terms of section 5(2)(d) of the Act, make an order for further property to be arrested or attached in order to provide additional security, and can, in appropriate circumstances, increase, reduce or discharge the security that is already in place. First-class South African bank guarantees and International Group of P&I Clubs undertakings constitute acceptable security.

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

The Sheriff of the High Court, who is entitled to recover the costs of maintenance from arresting parties.

29 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?

An arresting party may arrest for security for local or foreign proceedings in circumstances where it is able to satisfy the court on application:

• that it has a maritime claim enforceable by an action in rem against the property in question or against a ship of which the ship in question is an associated ship or that it has an action in personam against the owner of the property concerned;

• that it has a prima facie case in respect of such claim, which is prima facie enforceable in the nominated forum or forums of his or her choice and that the forum will exercise jurisdiction in the matter. In this regard it is incumbent upon the claimant to deal in the application for the arrest with the question of the court or courts in which it has brought or contemplates bringing proceedings and to nominate the forum or forums in respect of which it seeks the security; and

• that it has a genuine and reasonable need for security in respect of the claim. It will at least be expected of the claimant to allege and explain a need for security and to further allege that it has not already obtained security and that it cannot obtain such security in the other contemplated or pending arbitration or other proceedings.

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

Apart from the arrest for security for local or foreign proceedings a claimant is also entitled to commence local proceedings against a foreigner by way of an attachment of property owned by the alleged debtor to found or confirm jurisdiction against it. Property properly attached can only be released from attachment by the establishment of security to the value of the claim.

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

Section 5(5) of the Admiralty Jurisdiction Regulation Act, No. 105 of 1983 provides that:

(a) A court may in the exercise of its admiralty jurisdiction at any time on the application of any interested person or of its own motion–

(i) if it appears to the court to be necessary or desirable for the purpose of determining any maritime claim, or any defence to any such claim, which has been or may be brought before a court, arbitrator or referee in the Republic, make an order for the examination, testing or inspection by any person of any ship, cargo, documents or any other thing and for the taking of the evidence of any person;

(ii) in making an order in terms of subparagraph (i), make an order that any person who applied for such first-mentioned order shall be liable and give security for any costs or expenses, including those arising from any delay, occasioned by the application and the carrying into effect of any such order;

(iii) grant leave to any such person to apply for an order that any such costs or expenses be considered as part of the costs of the proceedings;

(iv) in exceptional circumstances, make such an order as is contemplated in subparagraph (i) with regard to a maritime claim which has been or may be brought before any court, arbitrator, referee or tribunal elsewhere than in the Republic, in which case subparagraphs (ii) and (iii) shall mutatis mutandis apply.

(b) The provisions of this Act shall not affect any privilege relating to any document in the possession of, or any communication to or the giving of any evidence by, any person.

Rule 14 of the Admiralty Rules details procedures in respect of those rights.

In the matter of Bouygues Offshore v M/T ‘Tigr’, her owners, master, crew and any party interested in her (unreported judgment, CPD, Case No. AC96/94, 5 July 1994) it was held that an applicant for relief under section 5(5) should satisfy the court that :

• it has a prima facie prospect of success in the main case;

• the evidence of which the gathering and preservation is sought might be of assistance to the court at the trial;

• the evidence is not reasonably available to the applicant from any other source; and

• there is a real apprehension that if the order is not granted the specific evidence sought may be lost, secreted or destroyed (see the Owner of the Cargo Lately Laden on Board the MV ‘Ioannis NK’ v the Master and Crew of the MV ‘Ioannis NK’ and others (unreported judgment, Western Cape High Court, Cape Town, Case No. AC66/2009, 26 August 2009)).

In the absence of special circumstances justifying a departure, the applicant may be required to provide security in an amount fixed by the registrar for the costs and expenses occasioned by the application and carrying into effect of the court’s order.

The court also held that applications for relief under section 5(5) should be approached by it with the same caution and restraint as it does with an application for analogous relief under its parochial jurisdiction.

Furthermore, if the proceedings for which the evidence is required are not proceedings to be heard in the Republic it will be necessary to demonstrate ‘exceptional circumstances’ before the order sought will be granted.

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

A claimant is entitled to attach bunkers to commence local proceedings against a foreign owner of those bunkers, or arrest such bunkers for security for local or foreign proceedings in the event that all the requirements for such arrest are able to be met (for which see 27).

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Any person with an interest may apply for the sale of a vessel that has been arrested or attached.

34 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?

An application for the sale of a vessel is made to the High Court (exercising its admiralty jurisdiction) on notice to all interested parties. The initial order is invariably to call all interested parties to show cause on a specified date in the future (the return day) why the vessel should not be sold and to suitably advertise that order. In the event that the court is satisfied that the sale should proceed, it will confirm the sale order on the return day. The sale usually takes place within a month to a month-and-a-half of the first application.

The sale can be by means of auction, private tender or treaty. The sale order ordinarily makes provision for:

• the conditions of sale;

• the proceeds of the sale to constitute a fund;

• the Registrar of the High Court to invest the fund in an interest-bearing account pending the distribution thereof;

• the appointment of a referee, usually an advocate (equivalent of a barrister) specialising in maritime law to receive and assess claims;

• the time periods within which claims are to be filed, objections raised and replies to objections lodged with the referee; and

• the referee to have the power to call for further documents and information relevant to the claims against the fund.

The sale costs vary depending on the value of the particular vessel concerned. However, the commission will vary around the following sliding scale:

• 3 per cent on the first US$500,000;

• 2.5 per cent on the second US$500,000;

• 2 per cent on the third US$500,000;

• 1.5 per cent on the fourth US$500,000;

• 1 per cent on the firth US$500,000; and

• 0.5 per cent thereafter.

After the sale claims, objections thereto and replies thereto, if any, are lodged with the referee, the referee assesses claims and furnishes a report to the court regarding his or her recommendations for ranking of claims and distribution of the fund. An interested creditor then applies for payment out in terms of that report as furnished or varied, in the event of disagreement with the report. Payment out of the fund is then effected in terms of the order made by the court.

It usually takes approximately six months to finalise the distribution of the fund from the date of the initial application for sale.

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

Section 11 of the Act determines the ranking of claims against a fund arising from the sale of maritime property. The court has no discretion to depart from this ranking. There are three queues. One for direct claims against the vessel sold, the second for sister-ship claims (that is, claims against a vessel owned by the same party against whom the claim lies) and the third is associated-ship claims. Within each queue the order is as follows:

• charges and costs associated with the sale of the vessel and the distribution of the proceeds thereof;

• claims for salvage and wreck removal;

• claims to a preference based on possession of the property by way of right of retention or otherwise that accrues before any of the following claims;

• claims that arose not earlier than one year before the commencement of proceedings to enforce the same, or before submission of proof thereof, and which are:

• claims in respect of the employment of the master or crew;

• claims in respect of port and harbour dues or any charge or levy imposed by SAMSA;

• claims in respect of loss of life or personal injury, whether occurring on land or on water, directly resulting from employment on a ship;

• claims in respect of loss of or damage to property;

• claims in respect of repairs, supply of goods or rendering of services to the ship;

• claims in respect of premiums owing under any policy of marine insurance; or

• claims in respect of P&I contributions;

• claims for mortgage, hypothecation or right of retention;

• claims in respect of a maritime lien; and

• any other maritime claim.

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

A judicial sale results in the purchaser obtaining clean title to the ship sold. Accordingly the judicial sale extinguishes all encumbrances, such as mortgages, maritime and possessory liens and all other maritime and other claims.

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

A judicial sale of a vessel in a foreign jurisdiction will be recognised on the basis of comity. Furthermore, the Ship Registration Act No. 58 of 1998 makes provision for the registration in South Africa of a ship sold in execution by a competent court, without a certificate of deletion from her previous register, where ‘all reasonable steps to secure termination of the ship’s registration in terms of the law of that other state have been unsuccessful’.

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

South Africa is not a signatory to this Convention.

Carriage of goods by sea and bills of lading

39 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 International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 1924, the Protocol of 1968 and the SDR Protocol, 1979 have not been ratified by South Africa. However, they have been incorporated into domestic legislation as a schedule to the Carriage of Goods by Sea Act No. 1 of 1986 (COGSA) and accordingly have force of law in South Africa in relation to and in connection with:

• the carriage of goods by sea in ships where the port of shipment is a port in the Republic;

• any bill of lading if the contract contained in or evidenced by it expressly provides that the Rules shall govern the contract;

• any receipt which is a non-negotiable document marked as such if the contract contained in it or evidenced by it or pursuant to which it is issued is a contract for the carriage of goods by sea which expressly provides that the Rules are to govern the contract as if the receipt were a bill of lading;

• deck cargo or live animals; and

• arguably, in the circumstances set out in article X of the Rules.

South Africa has ratified neither the Hamburg Rules nor the Rotterdam Rules.

40 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?

South Africa is neither a signatory of the International Carriage of Goods by Rail Convention, 1970 nor the Convention on the Contract for the International Carriage of Goods by Road, 1956.

UNCTAD/ICC Rules for Multimodal Transport Documents, 1992, can be incorporated into a contract of carriage by agreement between the parties.

Regarding the carriage of goods by air, South Africa has enacted the Carriage by Air Act No. 17 of 1946, which gives effect to the Warsaw Convention (Convention for the Unification of Certain Rules relating to International Carriage by Air, 1929, as amended by the Hague Protocol, 1955).

41 Who has title to sue on a bill of lading?

The Sea Transport Documents Act No. 65 of 2000 provides that a holder of a sea transport document (as defined and including a bill of lading) has title to sue on a bill of lading. The Act defines a holder of an original sea transport document as being a person in possession thereof or the person to whom the document was issued, the named consignee or a transferee.

42 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?

As a matter of South African law, the terms of a charter party can validly be incorporated into a bill of lading by reference, provided that there is a clear indication of such incorporation that appears legibly on the bill of lading. Ultimately, it is a question of contractual construction.

A South African court will usually apply English law to bill-of-lading disputes, either because of South Africa’s conflict-of-law provisions or because of the existence of a choice-of-law clause contained in the bill of lading. Accordingly, a South African court, in determining whether a jurisdiction or arbitration clause in a charter party whose provisions are incorporated in a bill of lading is binding on a third-party holder or endorsee of the bill, will enquire whether English law requirements are met, namely the existence of effective words of incorporation, and a description apt to describe the charter party clause sought to be incorporated that, if incorporated, is consistent with the remaining terms of the bill of lading.

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

The effectiveness of a demise clause will be determined by a consideration of the bill of lading as a whole, particularly any indications relating to the identity of the carrier and by whom the bill of lading has been signed and the mandate of that party. The House of Lords decision in the The Starsin will be persuasive.

44 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?

A South African court will recognise a contractual claim against the shipowner in circumstances where the bill of lading clearly provides that the owner is a co-carrier or the carrier is liable in tort or bailment.

The shipowner may be able to rely on the terms of the bill of lading notwithstanding that it is not the contractual carrier in circumstances where it is able to rely on the Himalaya clause in the bill of lading, circular indemnities in the bill of lading or bailment on terms arguments. As to whether any one or more of those will be effective will depend on the facts of the particular case. However, Himalaya clauses have been recognised and enforced in South Africa on a number of occasions.

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

South African law does not recognise a contractual deviation as voiding contractual rights. However, by the South African conflict-of-law rules, the rules that a court of England and Wales, including its private international law rules, would have applied as at 1 November 1983, apply to cargo claims in respect of goods carried into South Africa. As such, those rules may well apply in a particular case and serve to void contractual defences.

46 What liens can be exercised?

In terms of South African common law, a carrier, irrespective of the contractual terms, has a possessory lien over cargo, which is exercisable against all parties to the extent that the owner of the cargo has been enriched by the carriage (improvement) and exercisable against the contracting party for the full freight in respect of that cargo. Such liens are also available to a shipyard in respect of a vessel under build or repair.

Possessory liens can also be conferred by contractual agreement and the common law liens are usually extended by this device to cover not just freight in respect of the cargo concerned but other amounts due in respect of that and other cargoes. Such liens only operate between the contracting parties.

The lien on freight is not a possessory lien at all but a cession of freight or sub-freights due to the debtor by another to the creditor. Such a right is recognised in South African law if it has been contractually agreed.

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

A carrier is obliged to deliver cargo to the person entitled to it under the relevant bill of lading who presents an original version of the bill of lading. In circumstances where the cargo is delivered without production of a bill of lading, the carrier would be liable in damages for the value of the cargo. In the event that the bill of lading is not able to be presented it is usual for the carrier to take an indemnity from the party seeking delivery of the cargo.

48 What are the responsibilities and liabilities of the shipper?

In respect of shipments to which the Hague-Visby Rules are applicable the shipper is obliged to furnish accurate details of the cargo, specifying the ‘marks, number, quantity and weight’ of the cargo. By virtue of article III, Rule 5, the shipper ‘shall indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars’.

The shipper would also be subject to the primary obligation in terms of article IV, Rule 6 to disclose the nature of inflammable, explosive or dangerous goods.

The absolute undertaking under South African common law not to ship dangerous goods (interpreted broadly to include goods not necessarily inherently dangerous but also those posing a danger to the ship, crew or other cargoes) may have been displaced by article IV, Rule 3, but the shipper is always bound by the provisions of article IV, Rule 6.

Shipping emissions

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

No. South Africa has not yet ratified Annex VI of MARPOL and there is consequently no restriction on sulphur oxide and nitrogen oxide emissions.

50 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?

South Africa has not yet ratified Annex VI of MARPOL, nor has it introduced any sulphur restrictions for the fuel that may be used in domestic territorial waters.

While South Africa complies with the international requirements for the manufacturing and production of fuel, there are no regulatory and enforcement mechanisms to ensure that ships operating in South African waters use only low-sulphur fuel.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The High Court of South Africa in the exercise of its admiralty jurisdiction.

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

Service in arrest proceedings in rem is on the asset arrested, requiring no further service.

Service on a foreigner in proceedings in personam can only be made with the leave of the court on application. The court will detail the manner in which service is to occur and this varies depending on the circumstances.

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

The Arbitration Foundation of South Africa retains a maritime panel of arbitrators.

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

Legislation exists that governs the recognition and enforcement of foreign awards and judgments. However, this legislation is recognised as being deficient for various reasons. In practice, therefore, the common law rules in this respect are generally used.

The requirements for a foreign judgment or award to be recognised and enforced at common law are that the foreign court or tribunal have international jurisdiction (only residence and submission to the jurisdiction of the court or agreement to the tribunal concerned will afford international competence); the judgment or award is final and conclusive and has not become superannuated; its recognition and enforcement is not against public policy; and the judgment or award does not fall foul of the Protection of Businesses Act No. 99 of 1978.

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

Depending on the circumstances of the particular matter it may be possible to interdict the claimant from doing so.

56 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?

In the event of a claimant commencing admiralty proceedings in South Africa in breach of a jurisdiction clause it is open to the defendant to apply for a stay of those proceedings in favour of the agreed court or tribunal. The principles in The Eleftheria (1969) 2 All ER 641 (PDA) have been approved by the courts in that regard.

Limitation periods for liability

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

Under the Prescription Act No. 68 of 1969 the prescriptive period in South Africa in respect of breach of contract and delictual (tort) claims is three years from the time the debt is due. However, prescription does not run when the debtor is outside the country.

Specific prescription or time-bar periods are provided for particular types of claims. Of relevance are the one-year prescriptive period for cargo claims under the South African Carriage of Goods by Sea Act No. 1 of 1986, the two-year period of prescription for collision claims under section 344 of the Merchant Shipping Act No. 57 of 1951 and the two-year period in respect of claims for salvage in terms of the Wreck and Salvage Act No. 94 of 1996.

Time limits can be extended by agreement.

58 May courts or arbitral tribunals extend the time limits?

There is no provision for the court to extend the time limit under the Prescription Act No. 68 of 1969 and it generally may not do so under other provisions unless specifically permitted to do so. On that basis the court may in certain circumstances extend prescription for collision claims.

An arbitral tribunal may extend time limits in terms in an arbitration agreement, whether already lapsed or not, in terms of section 8 of the Arbitration Act No. 42 of 1965.

Miscellaneous

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

South Africa ratified the Maritime Labour Convention on 20 June 2013. However, it will only come into force on 20 June 2014. As such, it is not yet applicable in South Africa or to vessels flying the South African flag.

The Merchant Shipping (Consolidated Maritime Labour Convention) Regulations were published in 2007 for comment but have yet to come into force. An inter-disciplinary team has recently been tasked by the Department of Transport and the Department of Labour with making recommendations as to the implementation of the Convention.

60 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?

Generally, no. However, financially distressed South African companies may apply to be placed under business rescue, or seek a compromise with creditors. In the former, a general moratorium prevents claimants from instituting any potential action against the company.

The business rescue practitioner can, in certain circumstances, suspend or cancel the contract, either partially, conditionally, or in its entirety. In this instance, the only remedy available to the wronged party would be a damages claim. However, this would only occur if the business rescue fails, and the aggrieved party would then be ranked as an unsecured creditor on insolvency.

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

No.

* The authors wish to thank Jacqui Kaufmann, Cheri Young and Lisa Clarke of the ENS shipping department for their assistance with this chapter.

Tony Norton

tnorton@ensafrica.com

Mike Tucker

mtucker@ensafrica.com

Kate Pitman

kpitman@ensafrica.com

150 West Street

Sandton

2196 Johannesburg

South Africa

Tel: +27 11 269 7600

Fax: +27 11 269 7899

www.ensafrica.com

Spain

Marie Rogers, David Diez Ramos and Luis Alberto García Villar

Rogers & Co Abogados

Newbuilding contracts

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

The Law of Maritime Navigation 14/2014 (the Law), article 110, stipulates that title will pass on delivery, unless the parties agree to postpone passing of the title to a later moment in time.

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

There is no specific regulation of refund guarantees and the parties are free to negotiate. The shipbuilder should offer a first-class bank guarantee in sufficient sum and with a cut-off date to cover potential delays. The parties must agree in clear and unequivocal terms in what circumstances the guarantee can be called upon. Where the buyer finances the purchase through a loan, the guarantee must also allow for assignment of the benefit to the financier.

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

A Spanish court will not compel delivery to one party prior to hearing full arguments. Consequently, the buyer must await the provisional enforcement of the judgment at first instance to be able to compel the shipyard to deliver the vessel. In the meantime, the buyer can apply to the court to arrest the vessel as security.

4 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 buyer will have a claim for breach of contract against the shipyard where the vessel is defective and damage results. According to article 115 of the Law, the time limit to pursue such a claim is three years from the date of delivery of the vessel.

Otherwise, article 113 of the Law stipulates that the shipbuilder must rectify the defects in the vessel that were not otherwise manifest or could not have reasonably been appreciated at the time of the delivery, so long as the buyer protests such defects within a period of one year from the date of delivery. Article 113(3) stipulates that the shipbuilder will be liable for damages and loss, except where the parties have expressly agreed otherwise in the shipbuilding contract.

A third party purchasing the vessel from the original buyer will have a claim for breach of contract against the original buyer and a claim in tort against the shipyard.

A third party who is not a purchaser of the vessel has a claim in tort.

The General Law of Consumers and Users (Royal Legislative Decree 1/2007) governing product liability applies exclusively to protect consumers and could extend to the purchase of vessels by consumers.

Ship registration and mortgages

5 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?

Any vessel, ‘embarcación’ or naval artefact (as defined by articles 56–58 of the Law), irrespective of origin, tonnage or activity is eligible for registration.

There are two distinct registries: the administrative register, commonly known as the Maritime Register, and the commercial Register of Moveable Assets (Section for Vessels). The Maritime Register grants the licence of the vessel and is intended to maintain the identification and administrative control of Spanish vessels and ‘embarcaciones’. On the other hand, the Register of Moveable Assets records all acts and contracts relating to ownership and other proprietary rights in the vessel.

The Maritime Register is subdivided into the Ordinary Register and the Special Register of Vessels of the Canary Islands (REBECA). The REBECA offers more competitive labour and fiscal conditions. The Ordinary Register is universal for all national vessels irrespective of origin, tonnage or activity. The REBECA only applies to merchant vessels (not fishing vessels) of 100 GT or more.

In accordance with article 69 of the Law, all vessels, ‘embarcaciones’ and naval artefacts flagged in Spain must be registered in the Section for Vessels of the Register of Moveable Assets. Otherwise, at this time, inscription in this register is optional for state-owned vessels, ‘embarcaciones’ (including pleasure and racing yachts) and naval artefacts.

Vessels under construction can be registered in the Maritime Registry and the Register of Moveable Assets (Section for Vessels) but, according to the Law, if a vessel has a mortgage it must also be entered in a special book in the Register of Moveable Assets (Section for Vessels) relating exclusively to vessels under construction. Once construction is completed, the registration is transferred to the Book of Newbuildings.

6 Who may apply to register a ship in your jurisdiction?

Natural persons resident in Spain or legal entities duly domiciled in Spain and in the EEA, as long as a representative is appointed in Spain.

For the registration of vessels in the REBECA, the owning company must also be entered in the register, and for this purpose they must operate the vessel from the Canary Islands. Where they operate from another place in Spain or abroad, they must have a permanent representative in the Canary Islands.

The party registering the vessel must be the owner or bareboat charterer of the vessel.

Only the owners can enter the vessel on the Register of Moveable Assets (Section for Vessels).

7 What are the documentary requirements for registration?

The documents required will depend on whether the vessel is constructed in Spain or imported. For vessels constructed in Spain, the first step is the authorisation of construction followed by the registration of the vessel as a vessel under construction.

For imported vessels, the application must be made and accompanied by proof of ownership or bareboat charter, the certificate of deletion from the register of origin, proof of payment of customs duties and proof of the name of the vessel.

For imported vessels being registered in the REBECA, proof that the vessel complies with national and international safety regulations is also required.

There is a specific procedure for the flagging and registration of yachts that are 24 metres or less in length, imported or mass produced.

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

Article 91 of the Law prohibits dual registration and dual nationality.

In accordance with article 94 of the Law, where a Spanish vessel has been chartered by a resident outside Spain, authorisation can be obtained for it to be temporarily flagged in the place of residence of the charterer for the duration of the charter (the same is true in reverse for Spanish residents chartering foreign vessels) and for any other type of chartering contract that temporarily transfers possession of the vessel. The temporary flagging out must comply with the requirements of article 96 of the Law (among other things, the permission of the mortgagors must be obtained and duly noted on the Maritime Register and the corresponding certificates relating to mortgages from the foreign register of origin must be presented).

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

Article 65 of the Law provides that all mortgages, charges and encumbrances must be entered in the Register of Moveable Assets (Section for Vessels).

Article 68 states that the Register of Moveable Assets is maintained by the Ministry of Justice. The Register contains information relating to ownership and all charges and encumbrances, as well as information on debts (including concerning the mortgagor and mortgagee, date of constitution, amount and duration).

The Law brings an end to the duplication of information on the registers, although coordination and exchange of information between the registries continues.

Limitation of liability

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

The 1976 Convention on Limitation of Liability for Maritime Claims applies, as amended by its 1996 protocol. Article 1 of the 1976 Convention lists the parties that can limit their liability. Article 2(1) lists the maritime claims that can be limited in the amounts set out in the 1996 protocol. On ratifying the 1996 protocol, Spain reserved her right to exclude from the right to limit the claims covered by letters (d) and (e) of article 2(1), which relate to wreck and cargo removal.

The right to limit exists irrespective of whether the claims are contractual or in tort (article 396(2) of the Law), and irrespective of the applicable jurisdiction (whether civil, criminal, labour courts or administrative – article 393 of the Law).

11 What is the procedure for establishing limitation?

In order to exercise the right to limit, the corresponding limitation fund must be constituted in the amounts stipulated by the 1996 protocol to the 1976 Convention on Limitation of Liability for Maritime Claims, including legal interest accrued as from the date of the casualty giving rise to liability (article 403(1) of the Law). The limitation fund is constituted by depositing the corresponding sum at court or providing a bank guarantee granted by a financial entity authorised to operate in Spain (article 490(a) of the Law).

The right to constitute the limitation fund expires two years from the date on which the first claim is filed at court (article 405(2) of the Law). Each party that purports to rely on a right to limit must constitute the fund within a maximum of ten days from the initiation of the proceedings (article 488 of the Law).

The application for the constitution of the fund must be filed in writing by the lawyer and the procurator before the competent commercial court (article 487 of the Law). It must identify the facts relevant to the right to limitation and the following supporting documents must be presented with the application (article 490 of the Law):

• documentation proving a deposit in the court bank account of a sum equal to the maximum amount of the indemnity, or the provision of a bank guarantee issued by a financial entity authorised in Spain and granted in favour of the court;

• authenticated copy of the tonnage certificate;

• list of crew on board at the time of the casualty;

• where the limitation refers to claims for death or personal injury of passengers, a certificate confirming the number of passengers the vessel was authorised to carry;

• authenticated copy of the certificate of seaworthiness;

• certificate from the monetary organisation in relation to the conversion of SDRs into euros at the moment of constitution of the fund;

• document setting out the calculation of the limit; and

• list of creditors subject to limitation, stating their domicile, if known, the debt being pursued and the estimated quantum.

Once the application has been filed along with the corresponding documents, the judge will issue an order admitting the application and will declare the constitution of the fund without prejudice to the rights of the parties to challenge. If any of the criteria mentioned above are not met, the judge will grant a period of five days to rectify the application. The same right and time limit of five days is given where the calculation of the limit is incorrect.

12 In what circumstances can the limit be broken?

In accordance with the 1976 Convention on Limitation of Liability for Maritime Claims, the limit can be broken where it is proven that the loss resulted from a personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Since 31 December 2012 Spain has applied Regulation (EC) No. 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents, which harmonised the regime of liability and insurance for the carriage of passengers by sea based on the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the protocol of 2002 on the carriage of passengers and the IMO guidelines for implementation of the Athens Convention adopted in 2006.

The Regulation not only applies to international carriage, but also to carriage by sea within a single member state on board ships of classes A and B pursuant to Council Directive No. 98/18/EC of 17 March 1998 on safety rules and standards for passenger ships.

Spain is also a party to the Athens Convention.

Port state control

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

The Ministry of Public Works and Transport, specifically the Directorate General of the Merchant Marine, to which the corresponding harbour masters’ offices belong, carry out port state control functions through their teams of accredited inspectors.

15 What sanctions may the port state control inspector impose?

Where the inspection of a vessel reveals deficiencies in breach of Royal Legislative Decree No. 2/2011 of the State Ports and the Merchant Marine, the harbour master will open an administrative sanction file against the owner and the master (and in specific cases against the insurers).

An administrative sanction file is divided into two stages: the investigation of the facts, allegations and evidence; and the resolution or sanction. The first stage is conducted by the investigating officer of the Harbour Master’s Office, who then passes the completed investigation to the Directorate General of the Merchant Marine for resolution and imposition, where appropriate, of the corresponding sanction.

The potential sanction depends on the seriousness of the breach. Royal Legislative Decree No. 2/2011 of the State Ports and the Merchant Marine distinguishes between the following groups of sanctions:

• minor infringements up to €60,000;

• serious infringements up to €602,000; and

• very serious offences up to €3.005 million.

To obtain security for any potential sanction, the Harbour Master’s Office can detain the vessel until such time as the corresponding cash or bank guarantee is provided.

The Harbour Master’s Office will not authorise the departure of the vessel until such time as the deficiencies have been remedied. If certain repairs cannot be completed in the port, the Harbour Master’s Office can allow the vessel to sail to be repaired in another port or for scrapping.

16 What is the appeal process against detention orders or fines?

An appeal against the detention of the vessel can be lodged at the Directorate General of the Merchant Marine within a period of 30 working days.

Any sanction imposed by the Directorate General of the Merchant Marine can be appealed to the Ministry of Public Works and Transport within one month. Thereafter, the decision of the Ministry can be appealed to the administrative courts.

Classification societies

17 Which are the approved classification societies?

Article 101(2) of the Law stipulates that the maritime authorities can authorise recognised organisations to carry out inspections and, where appropriate, issue or renew the corresponding certificates, in accordance with the regulations.

Pursuant to Royal Decree No. 877/2011 of 24 June 2011 only three classification societies are authorised in the name of the Spanish state to carry out the functions of inspection, survey and certification of vessels flying the Spanish flag, namely:

• Bureau Veritas;

• the Korean Register of Shipping; and

• Registro Italiano Navale.

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

Article 106(2) of the Law stipulates that classification societies will be liable to the parties with whom they contract for damages and losses caused by breach of contract arising from a lack of due diligence in the inspection of the ship and issue of the certificate. Whether the classification society can rely on any standard terms exonerating or limiting liability will depend on the incorporation of those terms into the contract.

Article 106(3) of the Law stipulates that the liability of classification societies to third parties will be determined by the general law, understood to be article 1902 of the Spanish Civil Code, which in turn provides that a party who, as a result of an action or omission, causes damage to another by his or her fault or negligence shall be obliged to repair the damage caused. Such claims against classification societies have generally been very difficult to prove.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Yes. The port authority can order wreck removal in ports. In Spanish sovereign waters or jurisdiction, the harbour master will order wreck removal.

Where a party fails to obey an order to remove a wreck, the relevant Spanish authority can undertake the wreck removal and will pass the costs of doing so on to the registered owner and operator, as well as their underwriters.

In accordance with Spain’s ratification of the 1996 protocol to the 1976 Convention on Limitation of Liability for Maritime Claims, there is no right to limit liability for wreck removal.

The relevant Spanish authority has a maritime lien and, where necessary, can sell the vessel to cover the costs of all expenses incurred.

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

Spain is a party to the following international conventions:

Collision

• The 1910 Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels;

• 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; and

• the 1972 Convention on the International Regulations for Preventing Collisions at Sea.

Salvage

• The 1989 International Convention on Salvage.

Pollution Liability

• The 1992 International Convention on Civil Liability for Oil Pollution Damage;

• the 1992 International Oil Pollution Compensation Fund;

• the Oil Pollution Supplementary Fund Protocol 2003; and

• the 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage.

Others

• The 1969 International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties and its 1973 Protocol;

• the 1972 Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter and its 1996 Protocol;

• the 1973/78 MARPOL Convention and its Annexes I to VI;

• the 1974 Convention on land-based sources of marine pollution and its 1986 Protocol.

• the 1976 Convention for the Protection of the Marine Environment and the Coastal Region of the Mediterranean and its Protocols.

• the 1990 International Convention on Oil Pollution Preparedness, Response and Co-operation and its 2000 Protocol; and

• the 1992 Convention for the Protection of the Marine Environment of the North-East Atlantic.

21 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. The Lloyd’s standard form is acceptable.

In those cases where assistance has been provided to the vessel without first having agreed the remuneration, the Law offers the parties the possibility to bring their dispute before the Council of Maritime Arbitration and the auditors of maritime arbitrations, both operating under the Ministry of Defence. The commercial courts have jurisdiction over disputes arising from remuneration for salvage in those cases where the parties do not agree to submit their dispute to the Council of Maritime Arbitration.

Salvage operations can be undertaken by any person or entity with the resources to carry out the operations at sea (such as tugs, auxiliary vessels and booms) and from the coast.

Ship arrest

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

Spain has ratified the 1999 International Convention on the Arrest of Ships. In accordance with article 473(3) of the Law, the rules of the Convention apply irrespective of the flag.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel can only be arrested in Spain in accordance with the 1999 Convention on the Arrest of Ships, article 1. Further, a Spanish vessel can be arrested for additional claims or rights not listed in that article where the claims or rights have been caused by the owner of the vessel and the claimant is a person habitually resident in Spain, or the right of action has been acquired through an assignment of rights or subrogation. In addition, Spanish vessels can be arrested by the Spanish administration pursuant to the corresponding administrative law rules.

Foreign vessels flying a flag belonging to a contracting state of the 1999 Convention can only be arrested for those claims listed in the Convention. On the other hand, vessels belonging to a state that is not a party to the 1999 Convention can be arrested for any type of claim.

It is possible to arrest an associated ship in accordance with article 3(2) of the 1999 Convention on the Arrest of Ships.

24 What is the test for wrongful arrest?

An arrest will be deemed wrongful and set aside if it is not in accordance with the 1999 Convention on the Arrest of Ships, the underlying substantive action fails on the merits, or the underlying substantive action is not commenced within the time limit fixed by the Spanish court in the arrest order.

25 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. The 1999 Convention on the Arrest of Vessels only allows an arrest of a vessel for a claim not caused by the owner or demise charterer where that claim is also a maritime lien.

However, since the 1993 Convention on Maritime Liens and Mortgages does not list the supply of bunkers as a maritime lien, the vessel can only be arrested where the law of the flag recognises as a lien a right to arrest bunkers and the strict requirements of the 1993 Convention, article 6 are complied with.

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

Yes. The security can be provided in any form permitted by law (eg, cash, bank guarantee, insurance bond).

The amount of the security must cover the likely damages and losses as well as the costs that could arise from the arrest. The amount of the security is at the discretion of the judge, but article 472(2) of the Law provides that security cannot be ordered for less than 15 per cent of the amount claimed. The security must be lodged at court and only then will the court serve the arrest warrant.

The amount of security can subsequently be changed ex oficio by the court or at the request of either party, based on the freights and size of the vessel, the expenses incurred as a result of its detention in port, the daily market rate, whether it is part of liner traffic, whether or not it is loaded with cargo and contractual obligations.

27 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?

The arrested party will be ordered to provide counter-security of the principal sum pleaded in the writ of arrest. The arresting party can also request an increase of 30 per cent to cover interest and the costs of arrest. The arrested party can request a review of the sum of counter-security ordered. The counter-security must be provided by way of cash, Spanish bank guarantee or insurance bond.

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

The owner of the vessel.

29 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?

The Spanish courts have jurisdiction over the underlying substantive proceedings, unless the parties have agreed otherwise.

In any event, the claimant must ratify the arrest by submitting proof to the Spanish court that proceedings on the underlying substantive action have been commenced in the competent jurisdiction within the time limit fixed at the discretion of the Spanish judge, but usually within a period of 30 days up to a maximum of 90 days. If the claimant fails to meet this deadline, the Spanish court, at the request of the arrested party, will release the vessel or return any counter-security and declare the arrest wrongful.

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

Yes. The Law of Civil Procedure 1/2000 allows the adoption of precautionary measures, whether by way of arrest or injunction, in order to ‘ensure the effective judicial protection that could be given for a favourable judgment.’ This Law would apply to any attempt at pre-judgment arrest, whether of property, cargo or bank accounts, among other things. The application can be made prior to filing the writ of claim, subject to proving urgency.

However, there are two strict prerequisites:

• fumus bonus iuris – the claimant must demonstrate, prima facie, a legitimate claim; and

• periculum in mora – the claimant must demonstrate that there is a serious risk that, if such action is not taken before the judgment, the ultimate enforcement of the judgment will be rendered impossible or ineffective. In practice this is a heavy burden to prove.

In extreme circumstances, it is possible to make an ex parte application; otherwise the court will serve notice on the defendant before taking a decision.

The judge will usually seek security from the applicant of an amount at the discretion of the court, taking into consideration the particular facts of the case.

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

Orders of preservation of evidence are available. The Law of Civil Procedure 1/2000 provides a special system to safeguard evidence prior to and during litigation, at the request of one of the parties and always under the control of the court. However, as stated in question 3, the courts will not force delivery of property in dispute before rendering judgment.

In addition, there are rules in relation to deposits and the recognition and judicial sale of goods, as well as for the delivery of cargo and the recovery of freight by way of legal proceedings for collection.

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

There is no specific procedure for the arrest of bunkers, and such an arrest would be conducted in accordance with the precautionary measures established in the Law of Civil Procedure 1/2000 (see question 30).

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The mortgagee bank as well as any other persons who hold a favourable judgment or arbitration award confirming the existence of a valid and enforceable maritime lien or a claim against the owner of the vessel.

34 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?

The judicial sale of the vessel is governed by the 1993 International Convention on Maritime Liens and Mortgages, the Law of Maritime Navigation 14/2014 and, in default of these two regulations, by the Law of Civil Procedure 1/2000 for the auction of moveable goods subject to public registration.

The procedure starts with an application made by a creditor to the corresponding commercial court for the enforcement of the judgment or right against the vessel. The court will appoint an expert to value the vessel and request from the flag state a copy of the registration in order to identify all mortgages and other encumbrances.

Before proceeding to the judicial sale of the vessel, the court will serve written notice of the sale, with at least 30 days’ warning, on the following persons or entities:

• the competent authority in charge of the registration of the vessel;

• the owner of the vessel;

• holders of registered mortgages and charges; and

• holders of maritime liens recognised by the 1993 International Convention on Maritime Liens and Mortgages, article 4, so long as the judge has been duly notified of the existence of these liens and mortgages.

The holders of maritime liens and mortgages can appear in the enforcement proceedings and pursue claims of better entitlement.

Following compliance with the corresponding formalities, the vessel is auctioned to the highest bidder. Where there are disputes between creditors at the time of the sale, the funds raised in the sale are held in a judicial bank account pending judicial resolution of the dispute. Only the sum that is required to cover the dispute is retained by the court, such that any excess is paid to the creditor who instigated the sale proceedings.

It can take up to eight months to complete a judicial sale of a vessel. Disputes between creditors will result in delays pending judicial resolution.

The expenses recoverable in the judicial sale are:

• the legal fees of the lawyers and procurators for the enforcement;

• the fees of the judicial expert retained to value the vessel; and

• the costs and expenses incurred in the arrest proceedings and the subsequent judicial sale.

The amount of costs will depend on the circumstances of each case, as well as the value of the enforcement and whether or not there are claims of better entitlement, among others.

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

The order of priority is as follows:

• costs and expenses incurred in the arrest proceedings and the enforcement of the sale, which include, inter alia, the expenses of conservation of the vessel and maintenance of the crew, as well as wages and other sums, and the expenses referred to in the 1993 International Convention on Maritime Liens and Mortgages, article 4(1)(a), incurred from the moment of the arrest or from the commencement of the enforcement;

• expenses incurred by the state in removing the vessel;

• maritime liens as listed in the 1993 Convention;

• liens for builders and repairers of the vessel who have a right of retention;

• registered mortgages and encumbrances; and

• liens as provided by domestic law, so long as they are in accordance with and comply with the formalities of the 1993 Convention.

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

As long as the judicial sale has complied with the formalities of the 1993 International Convention on Maritime Liens and Mortgages, all the registered mortgages, charges, liens and encumbrances of whatever kind (save for those that the buyer has voluntarily accepted) will be removed from the vessel.

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

Yes, as long as the 1993 International Convention on Maritime Liens and Mortgages has been complied with.

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

Yes.

Carriage of goods by sea and bills of lading

39 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?

Article 277(2) of the Law provides that, in respect of contracts for the carriage of goods by sea, whether domestic or international, the rights under the bill of lading and the liability of the carrier will be governed by the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, signed in Brussels on 25 August 1924, the protocols that modify these rules to which Spain is a party, and by the Law of Maritime Navigation 14/2014. In this respect, Spain did not ratify the 1968 Hague-Visby Rules, but they were indirectly endorsed through Spain’s ratification of the 1979 protocol.

Spain is the only EU state to have ratified the Rotterdam Rules. The Rotterdam Rules do not contain any specific regulation on when sea carriage begins and ends, but article 26 implies that carriage begins once the cargo is loaded onboard the vessel and ends when it is discharged ashore. Article 14 states that the sea carrier, prima facie, assumes the obligations of, among others, loading and stowage.

40 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?

Domestic carriage

• By road: Law 15/2009 of the Contract of Carriage of Goods by Land limits liability for the year 2013 at €5.91 per kilogram of cargo damaged or lost;

• by rail: (same as by road, above);

• by air: Law 48/1960 on Air Transport, as updated in accordance with Royal Decree 37/2001, provides limits of liability of 17 SDR per kilogram of cargo damaged or lost;

• multimodal: article 209 of the Law stipulates that, where the contract of carriage consists of stages of transport other than by sea, those stages will be regulated by any specific rules of mandatory application to that form of carriage. Therefore, the ‘network’ system is applied, as occurs with liability under Law 15/2009 on the Contract of Carriage of Goods by Land.

International carriage

• By road: the 1956 Convention on the Contract for the International Carriage of Goods by Road;

• by rail: Appendix B of the Uniform Rules Concerning the Contract for International Carriage of Goods by Rail of the 1980 Convention Concerning the International Carriage by Rail;

• by air:

• the 1929 Convention for the Unification of Certain Rules relating to International Carriage by Air signed in Warsaw as amended by the Hague Protocol 1955 and Montreal Protocols 1, 2 and 4; and

• the 1999 Convention for the Unification of Certain Rules for International Carriage by Air, Montreal 1999; and

• multimodal: article 209 of the Law applies the ‘network’ liability regime to international multimodal carriage.

41 Who has title to sue on a bill of lading?

• The named consignee – or his or her assigns by way of endorsement;

• the endorsee of a ‘to-order bill’; and

• the holder of a bearer bill of lading (rare).

42 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?

In general, the charter party terms can be incorporated into the bill of lading through a clear and unequivocal incorporation clause, the validity of which will depend on the scope of said clause as well as compatibility with the terms of the bill of lading.

In general, and in accordance with articles 251 and 468 of the Law, for a choice of jurisdiction or arbitration clause to be considered binding on a third-party holder of a bill of lading, it must have been accepted by the third party in an ‘individual and separate’ manner.

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

No – in accordance with the Law, the issuer of the bill of lading will always and in all circumstances be considered to be the contractual carrier.

44 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?

Article 278 of the Law states that the shipowning carrier will be considered as the actual carrier and, thus, will be liable for all damage and loss to the cargo during carriage.

The carrier’s liability regime under the new law applies to all rights of action for damage, loss or delays during the sea carriage and will also apply to the shipowning carrier.

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

The carrier will be liable for the damage and losses that occur as a result of any deviation from the agreed route, deviation from the most appropriate route in accordance with the circumstances, save where such deviation is carried out to save human life or for any other reasonable and justified cause, so long as it is unconnected with the seaworthiness of the vessel.

46 What liens can be exercised?

Against the vessel

• The liens listed in the 1993 International Convention on Maritime Liens and Mortgages;

• the liens exercised by the Spanish authorities in relation to wreck removal;

• the right of the salvor to retain the vessel under its control pending provision in their favour of sufficient security to cover the reward claimed; and

• the right to retain the vessel of the holders of maritime liens relating to the construction, repair or reconstruction of the vessel.

Against the cargo

The Law permits the following liens against the cargo:

• the right of the salvor to retain cargo salvaged and under their control, save in situations where sufficient security has been granted in favour of the salvor for the sum of the reward claimed;

• the right of the owner of the salvaged vessel to retain the cargo pending provision of sufficient security by the cargo interests to cover any award due;

• the right of the owner to retain the cargo carried until such time as those interested in the voyage have provided a guarantee to contribute to the general average;

• the right of the port handling operator to retain the cargo in its possession pending payment of the price due for the services provided;

• the right of the carrier to retain the cargo in its possession pending receipt of the freight, demurrage or other expenses incurred during the voyage;

• the right of the time charterer to retain the cargo pending payment of the freight, demurrage and other expenses incurred during the voyage; and

• the right of retention of luggage by the carrier pending payment for the voyage.

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

In accordance with article 252(2) of the Law, the carrier has unlimited liability towards the rightful holder of the bill of lading for the value of the cargo at the port of destination.

48 What are the responsibilities and liabilities of the shipper?

The Law provides that the shipper is liable in the following circumstances:

• where the goods shipped are different to those contracted and the carrier has not been notified, the shipper will be liable for all damage and loss incurred as a result to the carrier and any other cargo interests;

• where the goods shipped are dangerous and the prior consent of the carrier has not been obtained, or where not declared and labelled in accordance with applicable rules, the shipper will be liable for any resulting damage towards the carrier and all other cargo interests; and

• in general terms, article 260 of the Law grants the carrier a right of action to demand compensation for damage and losses arising from any inaccuracy in the remarks or declarations relating to the cargo presented for carriage or the condition of that cargo.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

No.

50 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 the sulphur content of fuel oil in Spanish territorial waters, its exclusive economic zone and its sulphur emissions control area is 1.5 per cent m/m. For vessels in Spanish ports, the maximum permitted sulphur content of fuel oil is 0.1 per cent m/m.

The Spanish harbour master enforces the regulatory requirements through port state control inspections of the engine room log, fuel oil log and fuel delivery notes.

Sanctions for non-compliance will depend on the sulphur level found, but can result in administrative sanction proceedings and even criminal proceedings in more serious cases.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The commercial courts have jurisdiction over civil claims arising from the application of transport and shipping regulations.

Further, the Law provides for the intervention of Spanish notary publics in the handling of the following files (voluntary jurisdiction):

• sea protest;

• general average;

• deposit and sale of cargo and luggage;

• loss, removal or destruction of the bill of lading; and

• transfer of commercial effects that have been altered or damaged

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

Service of court proceedings are carried out by a Spanish court. The claimant must provide details in the writ of claim in relation to the domicile of the defendant for the purpose of service.

If the defendant is domiciled in the EU, Council Regulation (EC) No. 1393/2007 will apply.

If the defendant is domiciled elsewhere then it will be necessary to identify whether the defendant’s country of domicile is party to any international conventions to which Spain is also a party. Spain is party to the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

In the absence of any relevant international conventions, service is conducted in accordance with the Law of Civil Procedure 1/2000, whereby the claimant requests the Spanish civil court to send the writ of claim and supporting documents (with a translation if necessary) to the Spanish Ministry of Justice, which in turn will send the documents to the corresponding public agency in the defendant’s country of domicile.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

No.

54 What rules govern recognition and enforcement of foreign judgments and awards?

Judgments

For judgments rendered in the EU, Council Regulation (EC) No. 44/2001 will apply.

Otherwise it will be necessary to determine whether the judgment was rendered in a state party to the 1988 Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, to which Spain is a contracting state.

If neither of the above apply, then it will be necessary to determine whether any specific bilateral convention exists between Spain and the state in which the judgment was rendered.

If there is no bilateral agreement with Spain, then the 1881 Law of Civil Procedure will apply, which stipulates a single process for the authorisation of the foreign judgment to have legal effect in Spain, without distinguishing between recognition and enforcement. Otherwise, the recognition of the judgment will be subject to reciprocity or compliance with a list of both substantive requirements and formalities.

Arbitral awards

In the absence of an international convention to which Spain is a party that sets out a more favourable regime for the recognition and enforcement of arbitral awards, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards will apply.

Spain is a party to the 1961 European Convention on International Commercial Arbitration.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

No remedies are available in Spain. The defendant must appear before the foreign court to challenge the jurisdiction in accordance with the relevant procedural rules and time limits of that court.

If the defendant ignores the foreign proceedings, and a judgment is rendered in default against the defendant, then the defendant may be unable to oppose subsequent recognition and enforcement in Spain based on the lack of jurisdiction of the foreign court that rendered that judgment in default.

56 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?

A defendant can challenge the jurisdiction of the Spanish court by filing a motion to contest jurisdiction within a period of 10 days from the date of service of the writ of claim on the defendant. The motion suspends the 20-day time limit for filing a defence on the substantive claim. Pending resolution of the motion, a defendant must take no steps at court that could imply submission to the jurisdiction.

If the defendant successfully challenges the jurisdiction of the Spanish court, the claimant has a right of appeal to the Appeal Court. In the meantime, the proceedings on the main action remain stayed pending a ruling by the Appeal Court.

If the defendant fails in the challenge to the jurisdiction, then the stay of proceedings is lifted and the defendant has a minimum period of 10 days in which to file a defence against the substantive claim. There is no right of appeal on the issue of jurisdiction until the court of first instance has rendered judgment.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

Contract

Where the contract or Spanish law does not stipulate otherwise for the specific contract type, the time limit is 15 years.

Tort

For damage and personal injury, the time limit is one year from the date of the damage or, in the case of personal injury, one year from the date of full recovery.

The general time limit for both contract and tort can be extended for further periods on an annual basis by correspondence with all potential defendants, so long as there is proof of delivery or receipt of said correspondence.

The parties are also free to agree extensions.

However, where the law stipulates a time limit, then such time limit prevails over the general rules referred to above.

Examples of time limits for different claims

• Right of action arising from a breach of a shipbuilding contract: three years from the date of delivery;

• right of action arising from a failure to pay the purchase price for a newbuilding: three years from the date provided in the contract or, in the absence of such a date, from the date of delivery (these time limits for shipbuilding contracts can also be applied to ship repair contracts or naval remodelling);

• right of action arising from a mortgage: three years from the date on which the right could be exercised;

• right of action arising from the charter of a vessel: one year from the date of termination of the charter party or the return of the vessel;

• right of action arising from a charter party or under a bill of lading: one year;

• right of action arising from a contract to carry passengers: two years

• right of action from a towage contract: one year;

• right of action arising from the charter of a yacht: one year from the date of the termination of the contract or disembarkation of the charterer and crew, if later;

• right to recover by the contractual carrier against the actual carrier: one year;

• right of action arising from handling of cargo at port: two years;

• right of action arising from a collision: two years; and

• right to demand a contribution to general average: one year from the termination of the voyage in which the relevant casualty occurred.

While the parties are free to agree extensions in relation to the above-listed claims, not all of these claims can be extended by proof of correspondence and may need to be protected by litigation or arbitration in the competent jurisdiction.

58 May courts or arbitral tribunals extend the time limits?

No. Only the parties can extend time limits.

The filing of proceedings at the competent court or commencement of arbitration proceedings in the appropriate jurisdiction will protect the time limit.

There are a number of specific situations in which the legal rules allow the claimants to apply for a conciliation hearing, which has the effect of extending the time limit.

There is no conciliation procedure for arbitration.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

On 22 January 2013 Spain ratified the 2006 Maritime Labour Convention, which entered into force on 20 August 2013. Article 104 of the Law stipulates that the maritime authorities will ensure compliance with the Maritime Labour Convention. The competent authority in Spain is the Directorate General of the Merchant Marine. The port state control inspectors will ensure compliance with the Convention in relation to visiting foreign vessels.

In relation to the application of the Maritime Labour Convention 2006 to vessels flying the Spanish flag, on 18 April 2013 the Directorate General of the Merchant Marine clarified the categories of persons who are not to be considered ‘seafarers’ for the purpose of the Convention (including port workers, stevedores, pilots, vessel surveyors and shipbuilders) and also the types of vessels not to be included in the Convention (including fishing vessels, certain categories of recreational craft, artisanal or traditional craft, and state vessels), as well as listing the vessels that are prima facie exempt (including tugs, bunker supply vessels, dredgers, pontoons, port-cleaning vessels and supply vessels) where those vessels do not operate outside the port zones.

60 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?

In principal, in extreme cases the Spanish Supreme Court can apply the rebus sic stantibus rule whereby the court will try to re-establish the contractual balance in cases where there are proven extraordinary and disproportionate prevailing circumstances.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

No.

Spain

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1999.

For what types of claim can a ship be arrested?

Those listed in article 1 of the Arrest Convention.

In addition, a Spanish vessel can be arrested where the damage giving rise to the claim has been caused by the owner of the vessel and the arresting party is resident in Spain, has its principal place of business there, or has acquired the claim via an assignment of rights or subrogation. Spanish vessels can also be arrested by the Spanish authorities in accordance with administrative law regulations.

Foreign vessels flagged in a contracting state to the 1999 Arrest Convention can only be arrested in accordance with that convention, whilst those vessels flagged in a non-contracting state can be arrested for any claims.

How quickly can an arrest be effected and what, in summary, is the procedure?

Generally, the arrest warrant can be obtained in one morning. The warrant is not served until the judge is satisfied that the arresting party has lodged the counter-security fixed by the court.

The procedure is as follows: the claimant files a writ of arrest and the court grants the arrest subject to the provision of counter-security. Once the counter-security is in place, the court will send the arrest warrant to the port authorities to arrest and detain the vessel.

What are the associated costs and expenses of a ship arrest?

The fees are calculated in accordance with the Law Society Fee Guidelines relevant for the local jurisdiction. Those fees are calculated in accordance with the claimed amount.

A procurator must also be instructed and will charge separately.

How do you effect a release of the vessel?

By application to the court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, under article 3(1)(b) of the 1999 Arrest Convention.

Can a time-chartered vessel be arrested in respect of a claim against a time-charterer?

Only when the maritime claim also qualifies as a maritime lien under Spanish law.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes, pursuant to article 3(2) of the 1999 Arrest Convention.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes. The counter-security can be provided in any form allowed by law (eg, cash, Spanish bank guarantee, insurance bond). The amount fixed by the judge must take into consideration likely damages and losses as well as the costs arising from the arrest. The amount required is at the discretion of the judge but the minimum cannot be less than 15 per cent of the amount claimed for the arrest.

What claims give rise to maritime liens in your country?

Those listed in article 4 of the 1993 International Convention on Maritime Liens and Mortgages. In addition, and so long as they comply with article 6 of said Convention, those liens that are recognised in the general law or specific Spanish laws or by the law of the flag state of the foreign vessel.

How soon must the arresting party start proceedings on merits after the arrest?

The time limit is at the discretion of the arresting court judge and will depend on whether the claim on the substantive action is to be pursued in Spain or elsewhere. Where the proceedings on the substantive action will be pursued outside Spain, the judge can establish a period of 30 to 90 days. Where those proceedings will be conducted in Spain, the time limit will be set at a minimum of 20 days, though this time limit can subsequently be extended.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. An arrest is wrongful when it is not in strict compliance with the 1999 Arrest Convention, when it is not ratified by proof of proceedings on the merits, having been commenced in the competent jurisdiction within the time period fixed by the arrest order, or when the writ of claim in the main action fails. The shipowner can seek damages to the extent that those damages can be proven.

Update and trends

On 25 September 2014, the Law of Maritime Navigation 14/2014 will come into force in Spain. This ambitious project has been over 10 years in the making and is intended not only to update Spanish shipping law and bring it into the 21st century, incorporating all the international treaties to which Spain is a party along the way, but there are also a number of changes that take Spain in a different direction to other international trends, in an effort to streamline shipping law with domestic priorities.

It will be interesting to see if the Spanish judges endorse the vision of the legislator, but what is clear is that, as with all things new, it will take some time to break in this new law and embrace the changes.

Rogers & Co Abogados

Marie Rogers

marie@rogersco.es

David Diez Ramos

ddr@rogersco.es

Luis Alberto García Villar

lag@rogersco.es

Calle Francisco Silvela 7

Escalera 1ª Bajo B

28028 Madrid

Spain

Tel: +34 914 016 091

Fax: +34 914 017 062

rogers@rogersco.es

www.rogersco.es

Switzerland

Alexander Blarer and Anton Vucurovic

Bratschi Wiederkehr & Buob

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Swiss law does not provide a specific shipbuilding contract.

A shipbuilding contract is considered as an innominate contract, including elements of a sale contract (article 187 et seq of the Swiss Code of Obligations (CO)) and a work contract (article 363 et seq of the CO).

Generally, ownership only passes if there is a valid legal act transferring the ownership (article 714 of the Swiss Civil Code (CC)). In other words, without other agreement among the parties, title will pass on delivery.

Once the vessel has been registered in the Swiss Register of Ships, ownership will only pass upon registration (article 31 of the Federal Law on Vessel Registry (the Registry Law), and 37.1 of the Federal Law on Shipping Under the Swiss Flag (the Navigation Act).

2 What formalities need to be complied with for the refund guarantee to be valid?

Under Swiss law, there are no specific formalities to be complied with for a refund guarantee to be valid.

It is, however, always important for the parties to properly draft the refund guarantee to ascertain its significance. Particular concern shall be taken to differentiate a non-accessory, abstract guarantee from an accessory surety bond.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

The shipyard has a contractual obligation to transfer the ownership upon the agreed date of delivery. If the yard fails to comply with this obligation, the purchaser can either claim delivery of the vessel or rescind the contract.

The shipyard is liable for any damage resulting from a delay in the delivery of the vessel.

4 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 shipbuilder will be contractually liable against the first owner for any damage resulting from defects in the vessel.

If the vessel is sold to a third party, the original shipowner can be held liable for any defect according to the contract.

Third parties may have grounds for an action in tort based on article 41 CO or based on the Swiss Product Liability Act (which is consistent with EC Directive 85/374).

Ship registration and mortgages

5 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?

According to article 17 of the Navigation Act, seagoing vessels may be entered into the Swiss Register of Ships only if they are used for or intended for the commercial conveyance of persons or goods or for other commercial activity at sea. Yachts can also be entered in the Swiss register.

It is not possible to register vessels under construction under the Swiss flag.

In some cases, ships used for philanthropic, humanitarian, scientific or cultural purposes can also be entered into the Swiss Register. This requires approval from the Federal Department of Foreign Affairs.

6 Who may apply to register a ship in your jurisdiction?

To be entered into the Swiss Register of Ships, a seagoing vessel must fulfil the requirements of the Navigation Act and of the Navigation Ordinance:

Residence and domicile

The following persons must be domiciled or resident in Switzerland:

• the owner of a sole proprietorship;

• three-quarters of the partners or other members of a general or limited partnership or of a limited liability company, who must also hold more than three-quarters of the invested capital or shares of the registered capital;

• the shareholders of a stock corporation holding the majority of the share capital as well as two-thirds of the voting rights; and

• two-thirds of the members of a cooperative, who must also hold two-thirds of the cooperative capital on the basis of participation certificates.

Nationality and control

The above-mentioned natural persons must be Swiss nationals.

Entities that participate in the business of the Swiss shipowner in the capacity of partners, limited partners, shareholders, cooperative members and management, must also be Swiss nationals.

Administration and management

Two-thirds of the members of the board and management of a stock corporation, a limited partnership, a limited liability company or a cooperative society must be Swiss nationals. The majority must be Swiss residents.

Financial resources

The shipowner must finance at least 20 per cent of the book value of the ships registered under his or her name. The shipowner must disclose the origin of the funds. Borrowed funds shall not have an adverse effect on the Swiss influence in the business and foreign creditors must accept immediate repayment of the debt upon the request of the Swiss Maritime Navigation Office.

7 What are the documentary requirements for registration?

According to article 7 of the Navigation Ordinance, the following documents must be enclosed with the application:

• the certificate of conformity, the certificate of registration for maritime navigation and the approval of the name issued for the ship to be registered by the Swiss Maritime Navigation Office, as well as the certificate of ownership;

• evidence that the seagoing vessel, if it was already entered into the register of another country, has been deleted from this register or that this deletion will take place upon registration in the Swiss Register of Ships;

• a written declaration that the owner has not applied and will not apply for his or her ship to be entered in the register of another country; and

• evidence that there are no contractual liens on the seagoing vessel or if there are, that the lien holder consents to the entering of the lien in Swiss currency in the Swiss Register of Ships and to the claims being made subject to Swiss law and, if the lien holder is a foreign national, that this lien is permitted in accordance with article 5d, paragraph 4 of the Navigation Ordinance (the certificate of financing and obligation of repayment on request of the Swiss Maritime Navigation Office).

8 Is dual registration and flagging out possible and what is the procedure?

Dual Registration is not possible in Switzerland.

9 Who maintains the register of mortgages and what information does it contain?

Mortgages are maintained by the Swiss Register of Ships.

The Register contains principally information with regard to ownership, mortgages and usufruct (article 26 of the Registry Law). Additional information can be added (eg, bareboat charters and charter parties).

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The Convention on Limitation of Liability for Maritime Claims 1976 (LLMC) has been in force in Switzerland since 1 April 1988 (article 49 of the Navigation Act). Under the Convention, the parties entitled to limit their liability include owners, charterers, managers, operators and salvors (article 1 of the LLMC).

For damages relating to oil pollution, article 49 of the Navigation Act refers to the International Convention on Civil Liability for Oil Pollution Damage 1969.

In the event of loss or destruction of the goods, the liability of the carrier is limited to the value of the goods at the place of destination on the day the vessel should have discharged the cargo according to the freight contract (article 105.1 of the Navigation Act).

In case of partial destruction, damage or delay, the carrier shall be required to pay only the amount of the reduction in value of the goods without further damages (but in no case more than in the event of total loss (article 105.1 of the Navigation Act)).

Except in cases of fault or gross negligence, the liability of the carrier shall in any case be limited to:

• 666.67 SDR for each item or each unit transported; or

• 2 SDR for each gross weight kilogram of goods (article 105.3 and 105a of the Navigation Act and article 44 of the Navigation Ordinance).

11 What is the procedure for establishing limitation?

According to article 45 et seq of the Navigation Ordinance, the liability of the shipowner can be limited by establishing a limitation fund.

The procedure can be summarised as follows:

• the shipowner shall apply to the court, indicating, among other things, the amount of the liability and the creditors in respect of whom he or she wishes to rely on the limitation of liability;

• provided that the prerequisites for liability limitation have been established prima facie, the court shall immediately order the opening of the proceedings and appoint a trustee who shall inform all creditors;

• creditors can register their claims within 60 days and also apply to the court for increase of the liability fund; and

• finally, the funds are distributed to the creditors according to the collocation plan.

The shipowner has to deposit the amount of the fund with the cantonal deposit authority and the shipowner has to bear all costs of the proceedings including the costs of the trustee.

12 In what circumstances can the limit be broken?

The limitation does not apply if it is proven that the carrier or its employees have caused the damage by acting or neglecting to act with intent to cause the damage or recklessly, with the awareness that the damage would be likely to occur (articles 48 and 105a of the Navigation Act).

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, was ratified by Switzerland in 1987 and entered into force in 1988.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

Switzerland does not have a centralised port state control agency and is not a party to the Paris Memorandum on Port State Control of 1982 (Paris MoU).

15 What sanctions may the port state control inspector impose?

As Switzerland does not have a centralised port state control agency, this question is not applicable to this jurisdiction (see question 14).

16 What is the appeal process against detention orders or fines?

As Switzerland does not have a centralised port state control agency, this question is not applicable to this jurisdiction (see question 14).

Classification societies

17 Which are the approved classification societies?

The classification societies currently approved by the Swiss Maritime Navigation Office are the following:

• Lloyd’s Register of Shipping;

• Germanischer Lloyd;

• Det Norske Veritas;

• Bureau Veritas;

• the American Bureau of Shipping; and

• Nippon Kaiji Kyokai.

18 In what circumstances can a classification society be held liable, if at all?

A classification society can be held liable under contract and in tort. It can also be criminally liable.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The Swiss Maritime Navigation Office can order an owner to remove the wreck.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

The following conventions are in force in Switzerland:

Collision

• The 1910 International Convention for the Unification of Certain Rules of Law Related to Collision Between Vessels (23 September 1910); and

• the Convention on the International Regulations for Preventing Collisions at Sea (20 October 1972).

Salvage

• The International Convention for the Unification of Certain Rules of Law relating to Assistance and Salvages at Sea (23 September 1910); and

• the International Convention on Salvage (28 April 1989).

Pollution

• The International Convention of 12 May 1954 for the Prevention of Pollution of the Sea by Oil;

• the International Convention of 2 November 1973 for the Prevention of Pollution from Ships, as modified by the 1978 protocol;

• the International Convention of 30 November 1990 on Oil Pollution Preparedness, Response and Co-Operation;

• the International Convention of 29 November 1969 relating to Intervention on the High Seas in Cases of Oil Pollution Casualties (with the 1976 protocol);

• the International Convention of 29 November 1969 on Civil Liability for Oil Pollution Damage and with the related protocols of 19 November 1976 and 27 November 1992; and

• the Fund Convention of 27 November 1992.

21 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. Lloyd’s standard form is acceptable.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

Switzerland is a party to the International Convention Relating to the Arrest of Seagoing Ships of 19 May 1952.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Based on Swiss national law, a vessel can be arrested for any claim.

An arrest based on the Arrest Convention can be executed only with regard to maritime claims as defined in article 1 of the 1952 Convention.

In principle, a sister ship can only be arrested if the same person or entity owns it.

24 What is the test for wrongful arrest?

An arrest is considered to be wrongful if no claim existed or if the conditions for an arrest were not met. The test is therefore purely objective depending only on the ultimate failure of the claim.

25 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 Swiss law, a bunker supplier can only proceed against the contractual party. In other words, a bunker supplier will only be allowed to arrest a vessel if it has a claim against the shipowner (article 271, Federal Law on Debt Collection and Bankruptcy (SchKG)).

26 Will the arresting party have to provide security and in what form and amount?

The arresting party may be obliged to provide a security for the arrest (article 273 SchKG). The amount is fixed by the judge based on the probability of the existence of the claim and the possible damages of a wrongful arrest.

27 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?

The amount of the claim and the importance of the arrested goods (ie, the vessel) to the debtor are to be taken into consideration. Upon request, the judge may review the security during the arrest proceedings and adjust it to new circumstances. The security can be made as a deposit or as a security of equal value (ie, a security bond or bank guarantee).

28 Who is responsible for the maintenance of the vessel while under arrest?

According to article 57 of the Registry Law, if a vessel is arrested, the certificate of registration is to be deposited with the responsible debt enforcement office, and the master has to follow its instructions. The debt enforcement office is responsible for maintenance of the vessel while it is under arrest.

29 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?

The arresting party may pursue the claim on its merits before a competent court outside Switzerland.

The arrest will remain in force only if the decision of the foreign court can be recognised in Switzerland.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

No.

31 Are orders for delivery up or preservation of evidence or property available?

The debtor is obliged to provide information regarding the objects covered by the arrest. There is no explicit order to deliver or preserve evidence or property available.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

Under Swiss law, it is not possible to arrest bunkers independently of the vessel.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Parties of debt enforcement proceedings under Swiss law can apply for judicial sale of the vessel.

34 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?

According to article 54 of the Registry Law, the enforcement proceedings for vessels follow the procedure for the enforcement proceedings for real estate set out in SchKG, mutatis mutandis. The request for realisation of the asset can be lodged with the debt enforcement office at the earliest one month after the seizure and at the latest one year after the seizure (article 58 of the Registry Law). According to article 133 et seq of SchKG, the debt enforcement shall conclude the judicial sale within three months from the application for realisation. The costs for the judicial sale are 2 per cent of the vessel’s value.

35 What is the order of priority of claims against the proceeds of sale?

Pursuant to article 38.1 of the Navigation Act, the order of priority is the following:

• maritime claims listed in the 1926 International Convention for the Unification of Certain Rules of Law relating to Maritime Liens and Mortgages;

• ship mortgages; and

• other claims.

36 What are the legal effects or consequences of judicial sale of a vessel?

Maritime liens (statutory liens) cease to exist upon the forced sale of a seagoing vessel (article 38.2 Navigation Act).

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

The judicial sale of a vessel in a foreign jurisdiction will be recognised under the conditions of article 25 et seq of the Swiss Private International Law Statute (PILS).

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

No, Switzerland is not a party to the International Convention on Maritime Liens and Mortgages 1993.

Carriage of goods by sea and bills of lading

39 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?

Switzerland has ratified the Hague-Visby Rules but not the Hamburg Rules. The Rules are not directly applicable in Switzerland but have been included in the national legislation (part five, section four of the Navigation Act).

Switzerland did not ratify the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules).

According to article 208 of the Navigation Act, the carrier shall receive the goods at the port of loading under the hoisting device of the ship and deliver them to the consignee in the same manner at the port of unloading.

40 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?

The following conventions are in force in Switzerland:

• the Convention of 19 May 1956 on the Contract for the International Carriage of Goods by Road and the protocols 1978 and 2008;

• the Convention of 9 May 1980 concerning the International Carriage of Goods by Rail, with protocols 1990 and 1999; and

• the Convention of 28 May 1999 for the Unification of Certain Rules for International Carriage by Air.

41 Who has title to sue on a bill of lading?

The lawful holder of the bill of lading has title to sue.

Bills of lading are documents of title in terms of article 925 of the Swiss Civil Code (article 116 of the Navigation Act). The bill of lading is the decisive document with regard to the legal relationship between the carrier and the consignee of the goods.

Obviously, the charter party, not the bill of lading, is decisive with regard to the legal relationship between the carrier and the shipper. In this respect, the provisions of the bill of lading shall be deemed to be the contractual intent unless derogations are agreed upon in writing (article 115 of the Navigation Act).

42 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 extent to which the terms of the charter party can be incorporated into the bill of lading depend on the construction of the clause. It can generally be held that freedom of contract shall apply and terms in a charter party can be incorporated into the bill of lading as long as they do not violate compulsory statutory provisions (article 117 of the Navigation Act).

Whether a mere incorporation of a reference to the charter party in the bill of lading will be sufficient to render a jurisdiction or arbitration clause binding on a third-party holder will depend on the facts of the specific case. The Swiss Supreme Court has already given effect to an arbitration clause in a charter party, the terms of which were incorporated in the bill of lading. On the facts of the case, the Court held that the parties were professional shipping companies and were supposed to know the content of the Asbatankvoy arbitration clause.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

Whether a demise clause or identity of carrier clause will be recognised as binding under Swiss Law is primarily a question of contractual interpretation of the terms of the bill of lading as a whole.

In this regard, the following points need to be considered:

• the name and domicile of the carrier must be included on the bill of lading (article 114.2.a of the Navigation Act);

• a bill of lading signed by the master is primarily an owner’s bill of lading. Unless the master states that he or she has issued the bill expressly in the name of the charterers, both owners and charterers may remain liable jointly and severally (article 96.2 and 3 of the Navigation Act).

44 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?

Generally, only the carrier is liable under the bill of lading. The shipowner can be jointly and severally liable with the charterers (carrier) when the master did not expressly issue the bill of lading in the name of the charterers (article 96.2 and 3 of the Navigation Act).

In addition, according to article 48 of the Navigation Act, the shipowner shall be liable for any loss or damage caused to a third party by a crew member, a pilot or any other person working on board the seagoing vessel in the exercise of his or her duties, unless he or she demonstrates that such person was not at fault.

45 What is the effect of deviation from a vessel’s route on contractual defences?

Article 104.2(l) of the Navigation Act incorporates both articles IV (2)(l) and IV(4) of the Hague Rules, and holds that the carrier shall not be liable for loss resulting from saving or attempting to save life or property at sea nor for loss resulting from other justified deviation.

46 What liens can be exercised?

The lien on cargo is possessory and will apply following the general conditions of article 895 et seq, CC.

A lien on freight or sub-freight could be exercised in accordance with the proceeding rules of the Federal Law on Debt Collection and Bankruptcy, namely, by seizure of claims.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

A carrier that delivers the cargo without production of the bills of lading is liable towards the authorised holder of the bill of lading for any damage that may result.

A limitation of the carrier’s liability will be null and void (article 117.1 of the Navigation Act).

A properly drafted letter of indemnity by the consignee or the charterers will be requested by the carrier to allow discharge without presentation of bills of lading.

48 What are the responsibilities and liabilities of the shipper?

According to article 106.1 of the Navigation Act, which partly implements article III(5) of the Hague-Visby Rules, the shipper shall be deemed to have guaranteed to the carrier the accuracy of the dimensions; the number and weight; the markings required for the identification of the goods; and the nature and condition of the goods.

The shipper shall indemnify the carrier for any loss or damages resulting from inaccuracies as to the goods, even if he or she is not responsible for the loss or damage, and shall be liable to the other cargo owners if he or she is at fault with regard to the loss or damage.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

No emission control areas are in force in Switzerland.

50 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?

There is no such cap applicable in Switzerland.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Basle is the competent place of jurisdiction for actions in rem with respect to a vessel entered in the Swiss Register of Ships.

With regard to Swiss vessels, Basle is also the subsidiary place of jurisdiction for actions in tort and for other civil claims, ie, if no other court in Switzerland has jurisdiction.

Basle is also the competent place of jurisdiction for actions in connection with proceedings to limit the liability.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

The defendant must be formally served in compliance with all applicable rules, such as The Hague Conventions on the Service of Judicial Documents Abroad.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

Switzerland does not yet have an arbitral tribunal specialised in maritime arbitration. However, the Swiss Rules do not impose a panel of arbitrators, so that competent experts from Switzerland or abroad can be appointed. These can be lawyers or professionals from the shipping industry.

54 What rules govern recognition and enforcement of foreign judgments and awards?

The recognition and enforcement of foreign judgments and awards is governed either by the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 2007 or by the Swiss Private International Law Statute.

Switzerland is also party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

There is no remedy in respect to countries that are signatories of the Lugano Convention.

Judgments from countries that are not signatories of the Lugano Convention can only be recognised and enforced if the foreign court had jurisdiction over the defendant pursuant to the rules set out in the PILS.

56 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 challenge the jurisdiction before the domestic court. If the defendant can present a valid agreement on a foreign place of jurisdiction or arbitration or if the legal provisions regarding the place of jurisdiction refer to another jurisdiction, the court will declare itself incompetent.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

Time limits will depend of the nature of the claim.

Generally, claims for breach of contract are time-barred after a period of 10 years (article 127 of the CO).

According to article 87 of the Navigation Act, claims arising out of a bareboat charter, a charter party and a freight contract shall be time-barred one year after termination of the contract or one year after the date on which the goods were delivered or should have been delivered, respectively.

Claims resulting from general average shall be time-barred after a period of two years (article 124.1 of the Navigation Act).

Except where the Criminal Code provides a longer period, actions in tort are time-barred one year from the date of knowledge but in any case not later than 10 years from the date on which the cause of action occurred.

Except for the limitations pursuant to article 127 et seq, CO, the limitation periods can be altered by contract.

58 May courts or arbitral tribunals extend the time limits?

No. Courts and arbitral tribunals do not have the competence to extend the time limits.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

The Maritime Labour Convention of 23 February 2006 was approved in Switzerland and is due to enter into force on 20 August 2013.

60 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?

Generally, a change in economic circumstances cannot relieve a party from its contractual obligations.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

Switzerland’s only access to the sea is the Rhine. The most important seaports for Switzerland are Rotterdam, Amsterdam, Antwerp and Hamburg.

The Navigation Ordinance contains extensive provisions regarding employment law at sea.

Alexander Blarer

alexander.blarer@bratschi-law.ch

Anton Vucurovic

anton.vucurovic@bratschi-law.ch

Av. Mon-Repos 14

1005 Lausanne

Switzerland

Tel: +41 58 258 17 00

Fax: +41 58 258 17 99

www.bratschi-law.ch

Thailand

Alan Polivnick and Tossaporn Sumpiputtanadacha

Watson, Farley & Williams

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Title is normally transferred upon delivery but the parties can agree that title will pass at a different stage of construction. The parties to the shipbuilding agreement usually agree to deliver the vessel upon payment of the final instalment.

If there is no agreement as to when title will be transferred, the Civil and Commercial Code (CCC) will require the shipbuilder to transfer the title of the vessel to the shipowner within a reasonable time. The builder is entitled to withhold the transfer of title to the shipowner if the shipowner fails to make the contractual payments.

2 What formalities need to be complied with for the refund guarantee to be valid?

The shipbuilder’s bank will usually issue the guarantee, with each bank having its own requirements and formalities. There is no prescribed information required to be included in a guarantee, nor any requirement for it to be registered.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

The shipowner can seek specific performance to compel delivery of the vessel in accordance with the shipbuilding contract. If specific performance is ordered and the yard fails to comply, its directors and representatives can be arrested. However, Thai courts generally only grant specific performance in exceptional circumstances.

4 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 shipowner can claim in contract against the builder for damages resulting from a defective or damaged vessel. Similarly, the purchaser can claim against the seller pursuant to the sale contract.

Claims for product liability are largely governed by Thai consumer protection laws. Provided the party suffering the damage can fall within the broad definition of a consumer as defined in the product liability laws, they will be entitled to pursue a claim. This can also include third parties who have suffered damage.

Ship registration and mortgages

5 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?

• Motor vessels of 10 GT or more;

• seagoing vessels, other than motor vessels, of 20 GT and upwards; and

• river vessels, other than motor vessels, of 50 GT and upwards.

For fishing vessels:

• a motor vessel of any size; and

• a vessel, other than a motor vessel, of 6 GT and upwards.

Thai law does not allow the shipowner to register a vessel under the Thai flag while it is still under construction.

6 Who may apply to register a ship in your jurisdiction?

• A natural person of Thai nationality;

• an ordinary partnership whose partnership consists entirely of natural Thai persons;

• a state enterprise under the Budget Procedures Act, 1959; and

• a corporate entity established under Thai law as follows:

• a registered ordinary partnership whose partnership consists entirely of natural Thai persons;

• a limited partnership of which all partners with unlimited liability are natural Thai persons and of which not less than seventy per cent of the capital is owned by Thais;

• a limited company of which not less than one-half of the directors are Thai and not less than seventy per cent of the registered capital shares are owned by persons who are Thai, and that has no regulation to issue bearer share certificates; or

• a public limited company of which not less than one-half of the directors are Thai and not less than 70 per cent of its paid-up capital shares are owned by persons who are Thai For the purpose of this section, the definitions of ‘Thai’ and ‘foreigner’ are as defined in the Foreign Business Act.

7 What are the documentary requirements for registration?

To own a Thai vessel that trades in Thai waters, the shipowning company must be Thai-owned and controlled.

For a private limited company, the majority of the directors must be Thai nationals, no bearer share certificates can be issued, and a minimum of 70 per cent of the share capital must be issued to Thai nationals.

For a public limited company, the majority of directors must be Thai nationals and not less than 70 per cent of the share capital must be issued to Thai nationals.

However, if a company wishes to own a Thai vessel for international marine transport and she will not operate in Thai waters, the majority of the directors must be Thai nationals and a minimum of 51 per cent of the share capital must be issued to Thai nationals.

A limited company may not issue bearer share certificates.

8 Is dual registration and flagging out possible and what is the procedure?

No, it is not possible to have dual registration and flagging out in Thailand.

9 Who maintains the register of mortgages and what information does it contain?

The Marine Department maintains the register of mortgages. Information on the mortgage is kept together with the vessel registration records. The mortgage information includes the name and details of the parties to the mortgage, the amount being secured by the mortgage, the registration records along with a record of the vessel’s mortgage history and the mortgage agreement.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

Thailand is not a party to the 1957 and 1976 Limitation Conventions; as a result, tonnage and global limitations are not applicable in Thailand. Damage caused by a vessel, including pollution, injury or death to persons on board, salvage, wreck removal, and damage to third-party property is governed by the provisions of the CCC in respect of a ‘wrongful act’, for which no specific limitation is provided. However, the CCC allows the shipowner or the person who controls the operation of the vessel to rely on force majeure, the fault of the injured person or justifiable acts to deny or limit their liability.

The limitation of liability for the carriage of cargo by sea is contained in the Thai Carriage of Goods by Sea Act, 1991 (COGSA 1991). Although Thailand is not a signatory to the Geneva Convention, Hamburg Rules, Hague-Visby Rules, Hague Rules or the Brussels Protocols, those conventions have provided sources for and thus influenced Thai legislation in this area.

The carrier is presumed by law to be liable for the loss, damage and delay in delivery of the cargo. COGSA 1991 sets out a number of exceptions, which largely mirror the Hague-Visby Rules.

Provided that the carrier can prove that he or she performed everything a carrier should do as a person who is a carrier of cargo by sea; that everything that someone in that occupation would normally and reasonably be required to do; and that if any deficiency occurs after the cargo has been loaded on board or after the vessel has sailed, and the carrier has taken such measures to remedy that deficiency as soon as possible, the carrier will not be liable for loss, damage or delay in delivery arising from non-conformity with the following:

• making the vessel safe and seaworthy for the route;

• properly manning, equipping and supplying the vessel; and

• making the holds, the refrigeration, the cold rooms and all other parts in which cargo are loaded, fit and safe for the reception, carriage and preservation of the cargo.

The carrier will not be liable for loss, damage or delay in delivery resulting from his or her taking measures that could reasonably be required of him to put out fire and to avoid or to mitigate the consequences thereof, unless such loss is proved to have resulted from a fault or neglect by the carrier, his or her servants or agents in taking such measures.

The carrier will not be liable for loss, damage or delay in delivery if the carrier proves that such loss, damage or delay in delivery resulted from taking measures to save human life or from taking reasonable measures to save property whilst at sea, except in the case of general average, if applicable, in which case the carrier retains a proportionate liability.

For the carriage of live animals, the carrier will not be liable for loss, damage or delay in delivery resulting from any special risks usually inherent in the carriage of live animals, or from the special nature of the animals, provided that the carrier proves that: he or she has complied with instructions relating to those particular animals, and in particular any special instructions given to him by the shipper; and in the circumstances of the case, the loss, damage or delay in delivery could be attributed to those risks or to the nature of that animal.

However, this will not apply if it is proven that the loss, damage or delay in delivery, whether in whole or in part, resulted from a fault or neglect on the part of the carrier, his or her servants or agents.

If the cargo carried is coins, banknotes, bills (notes), bonds, share certificates, debentures, warrants, jewellery or other valuables, the carrier will not be liable for loss or damage to such cargo, unless the shipper has declared to the carrier the nature and value of such cargo at the time of handing them over to the carrier. Where the value of the cargo has been declared, the carrier will not be liable for more than the declared value.

Pursuant to section 58 of COGSA 1991, damages resulting from loss or damage to all or part of the cargo are limited to 10,000 baht per package or 30 baht per kilogram of net weight of the cargo, whichever is greater. However, if the actual loss is less than 10,000 baht per package or 30 baht per kilogram, the carrier will be liable for the actual loss.

The carrier’s liability for damages for delay is limited to two-and-a-half times the value of the freight payable for the delayed cargo but not exceeding the total freight payable under the contract.

The party whose liability is limited under COGSA 1991 is the ‘carrier’, which the Act defines as a person who is the carrier of cargo by sea for remuneration in his or her ordinary course of trade and who has entered into a contract for the carriage of cargo by sea with a shipper.

11 What is the procedure for establishing limitation?

Thailand is not a party to the 1924, 1957 and 1979 Liability Conventions. Providing a cash deposit, setting up a fund for salvage, or limiting the extent to which the shipowner can limit liability for claims based on tonnage is required under Thai law. The carrier can raise the provisions in COGSA 1991 to deny or limit its obligation for the losses of cargo or the losses caused by delay in delivery. Damage caused by a vessel, including pollution, injury or death to persons on board, salvage, wreck removal, and damage to third-party property is governed by the provisions of the Thai CCC in respect of a ‘wrongful act’ (see question 10).

12 In what circumstances can the limit be broken?

There is no limitation of liability for claims which are outside the scope of COGSA 1991 and which are considered wrongful acts.

Under the Thai COGSA, the carrier loses his or her right to limit liability in the following cases:

• where the loss, damage or delay in delivery resulted from an act or omission of the carrier or his or her agents or servants whether done with the intent to cause loss, damage or delay in deliver, or done with reckless disregard and with the knowledge that such loss, damage or delay in delivery could result;

• where the vessel and the carrier have agreed to fix, by so stating in the bill of lading, a limit to the liability of the carrier higher than that which is stipulated in section 58, COGSA 1991;

• where the carrier has inserted particulars in the bill of lading that were notified to the vessel but omits to record a reservation as to such particulars in the bill of lading with the intent to defraud the consignee or a third party who acts in reliance on the particulars in the bill of lading; and

• where the vessel has declared to the carrier the value of the cargo to be carried and this has been accepted by the carrier and the value of the cargo is shown on the bill of lading. If the value calculated is less than the value shown in the bill of lading, the carrier will only be liable for the value so calculated. However, if the value calculated is higher than the value shown in the bill of lading, the carrier will only be liable for the value shown in the bill of lading.

If the loss suffered was as a result of fault or negligence on the part of the carrier or its agents or servants, the carrier will not be entitled to limit its liability. The limitations are inapplicable where a higher limitation is stipulated on the bill of lading, where the value of the cargo has been declared to the carrier or where the carrier fails to note in the bill of lading any particulars notified by the shipper with the intent to deceive the consignee.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Thailand has not implemented the Athens Convention. There are no specific laws or regulations covering passenger and baggage claims, as they are governed by the Thai Civil and Commercial Code.

In relation to passenger claims, the carrier is liable for death and personal injuries and for damage resulting directly from delays. The exceptions to this are fault of the passenger and force majeure. The carrier is not liable for loss of or damage to baggage that the passenger does not entrust into the carrier’s custody, unless the loss or damage is the fault of the carrier or his or her employees.

For baggage entrusted into the carrier’s custody, the carrier is liable for the loss of or damage to the baggage and for delayed redelivery of the baggage to the passenger, with the exceptions of the fault of the passenger, the nature of the baggage or its contents, and force majeure. Where the baggage contains specie, currency notes, bank notes, bills, bonds, shares, debentures, warrants, jewels or other valuables, the carrier can limit its liability if the passenger does not specify the value or nature of the baggage on delivery to the carrier. Where the declared value is lower than the actual value, the carrier’s liability is limited to the declared value. For delays, the maximum compensation is the amount that would be awarded in the case of total loss of the baggage.

In passenger or baggage claims, a provision in a receipt, consignment note, ticket or such document issued by the carrier to the passenger excluding or limiting the liability of the carrier is void unless the passenger expressly agreed to such exclusion or limitation of liabilities.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

The Marine Department, under the control of the Ministry of Transport, is the port state control agency. The Marine Department derives its authority from two acts, the Navigation in Thai Territorial Waters Act (1913) and the Act on the Prevention of Collision of Ships (1979). In particular, the Marine Department has authority under the acts to determine the rules and regulations for surveying and inspecting vessels.

15 What sanctions may the port state control inspector impose?

The port state control inspector may:

• order rectification of non-compliance with regulations within a specified period of time;

• withdraw, revoke or cancel the certificates or licences issued by the Marine Department; or

• issue a detention order until non-compliance is rectified.

16 What is the appeal process against detention orders or fines?

An appeal against an order to withdraw, revoke or cancel the certificates or licences must be made to the minister of transport within one month from receipt of the order.

The Navigation in Thai Territorial Waters Act (1913) does not specify the appeal process to be used when appealing against a detention order. However, as the detention order is an administrative order, an appeal can be made to the authority that issued the order provided the appeal is lodged within 15 days of receipt of the order. The appeal can be made on the grounds of correctness of the decision-making by the officer, whether the law has been properly applied or whether the officer had discretion to make such an order. If the appeal is unsuccessful, the appellant can apply to the Administrative Court for judicial review of the order.

Classification societies

17 Which are the approved classification societies?

Currently, the approved classification societies are:

• Lloyd’s Register;

• Bureau Veritas;

• Nippon Kaiji Kyokai;

• the American Bureau of Shipping;

• Det Norske Veritas; and

• Germanischer Lloyd.

18 In what circumstances can a classification society be held liable, if at all?

The classification society may be liable on grounds of breach of contract or in tort. Although the classification societies usually offer a standard limitation of liability clause in their contracts, enforcement of these clauses remains uncertain in Thailand.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

According to section 121 of the Navigation in Thai Territorial Water Act (1913), the owner or a representative of the owner is required to remove the wreck. The Marine Department can specify a deadline for removal of the vessel. If the owner or its representative fails to remove the wreck within the deadline, the Marine Department can arrange for removal at the expense of the owner or the owner’s representative.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

The following is a list of the relevant international conventions and protocols in force in Thailand:

• International Regulations for Preventing Collisions at Sea 1972;

• International Convention on Oil Pollution Preparedness, Response and Cooperation 1990; and

• International Convention for the Prevention of Pollution from Ships 1973/1978.

21 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?

The Salvage Act 2007 governs salvage. There is no mandatory local form for salvage agreements and therefore Lloyd’s standard form is acceptable. However, when attempting to enforce a salvage contract, if the court is of the view that the agreement has been entered into as a result of undue influence, or the influence of danger and its terms are therefore inequitable or the payment under the contract is excessively large or small for the services actually rendered, then the court may issue any of the following orders to:

• annul the whole or part of the contract against the contracting party and apply the provisions of the Salvage Act 2007 instead;

• modify the terms or conditions of the contract as it sees fit; or

• increase or reduce the amount of the payment stipulated in the contract so that it is set at an appropriate amount for the services actually rendered.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

None. However, the Vessel Arrest Act of Thailand was greatly influenced by the International Convention Relating to the Arrest of Seagoing Vessels 1952.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

The claims for the arrest of a vessel must arise from ‘claims related to the vessel’, which means the following:

• loss of life, personal injury or damage to property belonging to anyone caused either by a vessel or the operation of a vessel;

• assistance in maritime salvage;

• a contract of employment, a contract for hire, hire-purchase or borrowing of a vessel, loading service or the like;

• a contract concerning the carriage of cargo by sea subject to the issuance of a bill of lading;

• general average;

• loss or damage to property carried onboard;

• towing services, irrespective of the method employed;

• pilotage;

• provision of any material or thing for use in connection with the operation or maintenance of a vessel;

• shipbuilding, repair or provision of furnishing of a vessel, or shipyard fees;

• port charges or port service fees;

• hire charges for loading and unloading cargo;

• the master or crew’s wages;

• vessel expenses that the master, charter, vessel’s agent or ship pays on behalf of the vessel’s owner, or person in possession of the vessel;

• disputes regarding ship ownership;

• disputes between co-owners over the possession or use of the income derived from a vessel; or

• a vessel mortgage.

The flag under which the vessel sails will have no effect on the court when determining whether or not to arrest the vessel. The court will usually grant the application where it can be shown that the claim falls into any of the claims related to the vessel and where it can be demonstrated that there is an arguable case.

The Act allows the arrest of a vessel where it is not owned by the debtor, but is in his or her possession both at the time the maritime claim arose and at the time of the vessel’s arrest.

The applicant will be entitled to arrest not only a vessel in dispute that belongs to the debtor but also her sister vessels and other vessels of which the debtor is in possession. There are two kinds of vessel that can be arrested: any vessel belonging to the debtor, including a vessel that is not directly involved or related to the claim; and a vessel in the debtor’s possession, provided that the vessel is directly involved in the claim and is in the possession of the debtor both at the time when the claim arises and when the arrest application is filed.

Where the claim involves issues of ownership and is initiated by co-owners of the vessel relating to the possession of, use of or income derived from a vessel or vessel mortgage, only the vessel directly involved in the dispute can be arrested.

The arresting creditor is entitled to apply for the arrest prior to initiating court action. However, the Arrest of Vessels Act is designed to protect creditors domiciled in Thailand, and as such specifically excludes creditors not domiciled in Thailand from applying to arrest a vessel in Thai waters.

There is no provision for the arrest of associated vessels in Thailand.

24 What is the test for wrongful arrest?

The claimant must demonstrate that the applicant for the vessel arrest acted in bad faith in exercising his or her right to apply for the vessel arrest.

25 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, it is a claim related to the vessel in the category of ‘a provision of any material or thing for use in a vessel operation or maintenance of vessel’ (see question 22).

26 Will the arresting party have to provide security and in what form and amount?

Yes, the court has discretion to stipulate the amount of security and the arresting party must provide security accordingly. There is no standard amount of security but the court will assess the amount of security with reference to the likely amount of compensation due for the vessel’s arrest. Generally, the court will prefer a cash deposit to be paid in the court.

27 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?

The court will specify in the arrest warrant the amount of security required for the release of the vessel. Although there is no method used to calculate the amount of security ordered, the court will usually order an amount equivalent to the value of the maritime claim as submitted by arresting party. The court order as to the warrant of arrest is final, and therefore the amount of security specified in the warrant cannot be reviewed.

There is no requirement as to the form of security provided. In practice, however, the court prefers security to be provided by way of cash deposit or bank guarantee, as these forms do not require further valuation by the court.

28 Who is responsible for the maintenance of the vessel while under arrest?

The shipowner or the charterer who has possession of the vessel is responsible for maintenance.

29 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?

The Vessel Arrest Act is silent on this point and there are no relevant cases dealing with this issue. However, it is has generally been accepted that a claim on the merits must be commenced in a Thai court within 30 days of the date on which the warrant for the vessel’s arrest is posted on the vessel, otherwise the court can issue a release order.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

Yes. The creditors can apply for an injunction against the shipowner. The Thai courts may grant an injunction allowing for the vessel to be seized as security for the enforcement of a judgment.

31 Are orders for delivery up or preservation of evidence or property available?

Yes. In civil matters, the court can grant an order for inspection of the vessel, while in criminal cases, the police can detain the vessel as evidence.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

There is no specific provision applying to the arrest of bunkers. However, bunkers can be seized under the court’s injunctive powers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The vessel arrest order serves to prevent the vessel from sailing out of Thai waters but does not give any entitlement to the arresting party to sell the vessel. Only if the arresting party is successful in its substantive proceedings can it apply for execution of the judgment, which includes the judicial sale of the vessel.

34 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 sale of a vessel is rare in Thailand. The applicant must obtain an execution order from the court and submit the application to the Legal Execution Department. The officer will then accept bids for the vessel. After the winning bidder has paid, the officer will deduct the cost of administration and pay the outstanding balance to the judgment creditors, with any surplus being returned to the shipowner. There is no set timeline for these proceedings.

35 What is the order of priority of claims against the proceeds of sale?

The order of priority will be as follows:

• court fees and administration costs of legal execution;

• maritime preferential rights;

• general preferential rights according to the Thai CCC; and finally

• unsecured debts.

36 What are the legal effects or consequences of judicial sale of a vessel?

Judicial sale extinguishes all prior liens and encumbrances on the vessel. However, vessel mortgagees can elect to receive the funds from the judicial sale and not pay off the mortgage, leaving the vessel encumbered.

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

No (see question 53).

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

No.

Carriage of goods by sea and bills of lading

39 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, Hague-Visby Rules, Rotterdam Rules and Hamburg Rules have not been ratified. However, many of the rules found therein, especially the Hamburg Rules, have been incorporated into the Thai COGSA 1991.

According to COGSA 1991, the obligations of parties in a carriage at sea contract begin at the commencement of sea carriage between countries and end once the cargo is delivered. In relation to liability, the carrier is deemed to have custody of the cargo from the time when it is received by them at the port of loading from the shipper or his or her agent, or from an officer or any other person to whom, pursuant to the law or regulations applicable at the port of loading, the shipper must hand over the cargo for shipment and until such time as the carrier has delivered the cargo to the port of destination, or the place agreed to be the destination.

40 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?

The Multimodal Transportation Act (2005) applies to the carriage of goods by at least two modes of transportation. Where the goods have been carried by one mode of transportation, for example sea carriage, and another mode has been used to deliver the goods to or from the port, warehouse, consignee or where the other mode of transport can otherwise be shown to be no more than incidental to the main mode of transport, the Multimodal Transportation Act will not apply. Instead, the Civil and Commercial Code will apply to the carriage by road.

41 Who has title to sue on a bill of lading?

The shipper or the lawful holder of the bill of lading can sue against the carrier under a bill of lading.

42 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?

Where a bill of lading is issued, the relationship between the carrier and the consignee for all the matters relating to the carriage of the cargo specified in the bill of lading will be governed by the terms of the bill of lading. Therefore, the terms of the charter party must be expressly incorporated into the bill of lading.

The arbitration clause in a charter party, which is expressly incorporated into the bill of lading, will bind the lawful holder of the bill of lading.

The enforceability of a choice of law and forum clause remains uncertain in Thailand, with each case being decided on its merits.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

COGSA 1991 defines ‘carrier’ as a person who is a carrier of cargo by sea for remuneration in his or her ordinary course of business and who has entered into a contract for the carriage of cargo by sea with a shipper.

The Thai courts are empowered to consider the surrounding circumstances in order to determine the true intentions of the parties. If the agreement says that the counterparty is not the ‘carrier’ but their conduct reveals that he or she acts as a carrier of cargo by sea and obtains remuneration in his or her ordinary course of business, it is likely that the Thai courts will arrive at the conclusion that such a person is a carrier.

44 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?

In general, shipowners are not the contractual carrier according to COGSA 1991. Therefore, shipowners are not normally liable for cargo damage. As shipowners are not a party to the contract of carriage, they do not have any rights or obligations in relation to the bill of lading.

45 What is the effect of deviation from a vessel’s route on contractual defences?

If the deviation from a vessel’s route causes delivery delays or damage to the cargo, the carrier is liable for loss unless the losses fall under the ambit of limitation of liability (see question 57), which says that the carrier will not be liable for loss, damage or delay in delivery if the carrier proves that such loss, damage or delay in delivery resulted from taking measures to save human life, or from taking reasonable measures to save property at sea, except in the case of general average, when the carrier retains a proportionate liability.

46 What liens can be exercised?

Thai law recognises liens (rights of retention) both by operation of the law and by contractual arrangement.

According to the CCC, the possessor of property belonging to another, who has an obligation in his or her favour relating to the property possessed, may retain the property until the obligation is performed, provided the obligation remains due. However, if the debtor becomes insolvent and is unable to perform the obligation, the possessor can retain the property although the obligation in his or her favour is not yet due. The right of retention does not exist if it is incompatible with the obligation assumed by the creditor or with the instructions given by the debtor before or at the time of delivery of the property, or if to retain the property is against public order. A good example is the right of the shipyard to retain the vessel until the shipowner settles the cost of the vessel’s repairs.

COGSA 1991 contains a specific provision giving the carrier a right of retention over cargo for freight due and related expenses (such as interest or other costs arising from or relating to the freight).

Thai law recognises a contractual right of retention that is exercisable between the parties to the contract. However, the contractual right of retention does not give the right to sell the retained property.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

When a bill of lading has been issued, the consignee can demand delivery of the cargo on surrendering the bill to the carrier or on giving reasonable security.

Where there is more than one original bill of lading, when the cargo has arrived at the port of destination or the place agreed to be the destination, the following applies:

• where the consignee has surrendered one original bill of lading and the carrier has delivered the cargo to the consignee, the other original bills of lading that have not been surrendered will cease to have any effect; or

• where, either before or during the delivery, more than one consignee is demanding delivery of the same cargo and each consignee presents an original bill of lading, the carrier can deposit all or the undelivered part of the cargo at a public deposit office.

If there is more than one original bill of lading and the cargo has not arrived at the port of destination or the place agreed upon to be the destination, the carrier is under no obligation to deliver the cargo to any person, unless all original bills of lading have been surrendered to the carrier. However, if the carrier has delivered the cargo before all original bills of lading have been surrendered, the carrier will be liable to the consignees in possession of the original bills of lading not already surrendered to the carrier.

48 What are the responsibilities and liabilities of the shipper?

The shipper is not liable for any damages sustained by the carrier, or for damages sustained by the vessel, unless such damages were caused by the fault or neglect of the shipper, his or her agents or servants or resulted from the nature of the cargo because of the failure of the shipper to comply with the law or commercial practice concerning the shipment of such cargo.

Where the shipper provides particulars concerning the general nature of the cargo, the leading marks, the number of units of carriage and the weight or quantity of the cargo, or has provided such information to be included in the bill of lading, the shipper will be liable to indemnify the carrier for any damage resulting from the inaccuracies in such information, even if the shipper has assigned the bill of lading to a third party.

The shipper must mark or label any dangerous cargo appropriately (including cargo which is flammable, explosive or in any way dangerous). Shippers must inform the carrier or other parties involved in the carriage of the cargo of its dangerous character and, in the event that the carrier so requires, the shipper must inform the carrier of the precautions and measures to be taken to avoid such danger. If the shipper has failed to comply with this, the shipper will remain liable for the damage and all the expenses resulting, whether directly or indirectly, from the carriage of such cargo other than the costs arising out of the carrier’s or other party’s unloading, destroying or rendering safe such cargo, as necessary.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

No.

50 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?

There is no regulation restricting the sulphur content of oil. Emissions that may give rise to environmental concerns are controlled by the Navigation in Thai Territorial Waters Act (1913). The Act empowers the Marine Department to implement sanctions (fines and imprisonment) against the shipowner or the captain of the ship if the ship causes damage to the environment.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The courts of the first instance, appellate courts and the Supreme Court have jurisdiction to hear maritime disputes. However, if there is an element of international trade or services, the case will be heard by the Intellectual Property and International Trade Court in Bangkok.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

Service on a defendant located out of Thailand is done through the Ministry of Justice and Ministry of Foreign Affairs. If the case is under the jurisdiction of the Intellectual Property and International Trade Court, the court is empowered to order the defendant to appoint a person under the court’s jurisdiction to accept service. If the individual fails to comply with court’s order, service is effected by posting the proceedings as an announcement at the court office and notifying the defendant.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

No.

54 What rules govern recognition and enforcement of foreign judgments and awards?

There are no treaties or legislation that govern the recognition and enforcement of foreign judgments. Foreign judgments are not generally enforceable and, in practice, claims must be litigated again before a Thai court. The Thai court will then regard the foreign judgment as an illustrative example of interpreting the laws of the jurisdiction of the judgment.

Thailand, however, is a party to the New York Convention. The Arbitration Act deals with the recognition and enforcement of international arbitration awards.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

Thai law does not recognise an anti-suit injunction. There are no laws or precedents that deal with remedies. Therefore, the interpretation of choice of forum clauses remains uncertain.

56 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?

See question 54. In relation to an arbitration agreement, the court will typically dismiss the case and refer it to the arbitration tribunal.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

The general time-bar is 10 years from the time a claim can be brought.

For breach of contract, claims for loss, damage or delay must be exercised within one year from delivery or one year after the delivery should have been made except in case of bad faith, where the limitation period will be 10 years. The claim of a carrier for the hire, freight, fees and disbursements is subject to a two-year limitation period from the date when the amounts became due.

In tort, prescription is limited to one year from the day when the tort occurred and the person bound to make compensation becomes known to the injured person, or where the tort has not become known to the person bound to make compensation 10 years from the day when the wrongful act was committed. If the tort is punishable in criminal law and the prescription of the related criminal offence is longer than the prescription for a civil tort claim, the prescription under criminal law will prevail.

COGSA 1991 has a specific limitation period that takes precedence over all other limitation periods. Any right to claim for damages arising from loss of or damage to the cargo, or for delay in the delivery of the cargo under a contract for the carriage of cargo by sea is time-barred if judicial or arbitral proceedings have not been instituted within one year from the day on which the carrier has delivered the cargo or, where no delivery has been made, from the day after the day on which the cargo was supposed to have been delivered or the reasonable time when the delivery should have been made.

At any time before the above-mentioned limitation period expires, the person against whom a claim is made may extend the period indefinitely by means of a signed declaration of consent.

58 May courts or arbitral tribunals extend the time limits?

No.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

Thailand is not a party to the Marine Labour Convention and as a result the convention has no effect in Thailand. However, Thailand is preparing to introduce an act concerning marine labour in order to implement the principles contained in the Marine Labour Convention.

60 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?

No.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

Although Thailand is not a contracting state to many international conventions, many legal doctrines similar to those found in the international conventions can be found in Thai legislation. Thai maritime legislation is generally conservative and designed to protect and foster the Thai shipbuilding and shipping industries.

Update and trends

The Marine Labour Convention (MLC) of 2006 came into force on 20 August 2013. Thailand continues not to be a signatory or party to this convention. The new Maritime Labour Act, which would adopt the key provisions of the MLC into Thai law rather than ratifying and acceding to the MLC, has not yet become law. This Act would not create a treaty relationship. The Thai cabinet is considering proposals on how to address the issues that arise when a Thai vessel cannot produce or present the Certificate of Marine Compliance, which is issued pursuant to the MLC, to the MLC member state’s port control. There is considerable support amongst Thai shipowners, seagoing professionals and the Ministry of Labour for a system of self-certification and self-regulation, with a system of compliance guidelines to be prepared by the Ministry of Labour. This would operate until the Maritime Labour Act had become law. It remains to be seen whether this will be implemented in the next 12 months and when the Maritime Labour Act will become law.

Alan Polivnick

apolivnick@wfw.com

Tossaporn Sumpiputtanadacha

tsumpiputtanadacha@wfw.com

Unit 902, 9th Floor, GPF Witthayu Tower B

93/1 Wireless Road

Patumwan

Bangkok 10330

Thailand

Tel: +66 2 665 7800

Fax: +66 2 665 7888

www.wfw.com

Tunisia

Achour Abdelmonêm

Achour Law Firm

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Pursuant to articles 15 and 23 of the Maritime Trade Code, unless otherwise agreed title in the ship only passes from the shipbuilder to the shipowner on the date of delivery of the ship. The parties may agree that title will pass during the course of construction, before delivery or after delivery. This agreement should be registered on the national register of ships.

2 What formalities need to be complied with for the refund guarantee to be valid?

As with shipbuilding contracts, there are no specific formalities to be complied with for the refund guarantee to be valid. The only requirement is that the refund guarantee must be made in writing and properly executed by the parties thereto.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

The seller is under an obligation to deliver the ship to the purchaser. Pursuant to the provisions of the Civil Code, if the shipyard, being solely responsible for the delay, fails to deliver the vessel, the purchaser may elect either to rescind the contract or request the delivery of the vessel (which may cause practical issues at the time of enforcement). In any case, the shipyard may be liable for damages.

4 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?

There are no specific provisions provided by the Maritime Trade Code for this purpose. Pursuant to the provisions of the Civil Code, the shipbuilder is liable for latent defects of the ship, even if the ship was accepted without reservation by the customer at the time of sale. The owner can take action against both the shipbuilder and the shipbuilder’s sub-supplier if the latter was responsible for supplying or installing the defective machinery or equipment. Normally, the owner must commence proceedings within 30 days of the discovery of the latent defect (Civil Code, provision 672). Any lawsuit, including summary proceedings, will stall the limitation period. However, the parties may extend or reduce this period by mutual agreement.

The aforesaid provisions apply in the case of a ship repair contract. The shipbuilding contract may contain specific provisions concerning the shipbuilder’s warranty regarding latent or apparent defects, in particular, extending its duration. In addition, if the ship does not comply with the contract specifications, the purchaser has a claim in damages against the seller (provided that the non-compliance was not apparent at the time of delivery or the parties had agreed that non-compliance that was apparent upon inspection did not preclude the purchaser from seeking damages).

The effects of an agreement for the sale and purchase of a ship are governed by the provisions of the Civil Code. An action resulting from latent defects must be brought by the buyer normally within a period of 30 days following the discovery of the latent defect. If the vessel is defective and loss or damage results from such defect, a direct claim in tort by any person (including third parties) incurring loss or damage would lie in product liability against the shipbuilder.

However, according to provision 673 of the Civil Code, a shipbuilder acting in bad faith cannot rely on this limitation period.

Ship registration and mortgages

5 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?

Ships are registered with the local customs authorities of their home port. According to article 39 of the Maritime Trade Code, these registries are held in the principal town of each maritime district. There are of two types of registries, one for the registration of ships eligible for mortgage (more than 10 GRT) and the other for the registration of ships not subject to mortgage (less than 10 GRT).

Under article 23 of the Maritime Trade Code, any ship sailing under the Tunisian flag must be registered in the principal town of the maritime area that became her home port. The owner shall register the ship fully built upon delivery or purchase as soon as he acquires its property. If a foreign ship is acquired abroad, the buyer must submit a written request of registration within seven days of the date of its entry into a Tunisian port. The registration formalities must be completed within a period not exceeding sixty days from that date.

It is possible to register ships under construction (article 25 of the Maritime Trade Code).

6 Who may apply to register a ship in your jurisdiction?

Individuals and companies may apply to register a ship in Tunisia. A shipowner must comply with certain conditions to obtain registration of a vessel. These conditions vary depending on whether the shipowner is an individual (a citizen or a foreign national) or a company. In all cases, however, such conditions apply both to new ships and to second-hand ships.

7 What are the documentary requirements for registration?

According to article 24 of the Maritime Trade Code, for vessels built in Tunisia the owner or his or her agent should provide the maritime authority of the home port of the vessel with the tonnage certificate and an original copy of the deed of sale.

For vessels built or acquired abroad, the owner or the agent should provide the maritime authority of the home port of the vessel with a written statement, in addition to the tonnage certificate and the original copy of the ownership title of the ship.

The maritime authority shall require the applicant to register all documents supporting his or her statement.

8 Is dual registration and flagging out possible and what is the procedure?

Dual registration by way of suspending the underlying registration is possible.

9 Who maintains the register of mortgages and what information does it contain?

Maritime mortgages are registered on a special register maintained by the registry of ship mortgages at the local customs authorities of the home port of the vessel.

As the registry of ship mortgages is a public registry, anyone may gather information regarding, inter alia, the name of the vessel, the date of the registration of the mortgage, the identity of the creditors, the debtor and the secured amount.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

Regarding international conventions, the Convention on Limitation of Liability for Maritime Claims 1976, as amended by the protocol of 1996, is not in force in Tunisia. The provisions concerning the limitation of liability for maritime claims are governed by articles 131 to 160 of the Maritime Trade Code. These provisions are applicable to vessels of 300 tons or more.

Pursuant to article 132 et seq of the Maritime Trade Code, the shipowner (meaning the owner, manager, charterer, operator or supervisor of a seagoing ship) and the maritime carrier (under a bill of lading) are entitled to limit their responsibilities for maritime claims.

11 What is the procedure for establishing limitation?

Under Tunisian maritime law, it is not compulsory to set up a fund. However, in practice, it is common to provide a limitation fund. To establish limitation, an expert request must be made before the president of the commercial court with territorial jurisdiction. Once the fund is set up (to be deposited at the Fund for Deposits and Consignments), the judge will record its constitution, which creditors may then dispute. Once all issues are resolved, the distribution of the fund takes place.

Pursuant to article 141 of the Maritime Trade Code, the limitation fund consists of the amount at which the shipowner intends to limit its liability plus legal interest from the date of the event until the date of payment to the fund for deposits and consignments, and the charges adjudicated by the judge.

According to the Tunisian Maritime Trade Code, the limitation of liability of the shipowner is set inclusively:

• with regard to the claims of repairing material damages to a total of 150 dinars by gross registered tonnage; and

• with regard to the claims of compensation for bodily injury, a total of 250 dinars by gross registered tonnage.

The limited amount of liability of carriers for loss, general average or damage is fixed at 400 dinars per package or usual unit of cargo freight.

Factors used to calculate the fund include, among others, the nature of the damage, the relevant regime and the tonnage of the ship.

Notwithstanding the above, under Tunisian maritime law there is no separate right to plead limitation without setting up a fund.

12 In what circumstances can the limit be broken?

Under Tunisian maritime law, the limit can be broken if it is proved that the loss resulted from an inexcusable fault. Tunisian courts assess in abstracto the concept of such fault and assess the fault against the concept of professional conduct. For instance, any breach of the fundamental obligation of seaworthiness is an inexcusable fault.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Passenger claims generally involve personal injury or death, but may also involve claims for lost or damaged luggage. Internationally, these claims are regulated by the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, but Tunisia is not a signatory to this Convention. Passenger claims are, therefore, governed by the general maritime law of Tunisia (provisions 150 to 157 and 219 to 225 of the Maritime Trade Code).

The carrier owes passengers a duty to exercise reasonable care under the circumstances. In order for a passenger to succeed in a negligence action, he or she must prove that the carrier breached a duty owed to the passenger, that the actions of the shipowner or one of his or her employees were the proximate cause of the injury, and the existence of actual injuries and damages.

The carrier may only be exonerated wholly or partly from liability for non-performance, defective performance or late performance of its obligations if it provides evidence that it had done its best to prevent the damage, or in cases of force majeure or fault of the passenger. Any contrary clause is void.

In addition to the limitation of liability of the shipowner as set out above, the carrier’s liability may not exceed 8,000 dinars per passenger (article 152 of Maritime Trade Code).

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

Tunisian maritime and commercial ports are managed by the Office of the Merchant Navy and Ports (OMMP), a state establishment endowed with financial autonomy and legal status. The OMMP provides merchant navy services, more specifically the administration of ships, seamen and maritime navigation security.

Port state control is operated by the Safety Inspectorate, under the OMMP (which operates under the Ministry of Transport).

15 What sanctions may the port state control inspector impose?

All Tunisian maritime ports are in conformity with the International Ship and Port Facility Security Code provisions:

• safety assessments and plans approved since 28 June 2004, reviewed yearly;

• port facility safety officers responsible for all areas of all ports;

• personnel with specific safety duties have received training in coordination with the international maritime organization (IMO); and

• simulations and safety training in ports.

In compliance with the Tunisian maritime regulations, during these inspections, inspectors may order the detention of a foreign vessel to request the rectification of all deficiencies detected that are clearly hazardous to safety. Under such circumstances, the inspector may also prohibit the ship from continuing a hazardous operation due to established deficiencies. In case of deficiencies that are clearly hazardous to safety, health or the environment, the competent authority of the port where the ship is being inspected shall ensure that the ship is detained or the operation in the course of which the deficiencies are revealed is stopped.

16 What is the appeal process against detention orders or fines?

Pursuant to article 46 et seq of the Administrative Policy of the Maritime Navigation Code, the appeal procedure provides that any appeal against a decision of an inspector shall be presented by the shipowner, operator of the ship or its representative, or captain whose departure clearance was denied, before the Chief of the Centre of Ship Safety. The appeal shall be made by the shipowner, operator of the ship or its representative, or captain whose departure clearance was denied within 15 days of being notified of the decision of the inspector.

Classification societies

17 Which are the approved classification societies?

In Tunisia, among the authorised classification societies are Bureau Veritas, DNV (Det Norske Veritas) and Nippon Kaiji Kyokai (ClassNK), which are all members of the International Association of Classification Societies.

18 In what circumstances can a classification society be held liable, if at all?

The liability of a classification society may arise under contract law. Tunisian courts acknowledge the validity of non-liability clauses inserted in contracts entered into between shipowners and classification societies. Provisions limiting the liability of classification societies are also valid under Tunisian law. However, the application of such clauses is excluded in the event of gross negligence on the part of the classification society.

A classification society may also incur liability in tort and be criminally liable.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The state or a local authority can order wreck removal. The law provides extensive powers to the relevant administration to remove wrecks, in particular when they present a danger to navigation and the environment or if the owner of the wreck is anonymous. Notably, under the circumstances described in article 6 of Special Law No. 89-21 of 22 February 1989 on Wreck and Wreck Removal, either the state or the port authority may act on their own initiative at the shipowner’s expense and risk.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

Regarding collision, Tunisia is not a member of the International Convention for the Unification of Certain Rules of Law with Respect to Collision between Vessels adopted in Brussels on 23 September 1910. However, Tunisia is a member of the Convention on the International Regulations for Preventing Collisions at Sea 1972, as amended.

Regarding salvage, the International Convention on Salvage 1989 is applicable in Tunisia (Law No. 98-36 of 25 May 1998). The International Convention on Maritime Search and Rescue 1979, adopted in Hamburg on 27 April 1979, is also applicable in Tunisia (Law No. 98-35 of 25 May 1998).

The key international provisions in force in Tunisia relating to pollution are as follows:

• the International Convention for the Prevention of Pollution from Ships (MARPOL) 1973, together with its 1978 and 1997 protocols;

• the International Convention on Civil Liability for Oil Pollution Damage 1992, establishing the principle of strict liability for tanker owners for damage caused by spills of persistent oil from laden tankers and creating a system of compulsory liability insurance;

• the Fund Convention 1992 and the Supplementary Fund Protocol 2003;

• the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001;

• the International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990, as amended;

• the International Convention relating to Intervention on the High Seas in Cases of Oil Pollution Casualties 1969;

• the Protocol relating to Intervention on the High Seas in Cases of Pollution by Substances other than Oil 1973, as amended;

• the International Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972, as amended; and

• the International Convention on the Control of Harmful Anti-fouling Systems on Ships 2001.

21 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. The Lloyd’s standard form of salvage agreement is acceptable.

There are no specific restrictions on who may carry out salvage operations. They are usually carried out by specialised companies.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

Tunisia is neither a party to the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-going Ships signed in Brussels on 10 May 1952, nor to the International Convention on the Arrest of Ships signed in Geneva on 12 March 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Under Tunisian maritime law and according to article 100 of the Maritime Trade Code, a ship may be arrested pursuant to an ex parte request for an order of conservatory arrest for any claim, as long as the claim appears to be well founded in theory.

Under article 100 of the Maritime Trade Code, a vessel can be arrested in respect of a maritime claim, as follows:

[…] maritime claims, pretentions with a right or a claim having one of the following causes:

• damage caused by any ship either in collision or otherwise;

• loss of life or personal injury caused by any ship or occurring in connection with the operation of any ship;

• assistance and salvage;

• agreement relating to the use or hire of any ship whether by a charter party or otherwise;

• agreement relating to the carriage of goods in any ship whether by a charter party or otherwise;

• loss of or damage to goods, including baggage carried in any ship;

• general average;

• towage;

• pilotage;

• goods or materials wherever supplied to a ship for her operation or maintenance;

• construction, repair or equipment of any ship or dock charges and dues;

• wages of masters, officers or crew;

• master’s disbursements, including disbursements made by shippers, charterers or agents on behalf of a ship or her owner;

• disputes as to the ownership or co-ownership of any ship;

• disputes as to the exploitation or earnings of that ship;

• the mortgage or hypothecation of any ship and, generally, any claim that has its source in one of the causes that allow the application of limitation of responsibility of the owners or ship-owners.

Regarding the arrest of associated ships, pursuant to article 103 of the Maritime Trade Code, in the case of a charter vessel whose nautical management has been replaced and where the charterer alone is responsible for a maritime claim relating to that ship, the claimant may arrest such ship or any other belonging to the charterer. No other ship belonging to the shipowner can be arrested under such a claim.

These provisions shall also apply to all cases where a person other than the owner holds a maritime claim.

24 What is the test for wrongful arrest?

Wrongful arrest would lie in the abuse of the right to arrest a vessel; absence of legitimacy, malice or the inappropriateness of the measure may constitute an abuse. In the event of such an abuse, the judge may award damages to the arrestee.

25 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. The creditor of a charterer may arrest the vessel as long as he or she benefits from a maritime lien.

Under Tunisian maritime law and pursuant to article 71 of the Maritime Trade Code, the bunker supplier will have a maritime lien if it entered into a contact with the captain of the vessel in relation to the supply of bunkers ordered outside the vessel’s home port.

26 Will the arresting party have to provide security and in what form and amount?

The arresting party does not have to provide security. The debtor can obtain the release of the arrest if it can provide a satisfactory guarantee to the arresting party.

27 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?

In the event that the shipowner or charterer suffers a loss due to the arrest of the ship, such parties may apply for an emergency proceeding to request the release of the ship from arrest. Under the terms of article 105 of the Maritime Trade Code, at the request of the shipowner on a subsidiary basis, the judge may authorise the release of the ship subject to the issuance of a guarantee or security.

Pursuant to article 105 of the Maritime Trade Code, the judge will decide as to the nature, extent and conditions of the guarantee if the parties do not agree. The guarantee or security will be deposited at the Fund for Deposits and Consignments. However, at the request of one of the parties it may also be deposited in the hands of a third party appointed for that purpose (in practice, often a bank). The judge who consents to such a request will state in his or her decision the conditions of such deposit. In the event that the third party refuses to accept such deposit, the sum will be deposited, without any new decision in this respect, at the Fund for Deposits and Consignments. Where the value of the guarantee cannot be determined immediately, the judge will invite the parties to appear before him with any evidence at a given date.

28 Who is responsible for the maintenance of the vessel while under arrest?

The bailiff in charge of the arrest of a ship will designate a person responsible for the surveillance of the vessel while under arrest. However, the shipowner and the OMMP are also responsible for the maintenance of the arrested vessel (article 21 of the Maritime Trade Code).

29 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?

Pursuant to article 104 of the Maritime Trade Code, the arresting party must pursue the claim on its merits in the Tunisian courts that have jurisdiction to decide within 30 days of the arrest order. Otherwise, the arrest will be considered null and void.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

According to the Maritime Trade Code, the arrest of a ship is subject to a specific legal regime, as a ship represents a specific type of property. Pursuant to article 71 of the Maritime Trade Code, apart from ship arrest, a creditor can benefit from a maritime lien that can be executed on the freight, if the claim has become due during the transport and if its value is still in the hands of the captain or the owner’s agent. In addition, the creditor can seek the arrest of the debtor’s receivables.

31 Are orders for delivery up or preservation of evidence or property available?

No, not in their conventional form. Pursuant to the Maritime Trade Code, the arrest of a ship is subject to a specific legal regime, as a ship represents a specific type of property. According to article 105 of the Maritime Trade Code, the judge may either allow the operation of the arrested ship by the shipowner if he or she provided adequate guarantees, or adjust the management of the ship in a manner that he or she deems most useful for the duration of the arrest.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

Yes. The arrest of a ship’s bunkers is subject to the same legal regime as the arrest of the ship itself.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Creditors of the shipowner may apply for judicial sale of the vessel. These creditors must have a maritime lien, mortgage or debt (article 101 of the Maritime Trade Code).

34 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?

The procedure for initiating and conducting judicial sale of a vessel is provided by articles 108 et seq of the Maritime Trade Code.

The initial step in such a procedure involves a bailiff notifying the shipowner of a judgment evidencing that payment is due or, in certain cases, a notarised deed. If payment is not made, the bailiff will then issue attachment minutes (from arrest to distraint), which will be notified to the relevant port authorities. In relation to the second phase of the procedure, summons to appear will be served in order to carry out the auction of the ship and the attachment minutes will be filed with the relevant ship and mortgage registry. The arrest will then be notified to the creditors.

The court will determine the conditions regarding the auction sale of the vessel.

The timing of the procedure will depend on a number of factors, such as whether the ship is registered under the Tunisian or a foreign flag. However, article 133 of the Maritime Trade Code provides that the time period must not exceed three months. The court costs in connection with the sale will be determined by the judgment given by the court, and will usually reflect the fees incurred in relation to the ship’s detention and the expenses incurred in the course of court proceedings.

35 What is the order of priority of claims against the proceeds of sale?

Article 71 of the Maritime Trade Code provides a list of the order of priority of maritime liens:

• judicial costs incurred in relation to the sale of the ship and the distribution of the proceeds of the sale;

• costs incurred in the last port of call;

• crew fees;

• salvage and general average contribution;

• claims arising out of collisions, accidents at sea and damage to port structures and cargo; and

• costs incurred by the captain outside the home port of the vessel for the preservation of the ship or the continuation of the journey.

These are followed by:

• mortgages;

• other secured claims; and

• all other unsecured claims.

36 What are the legal effects or consequences of judicial sale of a vessel?

The judicial sale of a vessel will serve to extinguish prior liens and encumbrances including maritime liens and all other claims (purifying effect).

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

The judicial sale of a vessel in a foreign jurisdiction is not recognised in Tunisia (articles 8 and 11 of the Tunisian Code of International Private Law (CIPL)).

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

Tunisia is a party to the International Convention on Maritime Liens and Mortgages 1993, adopted in Geneva on 6 May 1993 (ratified by Law No. 94-45 of 9 May 1994).

Carriage of goods by sea and bills of lading

39 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?

Tunisia is not a signatory of the Hague Rules 1924 or the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the Rotterdam Rules). However, the Hamburg Rules are applicable in Tunisia (ratified on 15 September 1980 and entered into force on 1 November 1992).

For the purpose of the application of such rules, carriage at sea begins when the goods are loaded on to the vessel and ends when they are discharged from the vessel.

40 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?

• For road transport, the Convention on the Contract for the International Carriage of Goods by Road 1956 and the Protocol of 1978; and

• for rail transport, the Convention Concerning the International Carriage of Goods by Rail 1980 as amended by the Protocol of 3 June 1999.

However, for air transport, the Convention for the Unification of Certain Rules for International Carriage by Air 1999 is not applicable in Tunisia.

41 Who has title to sue on a bill of lading?

Through the application of the maritime trade law, the consignee has title to sue on a bill of lading. Consignors may have title to sue on a bill of lading if they suffered loss or damage. The real consignee may also have title to sue on a bill of lading.

42 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?

In principle, clauses of the charter party that are not incorporated in the bill of lading and that have not been accepted by the holder of the bill of lading are not binding. A reference in the bill of lading to a clause in the charter party will not be binding.

However, if the clause of the charter party is entirely reproduced in the bill of lading, and if the holder or endorsee of the bill of lading has accepted such clause, it will be binding.

The above principle appears to be tempered by the jurisprudence in respect of arbitration clauses.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

The ‘demise’ and identity of carrier clauses are not prohibited under Tunisian maritime law, but are not considered binding by the Tunisian courts.

44 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?

In a large number of charterers’ bills of lading, the name of the carrier is not provided. Where such a bill of lading is kept by the charterer, the contractual relations are governed by the charter agreement. However, issues arise when this type of bill of lading is passed on to a consignee who is a third party to the charter agreement. In the event of loss of or damage to cargo, the holder may only rely on the charterer’s bill of lading, which does not provide information on the carrier. In this respect, the Tunisian courts have held that, when the bill of lading mentions neither the shipowner nor the charterer’s name and when the charter party that it refers to is not reproduced in or attached to the bill of lading, the recipient and its insurers are entitled to bring an action against the apparent carrier, namely, the shipowner. This entitlement exists regardless of the existence of information regarding the identity of the charterer, which may have resulted from elements external to the bill of lading that were revealed after delivery thereof. There is no distinction between the carrier and the shipowner.

45 What is the effect of deviation from a vessel’s route on contractual defences?

Under the Maritime Trade Code, loss or damage resulting from a vessel’s deviation in order either to save or attempt to save lives or property at sea or any reasonable deviation will not be considered as a breach of the contract of carriage, and the carrier will not be liable for any subsequent loss or damage. However, the carrier may be held liable for any loss or damage resulting from an unreasonable deviation, such as a voluntary deviation towards a manifestly unsuitable port.

46 What liens can be exercised?

Pursuant to article 193 of the Maritime Trade Code, the carrier does not have a lien on the cargo for payment of its freight. However, according to article 71-5 of the Maritime Trade Code, a lien can be exercised on the ship in relation to claims for loss of or damage to cargo.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

Delivery without production of the bill of lading may render the carrier liable. In practice, it is common for the consignee or his or her representative not to be in possession of the bill of lading at the discharge port. The carrier will accept to deliver the cargo without production of the bill of lading provided that an autonomous guarantee is issued. The Tunisian courts have held that delivery of cargo by the carrier without the delivery of such guarantee as requested by the consignor is a breach of contract.

48 What are the responsibilities and liabilities of the shipper?

In addition to the duty to present the goods properly packed and marked at the time and place determined in the bill of lading, the shipper has a duty of sincerity regarding the nature and value of the goods, in particular regarding dangerous goods. The shipper is also responsible for paying for the freight, unless otherwise agreed by the parties. A paid-freight note is usually affixed to the bill of lading.

Pursuant to the Maritime Trade Code, the shipper is liable for any damage to the ship or other goods caused by its fault or the inherent defect of its goods. If the shipper breached the duty of sincerity regarding the nature of the goods, the carrier will not be liable for the loss of those goods.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

Yes. In accordance with the International Convention for the Prevention of Pollution from Ships (MARPOL) (Annex VI in force as of 19 May 2005 and modified in 2008) there is an ECA in force in Tunisian territorial waters.

50 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 applicable cap on the sulphur content of fuel oil depends on the geographic area in which the ship is navigating.

According to Annex VI of the MARPOL Convention, under the general requirements, the sulphur content of any fuel oil used on board ships shall not exceed the following limits:

• 4.5 per cent m/m prior to 1 January 2012;

• 3.5 per cent m/m on and after 1 January 2012; and

• 0.5 per cent m/m on and after 1 January 2020.

Within an emission control area, the sulphur content of fuel oil used on board ships shall not exceed the following limits:

• 1.5 per cent m/m prior to 1 July 2010;

• 1 per cent m/m on and after 1 July 2010; and

• 0.1 per cent m/m on and after 1 January 2015.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

The Tunisian commercial courts will usually have jurisdiction regarding maritime disputes. However, it is important to note the use of arbitration in settling international maritime disputes. A large number of contracts, such as shipbuilding contracts, contracts in respect of salvage operations and charter agreements, provide an arbitration clause.

The Tunisian Commercial Maritime Court will exercise jurisdiction over maritime disputes regarding, among other things, offences committed by professionals of the maritime industry, the captain of a ship or the crew.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

In addition to the bilateral conventions between Tunisia and other states on the service of judicial and extrajudicial documents in civil or commercial matters, the main rules in Tunisia that govern the service of court proceedings on a defendant located out of the jurisdiction are set out in the Tunisian Code of Civil Procedure.

According to article 9 of the Tunisian Code of Civil Procedure, if the defendant is not resident in Tunisia and has a known domicile abroad, a copy of the act must be served to him or her by registered letter.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

No.

54 What rules govern recognition and enforcement of foreign judgments and awards?

The CIPL regulates the recognition and enforcement of foreign judgments. A claim for recognition and enforcement of a foreign judgment shall be initiated before the Court of First Instance and, once litigation has ended, the foreign judgment will be recognised and enforceable, or both. The courts will not review the scope or content of a foreign judgment; however, they will determine the compatibility of the judgment with the related provisions of the CIPL. Therefore, litigation within this area is usually faster than general litigation at the commercial courts. In compliance with provision 11 of the CIPL, recognition or enforcement, or both, shall not be granted for foreign court decisions if:

• the subject of the litigation comes under the sole competence of the Tunisian courts;

• the Tunisian courts have already made a decision not to admit an appeal via the ordinary channels, on the same subject, between the same parties and for the same cause;

• the foreign decision is against public policy according to the CIPL, or based on procedures that have failed to preserve defence rights;

• the foreign decision was cancelled, its enforcement was suspended in accordance with the legislation of the country where it was issued, or it is not enforceable in the country where it was issued; and

• the state where the judgment or decision was delivered does not comply with the rule of reciprocity.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

In principle, Tunisian courts do not issue anti-suit injunctions. Under Tunisian law, if the claimant, in breach of a jurisdiction clause, issues proceedings elsewhere in Tunisia, the party who wishes to raise the plea of lack of jurisdiction, under penalty of inadmissibility, must do so before the court at which the matter is brought and explain which jurisdiction it believes the matter should be brought before (article 18 of the Code of Civil Procedure).

56 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 can raise a plea of lack of jurisdiction before the court.

In the presence of an arbitration clause, the clause applies. Where a dispute that is referred to an arbitration tribunal pursuant to an arbitration agreement or arbitration clause is brought before a court of law of the state, the latter must decline jurisdiction unless the matter has not yet been brought before an arbitration tribunal and the arbitration agreement is manifestly null and void.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

Time limits vary depending on the nature of the claim. A two-year time limit applies to claims arising under a contract of carriage and a voyage or time-charter agreement governed by Tunisian law. The time limit can be extended by agreement.

In relation to liability in tort a longer time limit applies, which will usually be three years.

58 May courts or arbitral tribunals extend the time limits?

No.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

Tunisia has not yet ratified the Maritime Labour Convention 2006.

60 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?

In the absence of a contractual hardship clause, it would be very difficult to obtain relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract. Article 242 of the Tunisian Civil Code incorporates the principle of pacta sunt servanda (ie, the terms of a contract are generally binding as between the parties thereto and a judge is not entitled to modify the agreement or order its non-performance, even where economic circumstances have rendered the contract particularly onerous for one of the parties). The only statutory exception to this rule is when an event that constitutes force majeure has occurred; however, under Tunisian law, force majeure will only be deemed to have occurred when the event in question is irresistible (not simply an event that makes performance more difficult), unforeseeable (which may not necessarily be the case even for dramatic natural events, such as hurricanes, or human events, such as war), external (which would not necessarily be the case if a party’s performance is hindered by acts of its own subcontractors) and does not imply fault on the part of the party wishing to excuse its non-performance.

Contractual hardship clauses, which oblige the parties to negotiate in good faith modifications to the contract in the event of the occurrence of circumstances that upset the original economic equilibrium of the contract, are valid under Tunisian law but, in practice, their application is difficult, as the courts are wary of ordering modifications in the event that the parties, despite negotiating in good faith, are unable to agree on the necessary modifications. In any event, the courts will also scrutinise closely whether the events in question actually fall within the scope of the events referred to by the parties in the contract as triggering application of the hardship clause.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

No.

Achour Abdelmonêm

achour.a@cabinet-achour.com

6 Rue Lucie Faure (Av. de Paris)

Tunis 1000

Tunisia

Tel: +216 71 341 568 / + 216 25 232 401

Fax: +216 71 341 569

www.cabinet-achour.com

Turkey

Burak Çavuş

Çavuş & Coşkunsu Law Firm

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

According to Turkish law, this depends on whether the newbuild is registered at the shipping registry or not. The title of a newbuild that is not registered at the shipping registry shall pass through the transfer of possession from the shipbuilder to the shipowner, after the physical delivery and the signing of the protocol of delivery and acceptance. However, for registered vessels, the title shall pass to the shipowner at the shipping registry through an official transaction of the registrar, who shall transfer the ownership and record such change at the registry. Under Turkish law, the parties are free to decide in the shipbuilding contract whether the shipyard or the contractor will be the registered owner. The Turkish Commercial Code (TCC) allows foreign contractors to be registered owners of newbuilds, but this rule only applies to newbuilds.

2 What formalities need to be complied with for the refund guarantee to be valid?

Under Turkish law, although the refund guarantee is not specifically regulated by the Code of Obligations, leading scholars are of the opinion that the refund guarantee is a special form of the guarantee contract, whereas the rules of the Code of Obligations regulating ‘third-party performance liability undertaking’ shall apply by comparison to the guarantees. There is no formal requirement set out by the Code of Obligations for ‘third-party performance liability undertaking’, and neither this nor the guarantee contract depend on the principal contract, nor do they have any subsidiary effect that varies from the surety whereby the Code of Obligations requires specific formalities. Accordingly, article 583 of the Code of Obligations refers to the fact that surety contracts should be drawn up on paper and the maximum quantum for the liability, the date of the surety and the type (eg, joint and several liability) of liability should be executed by the handwriting of the person providing the surety. Article 584 also requires spouse consent in the event that the person providing the surety is not a member of the board of directors or a shareholder of the debtor company. Although these legal validity requirements govern the surety contract, article 603 of the Code of Obligations states that the same validity rules shall apply to any personal guarantee or undertaking given by natural persons. In the event that the refund guarantee in a shipbuilding contract is given by a natural person, the form of the guarantee should comply with the specific requirements for the sureties set out by articles 583 and 584 of the Code of Obligations, otherwise the personal guarantee or undertaking shall be deemed null and void.

However, in Turkey bank refund guarantees are common practice for shipbuilding contracts and the foregoing requirements shall not apply to bank guarantees issued by a bank as a legal commercial entity. In almost all cases, Turkish banks apply Turkish law and local jurisdiction and state that, if the contract is disputed, the refund guarantee shall only be liquidated in accordance with the final arbitration award or the final judgment of the courts.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

According to the articles of the Turkish Code on Procedural Law No. 6100, it is possible to apply to the courts and request a precautionary injunction order for the delivery of the vessel when the yard refuses to deliver it. The court, while granting such an order, would request that the claimant lodge sufficient security in consideration of the potential losses or damages to the opponents if such a request of the claimant were to be found illegal.

A precautionary injunction for the delivery of a vessel is an effective remedy against shipyards refusing to deliver. The claimant should also proceed with the main claim action before the relevant jurisdiction within two weeks for the sake of the precautionary injunction order.

4 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?

Where the vessel is defective and damage results, the liability of the shipyard against the original shipowner would be based on contractual liability. If the vessel is sold, the original shipowner shall be held liable to the purchaser in accordance with the law of the contract.

However, third parties, or a purchaser from the original shipowner whose rights are prejudiced from the defects arising from the fault of the shipbuilder may bring a tort action against the shipbuilder in accordance with the stipulations of the Code of Obligations.

Ship registration and mortgages

5 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?

According to article 956 of the TCC, commercial vessels owned by Turkish companies or Turkish natural persons, pleasure yachts and vessels used for scientific, sporting or educational purposes shall be registered in the Turkish shipping registry. Vessels under construction for Turkish and foreign entities and natural persons shall be entitled to be registered at the registry for vessels under construction.

Turkish commercial vessels exceeding 18 GT are to be mandatorily registered at the shipping registry.

6 Who may apply to register a ship in your jurisdiction?

In accordance with article 940 of the TCC, natural persons holding Turkish nationality and companies established in Turkey where the majority of directors are Turkish nationals and the majority of the votes representing shares are held by Turkish shareholders may apply to register a ship. For joint-stock companies, in addition to the foregoing requirements, the shares should be registered and share transfers to foreign entities or natural persons should be subject to the approval of the board of directors.

7 What are the documentary requirements for registration?

According to the relevant regulations, the applicant should submit the following documents:

• corporate authorisation of the Turkish company:

• notarised original resolutions of the board of directors of the company for the approval of the purchase and registration in the Turkish shipping registry;

• notarised original power of attorney giving the necessary power to the applicant if different from the authorised signatory;

• notarised original circular signatory showing the list of authorised persons empowered to act for and on behalf of the company;

• certificate of good standing from the Turkish Maritime Chamber of Commerce; and

• original or notarised copies of the articles of incorporation along with the amendments;

• original deletion certificate (if the second-hand vessel is purchased from a foreign seller);

• non-encumbrance certificate from the previous foreign registry;

• invoice;

• notarised and apostilled bill of sale signed by the foreign seller;

• protocols of delivery and acceptance along with their official Turkish translations;

• customs entry document of the vessel; and

• tonnage certificate duly issued by the Turkish authorities.

If the vessel is to be owned by a Turkish natural person, he or she should provide his or her identity card instead of the corporate documents.

For a foreign newbuild, the applicant should also submit the builder’s certificate.

8 Is dual registration and flagging out possible and what is the procedure?

Dual registration is not permitted under Turkish law. However, according to articles 941 and 942 of the TCC, if a Turkish vessel is managed and operated by a foreign entity for a minimum of one year, the vessel, with the formal consent of the Turkish Ministry of Transport, Maritime Affairs and Communication, shall fly the foreign flag during the management period. Owners should also provide the Turkish authorities with proof of the formal consent of the flagging-in state for the temporary entry of the vessel into their (bareboat) registry.

If a foreign vessel is managed and operated by Turkish entities for a minimum period of one year, the vessel, with the consent of the Turkish Ministry of Transport, Maritime Affairs and Communication, shall fly the Turkish flag during the management period. The applicant should also submit the official consent of the foreign owner along with the regulation of the foreign country enabling the temporary change of flag. In this case, the vessel shall be registered at the bareboat registry. In the event that the majority of the votes representing the shares are not granted to Turkish citizens in that (Turkish) management or operating (or bareboat charterer) company, and the shares are not registered and the share transfer to foreign entities or natural persons does not require the approval of the board of directors, the vessel is still allowed to fly the Turkish flag but would not benefit from cabotage rights.

9 Who maintains the register of mortgages and what information does it contain?

Mortgages are registered in the vessel’s registry records at the shipping registry. The registrar, while registering the mortgage, should record the name of the mortgagee, the amount, the interest rate and type of the mortgage, the degree of the mortgage, the notary certificate showing the number and date of the mortgage agreement executed before the notary public, and further information related to the principal claim for which the mortgage has been created as a security.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

In accordance with the current stipulations of the TCC, which entered into force on 1 July 2012, Turkey has abandoned the previous in rem liability regime and adopted the system of the Convention on Limitation of Liability for Maritime Claims (LLMC), 1976 and its 1996 protocol. The regime of the LLMC shall apply to all vessels irrespective of their flag.

The claims mentioned in article 2 of the LLMC are subject to limitation of liability, but Turkey reserves the right to exclude the application of the claims in respect of the raising, removal, destruction or rendering harmless of a ship that is sunk, wrecked, stranded or abandoned (article 2, subparagraph 1(d)) and the claims in respect of the removal, destruction or rendering harmless of the cargo of the ship (article 2, subparagraph 1(e)). Turkey also reserves the right to exclude the claims for damage within the meaning of the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996, or of any amendment or protocol related thereto.

According to article 1 of the LLMC, limitation of liability is available to shipowners (owner, charterer, manager and operator of the seagoing ships), salvors, their employees and the liability insurers of the claims that are the subject of the LLMC.

11 What is the procedure for establishing limitation?

Setting up a limitation fund occurs through a court action before the competent court as mentioned in article 1348 of the TCC. The fund shall be calculated based on the tonnage of the vessel and established for the maximum liability. This amount (converted to Turkish lira from SDR) shall be deposited in an interest-bearing account.

According to article 1335 of the Commercial Code, limitation of liability is also a defence that can be brought by any person without establishing the limitation of the fund.

12 In what circumstances can the limit be broken?

In line with the provisions of article 4 of the LLMC, liability shall not be limited in the event that the loss or damage is the result of the intention to cause such loss or damage, or of actions that were reckless and performed in the knowledge that such loss would probably result.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

The TCC has adopted the important stipulations of the Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea, 2002. In summary, for losses suffered as a result of the death of or personal injury to a passenger caused by a shipping incident, the maximum liability of the carrier for each shipping incident is 250,000 SDR per passenger. For losses suffered as a result of the death of or personal injury to a passenger and that are not caused by a shipping incident, the maximum liability of the carrier is 400,000 SDR. In the event of negligence or faulty action of the carrier, the maximum liability amount shall not be applied. For vessels carrying more than twelve passengers, reference must be made to compulsory insurance in respect of the death of and personal injury to passengers, which shall not be less than 250,000 SDR per passenger in each incident.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

The port state control that includes marine transport is making progress with international standards determined in the international conventions to which Turkey is a party, and national regulations administered by the Ministry of Transport, Maritime Affairs and Communications within the scope of the Mediterranean Memorandum of Understanding agreed in 1997 and the Black Sea Memorandum of Understanding agreed in 2006.

The Ministry of Transport, Maritime Affairs and Communications takes all measures in accordance with article 5 of Regulation No. 26120 on Port State Control in order to perform the obligations it sets forth, including providing qualified and sufficient numbers of staff and tools, equipment and documents to be used by the staff in order to carry out port state control services. Inspections are performed by the port state inspector nominated by the Ministry of Transport, Maritime Affairs and Communications.

Within the meaning of port state control, the principal aim is to ensure the safety of navigation, life, goods and the environment at sea through the provision of the maximum protection in terms of safety on board, in compliance with the international conventions to which Turkey is a party and national legislations, and to impose sanctions on vessels that violate such rules.

15 What sanctions may the port state control inspector impose?

The duty of the port state inspector is to detect the ‘detention circumstance’ criteria stated in the Regulation on Port State Control, section 5, under the relevant clauses of the Mediterranean MoU and Black Sea MoU (to which Turkey is a party) and the port state control procedure clauses that are included in the International Maritime Organization’s general assembly resolution A.1052(27).

When the port state inspector decides whether there is a need to detain a vessel that has deficiencies, he or she evaluates whether the vessel has good and valuable documents, and whether it is equipped with suitable crew according to the Minimum Safe Manning Certificate.

During the inspection, the port state inspector evaluates whether the vessel and its crew for the specific voyage are able to:

• navigate safely;

• exercise due care in the matter of safely loading, discharging and controlling safely;

• work the equipment and machines in the engine room;

• carry out suitable handling and steering;

• effectively fight fire on board, if necessary;

• abandon ship quickly and safely and, if necessary, perform rescue and salvage operations;

• prevent pollution;

• maintain sufficient balance;

• maintain water tightness;

• communicate throughout the entire voyage in an emergency situation, if necessary;

• maintain health and safety, living and working conditions on board throughout the whole voyage; and

• collect the maximum information in the event that an accident occurs.

If the detected deficiencies cannot be improved in a short time at the port of detention, the port state inspector may let the vessel sail to the nearest convenient port (nominated by the inspector) where the vessel can remove the deficiencies within as short a time period as possible, and in all cases within 30 days.

Punitive sanctions can be imposed, as set out under article 20 of Law No. 4922 on the Safety of Life At Sea.

16 What is the appeal process against detention orders or fines?

According to article 29 of the Regulation on Port State Control, a vessel’s owner, manager or agent has the right to make an objection to a detention order, an order prohibiting entry into the harbour imposed by the port state inspector, and a monetary fine imposed by Law No. 4922 on the Safety of Life At Sea.

The objection is made to the administrative body of the port authority within one month as from the date of detention of the vessel or sanction. However, the objection does not have a suspensive effect.

Monetary fines may be challenged before the basic criminal court, whereas annulment of administrative decisions may be sought before the administrative courts.

Classification societies

17 Which are the approved classification societies?

The list of classification societies approved in Turkey is as follows:

• Turkish Lloyd;

• American Bureau of Shipping;

• Bureau Veritas;

• DNV GL;

• Korean Register of Shipping;

• Lloyd’s Register of Shipping;

• Nippon Kaiji Kyokai;

• Registri Italiano Navale;

• Russian Maritime Register of Shipping;

• China Classification Society;

• Croatian register of Shipping;

• Indian Register of Shipping;

• Hellenic Register of Shipping;

• Registro International Navale SA; and

• Polish Register of Shipping.

18 In what circumstances can a classification society be held liable, if at all?

There are no direct rules regulating the liabilities of classification societies. Therefore, general rules and terms of agreements shall be taken into account in evaluating whether liability is attributable to a classification society.

In consideration of the contractual relationship between classification societies and owners, classification societies may be held liable in the event of a breach of contractual terms. However, under the principle of trust and of contract with protective effect towards third parties, classification societies may be faced with non-contractual liability as a consequence of their tortious acts. Pursuant to recent cases, agreements to which the classifications societies are party are interpreted as attorney agreements and, under article 310 of the Code of Obligations, such type of agreements confer a particular and more diligent obligation on the contractual parties when fulfilling their obligations. In this respect, in the event that classification societies breach such obligation, third parties may be entitled to claim damages under the principle of trust as well as the principle of contract with protective effect towards third parties.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

Pursuant to article 7 of the Code of Harbour Masters, shipowners, masters and agents shall be obliged to remove the wreck and properties within the timeframe granted by the harbour master in the event that the position of the wreck prevents safe and secure navigation in the port area. The interested parties shall be notified of the granted period either by notification via a notary public or an announcement in a newspaper.

In the meantime, local authorities shall take any preventive actions needed, including removal of the wreck, in the event that the position of the wreck prevents free navigation in ports, straits or other waterways. In this regard, the administrative authorities and harbour masters are authorised to immediately take the necessary action in order to remove wrecks without the need to comply with the rules and procedures.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

• The Convention for the Unification of Certain Rules of Law relating to Assistance and Salvage at Sea, (Brussels, 23 September 1910), duly entered into force on 23 June 1937;

• the Convention on the International Regulations for Preventing Collisions at Sea, 1972, duly entered into force on 23 May 2014;

• the amendments made to the International Regulations for Preventing Collisions at Sea, which duly entered into force on 18 November 1984, are still in effect;

• the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, (London, 27 November 1992), duly entered into force on 15 June 2001;

• the Protocol concerning Cooperation in Preventing Pollution From Ships and, in cases of Emergency, Combating Pollution of the Mediterranean Sea, duly entered into force on 20 May 2002;

• the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, duly entered into force on 23 June 1937;

• the International Convention on Oil Pollution Preparedness, Response and Co-Operation, 1990, duly approved by Turkey on 18 September 2003;

• the 2003 protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, duly entered into force on 3 March 2005;

• the Convention for the Protection of the Marine Environment and the Coastal Region of the Mediterranean, duly entered into force on 20 May 2003;

• the International Convention on Salvage, 1989, duly entered into force on 29 May 2013;

• the International Convention for the Prevention of Pollution from Ships, approved by Turkey on 24 June 1990, and its 1997 protocol, duly entered into force on 4 February 2014;

• the Protocol on Preparedness, Response and Co-operation to pollution incidents by Hazardous and Noxious Substances, 2000, duly entered into force on 3 December 2013;

• the International Convention on Maritime Search and Rescue, and its amendments, duly approved by Turkey on 5 June 2013;

• the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, duly approved by Turkey on 27 June 2013; and

• the MARPOL, Annex III Prevention of Pollution by Harmful Substances Carried by Sea in Packaged Form, duly approved by Turkey on 23 May 2014.

21 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. The standard form issued and published by the Directorate General of Coastal Safety, which has monopoly powers and rights in the Turkish Straits and Marmara Sea, is the most common salvage agreement. However, this form is not compulsorily binding upon the parties, who may agree their own terms.

Apart from in the aforementioned areas, salvage operations may be undertaken by any Turkish person or entity.

There is no law preventing the application of Lloyd’s standard form of salvage agreement.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

Turkey is not party to international conventions regarding the arrest of ships. However, the TCC, which recently came into effect on 1 July 2012, incorporates most of the rules of the International Convention on the Arrest of Ships, 1999.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel, irrespective of her flag or the law governing the claim, may be arrested in the event that the claim grants its creditor a maritime claim right under article 1352 of the TCC. The types of claim that constitute a maritime claim are the same as those defined in article 1 of the International Convention on the Arrest of Ships, 1999.

An arrest can be made under the circumstances described in article 3 of the International Convention on the Arrest of Ships, 1999. The arrest of associated ships under the same management is not allowed.

24 What is the test for wrongful arrest?

Article 1361 of the TCC states that the courts in which the arrest has been carried out would also be competent to deal with the lawsuit to be filed against the arresting party for recovering damages resulting from wrongful arrest. Therefore, if the claim for which the arrest was granted is found not to exist or is in any other way unjustified, the arrested party shall be entitled to claim damages. Thus, the test for wrongful arrest is the ultimate failure of the claim.

25 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?

No.

26 Will the arresting party have to provide security and in what form and amount?

Yes, pursuant to article 1363 of the TCC, the arresting party has to provide a fixed quantum security corresponding to 10,000 SDR. The security shall be either in cash or in a definite letter of guarantee unlimited in time issued by a Turkish bank.

The arrested party may always ask the court to increase the amount of security. The court, while evaluating such a request, shall take into account various factors, such as the daily maintenance expenses of the vessel and the loss of profits incurred as a result of the arrest. In the event that the court decides to increase the amount of security, the arresting party shall be obliged to provide additional security within the timeframe granted by the court. Failing that, the arrest shall be automatically lifted.

27 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?

Under article 1371 of the TCC, the shipowner or debtor may demand that the court lift the arrest in return for a sufficient security corresponding to the maritime claim amount plus interest and expenses, provided that this amount does not exceed the value of the vessel. The security shall be either in cash or in a definite letter of guarantee unlimited in time issued by a Turkish bank, and the suitability of the wording shall be at the sole discretion of the court. In addition, the parties may always freely agree upon the form and amount of security pursuant to article 1372 of the TCC.

28 Who is responsible for the maintenance of the vessel while under arrest?

Pursuant to article 1368(2) of the TCC, the enforcement offices through which arrest proceedings are implemented shall take all necessary measures for the operation, management, maintenance and protection of the vessel.

29 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. In this regard, article 1359 of the TCC states that the courts that are competent to hear arrest requests are also competent to hear principle claims, unless there is a valid jurisdiction or arbitration clause.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

No, as article 1353 of the TCC clearly stipulates that a vessel may only be arrested in respect of a maritime claim.

31 Are orders for delivery up or preservation of evidence or property available?

Under article 219 of the Code of Civil Procedure, the parties to a dispute are under the obligation to provide all documents that they rely on. In the event that the court opines that the presentation of a document is inevitable for evidentiary purposes of the arguments pertaining to the claim, the court may grant the concerned party a fixed period of time in which to procure the document. If the requested party fails to provide such document without any justified reason, the court may give precedence to the counter-evidence provided by the opposing party.

A third party may be invited by the court to present a document that a party to the dispute asserts that the third party possesses. The third party shall, accordingly, be obliged to procure such document or to submit justified reasons in the event of failure to fulfil the order. If the court is not satisfied with the explanation, the third party may be invited to give testimony.

On the other hand, an ex parte application may be made to the court for collection of evidence. While evaluating such a request, the court shall consider whether the applying party has a legal interest in the collection of evidence and whether there is a risk that the evidence may vanish in the event that it is not collected.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

The law does not describe a direct remedy for bunker arrest. However, under the principle and interpretation of precautionary injunction orders, arresting bunkers is possible although the procedure is difficult.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Any creditor who has an enforceable legal title against the owner of the vessel, irrespective of whether it is the arresting party, is entitled to apply for the judicial sale of an arrested vessel.

34 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?

The procedure for initiating and conducting judicial sale of a vessel consists of the following steps:

• service of the payment order to be issued by the enforcement office to the debtor;

• the proceedings becoming conclusive, either by failure of the debtor to oppose the proceedings within the time frame defined by law, or by obtaining a favourable judgment in the event of the objection of the debtor being challenged before the court;

• physical seizure of the vessel;

• valuation of the vessel to be conducted by the enforcement courts;

• request of the auction sale of the vessel;

• publication of the auction sale and information concerning the flag state of the vessel being auctioned;

• sale of the vessel;

• issuance of a list of creditors in the event that the sale amount does not suffice to cover all claims of the creditors who duly informed the enforcement office of their participation in the auction sale;

• actions brought by the creditors who, according to the list of creditors, do not appear to benefit from the sale amount and, therefore, allege that the ranks of priority are not valid or that the claims that affect the rank of priority are falsified or exaggerated;

• finalisation of the foregoing claims including appellate; and

• distribution of the sale amount to the creditors.

The period needed for the finalisation of the application for sale depends on various factors, such as whether the list of creditors is challenged by the creditors before the courts, whether service of the payment order needs to be made abroad through diplomatic channels, and whether the debtor challenges the enforcement proceeding before the courts. The process normally takes between six months and three years.

The following costs are associated with the judicial sale of a vessel:

• fees for the initiation of the enforcement proceeding, which amount to roughly 5 per cent of the claimed amount, whereas a fixed quantum is applicable with regards to execution proceedings by way of foreclosure of mortgage;

• costs and fees related to the translation and certification of the supporting documents;

• fees for the physical seizure of the vessel;

• fees and expert costs for the valuation of the vessel;

• costs for the publication of the auction sale; and

• costs for service of summons.

35 What is the order of priority of claims against the proceeds of sale?

In accordance with articles 1390 to 1397 of the TCC, the order of priority of claims against the proceeds of sale is as follows:

• cost of the forced sale, custody and maintenance of the vessel, and the wages and other receivables of the master and crew, for the time from the arrest of the vessel until signing off;

• cost of removal or salvage, or both, of a wrecked, stranded or sunken vessel by public authorities to ensure safe navigation or protect the environment;

• claims granting maritime lien rights;

• shipyard claims if the vessel is subject to a forced sale while in the possession of that shipyard;

• customs taxes and duties, and other taxes levied on the vessel;

• ship mortgages or other statutory liens;

• maritime claims that do not take priority over the specific claims above; and

• other ordinary claims against the owner.

36 What are the legal effects or consequences of judicial sale of a vessel?

The successful buyer shall obtain clean title on the vessel, free of all liens and encumbrances, as pursuant to article 1385(2) of the TCC. The auction publication shall include the notice that the vessel will be sold free from any in rem or in personam rights or encumbrances unless the buyer consents to undertake such encumbrances.

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

Yes, the judicial sale of a Turkish-flagged vessel in a foreign jurisdiction shall be recognised. Accordingly, all encumbrances pertaining to the vessel shall be deleted from the ship registry provided that, at least 30 days before the auction takes place, the authority conducting the judicial sale of the vessel informs the Turkish ship registry, the owners and the concerned parties who appear to hold a right on the vessel according to the ship registry records about the auction, and also provided that the auction is published in a national newspaper with a circulation above 50,000.

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

No. However, the TCC incorporates most of the rules of the International Convention on Maritime Liens and Mortgages 1993.

Carriage of goods by sea and bills of lading

39 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?

Turkey has been party to the Hague Rules since they were approved on 17 February 1955. Turkey has not approved the Hague-Visby Rules and the Hamburg and Rotterdam Rules, but the TCC incorporates a set of rules that purport to adapt the Hamburg Rules. In this respect, the period when carriage at sea begins and ends is stipulated under article 1178 of the TCC, which appears to be a translation of article 4, sub paragraph 2 of the Hamburg Rules.

40 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?

The conventions and domestic laws in force in respect of road, rail and air transport are as follows:

Road

• The Convention on the Contract for the International Carriage of Goods by Road – (Geneva, 19 May 1956), amended by the protocol of 5 July 1978, duly entered into force on 14 December 1993;

• the Road Transportation Code No. 4925, duly entered into force on 19 July 2003; and

• Regulation No. 27225 on Road Transportation, duly entered into force on 11 June 2009.

Rail

• The Contract of International Carriage of Goods by Rail, duly entered into force on 7 March 1930; and

• the Convention concerning International Carriage by Rail and its protocol.

Air

• The Convention for the Unification of Certain Rules for International Carriage by Air (Montreal, 28 May 1999), duly entered into force on 1 October 2010.

41 Who has title to sue on a bill of lading?

In principle, the shipper, consignee, carrier and third-party endorsee have title to sue on a bill of lading.

42 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?

Charter-party terms can be incorporated into a bill of lading provided that the bill of lading includes such an incorporation clause with clear reference (such as the date of the charter party).

A jurisdiction or arbitration clause in a charter party that is validly incorporated into a bill of lading is binding on a third-party lawful holder of the bill.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

The ‘demise’ clause or identity of carrier clause can be recognised and binding under Turkish law; however, under article 1192 of the TCC such clauses shall be deemed null and void if no court action can be taken against the actual carrier within the jurisdiction of Turkish courts.

44 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?

Under article 1191 of the TCC, shipowners remain responsible for the entire carriage in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his or her servants and agents acting within the scope of their employment under the principle of joint and several liability. If an action is brought against the shipowners, the same defences and limits of liability may be relied on as those conferred on the contracting carrier. Shipowners may, therefore, rely on the terms of the bill of lading.

45 What is the effect of deviation from a vessel’s route on contractual defences?

If the deviation is inevitable as a consequence of justified reasons, the parties’ rights and obligations shall not be affected and the shipowners shall not be held liable for the losses that might incur as a result.

46 What liens can be exercised?

The following lien rights can be exercised:

• lien right on moveables and valuable papers of the charterer for ensuring the recovery of freight and other receivables prescribed in the charter agreement;

• lien right on moveables and valuable papers of the charterer for ensuring the recovery of hire and other receivables prescribed in the time charter agreement;

• lien right on cargo for ensuring the recovery of all receivables the carrier is entitled to under the charter agreement;

• lien right on passengers’ luggage for ensuring the recovery of all receivables the carrier is entitled to under the passenger contract; and

• lien right on the vessel, cargo and freight for ensuring the recovery of general average distribution shares.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

Pursuant to article 1232 of the TCC, in the event that the bill of lading is issued to the order, the master is under the obligation to deliver the cargo upon presentation of all copies of the bill of lading. Otherwise, responsibility towards the rightful owner shall remain. If the bill of lading is not issued to the order and the shipper and the consignee give the relevant consent, the cargo may be redelivered or delivered without production of any of copies of the bill of lading. However, the carrier may ask for certain guarantees to be provided. As this article is mandatory, any clause restricting or removing such obligations shall be interpreted as null and void under article 1243 of the TCC. Liability shall not, therefore, be limited by way of a letter of indemnity.

48 What are the responsibilities and liabilities of the shipper?

Pursuant to article 1145 of the TCC, the shipper is obliged to provide a precise and accurate description of the cargo; otherwise, he or she shall remain responsible to the carrier for damages incurred as a result of false declaration. The shipper shall also be held responsible for loading dangerous or contraband cargo or cargo that is forbidden from being imported or exported. The responsibility cannot be avoided even if it is proved that illegitimate acts were carried out with the consent of the master.

Under article 1165 of the TCC, the shipper is under the obligation to present to the carrier all documents needed for the carriage of the cargo. The shipper shall remain responsible to the carrier and parties with interest in the cargo for any losses sustained as a result of falsification of documents.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

No.

50 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 is set at 3.5 per cent. Pursuant to the regulation published by the Ministry of Environment, the cap on grade 1 marine diesel oil is 0.1 per cent, and the same cap is applicable for fuel intended to be loaded on marine vehicles sailing in internal waters and on vessels at dock. Any contradictory act may risk the arrest of the vessel and imposition of an administrative fine.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Under article 5 of the TCC, if more than one commercial court is present the Supreme Council of Judges and Public Prosecutors may nominate one or more commercial courts to deal solely with maritime disputes. If no commercial court is situated in the concerned jurisdiction area, general civil courts of first instance shall hear disputes in the capacity of commercial courts involved in maritime disputes.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

International treaties, bilateral agreements, international legal assistance rules and the Code of Notification No. 7201 describe the rules governing service of court proceeding. Turkey has entered into various bilateral agreements with regards to the service of judicial documents and is also a party to the Convention on Civil Procedure (1954) and the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965).

Therefore, in principle the service of judicial documents requires diplomatic interference. However, according to a recently published letter by the General Directorate of International Law and Foreign Affairs of the Ministry of Justice, direct service by post is permissible to some countries.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

No.

54 What rules govern recognition and enforcement of foreign judgments and awards?

The rules governing recognition and enforcement of foreign judgments and awards are stipulated in articles 50 to 63 of the International Private and Procedure Law. In this respect, while considering whether the foreign judgment is enforceable in Turkey, the judge shall take into account the following conditions:

• whether there is an agreement, provision of law or de facto application between Turkey and the country where the award is rendered enabling the judgment to be enforced;

• whether the judgment is rendered by a court that was not entitled to conduct the judgment based on the grounds of lack of connection with respect to the matter in dispute or parties to the dispute, provided that an objection is raised by the defendant;

• whether the judgment is explicitly contrary to public policy; and

• whether the party against whom enforcement action has been started in Turkey has objected to the enforcement request on the grounds of at least one of the following issues:

• the party was duly summoned to the court or duly presented before the court that rendered the foreign judgment, in accordance with the procedural rules of the foreign country law; or

• the judgment was rendered in the absence of the party, contrary to the concerned procedural rules.

With respect to the recognition and enforcement of foreign awards, Turkey is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

There are no domestic remedies for this situation if proceedings are initiated elsewhere in breach of a jurisdiction clause that refers to Turkish courts. However, if proceedings are initiated in Turkey in breach of a jurisdiction clause that refers to another jurisdiction, then the defendant may lodge an objection of jurisdiction within the timeframe designated under the Code of Civil Procedure, requesting that the claim be dismissed on the grounds of a lack of jurisdiction. In the event that the jurisdiction of Turkish courts is defined as a requirement of public policy and not only in contractual terms, the judge may, ex officio, dismiss the claim on the grounds of a lack of jurisdiction, where such an objection may be argued until the judgment is rendered.

56 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?

See question 55.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

• Two years for claims arising out of salvage or wreck removal;

• one year for claims granting creditors maritime lien rights;

• two years for compensation for loss of life or passenger injury;

• two years for claims arising out of passenger contracts and damages or loss of luggage;

• one year for claims arising out of charter parties, contracts of carriage or bills of lading;

• one year (statutory time-bar) for claims arising out of damages, losses or late delivery of cargo. The action of recourse against the party liable may be started after the lapse of this period. However, the right to start an action of recourse shall be statute-barred within 90 days if the party entitled to start a claim of recourse does not exercise this right, starting from the date the entitled party paid the indemnity or from the date the claim petition with regards to the indemnity claim as served on the entitled party. The period for claims arising out of damages, losses or late delivery of cargo shall be extended by mutual agreement, to be made after the occurrence of the grounds for action;

• one year for general average contribution; and

• two years for claims arising from collision.

In the event that the incident concerns criminal liability the time limit may be longer, pursuant to article 72 of the Code of Obligations.

58 May courts or arbitral tribunals extend the time limits?

Neither courts nor arbitration tribunals have authority to extend the time limit. However, under article 1189 of the TCC, if the liable party acts maliciously in order to prevent the entitled party from bringing action within the time limits, the liable party cannot rely on such an objection and the time limit shall be deemed to be started from the date the entitled party acknowledges the incident.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

Turkey is not a party to the Maritime Labour Convention and, therefore, the rules of the convention do not apply directly to disputes heard by Turkish courts. However, administrative and bureaucratic studies of the ratification of the convention are ongoing, and common practice implicitly conforms to the Convention’s rules.

60 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 article 138 of the Code of Obligations, and under the interpretation of the theory of unpredictability, a party to a shipping contract may ask the court to adapt the contract to the new conditions or to renege on the contract if adaption is not possible, provided that the following conditions are met:

• the occurrence of an extraordinary event which was unpredictable or could not have reasonably been predicted by the parties when the contract was signed;

• the occurrence of the event shall not result from the acts of the debtor;

• the unpredicted circumstances shall have made the performance of the obligations of the debtor excessively onerous, to the extent that their performance contradicts the principle of good faith; and

• the debtor shall not have fulfilled its obligations or shall have fulfilled its obligations notwithstanding the rights arisen therefrom.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

Under the new provisions stipulated with regards to arrest in Turkey, the vessel must be in a Turkish port or at anchor without a transit regime, meaning that she should be at anchor for more than 48 hours or her transit passage should be broken for another reason in order for her arrest to be sought.

Update and trends

With the recently enacted Turkish Commercial Code, the first application for the constitution of a fund has been accepted by the 51st Commercial Court of Istanbul in respect of a claim where it was alleged that a Turkish-owned ship of 1,580 tons allegedly damaged a loading platform of an oil refinery while conducting loading operations, and a letter of guarantee amounting to US$2.35 million had to be procured to insure the ship against arrest. Therefore, without prejudicing the client’s defence, the constitution of the fund for the limitation of liability was claimed. On February 2014 the court accepted the claim where a fund amounting to 1 million SDR was constituted and all previous guarantees were deemed to be invalid. This decision will no doubt be regarded as a precedent for future cases.

Burak Çavuş

burak@cavus-coskunsu.com

Inebolu Cad.

Ozra Is Merk. No. 41

34427 Setustu Kabatas

Istanbul

Turkey

Tel: +90 212 245 5602

Fax: +90 212 245 5604

www.cavus-coskunsu.com

Ukraine

Arthur Nitsevych and Nikolay Melnykov

Interlegal, Ukraine

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Generally title in the ship passes from the shipbuilder to the shipowner at the moment of delivery. Another time for the title to pass can be provided for in the contract between the parties. A vessel’s delivery is legally determined by the protocol of delivery and acceptance. Parties can agree that title in the ship belongs to the shipowner from the very beginning of ship construction. If the shipowner’s refusal to accept the work performed has caused changes in the deadline for the acceptance of the work, it shall be considered that title in the ship was transferred to the shipowners as of the date when such transfer should have taken place.

2 What formalities need to be complied with for the refund guarantee to be valid?

Refund guarantees are not widely used in Ukraine due to the high level of formalities stipulated by the local legislation and the unwillingness of banks. It is a huge problem for Ukrainian banks, shipowners and shipbuilders and they try to resolve this problem by using diverse instruments. At the same time there is no legal prohibition on issuing a valid refund guarantee.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

The shipbuilding contract is an agreement for the construction of the res (vessel) and transfer of the work results to the shipowner. It creates the substantive grounds for the shipowner to file a claim with the local courts to compel delivery of the res when the yard refuses to do so. The yard has to compensate for any damages.

4 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?

Where the vessel is defective, the shipbuilder bears contractual liability at the suit of the original shipowner or a customer (party to the shipbuilding contract). Product liability may be placed by the purchaser on the seller or the shipbuilder, despite the fact that the latter is not a party to the contract of sale. As a general rule, the party that suffered a loss is entitled to compensation from the offender. The person who suffered the damage will certainly prefer to claim the damages and, in some cases, it is the only possibility of being indemnified; for example, a passenger who has suffered harm to his or her health, can only bring an action against the carrier for the injury, as a contract of carriage exists between him or her and the carrier. As a buyer has a contract with a seller, or a shipbuilder, he or she may impose a contractual liability on them, even if no damage has been suffered by the buyer. In particular, he or she may file a claim for cancellation of the contract and the return of the vessel if the vessel’s quality does not meet the standards provided in the contract or the common requirements and standards.

Ship registration and mortgages

5 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?

The right to sail under the flag of Ukraine belongs to any ship owned by the state of Ukraine, a Ukrainian citizen or a Ukrainian legal entity established solely by Ukrainian owners; or to any ship possessed by such persons under bareboat charter terms. Thus, if a non-resident has a share in a vessel, such vessel may not be registered in the Ukrainian Ship Registry, which is exclusively national.

Passenger ships, tankers, ships intended for transportation of hazardous cargo, tugboats (irrespective of engine power or gross tonnage), self-propelled vessels with an engine power of 55kW, and other vessels of 80 GT are eligible for registration under the flag of Ukraine. Cutters, lifeboats and other vessels that are tenders to another vessel and vessels powered by oars that are less than 2.5 metres long cannot fly the flag of Ukraine.

Vessels under construction may not be registered under the flag of Ukraine.

6 Who may apply to register a ship in your jurisdiction?

Ukrainian citizens and entities that are 100 per cent owned by Ukrainians may apply for the registration of a ship, including those acting as charterers under a bareboat charter. National law does not provide for registering a ship owned by a foreign company with Ukrainian capital that operates mainly in Ukraine. In any case, such situation has no practical significance as Ukrainian registers are not international and, on the contrary, are considered purely national.

7 What are the documentary requirements for registration?

All the documents required for registration in the Shipping Register of Ukraine must be attached to the application, a template of which was approved by the Ministry of Transport and Communications (now the Ministry of Infrastructure) by its order dated 13 December 2006 with further amendments. A special application form is approved for pleasure crafts, as well as a separate application form which is required for registration in the Shipping Book. The following documents must also be included: copies of the tonnage certificate; the certificate of seaworthiness or classification survey certificate of a vessel; a copy of the passenger certificate; the manning certificate; the civil liability insurance policy of the shipowner for damage from oil pollution under international treaties of which Ukraine is a signatory; and a document confirming the presence or absence of encumbrances. Photographs of the vessel taken from both port and starboard are to be attached. The owners must submit copies of documents showing that they legally own the ship. Registering the ship in the Shipping Book is somewhat simpler as there is no requirement for evidence of having paid mandatory fees and taxes, including a new fee imposed by the Tax Code of Ukraine (articles 231 to 239) for the first registration of a vehicle in Ukraine. To register a vessel in a bareboat charter (temporary registration), the following documents must be presented:

• a copy of the bareboat charter party;

• the shipowner’s agreement for registration of the vessel;

• the permit for the registration of the vessel issued by the competent authority of the foreign state where the ship is registered; and

• the permit of the mortgagee, if the vessel is mortgaged.

Originals of these last documents must be submitted and all copies must be certified by a notary or other competent person, or by the state registration body itself.

In addition, documents must be submitted proving the identity of individuals who acquire and dispose of the vessel if she is alienated. Vessels that are not registered in the Shipping Register of Ukraine are subject to registration in the Shipping Book.

8 Is dual registration and flagging out possible and what is the procedure?

In Ukraine, dual registration is possible under a bareboat charter for the term of its validity, under the condition that the foreign state’s legislation allows the vessel to enter more than one register. Other conditions of registration in the Ukrainian ship register (eg, no foreign owners of the ship) must be observed. A copy of the bareboat charter party, the written consent of the shipowner and a written consent for the dual registration from the competent body in the other flag state are to be presented.

9 Who maintains the register of mortgages and what information does it contain?

The State Registry of Encumbrances of Movables is maintained by the Ministry of Justice of Ukraine. This register contains the following information:

• details about the mortgagee and the mortgagors;

• grounds of origin of the encumbrance and its content;

• description of the object of mortgage;

• information about limitations on the right of the debtor to dispose of the object;

• details of the registrar; and

• the date of the state registration.

Although the vessel can be treated as immovable property in Ukraine, a maritime mortgage is registered in the State Registry of Encumbrances of Movables. Data on registered mortgages is sent to the harbour master of the port of registration.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The shipowner shall be liable for his or her obligations with all his or her property on which an action for recovery may be brought in accordance with the law. The liability of a shipowner shall be limited in regard to claims arising from:

• death or injury to a person on board the vessel or loss of or damage to property on board the vessel; and

• infringement of any right; loss of life or personal injury or damage to property whether on land or on water caused by the fault of any person on board the ship for whose act the owner is liable or, if not on board, caused by a fault in the navigation or management of the ship, or in the loading, carriage or discharge of cargo or passengers.

The liability of the carrier and the stevedore can be limited as well.

11 What is the procedure for establishing limitation?

If there is a claim brought before the courts or arbitration and the defendant intends to limit liability, the defendant has the right (not the obligation) to establish a liability limitation fund in accordance with the provisions of domestic law. In fact, such practice is absent in Ukraine. The defendant is obliged to provide other security for the claim by the order of the court. Thus, it is not necessary to plead limitation when setting up a liability limitation fund. The limitation fund is calculated according to the scale established by the Merchant Shipping Code of Ukraine. Its amount depends upon the vessel’s capacity.

12 In what circumstances can the limit be broken?

The shipowner’s liability shall not be limited if it is proved that the damage was caused by the actions made deliberately or presumptuously by the owner personally. A limitation of liability shall not be applied in respect of the following claims:

• salvage or general average;

• crew members and other employees of the shipowner;

• wreck removal;

• damages from pollution; and

• nuclear damage.

This does not mean limitation of liability for such claims is impossible. There are some special rules of limitation of liability applicable to these claims, but the general rules of limitation of liability are inapplicable to such claims. Such a complicated structure of liability limitation is a big problem in contemporary maritime law.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Ukraine is a party to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, as amended by the protocol thereto of 19 November 1976. However, article 194 of the Merchant Shipping Code of Ukraine provides for rules set by the protocol of 29 March 1990. Thus, a carrier’s liability for personal injury or death shall not exceed 175,000 SDR; for loss of or damage to cabin luggage – 1,800 SDR; for loss of or damage to vehicles (including all luggage, whether in or on the vehicle) – 10,000 SDR; and, for loss of or damage to other luggage – 2,700 SDR per passenger.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

The port state control agency is a division of the Office of the Harbour Master. The harbour master is a subordinate to the Head of the On Sea and River Transport Safety State Inspection of Ukraine, who in his or her turn is subordinate to the Ministry of Infrastructure.

15 What sanctions may the port state control inspector impose?

The port state control imposes the following sanctions:

• preventing a vessel from leaving the port; and

• prohibiting the use of vessels or the performance of works that threaten the life and health of people until the violations are eliminated, etc.

16 What is the appeal process against detention orders or fines?

The order of appeal against administrative penalties or other sanctions imposed by the port state control authorities can be divided into two main branches: administrative and court trial. Administrative procedure envisages a pleading to the harbour master. Local administrative courts are an alternative.

Classification societies

17 Which are the approved classification societies?

The approved classification societies are: the American Bureau of Shipping; Bureau Veritas; Det Norske Veritas Classification AS; Germanischer Lloyd; the Hellenic Register of Shipping; the Shipping Register of Ukraine; and the Russian Maritime Register of Shipping.

18 In what circumstances can a classification society be held liable, if at all?

In practice, Ukrainian shipping and maritime law envisages no circumstances in which a classification society is held liable for damages. In theory, it may be possible to hold a classification society liable, for example, in case of fraud.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The Administration of Sea Ports, which is a public company subordinated to the Ministry of Infrastructure, in agreement with the interested state authorities, shall give an adequate term for wreck removal to take place. If the owner intends to raise sunken property, he or she shall inform the harbour master of the nearest port within one year from the moment the sinking took place. In cases where the sunken property does present an obstacle to merchant shipping; marine works; hydrotechnical or other works; or a threat to human life or health or the environment, the property owner shall immediately notify the nearest port about the incident and, at the port harbour master’s demand, shall raise, remove or demolish said property within the term prescribed by the harbour master. If the owner does not remove the wreck, which poses a direct danger to maritime safety or the life and health of people, or threatens to contaminate the environment, the port authorities shall have the right to immediately take all necessary measures for wreck removal with the related costs being borne by the shipowner.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

The following international conventions are in force in Ukraine: the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 (MARPOL 73/78); the Protocol of 1997 to amend MARPOL 73/78; the International Convention on Maritime Search and Rescue, 1979; and the International Rules of Preventing Collisions at Sea, 1972.

The Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels, 1910 and the International Convention of Salvage, 1989 are not in force in Ukraine.

21 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 are recommended local forms of salvage agreement endorsed by the Ministry of Infrastructure and the Chamber of Commerce and Industry in Ukraine. The Lloyd’s standard form of salvage agreement and other standard forms of salvage agreement are acceptable. Salvage operations may be carried out by a professional salvor and a rescuer, who is effectively a volunteer. Recently, the trend towards the professionalisation and nationalisation of the rescue operations is becoming stronger. In section 2, Part 3 of article 19 of the Law on the Sea Ports of Ukraine it is stated that the provision of rescue operations should be carried out only by public corporations.

Usually the salvor consists of a shipmaster and other crew members. If the master of the ship in distress chooses one shipmaster in particular, then this shipmaster is the main salvor, who may enlist other shipmasters’ support in the rescue operation. The associate salvors must coordinate their activity with the main salvor. In Ukraine there is a public company, Maritime Accident Rescue Service, subordinated to the Ministry of Infrastructure of Ukraine.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

Ukraine acceded to the International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships (Brussels, 1952) in May 2012, but there is no special procedure for arresting a foreign ship which means that foreign ships will be arrested in the same manner as any other property.

Judicial practice remains quite controversial, but there is a growing trend towards the application of the Convention by the courts.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

A vessel in respect of which a maritime claim has arisen may be arrested only on one of the following conditions:

• a claim under the category of privileged claims, particularly:

• claims arising out of labour relations, claims for reimbursing damage inflicted by injury, other impairment of health or death;

• claims arising out of nuclear damage and pollution of the maritime environment as well as the elimination of that pollution;

• claims regarding port and channel dues;

• claims regarding salvage and payment of general average contribution;

• claims for reimbursement of losses resulting from collision of vessels or from other sea casualties, or from damage to port facilities and other property located in the port as well as to navigational aids;

• claims for reimbursement of losses related to cargo or baggage;

• claims based upon the vessel’s registered mortgage;

• claims referring to the rights of vessel ownership or possession; or

• claims that are not specified above, against the owner of the ship, who is liable to such a claim as of the time when the procedure on the ship’s arrest commenced.

The vessel’s flag or law governing the claim does not make a difference. Associated ships may be arrested in certain cases, like any other property of the defendant.

24 What is the test for wrongful arrest?

The person upon whose request the vessel has been arrested is liable for any losses inflicted on the vessel’s owner or bareboat charterer as a result of wrongful arrest of the vessel. An arrest will be regarded as wrongful if it is an unjustified arrest or an excessive security to a maritime claim is requested.

25 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?

It depends on the type of charter. In the case of a voyage charter or time charter the liable party is the owner of the vessel, but in the case of a bareboat charter the liable party is the charterer. If the claim referring to the person that is the vessel’s owner by the moment of origination of said claim and is responsible on this claim by the moment of a procedure connected with the vessel’s arrest a vessel can be arrested. If charterer of the vessel on bareboat charter contract is liable on said claim and is the vessel’s charterer or her owner by the moment of a procedure connected with her arrest vessel also can be arrested.

26 Will the arresting party have to provide security and in what form and amount?

The court of law or commercial court at the place where the arrested ship is registered or located at the time of the filing of the arrest application, and the head of the Maritime Arbitration Commission may, where a vessel is arrested or delayed, request the arresting party to provide security, the amount and conditions of which are determined by the court or the head of the Maritime Arbitration Commission. In practice this happens very rarely in Ukraine, as it can be regarded as a denial of justice. However, if a decision is made that the arresting side should provide security, that security should cover all damages that may be caused to the owner of the vessel or its bareboat charter from the arbitrary arrest or excessive security of the maritime claim, for which a person claiming arrest of the vessel or extension of detention imposed earlier may be responsible. As a rule, such person shall provide security in the form of a bank guarantee.

27 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?

An arrested ship shall be released from arrest subject to the provision of security for the maritime claim, which is acceptable to the claimants both in form and in amount. As a general rule, the sufficient amount in this context means the amount which covers all possible claims and interest, but in any case the amount of security shall not exceed the value of the ship. The form of security may be various – cash payment to the deposit account of the court, bank guarantee etc.

In the absence of agreement between the parties in respect of the form and amount of security, the court, the commercial court or the Maritime Arbitration Commission determine the form and amount of security. In practice, it is most likely that the courts will stick to the approximate amount which includes the principal amount of claim plus possible interest and costs.

The person who provided the security for the maritime claim may at any time apply to the courts or to the Maritime Arbitration Commission with a motion for reduction, modification or revocation of security, but in practice there are not many chances that such motion shall be granted, since it may affect the position of the claimant.

28 Who is responsible for the maintenance of the vessel while under arrest?

In general, the shipowner or the person who maintains the vessel is responsible for the maintenance of the vessel under arrest.

29 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?

The arresting party must pursue the claim on the merits in the courts of Ukraine to arrest the vessel. As a general rule, there are no insurmountable obstacles to pursuing proceedings on the merits elsewhere after obtaining security.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

In connection with the entry into force of the 1952 Ship Arrest Convention (the Convention) in Ukraine, the Commercial Procedure and the Code of Civil Procedure, articles 16 and 114 respectively (where the exclusive jurisdiction of the arrest institution is regulated) have been supplemented by the Law of 20 December 2011 as follows: ‘Cases on the arrest of ships to secure maritime claims shall be considered by the court at the location of the seaport of Ukraine in which the ship is located, or the port of registration of the ship.’

Thus, the entry into force of the Convention in Ukraine has not caused serious legal innovations which would provide proper procedural specifics to the institute of the ship arrest for maritime claims. Therefore, in the court practice the arrest of a ship may be performed in the form of general measures to secure the claim or interim (preventive) measures, which are used in action proceedings.

31 Are orders for delivery up or preservation of evidence or property available?

As preventive measures the following actions are applied by Ukrainian commercial courts:

• reclaiming of evidence;

• inspection of premises in which the action relating to the infringement takes place; and

• attachment of property belonging to the person against whom preventive measures are taken, and which is in that person’s or another person’s possession.

The following security measures are applied, in particular:

• seizure of property or monies belonging to the defendant;

• prohibition on the defendant from performing certain actions; and

• prohibition on other persons from taking actions relating to the subject matter.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

Arrest of bunkers is possible in Ukraine.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The following persons can apply for judicial sale of arrested vessels:

• crewman;

• salvor;

• pilot;

• port authorities;

• any person who suffered personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel; and

• any other person, who suffered tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers’ effects carried on the vessel.

34 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?

The creditor of the owner, demise charterer, manager or operator of the vessel may initiate the forced sale of the vessel after judgment lien for the plaintiff or arbitrator’s award. Before the forced sale of a vessel, the competent authority shall ensure notice is provided to:

• the authority in charge of the register in the state of registration;

• all holders of registered mortgages, hypothecs or charges that have not been issued to bearer;

• all holders of registered mortgages, hypothecs or charges issued to bearer and all holders of the maritime liens, provided that the competent authority conducting the forced sale receives notice of their respective claims; and

• the registered owner of the vessel.

Such notice shall be provided at least 30 days prior to the forced sale and shall contain either:

(i) the time and place of the forced sale and such particulars concerning the forced sale or the proceedings leading to the forced sale as the authority conducting the proceedings shall determine is sufficient to protect the interests of persons entitled to notice; or

(ii) if the time and place of the forced sale cannot be determined with certainty, the approximate time and anticipated place of the forced sale and such particulars concerning the forced sale as the authority conducting the proceedings shall determine is sufficient to protect the interests of persons entitled to notice.

If notice is provided in accordance with (ii), additional notice of the actual time and place of the forced sale shall be provided when known but, in any event, not less than seven days prior to the forced sale.

The notice shall be given in a judgment or arbitrator’s award by press announcement in the central state newspaper for three consecutive days. The publication must contain an invitation for other creditors to file a claim against the vessel within 60 days from the date of the publication.

The court duty is 1 per cent of the amount of the claim.

35 What is the order of priority of claims against the proceeds of sale?

The order of priority of claims is as follows:

• claims arising out of the arrest or seizure and subsequent sale of the vessel, including the claims for the upkeep of the vessel and the crew as well as wages, other sums and costs, for example, costs of repatriation and social insurance contributions payable on their behalf;

• claims for reward for the salvage of the vessel;

• claims in respect of loss of life or personal injury occurring in direct connection with the operation of the vessel;

• claims for port, canal, and other waterway dues and pilotage dues;

• claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers’ effects carried on the vessel; and

• claims out of other registered mortgages, hypothecs or charges.

36 What are the legal effects or consequences of judicial sale of a vessel?

In the event of the forced sale of the vessel, all registered mortgages, hypothecs or charges, except those assumed by the purchaser with the consent of the holders, and all liens and other encumbrances of whatever nature, shall cease. So, the purchaser may get clean title to the vessel, if he or she does not assume some encumbrances or if the holders of these encumbrances do not agree to this act. The costs and expenses arising out of the arrest or seizure and subsequent sale of the vessel shall be paid. The balance of the proceeds shall be distributed in accordance with the respective claims. Upon satisfaction of all claimants the residue of the proceeds, if any, shall be paid to the owner.

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

The judicial sale of a vessel in a foreign jurisdiction is recognised in Ukraine.

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

Ukraine signed the International Convention on Maritime Liens and Mortgages 1993 on 22 November 2002.

Carriage of goods by sea and bills of lading

39 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, Hague-Visby Rules, Hamburg Rules and Rotterdam Rules are not ratified by Ukraine, but the regulations of the Hague Rules are implemented in Ukrainian maritime law without ratification. Carriage covers the period from the time when the goods are loaded on board up to the time when they are discharged.

40 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?

There are no laws in force in respect of carriage under multimodal bill of lading. However, combined transport and multimodal bill of lading have fairly good usage in practice. The Association of International Forwarders of Ukraine has been a national member of the International Federation of Freight Forwarders Associations (FIATA) since 1994, and the members of this association may use combined transport bill of lading and other FIATA forms.

41 Who has title to sue on a bill of lading?

The cargo shall be delivered at the port of destination:

• on producing of a straight bill of lading – to the consignee indicated in the bill of lading or to the person by whom it was endorsed;

• on production of an order bill of lading – to the shipper or the consignee, depending on whose order it was made (‘to order of a shipper’ or ‘to order of a consignee’) and, if the said bill of lading contains an endorsement, to the last person endorsed, or to the holder of the said bill of lading with the last blank endorsement; or

• on production of a bearer bill of lading – to the bearer.

In the corresponding cases, the above persons have title to sue on a bill of lading.

42 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 terms of the contract not included in the bill of lading shall be binding on a consignee if there is a note in the bill of lading referring to a document wherein they are included. Thus, when the consignee and shipper or charterer is not the same person, the terms of charter are not binding on the consignee. But if in the bill of lading there is a note referring to the charter party, then, the charter party terms are considered incorporated. The more general the character of the note in the bill of lading, the narrower is the range of the charter party terms that can be incorporated into the bill of lading. A note such as ‘all other terms – in compliance with charter party’ is a note of the most general character. If some term in the charter party does not make sense in the context of the bill of lading, then this term is to be considered as unincorporated into the bill of lading.

If the content of the arbitration clause in the charter party does not envisage consideration of disputes under the bill of lading, it cannot be incorporated; if not, it can be incorporated in the bill and it is binding on third parties.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

The demise clause and identity-of-carrier clause are not recognised or binding.

44 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?

The shipowner is not liable for cargo damage where he or she is not the carrier under bill of lading and he or she cannot rely on its terms. The shipowner is liable for cargo damage if he or she is guilty of trespass or if the shipowner is liable on the claim of recourse.

45 What is the effect of deviation from a vessel’s route on contractual defences?

Any deviation of the vessel from the planned route with the purpose of saving life, vessels or cargoes at sea and, similarly any other reasonable deviation (if it has not been caused by wrongful actions of the carrier), shall not be considered a violation of the contract.

46 What liens can be exercised?

The carrier is at liberty not to deliver the cargo until payment is received or secured. The carrier shall retain the right of lien on the cargo if he or she deposits the cargo in a warehouse not belonging to the consignee, provided the carrier informs the warehouse owner of the said right.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

If the value of cargo has not been declared and included in the bill of lading, the reimbursement for a missing or damaged unit of cargo shall not exceed 666.67 units of account or 2 units of account per kilogram of gross mass of the missing, damaged or spoiled cargo, whichever sum is greater.

48 What are the responsibilities and liabilities of the shipper?

Among the most important responsibilities and liabilities of the shipper are complete and distinct marking, proper packing of cargo requiring care and packing for safe delivery to the receiver of cargo. The shipper has to sign and hand in all necessary documents when transferring the cargo to the carrier. These documents must contain all data necessary to issue the bill of lading or other document providing the receipt of cargo for carriage. The shipper shall be liable to the carrier for any consequences that arise out of incorrect or incomplete data entered in said documents. The shipper shall, in a timely manner, pass to the carrier all the documents related to cargo as required by the port, customs, sanitary and other administrative rules. The shipper shall be liable to the carrier for any losses caused by untimely transfer, incorrectness or incompleteness of these documents. Timely loading of cargo is one of the most important duties of the shipper. Delay of the vessel for completion of cargo loading entails demurrage, and completing the loading prior to expiry of lay time entails dispatch as an award to the shipper. If loading the vessel continues past the expiration of the demurrage time, the shipper has to recover the losses incurred by the carrier, and the carrier may send the vessel to the sea even if unavailable cargo is not loaded on board for reasons not dependent on the carrier, who preserves his or her right to receive the freight in full. Usually the shipper has to advance the charter freight.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

In the territorial waters of Ukraine, there are three specific areas aiming at the:

• prevention of marine oil pollution;

• prevention of pollution by noxious liquid substances carried in bulk; and

• prevention of marine pollution by waste materials.

50 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?

According to the current MARPOL Annex VI, Regulation 14 (1.2), the content of sulphur in bunker fuel shall not exceed 3.5 per cent m/m as from 1 January 2012, with further reduction to 0.5 per cent by 2020. Ukraine intends to gain EU membership, therefore it aspires to implement domestic requirements that correspond with the Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC. Unfortunately, the standards established by this Directive have not yet been met by Ukraine. Nevertheless, Ukrainian legislation imposes liability, including criminal liability, for air pollution if it has caused a danger to the life or health of people or has caused environmental damage. There is also an administrative responsibility for a breach of the duty to register in the ship’s documents operations involving harmful substances. Civil legislation generally deals with environmental protection matters and particularly liabilities in tort.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

Commercial courts and courts of general jurisdiction are the state courts that exercise jurisdiction over maritime disputes.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

The Law on International Private Law, Commercial Procedural Code, and the Civil Procedural Code contain the rules that govern service of court proceedings on a defendant located outside Ukraine. In general, it is impossible to file a claim on a defendant located out of the jurisdiction, unless he or she has trade representation, immovable assets or movable property on the territory of Ukraine.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

The Maritime Arbitration Commission at the Chamber of Commerce and Industry of Ukraine is a domestic arbitral institution with a panel of arbitrators specialising in maritime arbitration.

54 What rules govern recognition and enforcement of foreign judgments and awards?

Ukraine is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958. The UNCITRAL Model Law on International Commercial Arbitration of 21 June 1985 is the basis of the Law on International Commercial Arbitration of 24 February 1994. The Rules of the International Commercial Arbitration Court and Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry are annexes to this Law. Ukraine is a party to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters of 18 March 1970 and the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 15 November 1965. According to their regulations and the regulations of Ukrainian domestic legislation, a judgment creditor can enforce a foreign judgment in Ukraine. Bilateral treaties between Ukraine and foreign countries also may be legal grounds for enforcement. The enforcement of a foreign judgment may be implemented within three years from the date the judgment came into force.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

If the claimants initiate proceedings outside Ukraine in breach of a jurisdiction clause, the defendants will have no remedies to stop or dismiss the matter by an action in Ukraine. But an award coming from such proceedings will rarely be enforced in Ukraine.

56 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 filing of a claim with a domestic court, when a jurisdiction clause provides another forum for hearing the case, is not considered an infringement of justice unless the defendant requests to stop or dismiss the matter because of the lack of jurisdiction of the domestic court. According to the provisions of the New York Convention 1958, the court, when seized of an action in a matter in respect of which the parties have made an arbitral agreement, shall, at the request of one of the parties, refer the parties to arbitration, unless the court finds that the said agreement is null and void, inoperative or incapable of being performed.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

General limitation of action is established for three years. For certain types of claims the laws establish a special limitation of action. For recovery of a forfeit (penalty, fine, etc) or for disputes connected with freight, a one-year limitation shall be applied. The limitation period established by the law may be extended by agreement of the parties in writing.

58 May courts or arbitral tribunals extend the time limits?

Upon an application of the claimant, the court may consider that the limitation period was missed for good reasons. Thus, the time limits may be extended.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

Ukraine is not a signatory of the Maritime Labour Convention, 2006. Therefore in Ukraine, ships will not be checked for compliance with the terms of this Convention. However, many shipowners whose vessels fly the Ukrainian flag voluntarily procure certification of compliance with the terms of the Convention before calling at the ports of signatories to the Convention.

60 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?

Despite the general principle of pacta sunt servanda, the principle of rebus sic stantibus is enshrined in article 652 of the Civil Code of Ukraine. The essence of this principle is to ensure that a material change in the circumstances of the contract may allow the contract be amended or terminated by agreement of the parties. If such an agreement is not reached, the contract may be terminated or modified by the courts. The courts are permitted to alter a contract in exceptional cases, if terminating the contract would be contrary to the public interest or would expose the parties to damages which significantly exceed the costs required to perform the unmodified contract. In any case, there should be a substantial change in conditions, namely, a change that the parties could not have foreseen and that, had those conditions been prevailing at the time, would have stopped the parties from entering into the contract in the first place.

In addition, the party that requires termination of the contract in court must prove that:

• at the time of conclusion of the contract the parties proceeded from the fact that such a case would not occur;

• a change of circumstances occurred due to reasons that the interested party could not resolve with the exercise of all diligence and prudence required from him or her;

• performance of the contract would violate the property interests of the parties and would deprive the party concerned of what was expected at the conclusion of the contract; and

• from the nature of the contract or customs of business it is not intended that the risks of changing circumstances lie with the interested party.

Thus, only a significant change in the business environment can serve as a ground for termination of contracts, and to change contracts through the judicial process is only permitted where there are exceptional changes, such as the depreciation of the currency to which the price of the contract is pegged by more than a half, etc.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

The Merchant Shipping Code remains the main source of maritime law. At the present time the new Law of Ukraine on Sea Ports, which was adopted and partially entered into force from 13 June 2012, adjusts the legal status of Ukrainian ports to international standards and brings about the liberalisation of the sector. The following activities, however, will continue as state monopolies:

• the provision of salvage and rescue operations;

• navigational and hydrographic support;

• cartographic seagoing support; and

• provision for the prevention and relief of pollutant overflow.

Some aspects of port activity have already faced a certain liberalisation. Economic activity is separate from administrative activity, in particular from navigation safety management. Almost half of all dock work is now carried out by private enterprise and the share of the private sector is still growing. The liberalisation of port service tariffs is expected. The Register of Sea Ports of Ukraine will be created, the ports will cease to be legal entities and their administrations will become branches of the state enterprise Administration of Sea Ports of Ukraine. This Law is now completely in force and the port reform will continue this year.

Update and trends

There is a draft law on the introduction of the second (international) ship registry in Ukraine. It is supposed to allow the registration of ships under the Ukrainian flag for shipping companies with foreign investments. However, it is assumed that significant problems will emerge in transport law, including maritime law, in connection with the occupation of the Crimean peninsula by Russia and its de facto annexation of Crimea.

Arthur Nitsevych

nitsevych@interlegal.com.ua

Nikolay Melnykov

melnykov@interlegal.com.ua

24B Genuezskaya str

Odessa 65009

Ukraine

Tel: +380 482 33 75 28 / 29

Fax: +380 482 49 69 25

www.interlegal.com.ua

United States

Bruce G Paulsen*

Seward & Kissel LLP

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

Title in the vessel typically passes when the shipbuilder delivers the ship and the shipowner accepts delivery, depending on the terms of the contract and the law of the state where the vessel is being constructed – construction contracts are state law contracts. The parties can negotiate when title transfers to the buyer, and contracts may reflect title in a partially constructed vessel passing to the buyer based on construction milestones. In some jurisdictions, title insurance may also be obtained based on construction milestones.

2 What formalities need to be complied with for the refund guarantee to be valid?

Shipbuilding contracts are not maritime contracts and are governed by state law. Refund guarantees are, similarly, state law contracts and typically issued by the builder’s bank, parent or some other guarantor. Formalities will vary according to state law, and are simply a matter of contract and state law.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

Again, because shipbuilding contracts are not maritime contracts and are subject to state law (including the Uniform Commercial Code (UCC) applicable in all states except Louisiana), remedies would depend on the contract’s choice of law provision, or the law of the state where the contract is performed. A buyer may have a right to seek the equitable relief of specific performance of the contract if the vessel is unique or has been identified to the contract under the UCC.

4 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?

Claims for defects in vessel construction are typically state law claims brought under the UCC or the construction contract’s warranty provisions, or both. Product liability claims arise when injury is caused to a third party by a defective product placed into the stream of commerce, and are largely irrelevant to warranty claims.

Ship registration and mortgages

5 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?

As defined in Section 3 of Title 1 of the US Code, the word ‘vessel’ includes ‘every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.’ Recent interpretations of that expression by the United States Supreme Court have injected an element of uncertainty into what legal practitioners once thought was a well-settled area of law, but the prevailing view is that, for these purposes, the definition includes offshore drilling rigs and mobile offshore drilling units.

Any vessel of at least five net tons not documented under the laws of a foreign country is eligible for registration with the National Vessel Documentation Center (NVDC), provided it is owned by a citizen of the United States (see below). Federal documentation of a vessel allows the vessel to fly the United States flag and makes it eligible to become subject to a ‘preferred mortgage’, which is generally considered to entitle the mortgagee to superior treatment than comparable treatment in respect of state-titled vessels.

One can apply for documentation while a vessel is under construction in order to pre-obtain the official number, but a permanent, full-term certificate of documentation cannot be issued until completion.

6 Who may apply to register a ship in your jurisdiction?

As noted above, a US-flagged vessel must be owned by a US citizen to be documented with the NVDC. However, there are different levels of citizenship with respect to certain entities and for certain trades (eg, a corporation seeking to register a vessel must be formed under the laws of the United States or a state thereof, its chief executive officer must be a United States citizen, no more of its directors may be non-citizens than a minority of the number needed to constitute a quorum of the board, but the shareholders need not be US citizens). However, if the vessel is intended to be used in the US coastwise trade (or the American fisheries trade), the corporation must be at least 75 per cent owned by US citizens. The complete rules and procedures for determining when an entity (as opposed to an individual) is a US citizen are voluminous and the foregoing is a mere example. A full analysis is beyond the scope of this summary and each case must be looked at thoroughly and independently.

7 What are the documentary requirements for registration?

Evidence of 75 per cent US citizenship, title, build, tonnage and dimensions, and a designated managing owner, vessel name and hailing port must be filed with the NVDC, together with the required fees.

8 Is dual registration and flagging out possible and what is the procedure?

Dual registration is not permitted. Flagging out is possible but may require governmental approval. Most US-based owners register their vessels with various open registries rather than under the US flag.

9 Who maintains the register of mortgages and what information does it contain?

The register of ship mortgages is maintained by the NVDC. Abstracts of title filed with the NVDC will show the builder, previous owners, mortgages, notices of lien claims and judicial sales.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The Limitation of Liability Act was passed in 1851 to encourage investment in shipping. Under this Act, vessel owners (including demise charters) may limit liability to the value of the vessel and pending freight in certain circumstances where the loss occurred without the privity or knowledge of the owner.

The Act provides for limitation to apply in a wide variety of claims, but there are limits to limitation in cases of personal injury and death, pollution liabilities, wage claims and others. Limitation is generally not favoured by the courts.

11 What is the procedure for establishing limitation?

A limitation proceeding is commenced under Rule F of the Federal Rules of Civil Procedure, Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (the Supplemental Rules) and creates not only a limitation proceeding, but also a concursus of claims where all claims are marshalled into one proceeding. The limitation proceeding must be commenced within six months of the owner receiving a claim in writing, and the loss must have occurred without the privity or knowledge of the owner to successfully limit liability. To commence the proceeding, the owner must deposit with the court a sum equal to the value of the owner’s interest in the vessel and its pending freight (or security therefor), together with such sums as the court may deem necessary to carry out the provisions of the Act.

12 In what circumstances can the limit be broken?

As noted above, limitation is generally not favoured by the courts and can be broken if the loss is deemed to have occurred with the privity or knowledge of the owner. With today’s communications, where owners and their vessels are in near-constant contact, it is not hard for a court to find that privity or knowledge existed at the time of the loss. Such privity is imputed to the owner in cases of personal injury and death (46 USC section 30506(e)), and US$420 per gross ton is set aside for such claims, even in the event the vessel is a total loss.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Under the Limitation Act, claims against a ship or its owner for cargo loss, personal injury and death are subject to limitation (claims subject to limitation ‘are those arising from any embezzlement, loss, or destruction of any property, goods, or merchandise shipped or put on board the vessel […] any loss, damage, or injury by collision, or any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of the owner’) (emphasis added). Moreover, under the Limitation Act, a shipowner may not limit liability for negligence to passengers.

Outside of the US, passenger claims concerning personal injury or death and claims for loss or damage to luggage are governed by the Athens Convention on the Carriage of Passengers and Their Luggage by Sea. However, the US has not acceded to or ratified the Athens Convention.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

The US Coast Guard is responsible for port state control and vigorously implements port state control initiatives.

15 What sanctions may the port state control inspector impose?

The Coast Guard of the Department of Justice and other federal agencies may issue fines and other sanctions for violations of security and environmental regulations. Sanctions are frequently issued in the environmental area and are common in ‘magic pipe’ and other environmental cases that the government pursues. The Coast Guard can also deny entry or expel ships from port. Vessels may be required to post a bond or letter of undertaking covering the amount of the penalty to gain entry to a US port or obtain clearance to depart, or as security for possible fines.

16 What is the appeal process against detention orders or fines?

Port state control actions may be challenged in writing or at a hearing, and an appeal can also be lodged with the appropriate US district court. This is a common occurrence.

Classification societies

17 Which are the approved classification societies?

International Association of Classification Societies members, or other classification societies approved by the Coast Guard, may survey or certify the construction, repair or alteration of a vessel in the United States.

18 In what circumstances can a classification society be held liable, if at all?

A classification society is not liable to a shipowner for negligently performing its classification services. Third parties, such as vessel purchasers, may sue a classification society for negligent misrepresentation, but such claims rarely succeed.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

The owner, lessee or operator of a wrecked vessel located in navigable waters has strict duties under federal law to mark and then promptly remove the wreck. Civil and criminal liability can result from failure to do so. Failure to do so in a timely manner may also result in the abandonment of the wreck, in which case the US government would assume responsibility for marking and removal and may then seek reimbursement from the owner, lessee, or operator under the federal Wreck Removal Act.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

The United States does not frequently adopt international conventions, and has not adopted the 1910 Collision Convention, although the International Convention for the Safety of Life at Sea, the 1989 International Convention of Salvage, and the International Convention for the Prevention of Pollution from Ships have been adopted in whole or in part by the United States.

21 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 form of salvage agreement. The standard Lloyd’s Open Form is often used and local salvors may have their own forms containing local or foreign arbitration clauses. Salvage operations may be carried out by any person or company and salvage awards may be issued depending on the order of salvage. Salvors have possessory liens on salved vessels.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

The United States is not a signatory to international conventions with respect to ship arrest. In the US, actions involving ship arrests are governed under substantive federal law and the Federal Rules of Civil Procedure.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Maritime lien creditors and those with statutory rights may enforce their rights in rem against a vessel. Such arrested vessels are governed by Rule C of the Supplemental Rules, which provides that a vessel may be arrested to enforce any maritime lien or where a statute provides for in rem proceedings. There is no associated or sister ship arrest regime in the United States. However, property of the defendant may be attached under Rule B and, where the defendant owns a vessel and if the requirements of Rule B are met, that vessel may be seized.

24 What is the test for wrongful arrest?

An arrest can be held to be wrongful if made in bad faith, with malice or with gross negligence.

25 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?

A bunker supplier’s claim is the classic maritime lien for necessaries. A supplier of necessaries may (and is, indeed, presumed to) rely on the credit of the vessel and is entitled to a maritime lien unless it has actual notice of a ‘no lien’ clause in the charter. Vessels are routinely arrested to enforce bunker suppliers’ maritime liens and many ship mortgage foreclosures are commenced by such suppliers rather than mortgagee banks.

26 Will the arresting party have to provide security and in what form and amount?

Initially, security is not required for a vessel arrest. The US Marshals Service, however, will require a deposit of sufficient funds to cover anticipated custodial costs before arresting a vessel, usually less than US$50,000. In addition, under Rule E of the Supplemental Rules, the court may require security in the form of a sufficient amount to pay all costs and expenses that may be awarded against a party. If the vessel owner asserts a counterclaim, the court will require that counter-security be provided under Rule E(7). Rule E mandates that security be in the form of a bond or other suitable security.

27 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?

Security may be posted to release the vessel from arrest. It is common for the parties to agree upon the amount and the form, which is frequently a P&I club letter of undertaking, sometimes posted by agreement in advance to avoid arrest altogether. Rule E governs the process. Rule E provides that the principal sum of the bond or stipulation will be set at an amount high enough to cover the amount of the plaintiff’s claim together with accrued interest and costs, but not to exceed the lower of twice the amount of the plaintiff’s claim or the value of the arrested property on ‘due appraisment.’ In distressed situations, as numerous claimants intervene, the posting of security can become problematic and unlikely. The security shall provide for the payment of the principal sum plus interest at 6 per cent per year. The court may reduce or increase the amount of security as required.

28 Who is responsible for the maintenance of the vessel while under arrest?

Arrest of a vessel is effected by the US Marshals Service, but the marshal rarely tends to the vessel beyond the initial arrest. An order approving a substitute custodian is usually obtained at the same time as the arrest. The substitute custodian (or the marshal, if no substitute is appointed) will care for the vessel while in custody and its expenses will be given the highest priority in the rank and priority of lien claims.

29 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?

Attachment of property in aid of a foreign proceeding may be obtained under Rule B.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

Maritime attachment is available under Rule B where a plaintiff has a maritime claim (not necessarily a lien claim) and such a plaintiff can bring an action to attach property of the defendant, provided the defendant is not found within the federal judicial district where the property is located for jurisdictional or service of process purposes. Rule D can be used by an owner to repossess a vessel. Freezing or Mareva-type injunctions are not available in the United States.

31 Are orders for delivery up or preservation of evidence or property available?

These are injunctive remedies that are not generally available in the United States. Parties to litigation will be required to preserve evidence under common law and procedural rules. The seized vessel or assets will be preserved pursuant to order while the litigation is pending.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

Bunkers and other assets may be attached or arrested under Rules B and C. Under Rule B, bunkers or any other property of the defendant can be attached to secure a maritime claim when a defendant is not present in the federal district where the bunkers are found. The defendant must have title to the bunkers or other property in order for the bunkers to be subject to attachment.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

Any party to the action, the marshal or the custodian may apply for sale of the vessel. As a practical matter, it is usually the mortgagee bank or the largest creditor that moves to have the vessel sold.

34 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?

A party usually makes a motion for interlocutory sale of the vessel near the commencement of the action because the vessel is a wasting asset. Notice of the action and arrest of the vessel, as well as notice of the motion for interlocutory sale, is given pursuant to statutory authority. Although a broker may be involved pursuant to court order, the vessel sale is conducted by the US marshal, usually in the courthouse lobby. The court will later confirm the sale, at which point the vessel is delivered to the buyer free and clear of liens.

Although the length of time required to conduct a motion for interlocutory sale varies from jurisdiction to jurisdiction within the United States, on average the time from making the motion through to the sale of the vessel is about two months. The marshal will charge poundage in the amount of 3 per cent of the first US$1,000 of proceeds and 1.5 per cent of proceeds above that amount, and brokerage commission may be involved too, if a broker is utilised. The proceeds of the sale of the vessel are paid into the registry of the court and distributed according to the rank and priority of liens subsequent to the confirmation of sale of the vessel.

35 What is the order of priority of claims against the proceeds of sale?

While rank and priority of liens varies from jurisdiction to jurisdiction, the general order of priority is as follows:

• expenses, fees and costs allowed by the court, including those incurred while the vessel is in custody;

• wages of vessel crew;

• maritime liens arising before a preferred mortgage was filed;

• maritime tort liens;

• salvage and general average claims;

• preferred mortgage liens on US-flagged vessels;

• liens for necessaries;

• preferred mortgage liens on foreign-flagged vessels;

• general maritime contract liens;

• claims on non-maritime liens; and

• non-lien maritime claims.

Where liens accrue at different times, the general rule is that liens last in time take precedence. In practice, in distressed situations, any claimant coming after the mortgagee is unlikely to recover.

36 What are the legal effects or consequences of judicial sale of a vessel?

An admiralty sale of a vessel is an in rem proceeding that completely extinguishes all prior liens and encumbrances on the vessel.

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

US admiralty courts will recognise foreign admiralty sales of vessels provided the court conducting the sale had jurisdiction over the vessel and due process occurred.

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

No.

Carriage of goods by sea and bills of lading

39 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 United States applies a version of the Hague Rules through the Carriage of Goods by Sea Act (COGSA) as well as the Harter Act. The United States also recently signed the Rotterdam Rules, which are not yet ratified. COGSA has been in place for generations and provides a reasonable and predictable cargo loss and damage liability regime. COGSA applies ‘tackle to tackle’ but the period it covers is frequently extended by clauses in bills of lading.

40 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?

The Supreme Court of the United States recently held that a through bill of lading is a maritime contract even for those portions (in that case, the rail portion) of the transportation services that take place on land. There are other cargo liability regimes covering rail and truck transportation that, at times, conflict with COGSA and that may impact the carrier’s liability for the times the cargo is not aboard a vessel.

41 Who has title to sue on a bill of lading?

A real party in interest may bring a suit under a bill of lading, and cargo claims are frequently brought by shippers and their insurers under bills of lading.

42 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 terms of a charter party can be incorporated into a bill of lading, provided it is clearly done so on the face of the bill of lading.

Foreign forum selection clauses and foreign arbitration clauses found in incorporated charter parties are enforced if the charter party is properly incorporated in the bill of lading. To enforce an arbitration clause against a third-party holder, a bill of lading should specifically identify the charter party and clearly incorporate the arbitration clause. A party seeking to avoid enforcement of a foreign arbitration or forum selection clause has the burden of proving a likelihood that ‘the substantive law to be applied will reduce the carrier’s obligations to the cargo owner below what COGSA guarantees.’

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

COGSA states that any bill of lading clause will be ‘null and void’ if it relieves the carrier or the ship from liability for loss of, or damage to or in connection with, the goods. There is conflicting authority in this area; agency principles are sometimes applied to resolve the issue and commentators have stated that clauses in a charter party that identify the carrier or that apportion the losses incurred to third parties should not control the ability of the third party to recover, but there is no reason why they should not be given effect as between the charterer and the owner.

44 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?

The shipowner may not be liable under COGSA if it is not the contractual carrier, however, the ship itself will be liable in rem for having carried the cargo and ratified the terms of the bill of lading.

45 What is the effect of deviation from a vessel’s route on contractual defences?

COGSA provides that carriers are not liable for losses resulting from reasonable deviations, and although the decisions are inconsistent, some courts have held that unreasonable deviations deprive the carrier of the right to assert certain COGSA defences, such as the package limitation.

46 What liens can be exercised?

Characteristic maritime liens recognised under US law include the following:

• wages of a ship’s master and crew;

• salvage;

• general average;

• breach of charter party;

• ship mortgages, both US and foreign flag;

• contract liens, such as contracts for repairs, supplies, towage, pilotage and a wide variety of necessaries;

• maritime tort liens for personal injury, death and collision;

• claims for cargo loss or damage;

• claims for unpaid freight and demurrage; and

• pollution claims.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

A carrier that delivers the cargo without presentation of the original, negotiable bill of lading can be liable to the holder of the original bill of lading. In most circumstances the owner will demand a letter of indemnity in cases where the original bills are not presented.

48 What are the responsibilities and liabilities of the shipper?

Under COGSA, the shipper is responsible for proper marks, number, quantity, and weight of the cargo, and must indemnify the carrier ‘against all loss, damages, and expenses arising or resulting from inaccuracies in such particulars’.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

ECAs exist along certain areas of the US coast. See: www.epa.gov/otaq/regs/nonroad/marine/ci/mepc1-circ-re-na-eca.pdf.

50 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?

Ships may not use fuel oil with a sulphur content greater than 1 per cent m/m as of 1 August 2012, and not greater than 0.1 per cent m/m from 1 January 2015. There are some limited opportunities for waivers and exemptions, the use of which is strictly scrutinised. Violation of these requirements can result in civil or criminal penalties and fines.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

US federal courts possess subject matter jurisdiction over maritime matters. The state and federal courts have concurrent jurisdiction over many matters not specifically in admiralty, and personal injury claims are often brought in state court. However, certain claims are only cognisable in admiralty and must be brought in federal courts (eg, ship mortgage foreclosures, vessel arrests and Rule B attachments).

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

The United States is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Also, federal procedural rules and state court rules will set forth how personal service may be accomplished in a jurisdiction outside of where the matter is proceeding. Frequently, this will involve service in one state pursuant to the rules of the forum state. There are also substituted service rules that permit service, for instance, upon a state’s secretary of state in certain circumstances. The rules vary from state to state.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

The relevant arbitral body is the Society of Maritime Arbitrators in New York. Houston and Miami also are looking to become centres of maritime arbitration. Many charters specifying arbitration in New York are ad hoc and do not require that arbitrators be members of any specific arbitral body.

54 What rules govern recognition and enforcement of foreign judgments and awards?

Many states have laws allowing the courts to enforce foreign money judgments through adoption of the Uniform Foreign-Country Money Judgments Recognition Act. In addition, foreign maritime arbitration awards are frequently enforced under the New York Convention, which is codified as part of the Federal Arbitration Act.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

Under the laws of the United States, jurisdictional clauses are enforced unless unreasonable. Of course, if the foreign proceedings commenced in violation of the choice of forum clause are not shut down by the foreign court, as a practical matter there is little a US court can do to prevent the foreign court from proceeding, short of issuing some sort of stay, which may be of limited practical effect.

56 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?

A defendant may bring a motion to stay or dismiss an action brought in violation of a foreign arbitration or venue provision.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

Under the general maritime law, there are no strict statues of limitation and the doctrine of laches applies. However, courts will generally look to analogous state statutes in the district where the action is brought to see if the claim should be barred by laches. Under a laches analysis, the defendant generally must have suffered some prejudice by the failure of the plaintiff to timely make its claim. In addition, there are maritime statutory rules for bringing claims, such as the one-year limitations period under COGSA and personal injury claims generally must be brought within three years.

58 May courts or arbitral tribunals extend the time limits?

In some cases limitations periods can be extended.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

The United States has not ratified the Maritime Labour Convention.

60 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?

In general, maritime contract claims, like other contract claims, are not construed such that one party, in the absence of an applicable force majeure clause, can claim that it is relieved of its obligations under that contract due to a change of economic circumstances. In fact, the majority of arbitration awards and court cases reflect the commercial reality that arbitrators and courts disfavour contract parties who seek to avoid their obligations due to market conditions. Force majeure provisions, in addition, are strictly construed and frustration claims must go to the root of the contract before a judge or a panel of arbitrators will consider relieving a party of its obligations under the contract.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

While maritime creditors’ rights are described above, recently there has been an upturn in the number of bankruptcy proceedings brought by shipping companies in the United States and often bankruptcy law and maritime law come into conflict. Maritime lien claimants, whether by virtue of possession contract liens or ship mortgages, will be secured creditors in maritime bankruptcies and the rank and priority of liens should ultimately reflect maritime law, even in bankruptcy court. However, it is very important to know both areas of law and have advice in both areas before making a claim in a bankruptcy proceeding. In addition, although bankruptcy courts may sell vessels ‘free and clear of liens’ it is still not fully established whether foreign admiralty courts will recognise US bankruptcy court sales as admiralty sales fully cleansing the vessels of liens.

* The author would like to acknowledge the research assistance of Natasha Norman.

Update and trends

Trends in maritime law in the United States follow the trends in the industry, which has been in a significant recession since the financial crisis in 2008. Due to the overcapacity caused by a large number of new building contracts entered into prior to the downturn, the recession in shipping has lasted longer than in other sectors of the economy. This has given rise to a number of bankruptcies, defaults, restructurings and workouts, which are still ongoing. In addition, because of the significant amount of capital required for shipping operations, prior to the economic downturn many shipping companies sought to raise capital in the United States through public markets (offerings of both debt and equity). Following a time where few initial public offerings were made in the shipping sector, in 2014 and 2015 there has been a substantial increase in activity in this area. On the litigation side, this has given rise to lawsuits against publicly held shipping companies, not only with respect to shipping issues but also for securities law violations. Accordingly, we expect that there will be continued utilisation of the US bankruptcy courts by distressed shipping companies and that the number of publicly held shipping companies will increase, as will litigation against them. Traditional maritime litigation will continue as it always has.

Bruce G Paulsen

paulsen@sewkis.com

One Battery Park Plaza

New York

NY 10004

United States

Tel: +1 212 574 1533

Fax: +1 212 480 8421

www.sewkis.com

Vietnam

Dang Viet Anh and Vu Phuong Trang

Dzungsrt & Associates LLC

Newbuilding contracts

1 When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

It is very common for local builders to hold title in the ship until actual delivery or closing time. Local builders are allowed to raise finance by mortgaging equipment and facilities installed into a particular hull as well as to take out appropriate insurance on the vessel being constructed. The buyers often try to secure their instalments through a refund guarantee issued by the builder’s bank, the builder’s holding company, or both.

In some circumstances, the Vietnamese law may allow parties to choose a foreign law as the applicable law of the shipbuilding contract. In this situation, parties may agree to change the time at which title to the ship will pass, provided that such time is not earlier than the time at which a deregistration or deletion certificate is issued to the effect that the builder is no longer the owner of the ship under Vietnamese law.

If the ship flies the Vietnamese flag or Vietnamese law applies to the shipbuilding contract, title of the ship under construction will pass from the shipbuilder to the shipowner when the latter is recorded in the National Register of Ships as the new owner.

2 What formalities need to be complied with for the refund guarantee to be valid?

A refund guarantee is defined as a unilateral undertaking (a unilateral civil transaction), which is often provided by a bank or a holding company of the shipbuilder. In accordance with the conflict rules of Vietnamese law, a refund guarantee must comply with the guarantor’s corporate procedures and the law where the guarantor is incorporated or operating.

3 Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

Vietnam has not yet established an effective mechanism for local courts to issue an interim order to assist foreign courts or arbitral tribunals. Hence, only in cases where parties have agreed to settle their disputes in Vietnam may they submit an application to obtain an interim order from the local courts, which will compel the yard to deliver the ship to the buyer.

In practice, almost all jurisdiction clauses in shipbuilding contracts refer parties to foreign forums for dispute resolution, namely, through arbitration in London, New York, Singapore or Hong Kong. Therefore, there is no mechanism by which Vietnamese courts apply interim relief to compel delivery of the vessel.

We recommend that foreign buyers obtain a valid refund guarantee from the builder’s bank.

4 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 builder’s liability for defective work is contractual and is available during the warranty time, which is normally set for 12 months as from the actual delivery. Hence, both the shipowner and a purchaser from the origin time may claim against the builder under the terms and conditions of the shipbuilding contract and the warranty certificate attached thereto.

In the case of a third party that has sustained damages, he or she may file a claim in tort against the shipbuilder under product liability.

Ship registration and mortgages

5 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?

Any kind of vessel used in navigation is eligible for registration, whether it be propelled or moored, including lighters, barges, offshore industry mobile units, seismic vessels and so on.

Vietnamese vessels that meet any of the following criteria must be registered with local ship registers:

• self-propelled with main engine capacity of 75 kW or higher;

• non-self-propelled vessels of 50 GT or more;

• have a deadweight tonnage of 100 tons or more;

• have a designed lead waterline length of 20 metres or more; or

• seagoing vessels smaller than the above-mentioned vessels but operating in international shipping routes.

Passenger ships must not be more than 10 years old and other ships must not be more than 15 years old at the time of their first registration.

A vessel under construction may be registered once the keel has been laid.

6 Who may apply to register a ship in your jurisdiction?

Both Vietnamese and foreign companies, individuals and entities which are incorporated and operating in Vietnam or have established a representative office in Vietnam may file an application to register their ships with the local ship registers.

7 What are the documentary requirements for registration?

The following documents are required for registration of a vessel in Vietnam:

• the ship registration application (as standard form);

• the deregistration certificate from the current register in the case of a sale;

• a builder’s certificate and protocol of delivery and acceptance in the case of a new build;

• the ship sale contract, shipbuilding contract or other proofs of title over the ship to be registered;

• the ship tonnage certificate;

• the ship classification certificate;

• payment receipt of registration fee; and

• the shipowner’s certificates of incorporation, its branch or representative office licence in Vietnam, or both, and other documents subject to the kind of registration to be applied.

8 Is dual registration and flagging out possible and what is the procedure?

Dual registration and flagging out of a vessel is not allowed.

9 Who maintains the register of mortgages and what information does it contain?

The register of mortgages is controlled by the three regional ship registers, namely the Vietnam ship registers in Ho Chi Minh City, Hai Phong City and Da Nang City; and the three Secured Asset Transaction Registration Centres in Ho Chi Minh City, Da Nang City and Hanoi City.

The mortgage information may contain the name of the mortgaged vessel, her IMO number, call sign, year of construction, number of mortgage registration, name of the shipowner, name of the mortgagee(s), term of the mortgage, the mortgage status (whether the ship has been mortgaged or not) and a mortgage certificate (including the number of the certificate, the date of issuance and the value of the mortgaged ship), etc.

Limitation of liability

10 What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The limitation regime applies to cargo (limitation for carriers) and tonnage (limitation for the shipowner).

Cargo limitation

In brief, Vietnamese law has an interesting application of both the Hague-Visby Rules and the Hamburg Rules, according to which the carrier’s and the ship’s liability for any loss or damage to or in connection with the cargo is limited to 666.67 SDR per package or unit, or 2 SDR per kilogram of gross weight of the goods lost or damaged.

Similar to rule 6.1 of the Hamburg Rules, the liability of the carrier for the late delivery of cargo shall be limited to a sum 2.5 times the freight of the quantity of cargo that is delivered late, but in any circumstance, it shall not exceed the total freight payable under the contract of carriage of cargo by sea.

Tonnage limitation

Under Vietnamese law, the limitation of liability based on tonnage has been provided for in a broad range of claims:

• claims in respect of loss of life, personal injury or another health damage; loss of or damage to property, including damage to harbour facilities, areas for anchorage and navigable channels and aids to navigation, occurring on board or in direct connection with the operation of the seagoing vessel or with salvage operation, and consequential loss resulting therefrom;

• claims in respect of losses resulting from delay in the carriage of cargo, passengers or their luggage by sea;

• claims in respect of other losses resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the seagoing vessel or salvage operations.

• claims in respect of the recovery, removal, destruction or the rendering harmless of a seagoing vessel which is sunk, wrecked, destroyed or abandoned, including property that is or has been on board such vessel; and

• a third party’s claims in respect of measures taken to avert or minimise loss for which such person may limit his or her liability, and further losses caused by the application of such measures.

Parties entitled to limit are the:

• shipowner;

• charterer;

• salvor;

• operator;

• manager; and

• insurer.

11 What is the procedure for establishing limitation?

A potentially liable party who is eligible may constitute a limitation fund by submitting an application to the local court that has jurisdiction to resolve the case, arrest the ship, or both. Subject to the court’s approval, the limitation fund may be established under the form of a frozen account opened in a bank operating in Vietnam, a letter of undertaking issued by a ‘reputable’ insurer chosen from among the 29 insurers approved by the Ministry of Finance, or by other forms.

The calculation of the limitation fund has two groups, namely, personal injury claims, which include death; and ‘other’ claims, with the former ranking higher in priority to the latter.

Personal injury claims

Tonnage

Liability limit

Up to 300 GT

167,000 SDR

300 – 500 GT

333,000 SDR

501 – 3,000 GT

333,000 SDR plus 500 SDR for each ton over 500 GT

3,001 – 30,000 GT

1.583 million SDR plus 333 SDR for each ton over 3000 GT

30,001 – 70,000 GT

10.574 million SDR plus 250 SDR for each ton over 30,000 GT

Over 70,000 GT

20.574 million SDR plus 167 SDR for each ton over 70,000 GT

Other claims

Tonnage

Liability limit

Up to 300 GT

83,000 SDR

300 – 500 GT

167,000 SDR

501 – 30,000 GT

167,000 SDR plus 167 SDR for each ton over 30,000 GT

30,001 – 70,000 GT

5.094 million SDR plus 125 SDR for each ton over 30,000

Over 70,000 GT

10.094 million SDR plus 83 SDR for each ton over 70,000

There is not a separate right to plead limitation without setting up a fund.

12 In what circumstances can the limit be broken?

If loss or damage resulted from a shipowner’s personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss or damage would probably result, the limit shall be broken.

Furthermore, requests to limit liability would be refused if they are claims for salvage, claims for contribution in general average, claims for oil pollution damage or claims for nuclear damage.

13 What limitation regime applies in your jurisdiction in respect of passenger and luggage claims? Is it the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea or some other limitation regime?

Vietnam is not a member of the Athens Convention 1974 and its successors, but some provisions of the 1974 Convention and 1976 Protocol were incorporated into the Maritime Code of Vietnam in 2005, including articles 2.1, 2.2, 2.3 and 2.4 of the 1976 Protocol, according to which carriers’ liabilities are limited as follows:

Passenger

Limitation of liability

Claim for loss of life and/or personal injury

46,666 SDR per passenger, per carriage

Luggage

Limitation of liability

Claim for loss of and/or damage to cabin luggage

833 SDR per passenger, per carriage

Claim for loss of and/or damage to vehicle including luggage in or on the vehicle

3,333 SDR per vehicle, per carriage

Claim for loss of or damage to other luggage or valuables deposited with the carrier

1,200 SDR per passenger, per carriage.

Note that Vietnamese legislation allows the carrier and the passengers to agree on a deductible liability not exceeding 117 SDR in the case of damage to a vehicle, and not exceeding 13 SDR per passenger in the case of loss of or damage to other luggage. Until now, the legislation recognised the capped limitation of 25 million SDR set forth in article 7 of the 1976 Convention on Limitation of Liability for Maritime Claims. All higher limits of liability provided in the 1990 Protocol and the 2002 Protocol, as well as the widely recognised limit of 400,000 SDR per passenger on each distinct occasion, have not yet been recognised in Vietnam.

Port state control

14 Which body is the port state control agency? Under what authority does it operate?

The various port authorities are the state agencies that perform the management of maritime activities in seaports. There are currently 25 port authorities around Vietnam.

The port director of each seaport has the authority to regulate, restrict and prevent movement of vessels in the port and approach to the port and may direct the berthing and removal of any vessel in accordance with the Maritime Code of Vietnam in 2005, Governmental Decree No. 21/2012/ND-CP and each seaport’s internal regulations.

15 What sanctions may the port state control inspector impose?

The port state control inspector may refuse to grant a port clearance to a vessel. In addition, a port director is allowed to impose other sanctions, namely, to impose fines, order the removal of a wreck or salvage of a sunken ship as well as to recommend competent authorities to temporarily withdraw professional certificates of crew members and others.

16 What is the appeal process against detention orders or fines?

Normally, the port authority director or inspector shall issue detention orders or impose fines. Any appeal against their orders or decisions may be submitted to the port authority director or the director of the Vietnam Maritime Administration as well as to a provincial court.

Classification societies

17 Which are the approved classification societies?

The Vietnam Register (VR) is the only local classification society that has the authority to approve classification of a vessel. The candidate vessel must have sufficient certificates issued by the agency or foreign classification societies which are the members of IACS with approval of VR. The twelve recognised classification societies are:

• the American Bureau of Shipping;

• Bureau Veritas;

• the China Classification Society;

• Lloyd’s Register;

• DNV GL (merger of Det Norske Veritas & Germanischer Lloyd);

• the Korean Register of Shipping;

• Nippon Kaiji Kyokai;

• Registro Italiano Navale;

• the Russian Maritime Register of Shipping;

• the Croatian Register of Shipping;

• the Indian Register of Shipping; and

• the Polish Register of Shipping.

18 In what circumstances can a classification society be held liable, if at all?

If a duty of care is owed by the classification society that caused pecuniary loss by negligent misstatement to the claimant, then liability may exist and the injured party may file a claim in tort against the classification society. So far there is no case in Vietnam where a claimant has succeeded against a classification society.

Collision, salvage, wreck removal and pollution

19 Can the state or local authority order wreck removal?

In case the owner is slow to remove a wreck, the port authority director may order wreck removal. In that event the port authority shall seek reimbursement of its expenses from the shipowner.

Where owners of a wreck are not identified or fail to remove the wreck within a particular deadline, the local port authority will prepare and submit removal plans by itself and submit the same to the Vietnam Maritime Administration for approval before removing the wreck, destroying a sunken vessel or salvaging and selling the wreck through auction in order to reimburse the salvage costs.

20 Which international conventions or protocols are in force in relation to collision, salvage and pollution?

The following conventions and protocols are in force in Vietnam:

Collision

The Convention on the International Regulations for Preventing Collisions at Sea, 1972.

Salvage

The International Convention on Maritime Search and Rescue, 1979; and the International Convention for the Safety of Life at Sea, 1974.

Neither the International Convention on Salvage 1989 nor the Nairobi International Convention on the Removal of Wrecks 2007 have been ratified by Vietnam. Hence, salvage operations in Vietnamese waters have been regulated under the framework of the Maritime Code of Vietnam in 2005, two governmental decrees and some Ministry of Transport’s circulars.

Pollution

The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001; the International Convention for the Prevention of Pollution from Ships and the 1978 Protocol amending the Convention; and the Protocol of 1992 amending the International Convention on Civil Liability for Oil Pollution Damage.

21 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?

In practice, there is no mandatory form of salvage agreement. The Lloyd’s standard form of salvage agreement has been accepted in some cases where the salvors come from, inter alia, Japan, Singapore, the Netherlands and China.

Both foreign and local salvors may obtain a permit to carry out their professional salvage services in Vietnam. Where a salvage operation is performed in the Vietnamese waters, local salvors shall have a preferential claim to conduct the salvage operations over their foreign colleagues.

Ship arrest

22 Which international convention regarding the arrest of ships is in force in your jurisdiction?

The Vietnamese regulations on ship arrest are being updated to harmonise them with international standards. Although neither convention on the arrest of ships (the Brussels Convention, 1952 and the Geneva Convention, 1999) have been ratified by Vietnam, many regulations in those conventions have been incorporated into the Ordinance on Procedures for Arrest of Seagoing Ships passed by the Standing Committee of the National Assembly of Vietnam under Act No. 05/2008/UBTVQH12 of 27 August 2008 (Ordinance on Ship Arrest). The government and some relevant ministries have also issued decrees and circulars to provide particular guidelines on the Ordinance.

23 In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested?

Under the Law of Vietnam, maritime claims that may grant a right to arrest a ship include the following five groups of maritime lien and 17 groups of maritime claims.

Maritime liens

• Claims for wages and other sums due to the master, officers and other members of the ship’s company, including costs of repatriation and social insurance contribution payable on their behalf;

• claims in respect of loss or personal injury occurring in the operation of the ship;

• claims for the ship’s tonnage dues, maritime safety fees, pilotage dues, harbour dues and other port charges;

• claims for reward for the salvage of the ship; and

• claims based on tort arising out of loss or damage caused by the operation of the ship.

Maritime claims

Claims in connection with the following may grant a right to arrest a ship:

• damage or threat of damage caused by the ship to the environment, coastline or related interests including:

• measures taken to prevent, minimise, or remove such damage;

• compensation for such damage;

• costs of reasonable measures to return the damaged environment to its previous condition, either actually undertaken or to be undertaken; and

• losses incurred or likely to be incurred by third parties in connection with such damage, and damages, costs, or losses of a similar nature to those identified in this paragraph;

• costs or expenses relating to the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship, and costs or expenses relating to the preservation of an abandoned ship and maintenance of her crew;

• any agreement relating to the use or hire of the ship, whether contained in a charter party or otherwise;

• any agreement relating to the carriage of goods or passengers on board the ship, whether contained in a charter party or otherwise;

• loss of or damage to or in connection with goods (including luggage) carried on board a ship;

• general average;

• towage;

• pilotage;

• goods, materials, provisions, bunkers, equipment (including containers) supplied or services rendered to the ship for her operation, management, preservation or maintenance;

• construction, reconstruction, repair, converting or equipping of the ship;

• disbursements incurred on behalf of the ship or her owners;

• insurance premiums (including mutual insurance calls) in respect of the ship, payable by or on behalf of the shipowner or demise charterers;

• any commissions, brokerages or agency fees payable in respect of the ship by or on behalf of the shipowner or demise charterers;

• any dispute as to ownership or possession of the ship;

• any dispute between co-owners of the ship as to the employment or earning of the ship;

• a mortgage on the ship; and

• any dispute arising out of a contract for the sale of the ship.

As long as the claim falls into the scope of these five maritime liens or 17 maritime claims mentioned above, the vessel’s flag or law governing the claim makes no difference to the claimant’s right to request Vietnamese courts to arrest a seagoing ship to secure the settlement of maritime claims.

Under the law of Vietnam, a corporation or company is strictly treated as a separate legal entity that is solely responsible for its debts, and therefore, the theory of piercing the corporate veil is not recognised in Vietnam. The arrest of an associated ship is not allowed in Vietnam.

24 What is the test for wrongful arrest?

Arrest orders are often challenged upon the following grounds:

• the maritime claim is not among the 22 permissible maritime claims (see question 22);

• the arresting party does not have title to sue;

• the shipowner or bareboat charterer is not liable for the claim;

• a sufficient counter-security has not been provided before the issuance of the arrest order;

• the court does not have jurisdiction to issue the arrest order; and

• procedural fault or violation on the part of the arresting party or the court.

Bad faith and the ultimate failure of the claim are not regarded as tests of wrongful arrest under the Law of Vietnam.

25 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?

A bunker claim is regarded as one of the 17 permissible maritime claims, thereby granting the bunker supplier a right to arrest the supplied vessels provided that the bunker has been ordered by the bareboat charterer who is responsible for the claim and remains the bareboat charterer when the arrest is effected.

26 Will the arresting party have to provide security and in what form and amount?

Yes, the arresting party will be required to provide local courts with sufficient security in the form of: a bank guarantee (favoured by local courts and widely acceptable); a deposit in a frozen account; or a letter of undertaking issued by a reputable insurer (chosen from among the 29 insurers approved by the Ministry of Finance of Vietnam).

The quantum of a security is normally calculated upon the charter rate of the ship and the number of days she is arrested in the Vietnamese water. It may also be calculated in consideration of the claimed amount.

27 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?

The court may order the arrested party to arrange a security for release of the arrested ship set at either the total claim amounts raised by the arresting party or parties; or an agreed sum between the arrested party and the arresting party or parties.

The quantum of the security can be reviewed subsequently at a party’s request, namely, additional claims can be submitted to the court or the arrested party may also try to challenge some unreasonable claims. The law does not allow the court to order a security amount that is higher than the purchase price of the arrested ship.

The security may be provided in the form of a bank guarantee, a deposit in a frozen account or a letter of undertaking issued by an insurer chosen from among the 29 insurers approved by the Ministry of Finance of Vietnam.

28 Who is responsible for the maintenance of the vessel while under arrest?

Under Vietnamese law, the arrested party, not arresting party, is responsible for the maintenance of the vessel during the arrest period.

Should the shipmaster or the shipowner’s agents no longer be able to finance operations of arrested seagoing ships, the port authorities that carried out the arrest shall finance the necessary operations of these ships.

29 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?

The arresting party is not obliged to purse its claim on the merits before the courts of Vietnam.

30 Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

Yes, when the involved parties bring the case to local courts or an arbitration centre, the competent courts or a Vietnamese arbitration centre may issue an interim order apart from the arrest order, namely, freezing an account or attaching an asset in order to assist the claimant to obtain a security from the defendant.

31 Are orders for delivery up or preservation of evidence or property available?

When a claimant initiates a lawsuit against a defendant, the former is entitled to request the courts handling such cases to apply one or more methods of interim relief as stipulated in the current Civil Procedure Code to provisionally deal with the urgent requests of the involved parties. These interim measures serve to protect evidence, preserving their condition in order to avoid irrecoverable damage or to ensure the execution of a judgment and may include prohibiting involved parties from performing, or forcing them to perform certain acts; freezing accounts at banks or other institutions; freezing properties at the places of their deposit, etc.

32 Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

No, the law of Vietnam has not yet established any mechanism for local courts to arrest bunkers or to obtain an attachment order or injunction in respect of bunkers.

Judicial sale of vessels

33 Who can apply for judicial sale of an arrested vessel?

The arresting party, judgment creditor or award creditor is able to apply for a judicial sale against an arrested vessel.

34 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?

To initiate the judicial sale of an arrested vessel, an application should be filed with the competent court.

The court will consider all relevant circumstances before issuing a judgment allowing the arresting party to initiate a judicial sale of the ship. The judgment will then be served to the relevant state enforcement agency and then the arresting party will enter an auction agreement with an auctioneer in order to sell the vessel. The auction shall be publicised in the mass media at least twice with a three-day interval between the two occasions.

The length of time to complete a judicial sale can vary from case to case. In some circumstances, it may even take longer than six months or a year.

The court costs associated with judicial sale consist of ship arrest fees of 5 million dong and auction fees, which are calculated as follows:

Value of vessel

Fees

Up to 50 million dong

5%

50 million – 1 billion dong

2.5 million dong plus 1.5%

1 billion – 10 billion dong

16.75 million dong plus 0.2%

10 billion – 20 billion dong

34.75 million dong plus 0.15%

More than 20 billion dong

49.75 million dong plus 0.1%

In any circumstance, the total auction fees shall not be higher than 300 million dong per auction.

35 What is the order of priority of claims against the proceeds of sale?

In Vietnam, the order of priority of claims in the distribution of proceeds of sale is generally as follows:

• charges and fees for enforcement of the judgment, expenses for arresting seagoing ships and expenses for auctioning arrested seagoing ships and expenses for maintaining operations of ships during the period of arrest;

• maintenance, wages, labour remuneration, severance, redundancy allowances, working capacity loss allowance; compensations for death or injuries and other psychological damage of crewmembers working on board arrested ships;

• court charges and fee;

• maritime dues and fees;

• guaranteed debt;

• unguaranteed debt with priority in favour of maritime liens; and

• other debts under court judgments or decisions.

36 What are the legal effects or consequences of judicial sale of a vessel?

In practice, the judicial sale of a vessel in Vietnam would be very complicated, and local ship registers as well as other competent authorities have not yet established an adequate mechanism to support local courts in selling a ship through judicial auction. In theory, an auction through judicial sale may extinguish all liens and encumbrances on the vessel and grant the buyer a clean title over the vessel, however, in practice, such a title may be challenged in some circumstances.

37 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

Judicial sales of ships in foreign jurisdictions may be considered for recognition in Vietnam by submitting evidence on the judicial sales as well as the relevant judgment issued by a foreign court. In theory, the buyer may also submit an application for recognition and enforcement of the judgment in Vietnam through normal civil procedures, namely, by filing the application and all supporting documents from the foreign judgment with the Ministry of Justice of Vietnam.

We would note that as Vietnam is not a member of the International Convention on Maritime Liens and Mortgages 1993, the local court and competent authorities will not automatically recognise a judicial sale or forced sale order issued by a court in a state that is a signatory to the Convention.

38 Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

Vietnam has not yet ratified the International Convention on Maritime Liens and Mortgages 1993. However, some basic articles of the Convention have been incorporated into Vietnamese law, including (with some interesting modifications) article 4 (maritime liens) and article 5 (priority of maritime liens).

Carriage of goods by sea and bills of lading

39 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?

Vietnam has not ratified the Hague, Hague-Visby or Hamburg Rules. However, some basic rules of such conventions have been incorporated into Vietnamese law. In particular the carrier’s and the shipowner’s liability for any loss or damage to or in connection with the cargo are similar to those mentioned in the Hague-Visby Rules, namely, 666.67 SDR per package or unit, or 2 SDR per kilogram of gross weight of the goods lost or damaged. Meanwhile, the liability of the carrier for the late delivery of cargo is similar to the limitation set forth in rule 6.1 of the Hamburg Rules, namely, 2.5 times the freight of the quantity of cargo that is delivered late, but in any circumstance not more than the total freight payable under the contract of carriage of cargo by sea.

Vietnam has not ratified the Rotterdam Rules.

40 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?

Vietnam is not a party to any international convention relating to carriage by road but Vietnam is a party to the Chicago Convention on International Civil Aviation and the Asian Framework Agreement on Multimodal Transport and is a signatory of the Agreement on International Goods Transport by Rail. Generally, in case of inconsistency between an international convention and domestic law, the international convention shall prevail.

Under Vietnamese Law, the different modes of transport are subject to different laws and where the cargo is lost or damaged when it is carried by a certain mode of transport in the carriage process, the provisions of law relevant to such mode shall be applied, in particular:

• Law No. 66/2006/QH11 of 12 July 2006 on Vietnam Civil Aviation;

• Law No. 23/2008/QH12 of 28 November 2008 on Road Traffic;

• Law No. 23/2004/QH11 of 15 June 2004 on Inland Waterway navigation;

• Law No. 35/2005/QH11 of 27 June 2005 on Railways;

• Decree No. 87/2009/ND-CP of 19 October 2009 on multimodal transport; and

• Decree No. 89/2011/ND-CP of 10 October 2011 on modifying Decree No. 87/2009/ND-CP.

41 Who has title to sue on a bill of lading?

In conformity with international law, the 2005 Vietnam Maritime Code provides that the bill of lading may serve as evidence of the ownership of cargo and shall be used for the disposal or receipt of the cargo and will also serve as evidence of the contract of carriage of cargo by sea. Thus, the legitimate bill of lading holder shall have legitimate title to sue the carrier for cargo loss or damage.

42 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 involved parties are free to determine which terms in the charter party are to be incorporated into the bill of lading and those incorporated terms shall bind a third-party holder of the bill of lading, unless otherwise stipulated by law. In order for terms of the charter party to be incorporated into a bill of lading, the date of the charter party should be clearly indicated in the bill.

A jurisdiction or arbitration clause in a charter party the terms of which are incorporated in the bill of lading may bind on a third-party holder or endorsee of the bill even they are not signatories of the charter party.

43 Is the ‘demise’ clause or identity of carrier clause recognised and binding?

The Law of Vietnam has no definition of a demise clause and, therefore, the recognition of such shall depend on practical circumstances, which may vary from court to court and even judge to judge.

44 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?

Yes, shipowners may still be held liable for cargo damage even when they are not the contractual carrier. The Law of Vietnam grants the cargo interests the right to claim against both the contractual carrier in a contractual claim and the shipowner in a tort claim. In case the name of the carrier is not identified in a bill of lading, the local courts may even judge that the shipowner shall be considered as the carrier who is liable for the cargo loss or damage.

The Himalaya clause, which provides that the agents, servants and independent contractors of the carrier shall be deemed to be parties to the contract of carriage, has not been embodied in the 2005 Vietnam Maritime Code. Thus, the shipowner, as an actual carrier, could not rely on the terms under the contractual carrier’s bill of lading as they are not a contractual party.

A shipowner may have many defences against such liability and they may vary depending on the statements of claim and other supporting documents. In the position of the shipowner, some particular defences may include challenging the right of claimant to initiate the lawsuit before the local court, the jurisdiction of a court to resolve the case, the identification of the defendant, ie, whether the contractual carrier or actual carrier.

45 What is the effect of deviation from a vessel’s route on contractual defences?

In Vietnamese law, deviation is considered to occur when the carrier fails to perform the carriage within a reasonable period of time by the route provided for in the contract or by the usual route.

A deviation from the route for the purpose of saving life or property at sea or for other plausible reasons shall not constitute an infringement of the contract of carriage and the carrier shall be exempted from liability for relevant cargo damage.

46 What liens can be exercised?

To the best of our knowledge, the law of Vietnam has not established a mechanism for a local court to recognise contractual liens.

Under the Law, there are five groups of maritime lien:

• maritime claims for wages, repatriation costs, social insurance contributions and other monetary items which are payable to masters, officers and other members of the ship’s crew;

• maritime claims for indemnity for loss of life, personal injury and other damage to health directly related to activities of a seagoing ship;

• maritime claims for tonnage dues, maritime safety assurance dues, pilotage fees, wharfage fees and other seaport fees and charges;

• maritime claims for remuneration for salvage; and

• non-contractual maritime claims for loss and damage to property directly related to activities of a seagoing ship.

Two possessory liens may be exercised over detained cargo:

• in a dispute over a bill of lading, the carrier may refuse to deliver the cargo and exercise a lien over the cargo if the shipper, the consignee, or both have not yet fully paid or properly secured the amounts being owed to the carrier; and

• the above provision regarding the handing of detained cargoes shall apply in the same manner to the carriage of cargoes under voyage charter parties.

47 What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

In Vietnamese law, the bill of lading is a carriage document serving as evidence of the ownership of the cargo for the disposal or receipt of the cargo and as an evidence of the contract of carriage by sea. Thus, should the carriers deliver the cargo without the original bill of lading, the cargo owner who has title over the cargoes shall have legitimate title to claim the carriers for any loss of cargo.

Normally, the carrier will try to obtain a letter of indemnity or a court order to release the cargo in order to prove that he or she has properly and carefully carried and delivered the good to a cargo receiver although the relevant bills of lading have not yet been surrendered.

48 What are the responsibilities and liabilities of the shipper?

Subject to the terms and conditions of the sale contract, charter party, bill of lading and contract of carriage of good by sea, a shipper may have the following responsibilities:

• the shipper must ensure that the cargo be packed and marked according to parties’ agreements or other internal regulations, or both;

• for explosive, inflammable or otherwise dangerous cargo or cargo which must be handled by special measures during loading, carriage, preservation and unloading, the shipper must furnish within a reasonable time limit to the carrier necessary documents and guidelines pertaining to the cargo;

• the shipper must compensate for the loss or damage arising from the late supply of such necessary documents and guidelines or from irregularities or inaccuracies thereof; and

• the shipper shall be responsible to the carrier as well as passengers, crewmen and owners of other cargoes for the loss or damage arising from the in accurate or untruthful declaration of the cargo, regardless of such declaration is intentional or unintentional, if the carrier proves that such loss or damage is caused by the fault of the consignor or shipper.

Shipping emissions

49 Is there an emission control area (ECA) in force in your domestic territorial waters?

Similar to ECA, vessels of all types, regardless of their nationality, tonnage and use purpose, may only enter a seaport when they satisfy all conditions of maritime safety and security, environmental pollution prevention.

Vietnam has also established some control areas (eg, military zones and areas around major offshore platforms and oil wells), which are not accessible to the public.

50 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?

Up to now, Vietnam Maritime Administration has been conducting necessary measures to put a limit on the amount of sulphur of fuel oil and there are some limitations of the sulphur content of fuel oil used in different territorial waters of Vietnam.

Jurisdiction and dispute resolution

51 Which courts exercise jurisdiction over maritime disputes?

In Vietnam, there is no specialised court to resolve maritime disputes. Civil courts often consider claims in tort while commercial courts are often assigned to handle contractual claims.

Normally, provincial courts shall have jurisdiction to resolve maritime disputes at first instance where a party is foreign. Disputes between local parties are often resolved at district courts in first instance procedures.

52 In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

Service of court proceedings on a defendant located out of the jurisdiction is governed by any international judicial assistance treaties signed between Vietnam and the defendant’s country; Chapter XXXVI of the 2004 Civil Procedural Code of Vietnam, as amended in 2011; the Law on Judicial Assistance No. 08/2007/QH12 of 14 December 2007; and other relevant laws, such as the Ordinance on Arrest of a Seagoing Vessel 2008.

53 Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

In the past, there was the Maritime Arbitration Council established in 1964. However, on 28 April 1993, it was merged, together with the Foreign Trade Arbitration Council, established in 1963, into the Vietnam International Arbitration Centre (VIAC). The current list of VIAC arbitrators does include some maritime arbitrators specialising in handling maritime disputes.

54 What rules govern recognition and enforcement of foreign judgments and awards?

A foreign award shall be recognised and enforced in Vietnam pursuant to: the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Chapter XXIX of the 2004 Civil Procedural Code of Vietnam, as amended in 2011, and Resolution No. 01/2014/HDTP of the Council of Judges of the Supreme People’s Court dated 20 March 2014 on guidance on application of a number of provisions of the Law on Commercial Arbitration.

A foreign judgment shall be recognised and enforced pursuant to the multilateral and bilateral international conventions on civil, family and criminal matters signed between Vietnam and the countries where the judgment or decision has been issued (there are 14 judicial assistance conventions/treaties (three are awaiting ratification)), and Chapters XXVI, XXVII, and XXVIII of the 2004 Civil Procedural Code of Vietnam, as amended in 2011.

55 What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

In case the jurisdiction clause provides that the disputes between the parties shall be settled by arbitration, the defendant may request a Vietnamese court to issue a decision to dismiss the case.

56 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 that a Vietnamese court issue a decision to dismiss the case in Vietnam if the jurisdiction clause provides that the disputes shall be settled by foreign arbitration.

Where the foreign court has jurisdiction to settle the dispute between the parties but a party tries to initiate a separate lawsuit before local courts, it may cause a conflict of jurisdiction between the courts of two countries. Unfortunately, Vietnamese jurisprudence has not yet provided a sufficient legal framework to deal with such situation.

Limitation periods for liability

57 What time limits apply to claims? Is it possible to extend the time limit by agreement?

Normally, a general time-bar applies for almost all claims, whether tortious or contractual. The limitation period is two years from the time when the claimant’s lawful rights and interests were infringed. In some cases, claims arising from loss or damage to cargo under the bill of lading and maritime liens are under a one-year time-bar.

Apart from the above, the time-bar for claims against logistic service providers regarding losses of cargo shall be nine months from the delivery of cargo.

Under the law of Vietnam, contracting parties are not allowed to extend the time bar as it is a statutory time limit. However, in order to harmonise Vietnamese law with international standards, the Supreme Court of Vietnam has issued some resolutions allowing contracting parties the right to agree on the commencement point of a time bar. It means that although parties are not allowed to extend the time-bar, for example from two years to three years, they are allowed to agree on when a time-bar is commenced – to the same effect – namely, to extend the time in which they can bring the case to the local courts.

58 May courts or arbitral tribunals extend the time limits?

No, the court or arbitral tribunal is not allowed to extend the time limit.

Miscellaneous

59 How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

The Maritime Labour Convention (MLC) has now been ratified by 46 countries and came into force in Vietnam on 20 August 2013 under Prime Ministerial Decision No. 1221/QD-TTg.

The competent authorities, namely, the government of Vietnam and the Ministries of Transport, Labour, Finance and Health Care shall have between two and three years to train their officers and make available databases for the implementation of the Convention.

In order to implement the MLC 2006, the Ministry of Transport issued Circular No. 05/2013/TT-BGTVT dated 2 May 2013 to regulate minimum standards of accommodation and recreational facilities, followed by Circular No. 45/2013/TT-BGTVT dated 19 November 2013 on procedures for examination of the maritime labour certificate and the declaration of maritime labour compliance. In order to harmonise the local laws with the rules of the MLC 2006, which came into effect in Vietnam as of 8 May 2014, the Ministry of Transport is now drafting a new decree in order to replace or amend, or both, many current laws and rules. This draft is expected to be available for comments by around August 2014 before being issued by the government of Vietnam by around October 2014, at the earliest.

Currently, local legislation is still insufficient to cover many major issues required by the MLC 2006, with lacunae including but not limited to:

• no regulations on records of seafarers’ daily hours of work or daily hours of rest, as required under article 2.3;

• no regulations on repatriation as stated under Guideline B2.5;

• no minimum standards for the quantity and quality of food and drinking water and for the catering standards that apply to meals provided to seafarers on ships, as stated under Standard A3.2;

• no regulations on financial support for port welfare facilities as stated under Guideline B4.4.4;

• no regulations on onboard complaint-handling procedures as stated under Guideline B5.1.5;

• local regulations need to be amended in order to satisfy the requirements under Standard A1.4.5(b), which requires that no fees or charges for seafarer recruitment or placement or for providing employment to seafarers are borne by seafarers directly or indirectly; and

• miscellaneous regulations, such as annual leave and vibration on board ship, also need to be modified or amended in order to meet relevant requirements set forth under the MLC 2006.

60 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?

Should the party in breach of the contract be able to prove that economic conditions rendering contractual obligations more onerous to perform are caused by the implementation of a decision of a competent state administrative agency about which the party could not have known at the time of entering into the contract (as stipulated in article 294 of Vietnam Commercial Law, 2005) it shall be immune from liability.

61 Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

To date, Vietnam has not ratified but has partly incorporated major terms and regulations of many international conventions and rules, such as the Convention on Maritime Liens and Mortgages 1993; LLMC 1976; the LLMC Protocol 1996; the Fund Convention 1971; the Fund Protocols 1976, 1992 and 2003; the Hague-Visby Rules; the Hamburg Rules, the two Arrest Conventions of Brussels 1952 and Geneva 1999; the Salvage Convention 1989; and the Nairobi Wreck Removal Convention 2007etc.

Such terms and rules have been partially incorporated into Vietnamese Law with some modifications which may sometimes cause them to be inoperable or incapable of being performed, such as ‘cargo’ limitation on carrier’s liability, limitation funds, and others. Hence, we strongly recommend that readers seek legal advice before doing business in this area.

Vietnam is a developing country which only opened its market in 1986. Up to now no maritime court has been established and only a few local judges have experience of dealing with maritime disputes. Consequently, in many major issues of shipping law such as the limitation regime; maritime liens and maritime claims; transfer of title of ship under construction; ship registrations and mortgages; blame ratio of parties in a collision case; arrest of a ship under in rem action; and so on, the practical views may vary from court to court, judge to judge and even case to case. For example, a letter of undertaking may be accepted as sufficient security to release a ship in one court but may be refused by another court and even sometimes by other judges of the same court.

Update and trends

In order to comply with section 11(a) of its WTO commitments, Vietnam has partly opened its market for both maritime transport services and some maritime auxiliary services. New government guidelines, effective as of July 2014, provide clear legal grounds for foreign investors to establish joint venture companies in Vietnam in order to provide, inter alia, towing and tug assistance, and maritime agency services, with a maximum 49 per cent of shares owned by foreign investors.

In relation to arrest and release issues, efforts last year to adopt the 1999 Geneva Convention were unsuccessful, and it seems unlikely that such efforts will be renewed. The good news is that our firm was invited by five senior judges of the Supreme Court in early June to assist them in preparing a resolution and guidelines on detailed procedures for the arrest and release of ships in Vietnamese waters. The resolution and guidelines are expected to be issued by early 2015, with the aim of providing a better framework for both arresting and arrested parties in relation to various issues, namely: court procedures and the documents required to arrest a ship under in rem actions in order to secure a maritime claim or lien; the requirements and form of counter-security or security to be provided; the exercise of rights of arrest in cases of sister ship or associated ship arrest; re-arrest and multiple arrest; and other pending issues.

Besides the opening of some maritime services and the arrest and release issues mentioned above, it is our great honour to be recommended to assist the Drafting Committee of the Ministry of Transport in preparing a Code on Amendment of the Maritime Code of Vietnam of 2005. The new code is scheduled to be issued by the second half of 2015 and the updated version (the second draft Code on Amendment) will ensure that most major issues of the Shipping Law of Vietnam are amended and updated to bring them in line with international standards, including but not limited to:

• new regulations on ship-building, repairing and ship-breaking services;

• new regulations on ship registration and the rights of foreign shipowners;

• amended definitions of sea-going vessels and clarifications on some special floating structures (eg, dry docks, FSOs, FPSOs, fishing vessels and submarines);

• licences, certificates and permits for performing salvage, pilotage, tug and tow and other port services, and maritime auxiliary services, in accordance with Vietnam’s WTO commitments;

• amended regulations on the investigation of marine incidents and powers of the port authorities and PSC officers during the investigation;

• rights and liabilities of the captain and crew members, amended subject to the MLC 2006 and effective in Vietnam (the 40th member) as of May 2014;

• maritime liens and claims, and circumstances for the release of a ship arrested by a local court; and

• marine insurance.

Since the fourth round of discussion, there have been many disputes without a final conclusion or agreement between members of the Drafting Committee on amendments of the local laws concerning contracts of affreightment and charterparties, bills of lading and conflict rules on the applicable law and jurisdiction in cases of maritime disputes.

As there will be many changes and updates between the current (second) version of the Code and the version to be submitted to the government by the last quarter of this year, as well as the final version to be passed by the National Assembly in late 2015, we shall try our best to keep readers promptly updated in future publications. In the meantime, readers are strongly recommended to consult our lawyers on any of the above-mentioned issues so that emerging trends and amended regulations can be updated in due time.

Dang Viet Anh

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Vu Phuong Trang

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Quick Reference Tables

These tables are for quick reference only. They are not intended to provide exhaustive procedural guidelines, nor to be treated as a substitute for specific advice.

The information in each table has been supplied by the authors of the chapters.

Brazil

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

If the arrest is in rem, the creditor shall have the privileged credit properly constituted, according to article 1 of the 1926 Brussels Convention.

If the arrest is filed in personam, the claimant shall evidence the fumus boni iuris by presentation of a clear and undisputable debt, while the periculum in mora may be proved by evidence that the debtor might leave Brazilian territorial waters without having other assets in the country, or if the debtor disposes of its assets.

How quickly can an arrest be effected and what, in summary, is the procedure?

The arrest can be pursued in a precautionary measure to be filed at court evidencing the requirements above-mentioned. If all the requirements are met and the judge is convinced, the arrest order can be immediately effected.

What are the associated costs and expenses of a ship arrest?

The judicial court costs for filling an arrest lawsuit will depend on the state where the claim is going to be filed. In general, the court costs do not exceed 2 per cent of amount under dispute.

A counter-security may be required by the judge, as mentioned below.

How do you effect a release of the vessel?

If a vessel is arrested, the shipowner may file a motion for the judge to reconsider the order, trying to evidence that the requirements for the arrest were not present or even file a bill of review to the second instance court (State Court of Appeals).

Alternatively, and in order to avoid any delay, the shipowner may offer a security/bank guarantee to be posted at court in order to guarantee the claim in substitution for the arrest.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Brazil has not ratified the international arrest conventions thus impeding the security in Brazil of a judicial claim or arbitration to be submitted to the jurisdiction of another country. However, if the foreign court decision or arbitration award is ratified in Brazil before the Superior Court of Justice, a vessel can be arrested as an enforcement of the foreign decision.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

There is a chance of the arrest being granted eventually, although the shipowner will have a justifiable reason to challenge the arrest order.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

There is a chance of the arrest being granted eventually, although the shipowner will have a justifiable reason to challenge the arrest order.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

There are no provisions dealing with sister-ship arrests. If the claim is based on privileged creditors with effects in rem on the vessel, the claimant would be unlikely to obtain the arrest of another vessel of the debtor’s fleet. 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.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

A guarantee may be required from claimants that present their arrest as a precautionary measure (Civil Procedural Code, articles 804 and 816, item II). The court may also require a counter-guarantee to compensate eventual losses sustained by a vessel’s interests in 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 (Code of Civil Procedure, article 825). In this case, the judge may demand security of between 10 and 20 per cent in order 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.

Brazil continued

What claims give rise to maritime liens in your country?

• 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 captain outside the port of registry for actual maintenance needs or continuation of the voyage;

• indemnities due as a result of collisions, or any other sea accident;

• ship mortgages;

• port dues, other than taxes;

• outstanding payments due to depositaries, storage and warehouse rentals, ship equipment;

• expenditures 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

• outstanding price of the vessel.

How soon must the arresting party start proceedings on merits after the arrest?

The arresting party has 30 days to file the main lawsuit after the arrest order is fulfilled.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. A wrongful arrest can be verified when a decision rendered on merits considers the main lawsuit groundless. In this case, the party that requested the arrest may be held liable for wrongful arrest and ordered to pay the losses sustained by the defendants if a counterclaim is also filed, including lawyers’ fees of up to 20 per cent of the amount claimed.

Chile

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

No. Chile has not ratified any of these international conventions.

For what types of claim can a ship be arrested?

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 listed by articles 844, 845 and 846 of the Chilean Commercial Code; or

• credits other than those mentioned in the first point.

How quickly can an arrest be effected and what, in summary, is the procedure?

The arrest order is usually granted quickly, subject to their criteria on the antecedents attached to the arrest petition.

Arrest or retention of a vessel is carried out by service to the maritime authority where the vessel is or by official letter/notification to the director general of the maritime territory and the merchant marine if the vessel is not in the jurisdiction of the court that decreed the measure. Prior service to the person against whom the measure is requested is unnecessary.

In urgent cases, the court may communicate arrest via telegram, telex or other reliable means. In a preliminary proceeding, the person against whom the arrest is requested must also be notified within 10 days from the resolution that granted such measure. This may be extended by the court for good reason. Lack of service within 10 days or extensions will cause the automatic forfeiture of the decreed arrest, which is communicated directly to the maritime authority by the court.

What are the associated costs and expenses of a ship arrest?

Except for costs related to the fees of the service processor who informs the Maritime Authority of the arrest and performs service of process against the person against whom the arrest is requested, there are no court fees to be paid. As discussed in question 28, if the vessel is likely to remain under seizure for a substantial time it may be necessary to ask the court to appoint a depositary, which may imply additional costs.

How do you effect a release of the vessel?

As soon as the requested guarantee is given, the court must lift the arrest without further proceedings. The same applies if the parties agree on such matters. The court may also decide upon the sufficiency of the guarantee that the respondent offers or process this matter incidentally.

In this respect, there are no specific rules: a court may have ordered that a cheque be issued, but may instead accept a deposit, bank guarantee or otherwise. P&I club letters of undertaking are accepted only if agreed by the parties. In all cases, the guarantee may not exceed the value of the detained vessel. Such a guarantee replaces the vessel as the exclusive object of the respective privilege.

In an arrest based on privileged credits, the person establishing the guarantee or affected by it may at any time request, for good reason, that the guarantee is modified, reduced or lifted. Lifting the arrest does not impair the right of the petitioner to later allege or enter the motions or defences he or she sees fit. It is not considered a waiver of the right to limit responsibility according to the Commercial Code. The motion objecting to a retention or arrest and the motion objecting to the amount or form of the guarantee are considered incidental motions that do not suspend the effects of the resolution. A request for modification, reduction or lifting of a guarantee substituting for an arrest will also be treated as incidental.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

If procedural obligations established when an arrest has been decreed as a prejudicial precautionary measure are met (ie, a measure to secure the outcome of a subsequent substantive action) , it would be possible to obtain security and then pursue proceedings on the merits elsewhere. However, this is an option that has to be further tested at Chilean courts.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Bareboat charterers are treated as owners under Chilean law; therefore same rules apply to them in connection with the arrest of a bareboat (demise) chartered vessel.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Not only may the time-chartered vessel to which the privileged credit attaches be arrested, but also ships in the same ownership, administration or sister ships.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

See comments on time-chartered vessels.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

If the court considers that the antecedents attached are not sufficient (court’s discretionary faculty) 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. As to its form and amount, there are no specific rules, so it is up to the court.

What claims give rise to maritime liens in your country?

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 listed by articles 844, 845 and 846 of the Chilean Commercial Code; or

• credits other than those mentioned in the first point.

How soon must the arresting party start proceedings on merits after the arrest?

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 which, in principle, is 10 days, but which may be extended for up to a total of 30 days, provided there is sound basis to do so as per article 280 of the Code of Civil Procedure. 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.

It should be noted that privileged credits are time-barred within a year since the creation of the credit.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

An arrest based on privileged credits is subject to the following conditions.

• the arresting party must invoke one or more of the privileged credits enumerated in question 23;

• the arresting party must attach antecedents that constitute presumption of the right being claimed; and

• if the court estimates that the antecedents attached are not sufficient (court’s discretionary faculty) or the petitioner states they are not yet available to him, 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.

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.

China

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1999.

For what types of claim can a ship be arrested?

Twenty-two kinds of maritime claims, as listed in article 21 of the Special Maritime Procedure Law.

How quickly can an arrest be effected and what, in summary, is the procedure?

Normally one or two days. Procedures: claimant’s application with supporting documents and provision of counter-security; court’s order and execution thereof.

What are the associated costs and expenses of a ship arrest?

Application fee and ship maintenance fee while the ship is under arrest.

How do you effect a release of the vessel?

Provision of security, court’s acceptance of shipowner’s objection to arrest, applicant’s withdrawal of application for arrest.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, provided that the conditions for arrest of the vessel have been met. In addition, if litigation or arbitration has not started, the applicant shall start litigation or arbitration within 30 days of the arrest. Otherwise, the vessel shall be released.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, provided that the bareboat charterer remains the bareboat charterer or has become the shipowner at the time of arrest.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No, unless the time charterer has become the shipowner at the time of arrest.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

A sister ship is subject to arrest, except the cases of disputes over ownership or possession of a ship.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Where a vessel is to be arrested before litigation or arbitration, provision of a counter-security is a must. Where a vessel is to be arrested during litigation or arbitration, it is at the discretion of the maritime court with which arrest of a vessel is applied for whether a counter-security is required. Where a vessel is to be arrested for the purpose of enforcing an effective court judgement or ruling or arbitration award, no counter-security is required. Normally, a counter-security is required in the form of a cash deposit or a letter of security issued by a Chinese commercial bank or insurance company, or other security acceptable to the maritime court. There is no uniform standard as to the amount of counter-security.

What claims give rise to maritime liens in your country?

Claims made by the master or crew members; claims for loss of life or personal injury; claims for ship’s tonnage dues or other port charges; claims for salvage payment; claims for loss of or damage to property resulting from a tortious act.

How soon must the arresting party start proceedings on merits after the arrest?

Within 30 days as of the date of arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. An arrest shall be wrongful if it is proven that: the claim is not a maritime claim (except for the case of enforcement of an effective court judgement or ruling or arbitration award); the vessel arrested is not owned or bareboat chartered by the person against whom the claim is made; or the owner or bareboat charterer is not liable for the claim giving rise to the arrest. Where an arrest proves wrongful, the owner, bareboat charterer or other interested party may claim against the applicant for damages resulting therefrom.

Colombia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Colombia is not a party to any of those conventions. However, Decision 487/2000 of the Andean Community – inspired by the Arrest Convention 1999 – is the regional regulation dealing with arrest of ships in member countries (such as Colombia).

For what types of claim can a ship be arrested?

A ship can be arrested if there is a ‘maritime claim’ or a ‘maritime privileged claim’ on the ship, or a registered mortgage and the obligation guaranteed with said mortgage has been breached. For a list of ‘maritime claims’ and ‘maritime privileges’ see article 1 (definitions) and article 22 of Decision 487/2000.

How quickly can an arrest be effected and what, in summary, is the procedure?

The time spent obtaining an arrest order will vary depending upon the judge appointed by the judiciary to deal with the arrest (approximately four to eight weeks).

What are the associated costs and expenses of a ship arrest?

The associated costs for a ship arrest normally are: the cost of the counter-security; the fees of the sequester of the ship, if applicable, and the attorney fees and expenses.

How do you effect a release of the vessel?

The vessel will be released if sufficient security is provided in the amount and form that the parties so agreed, or, in the absence of such agreement, in the form and amount that the tribunal so decide in the application of Decision 487/2000 (articles 44 and 45) and the Colombian Commercial Code and Colombian Civil Procedure Code/General Procedure Code.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

According to article 52 of Decision 487/2000, the tribunal dealing with the arrest proceedings will not be necessarily the one dealing with the merits.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

According to article 41 of Decision 487/2000, for the arrest to proceed against a demise charterer the demise charterer must be obliged in virtue of such claim in the moment in which that claim emerges, and he or she must have the condition of ‘demise charterer’ at the moment in which the arrest is effective. However, according to article 43 of Decision 487/2000, an arrest against a ship not belonging to the person obliged in virtue of such claim will only be admissible if, according to the domestic law of the member country in which the arrest is being requested, a judgment against the ship could be executed by reason of such claim through its judicial sale.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

According to article 41 of Decision 487/2000 for the arrest to proceed, the action must be against the owner and only in exceptional cases against the ‘person exploiting the vessel’ (ie, the charterer). In order to do so against the time charterer, the claim against the time charterer must be guaranteed by a ‘maritime privilege’.

However, according to article 43 of Decision 487/2000, an arrest against a ship not belonging to the person obliged in virtue of such claim will only be admissible if, according to the domestic law of the member country in which the arrest is being requested, a judgment against the ship could be executed by reason of such claim through its judicial sale.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It is possible to arrest ‘a sister ship’ (same ownership) according to article 42 of Decision 487/2000 if one of two conditions are met:

• such person was, at the moment in which the claim emerges, owner of the ship in relation to which the maritime claim emerges; or

• such person was bareboat charterer, time charterer or voyage charterer of the vessel.

However, this is not possible when the alleged claim is about property or possession of a ship.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

A counter-security could be requested by the tribunal. Such security must be provided in the form and amount that the tribunal requests in a case-by-case basis.

What claims give rise to maritime liens in your country?

Those listed in article 22 of Decision 487/2000 – ‘maritime privileged claims’.

How soon must the arresting party start proceedings on merits after the arrest?

According to article 53 of Decision 487/200, the judge who issues the arrest order might assign – and must assign by petition of the shipowner – a certain term for the claimant to file the lawsuit before the competent court, or to initiate arbitration proceedings, as the case may be.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

There is no case law on this issue. However, article 51 of Decision 487/2000 establishes that the tribunals of the country in which the arrest has been carried out would also be able to deal with the liability of the creditor if, among other situations, the arrest was illegal or unjustified or the asked and obtained guarantee was excessive.

Croatia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1952 (AC 1952).

For what types of claim can a ship be arrested?

Ships flying flags of state parties to the AC 1952 – only for the claims listed in the Convention, except claims relating to ownership.

Ship flying flags of non-parties to the AC 1952 – for any claim.

How quickly can an arrest be effected and what, in summary, is the procedure?

The court usually renders a decision within the same day of receiving the motion.

The time needed for preparation largely depends on the volume of supporting documents (which have to be translated into Croatian).

Arrest cases are within the jurisdiction of commercial courts. The proceedings are commenced by filing a motion for arrest. The applicant need not prove to have a claim, but only show likelihood. The court usually decides without contacting the respondent.

What are the associated costs and expenses of a ship arrest?

· Court fees – depend on the amount of claim, but not exceeding 10,000 kune;

· translation costs – in the range of 150 kune per page;

· ship and crew maintenance – to be covered by the respondent; and

· watching costs (if watching ordered by the court) – varies from port to port – to be advanced by the applicant.

How do you effect a release of the vessel?

Upon security (cash deposit, bank guarantee, club letter of undertaking and the like), if accepted by applicant or, where the applicant refuses to accept, if deemed sufficient by the court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

No.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Only in exceptional circumstances.

What claims give rise to maritime liens in your country?

· 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, canal and other waterway dues and pilotage dues; and

· 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.

How soon must the arresting party start proceedings on merits after the arrest?

Within 15 days of receiving the arrest order.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Croatia does recognise a concept of wrongful arrest.

The arrest is wrongful if it occurs (on appeal) that the arrest was unjustified, or if the applicant fails 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 wrongful arrest.

Cyprus

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither. But the 1952 Convention applies (see question 22 of the Cyprus chapter).

For what types of claim can a ship be arrested?

The Administration of Justice Act 1956 section 1, points (a) to (r), states the types of claims (see question 23 of the chapter).

How quickly can an arrest be effected and what, in summary, is the procedure?

An arrest may be obtained ex parte. A substantive action needs to be filed on or before the arrest application, which is (usually) granted on the same day.

What are the associated costs and expenses of a ship arrest?

Apart from legal costs the initial arrest expenses, which the arresting party is responsible for covering, are approximately €5,000.

How do you effect a release of the vessel?

A bank guarantee needs to be put up in court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes (see question 27 of the Cyprus chapter).

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, provided the claim falls within section 1 of the Administration of Justice Act 1956.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Same as above.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes (see question 23 of the Cyprus chapter).

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security is ordered and the arresting party needs to file a bank guarantee in court in order for the arrest warrant to be drawn up. There is no general rule as to what the amount is.

What claims give rise to maritime liens in your country?

Damage done by a ship, salvage, seamen’s and masters’ wages, masters’ disbursements, bottomry and respondentia.

How soon must the arresting party start proceedings on merits after the arrest?

The arrest proceedings are tried first. The court will then give directions for the filing of pleadings soon thereafter. It usually takes three to four months for the pleadings on the substantive action to be filed.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. The test is bad faith (question 24 of the chapter). The aggrieved party must show that he or she has suffered damage as a result, which is recoverable from the responsible (arresting) party.

Denmark

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1952.

For what types of claim can a ship be arrested?

Maritime claims and non-maritime claims, if the possibility of payment will otherwise be significantly reduced.

How quickly can an arrest be effected and what, in summary, is the procedure?

In theory, arrest can be effected immediately after the application for arrest with the enforcement court, but practical issues might delay the procedure.

What are the associated costs and expenses of a ship arrest?

A court fee of 285 Danish kroner plus 0.5 per cent of the claim must be paid at the time of application for arrest with the enforcement court.

How do you effect a release of the vessel?

The enforcement court will effect the release, when sufficient security has been provided or the arrest has been lifted.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Arrest of a ship without the owner being liable for the underlying claim is only possible if the claim is secured by a lien.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

See above.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Sister ships owned by the person who is liable for the maritime claim can be arrested unless the claim is a dispute on property rights to a ship, or a dispute between co-owners of a ship on property rights, possession, use or revenues of the ship or mortgages on a ship.

Arrest of associated ships is not possible.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security is required for the damages and inconvenience that the arrest might cause the arrestee. The enforcement court decides the sufficient security. The security amount usually corresponds to five days’ loss of hire.

What claims give rise to maritime liens in your country?

Wages and other sums due to the master and other members of the ship’s complement in respect of their employment on board; port, canal and other waterway dues and pilotage dues; compensation for personal injury occurring in direct connection with the operation of the ship; compensation for damage to property in direct connection with the operation of the ship, if the claim cannot be based on contract and rewards for salvage; removal of wrecks; and contribution in general average.

How soon must the arresting party start proceedings on merits after the arrest?

The arrestor must initiate validation proceedings within one week, if proceedings are to be initiated in Denmark, and within two weeks, if proceedings are to be initiated in a foreign country.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

An arrest is wrongful if the claim for which the arrest is made is not valid. The arrestor is strictly liable for the validity of the claim.

England & Wales

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Arrest Convention 1952.

For what types of claim can a ship be arrested?

Section 20(2) of the Senior Courts Act 1981 lists the types of maritime claims in respect of which the vessel can be arrested.

How quickly can an arrest be effected and what, in summary, is the procedure?

Provided that all necessary documents and information are available, the arrest can be effected in less than a day. A standard procedure is as follows:

• a claim form is issued at the Admiralty and Commercial Court Registry;

• arresting party then applies for arrest by filing an application and undertaking for arrest and custody, declaration in support of application for warrant of arrest and a draft warrant of arrest;

• arresting party requests a search of the Registry to ensure that no caution against arrest of the ship is in force; and

• the court issues a warrant of arrest and it is served by the admiralty marshal.

What are the associated costs and expenses of a ship arrest?

• Admiralty marshal’s fees and expenses (costs of arrest, care and custody);

• court fees; and

• legal fees.

The first of these is recoverable as first priority on judicial sale of the vessel.

How do you effect a release of the vessel?

Usually, release of the vessel from arrest takes place after the arresting party has received security for its claim. A party can obtain the vessel’s release from arrest by filing a request for release endorsed with the consent of the arresting party.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes. See question 29 of the England & Wales chapter.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, provided that the ship to be arrested is the one in respect of which the claim arises, and at the time action is brought, the vessel is still on demise charter to or owned by that party. It is also possible to arrest any other vessel that may be owned by the demise charterer.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No. However, it may be possible to arrest another ship if it is owned by the time charterer – see    The Span Terza [1984].

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It is possible to arrest a sister ship if the defendant is the beneficial owner of all the shares in the sister ship. It is not possible to arrest an associated ship.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

No. However, an arresting party is required to provide a personal undertaking to the admiralty marshal to pay all the costs of the arrest upon demand of the admiralty marshal.

What claims give rise to maritime liens in your country?

The following claims give rise to maritime liens:

• damage done by ships;

• salvage;

• crew’s wages and emoluments;

• master’s wages and disbursements;

• fees and expenses incurred by a receiver of wreck; and

• bottomry and respondentia.

How soon must the arresting party start proceedings on merits after the arrest?

If the vessel is arrested for a claim to be pursued in England, then the claim form (which marks the start of the proceedings) will generally have been issued before the arrest took place. Where the court stays the proceedings on the ground of forum non conveniens or on the ground that the claim is subject to the jurisdiction of a foreign court or arbitration tribunal, then the court is likely to set a time limit within which such foreign proceedings or arbitration shall be commenced.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. If bad faith or gross negligence is established, then the arresting party can be ordered to pay damages.

Estonia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1999.

For what types of claim can a ship be arrested?

Maritime claims and maritime liens as per the Arrest Convention 1999 and the International Convention on Maritime Liens and Mortgages 1993.

How quickly can an arrest be effected and what, in summary, is the procedure?

The arrest can usually be effected within one to two days from submitting of the application for arrest.

The claimant wishing to arrest a ship must submit an application for arrest and pay a state fee of €50. A court shall adjudicate the application not later than on the working day following the date of submission of the application, however if the application is submitted in the morning, then it is likely, that the court makes the ruling on the same day. The claimant should submit the bailiff the court ruling and an application for arrest. The bailiff proceeds to arrest the ship immediately.

What are the associated costs and expenses of a ship arrest?

State fee for submitting the application for arrest (€50), costs of lodging counter-security (see below), potential advance payment of enforcement costs.

How do you effect a release of the vessel?

Upon payment of a sum of money (or provision of a bank guarantee in the same sum) determined by the court to the bank’s account the arrest will be terminated and deemed substituted with the sum of money deposited or the provided guarantee.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Only in case of a maritime lien.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes, by depositing money or securities on the court’s bank account or by submitting a bank guarantee. The amount of the security is at least 5 per cent of the claim, but in any case not less than €32.

What claims give rise to maritime liens in your country?

As per article 4(1) of the International Convention on Maritime Liens and Mortgages 1993.

How soon must the arresting party start proceedings on merits after the arrest?

The court can grant a term of up to one month to start proceedings.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

The injured party may claim damages for arrest on the basis of general principles of tort or pursuant to specific grounds:

• a court judgment for refusal to satisfy or hear the secured action enters into force, or the proceeding in the matter is terminated on any other grounds except approval of the compromise of parties;

• it becomes evident that no claim for securing a claim or no cause for securing the action existed at the time of securing the action; and

• a ruling on securing the action which was made before the action was filed has been revoked due to the fact that the action was not filed on time.

France

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

France is a signatory to the Arrest Convention 1952 but not to the Arrest Convention 1999.

For what types of claim can a ship be arrested?

The ship may be arrested for any claim if it ‘appears founded in theory’ (article L 5114-22 of the French Transport Code) or for any maritime claim as defined in the 1952 Convention.

How quickly can an arrest be effected and what, in summary, is the procedure?

The arrest may be effected swiftly if the arresting party holds an executory title. The procedure to arrest a vessel is as follows: the arrest of a vessel may be obtained upon ex parte application before the enforcement judge, by establishing a debt which ‘appears founded in theory’; the granting of an arrest order prohibits the vessel from departing from the port but the court may, upon deposit of security, authorise the departure of the vessel for one or several voyages determined in advance.

What are the associated costs and expenses of a ship arrest?

The associated costs and expenses are, among other things, those generated by the vessel’s detention in port, legal fees and bailiff fees.

How do you effect a release of the vessel?

Parties may agree to release the vessel without any interference from the courts. The arresting party may accept the release in exchange of security.

If parties do not manage to reach an agreement, the shipowner may apply for an order before the judge to release the vessel. The judge will then consider whether to withdraw his or her order.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, it is possible.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Yes, it is possible under specific conditions, even though French courts were traditionally not favourable.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes. An associated ship may be arrested, provided that the associated company is proved to be fictitious.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

In practice, no.

What claims give rise to maritime liens in your country?

The following claims give rise to maritime liens in France: legal costs incurred in relation to the sale of the ship and the distribution of the proceeds of the sale; fees incurred in the last port of call; the crew’s wages; salvage and general average contribution; claims arising out of collisions, accidents at sea and damage to port structures and cargo; and costs incurred by the captain outside the home port of the vessel.

How soon must the arresting party start proceedings on merits after the arrest?

As a general rule, the party should start proceedings on merits within one month of the arrest unless the arrest is based on the provisions of the 1952 Convention. The 1952 Convention states that ‘if the parties have agreed to submit the dispute to the jurisdiction of a particular court other than that within whose jurisdiction the arrest was made or to arbitration, the Court or other appropriate judicial authority within whose jurisdiction the arrest was made may fix the time within which the claimant shall bring proceedings’.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes, France recognises the concept of wrongful arrest. There has to be an abuse of the right to arrest the vessel: the absence of legitimacy or the malice or inappropriateness of the measure may constitute an abuse. Compensatory damages may be awarded in cases of abuse.

Germany

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Germany has been a member of the Brussels Arrest Convention of 1952 since April 1973, but due to the leading opinions in Germany the provisions of the Civil Procedure Code should prevail.

For what types of claim can a ship be arrested?

An arrest may be applied for if a creditor’s claim is for payment or may become a claim for payment that is generally broader than the claims admitted under the Brussels Arrest Convention 1952.

How quickly can an arrest be effected and what, in summary, is the procedure?

In Germany an arrest can be effected/achieved within a day.

What are the associated costs and expenses of a ship arrest?

The associated costs depend on the claim amount in question and are calculated according to the Attorney Compensation Law (RVG).

How do you effect a release of the vessel?

In order to have an arrest lifted the shipowners may put up security; security may be given by a bank guarantee and P&I club letters of first-class P&I clubs (international group) are widely accepted.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

If a claim is not based on a maritime lien the vessel may not be arrested for claims against bareboat charterers as it does not affect the owner of the vessel. However, if the property of the charterer is concerned, ie, bunkers, that property may be arrested.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

See above – the same applies to time-chartered vessels.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes, provided that the sister ship is owned by the company or person against whom the claim is made.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

The judge may grant the arrest but allow the execution only if the creditor provides for counter-security. The actual amount is at the discretion of the judge but the ship’s charter rate for the off-hire period may be a reasonable guideline. The counter-security of the creditor will be ordered in cash or – if so requested in the application – may be given as a bank guarantee of a first-class European bank.

What claims give rise to maritime liens in your country?

Liens are accepted for crew wages, port and pilots’ charges, claims for personal injury and death or damage to property, general average contributions and salvage remuneration and claims of the social security authorities.

How soon must the arresting party start proceedings on merits after the arrest?

As to the legal action there is no automatic commencement of a proceeding, however, on an application of shipowners the court will file an order giving the applicants reasonable time, which is at the discretion of the court and is usually about a month. If the applicant fails to comply with this order the arrest will be lifted.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

German law is rather strict on compensation for wrongful arrest. Section 945 of the Civil Procedure Code stipulates strict liability. Costs, damages, demurrage and expenses will be recoverable if the defendant can show that the arrest was made unreasonably and in bad faith.

Indonesia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Indonesia has neither signed nor ratified either convention.

For what types of claim can a ship be arrested?

A vessel can be arrested in relation to all types of civil claim. An arrest of vessel can only be conducted by a written order from the court following a petition for arrest from the claiming party.

How quickly can an arrest be effected and what, in summary, is the procedure?

There is no fixed time frame within which an arrest can be affected. It depends on the discretion of the court based on the complexity of the case.

An arrest of a vessel can only be conducted by a written order from a court. The Indonesian Shipping Act, Law No. 17 of 2008, provides that a request for an arrest of vessel can be submitted to the court based on the connection with the existence of a maritime claim.

Alternatively, an arrest of vessel can also be pursued by requesting a writ of attachment from the court through the process of filing a civil claim, which is regulated under the Indonesian Civil Procedural Laws.

What are the associated costs and expenses of a ship arrest?

Upon the arrest of a vessel, the court administrative fees shall be incurred, which amount varies depending on the stipulation issued by the head of each district court. Additionally, there are also administrative costs of the harbour master and the maintenance fees incurred.

How do you effect a release of the vessel?

A release of an arrested vessel shall only be affected by a request for such release to the court with an evidence of a settlement of the dispute.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

A vessel cannot be arrested to obtain security in respect of foreign court or arbitration proceedings. Indonesian courts do not recognise foreign court judgments.

As to foreign arbitration proceedings, in practice Indonesian courts only enforce final awards. Therefore, an interlocutory award ordering arrest of a vessel to obtain security cannot be enforced as it is not a final award.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

No, because bareboat charterer is not the owner of the vessel. Under Indonesian law, an arrest of a vessel can only be imposed over the vessel owned by the defaulting party. An arrest against bareboat (demise) chartered vessel may trigger the owners of such vessels to submit rebuttal against the said request for arrest of vessels or the order of arrest itself (if granted).

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No, because the time-chartered vessel is not the asset of the time charterer. Under Indonesian law, an arrest of a vessel can only be imposed over the vessel owned by the defaulting party (the time charterer).

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It is possible if the sister ship or the associated ship is also owned by the defendant or the defaulting party.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

There is no requirement for counter-security before an arrest order is granted.

What claims give rise to maritime liens in your country?

The following claims give rise to maritime liens:

• costs of execution;

• debts due to the master and the crew arising under the seafarer’s agreements relating to the period during which they have served aboard the ship;

• remuneration for salvage, pilotage dues, canal and harbour dues and other shipping dues; and

• debts arising from collisions.

How soon must the arresting party start proceedings on merits after the arrest?

An arrest of vessel under Indonesian law may only be affected after the court proceedings initiated by either party.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. A wrongful arrest occurs if the arrested vessel is not registered under the name of the debtor. There are no specific regulations stipulating the penalties/remedies. However, a party that has suffered a wrongful arrest may submit a counter-claim or a fresh claim to pursue damages.

Ireland

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Ireland is a signatory to the International Convention Relating to the Arrest of Seagoing Ships 1952.

For what types of claim can a ship be arrested?

A ship can be arrested for the claims as per article 1 of the 1952 Convention.

How quickly can an arrest be effected and what, in summary, is the procedure?

Arrest can be achieved within a day and the procedure is as follows:

• a summons, supporting affidavit, notice or praecipe for a warrant and warrant of arrest are required;

• an in rem admiralty summons is issued by the High Court to found jurisdiction prior to the application for an arrest;

• ex parte application required to arrest a vessel grounded on affidavit;

• if the judge is satisfied he will sign the warrant for arrest. It will be then executed by the admiralty marshal by sending the warrant to the local custom office at the port where the vessel is berthed;

• the local customs office will arrest the vessel;

• service of the original summons is effected by nailing or fixing it for a short period of time to the main mast or to a conspicuous part of the vessel and by leaving a true and certified copy nailed or fixed in its place;

• on service of summons, the Irish court has jurisdiction to hear the claim unless the parties have expressly agreed another jurisdiction; and

• the vessel remains under arrest until such time as appropriate security has been provided. Application has to be made in court in person for the release of the vessel and release papers have to be signed to release the vessel from arrest.

What are the associated costs and expenses of a ship arrest?

Legal fees including counsel’s fees and admiralty marshal expenses.

How do you effect a release of the vessel?

Order on consent is presented to the admiralty judge to secure release.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes. Section 5(4) of the Jurisdiction of Courts (Maritime Conventions) Act 1989.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, if it relates to a claim on the ship only. Article 3(4) Arrest Convention 1952.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No. It’s possible to obtain an attachment of bunkers.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It is not possible to arrest associated ships. It is possible to arrest a sister ship of convention countries under which the original claim is actually founded.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

No, but solicitors undertaking for costs of admiralty marshal’s expenses must be provided.

What claims give rise to maritime liens in your country?

Ireland is not a signatory party or contracting state to the 1926, 1967 and 1993 Liens Conventions. A maritime lien will not attach to a ship for a claim arising in the Irish jurisdiction. If a ship moves into the jurisdiction of a signatory party to the 1967 and 1993 Lien Conventions, the Lien Conventions will apply.

How soon must the arresting party start proceedings on merits after the arrest?

• Once the arresting order is obtained, the arresting party serves a plenary summons on the arrested vessel;

• plenary summons is served on the vessel the Irish courts have jurisdiction over;

• entry of appearance to be entered within eight days of service of the plenary summons;

• the plaintiff is required to deliver his or her statement of claim within 21 days from the date of the appearance;

• the defendant’s solicitor usually serves a notice for particulars of the plaintiff’s claim; and

• the defendant is allowed 21 days from the delivery of the statement of claim by the plaintiff’s to deliver the defence.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

The test for wrongful arrest is usually bad faith or gross negligence.

Italy

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Italy is a signatory country to the Arrest Convention 1952, but not to the Arrest Convention 1999.

For what types of claim can a ship be arrested?

A ship can only be arrested for maritime claims as defined by article 1 of the Arrest Convention 1952 if registered in a contracting state. Ships flying the flag of non-contracting states can be arrested for any claim.

How quickly can an arrest be effected and what, in summary, is the procedure?

The arrest can be effected very quickly, with the possibility of obtaining a provisional arrest on the same day the petition is filed.

In order to obtain the arrest of a ship, the claimant must file a petition in the competent court and provide prima facie evidence of his or her claim. Following the petition, the court fixes a hearing for the discussion of the arrest with both the claimant and the defendant, in order to decide whether to grant the arrest or not. As mentioned in question 3 of the Italy chapter, if the arrest is urgently needed and the time necessary to summon the defendant would jeopardise the claimant’s rights, as generally happens for the arrest of ships, the court can order the immediate arrest of the ship and then fix the hearing in order to decide whether to confirm, amend or revoke the arrest.

What are the associated costs and expenses of a ship arrest?

Court fees depend on the amount claimed and must be paid at the moment the petition is filed. Legal fees are agreed with the client or calculated following the parameters set by law.

How do you effect a release of the vessel?

Release of the vessel is granted if proper security is provided.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

See question 25 of the Italy chapter.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

See question 25 of the Italy chapter.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

See question 23 of the Italy chapter.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security in the form of cash or a bank guarantee can be ordered by the judge, at his or her discretion, in order to cover potential damages for wrongful arrest.

What claims give rise to maritime liens in your country?

Maritime liens in Italy are those listed in article 552 of the Code of Navigation and in article 1 of the Arrest Convention 1952.

How soon must the arresting party start proceedings on merits after the arrest?

Once a ship has been arrested, the court fixes a deadline (not exceeding 60 days) for the claimant to start proceedings on the merits before the competent court. If the claimant fails to do so, the arrest ceases to be effective.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes, an applicant may be liable for damages by wrongful arrest if the claim for which the arrest has been granted does not exist and has been brought by the claimant without due care. In this case, the court may order the applicant to pay compensatory damages.

Japan

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

The ship can be arrested without any security by the claims with maritime lien including the necessity supply to the ship, the collision claim, the cargo claim, etc.

Other claimants against the shipowners can arrest the ship preliminary by putting up security of one-third to one-fifth of the claim amount.

How quickly can an arrest be effected and what, in summary, is the procedure?

The claimant shall apply the ship arrest to the court with the evidence. If it is preliminary arrest, a security of one-third to one-fifth of the claim amount is necessary. If the evidence is sufficient, it is possible to obtain the arrest order in one or two days.

What are the associated costs and expenses of a ship arrest?

The costs for maintenance and evaluation, etc, would be not less than ¥1.5 million.

How do you effect a release of the vessel?

The shipowner may obtain the release order by depositing the full claim amount as security.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, a vessel can be arrested prior to obtaining security even though the foreign jurisdiction or arbitration is agreed.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, as long as the maritime lien is recognised by the claim.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It may be possible to arrest a sister ship preliminarily in the same ownership, but it is very difficult and almost impossible to arrest an associated ship owned by another company, even if it is in the same company group. It is very difficult to pierce the corporate veil.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

When the claimants arrest the vessel preliminarily, the security required shall be about one-third to one-fifth of the claim amount by way of a cash deposit or a security issued by a bank, insurance company or P&I club with a licence in Japan.

What claims give rise to maritime liens in your country?

All public claims due to the ship, pilotage, towage, salvage, general average, necessities supplied to the ship, master and crew wages, collision claims, cargo claims, etc.

How soon must the arresting party start proceedings on merits after the arrest?

In the case of preliminary arrest, the court may order the claimant to start proceedings within a month of the defendant’s application.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Wrongful arrest may constitute a tort, as long as the arresting party is negligent. If the tort claim is established, the claimant may be entitled to recover their loss or damage reasonably anticipated.

Korea

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

Provisional arrest: any type of claim including cargo claims and claims for an outstanding amount owed by the shipowner.

Maritime lien arrest: claims that give rise to a maritime lien.

How quickly can an arrest be effected and what, in summary, is the procedure?

Usually within two to three days, but longer in the case of weekends or holidays.

What are the associated costs and expenses of a ship arrest?

Costs for maintenance and preservation of the vessel.

How do you effect a release of the vessel?

Upon deposit of the claim amount in cash or provision of the P&I club’s letter of undertaking, if the arresting party consents.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

No, but if a claim exists against the registered shipowner, such as damage to cargo due to defects of the ship itself, a provisional vessel arrest based on the claim against the registered shipowner could be possible.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

No.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security in cash of about one-tenth of the claim amount, or a surety bond issued by an insurance company, if the court allows.

What claims give rise to maritime liens in your country?

Court-related expenses, port dues, pilotage, towing charges and preservation expenses or survey fees for the vessel.

Claims of the crew or servants of the owner arising from the employment contract.

Salvage remuneration and the ship’s contribution to general average.

Claims for collision and other maritime accidents, damages to the navigational aids, port facilities and fairway and claims for loss of life or damages to crew or passengers.

How soon must the arresting party start proceedings on merits after the arrest?

Upon application by the arrested party for an order upon the arresting party to commence the action on the merits, in the case of provisional arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. Only the ultimate failure of the claim on the merits, an arrest of a sister ship or an arrest based on the claim against the time charterer can result in wrongful arrest. The wrongfully arresting party can be liable for loss of earnings or any other damages sustained by the shipowner due to such wrongful arrest.

Latvia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Latvia is signatory to both Arrest Conventions.

For what types of claim can a ship be arrested?

• Loss or damage that is caused by the operations of a ship;

• loss of human life or harm caused to human health that has arisen on the water or on land in relation to the operations of a ship;

• salvage or any salvage contract including a special reward for the salvage of such ship or cargo that endangers the environment;

• damage or the threat of damage to the environment (including coastal areas) or interests associated with the environment caused by a ship; such reasonable and justified measures that are performed to reduce or prevent such damage; compensation for such damage; the cost of such measures as are conducted or will be conducted to restore the natural environment; damage that has arisen or may arise for a third person in connection with the damage caused to the environment; damage, losses, or costs similar to the those referred to in this point;

• costs that are associated with the raising, relocation, recovery, destruction or rendering harmless of sunken, damaged, run aground or abandoned ships, including everything that is or was on the ship, and costs that are associated with the preservation of abandoned ships and the maintenance of their crews;

• a contract for the lease or use of a ship in accordance with a charter or any other contract;

• a contract for the carriage by ship of cargo or passengers in accordance with a charter or any other contract;

• loss or damage that has arisen to cargo or in relation to cargo (including luggage) that is carried by ship;

• general average;

• provision of towing services;

• provision of pilotage services;

• goods, materials, stores, fuel, equipment (including containers) delivered or services provided for the operation, management, preservation or maintenance of a ship;

• the building, repair, restoration of a ship, and the transformation of a ship or the installation of equipment;

• payments for the use of port, canal, dock or other waterways;

• wages intended for the master, officers and other members of the crew and other amounts of money associated with their employment on the ship, including costs of repatriation and social insurance contributions;

• a ship’s or its owner’s shore maintenance (disbursements) accounts;

• ship insurance premiums (including mutual insurance payments) that are paid by the shipowner or bareboat charterer of a ship or that are paid on behalf of the shipowner or bareboat charterer of the ship;

• any commissions or intermediary or agent services payments paid for a ship by the shipowner or bareboat charterer of the ship or that are paid on behalf of the shipowner or bareboat charterer of the ship;

• any disputes regarding the ownership or possession rights to a ship;

• any disputes between the joint shipowners regarding the operations of the ship or the profit acquired;

• a mortgage or mortgage claims regarding a ship, or any similar such encumbrances in relation to the ship; and

• any dispute regarding a contract for the sale of a ship.

How quickly can an arrest be effected and what, in summary, is the procedure?

Theoretically a ship arrest may be effected within one working day, but practically it will take several working days (two to five days). All the supporting documents must be translated into Latvian and filed in court along with an application. Court rulings will be issued on an ex parte basis and rulings may be appealed.

What are the associated costs and expenses of a ship arrest?

Associated costs and expenses include:

• court tax for applications regarding securing of claims – 0.5 per cent of the amount claimed (minimum – €71.14); and

• translation of documents supporting the claim into Latvian.

How do you effect a release of the vessel?

Lifting an arrest is a lengthy procedure: an order to release a vessel must be issued by a judge in a court hearing with participation of both plaintiff and defendant. In practice, it takes 10 to 15 days.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, an arrest may be obtained.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

A counter-security (deposit of cash money) may be required, but usually it is not.

What claims give rise to maritime liens in your country?

• Claims associated with employment on the ship of the master of the ship, officers and other members of the crew of the ship, including the cost of repatriation and social insurance contributions payable on their behalf;

• claims in relation to the loss of human life or harm caused to human health (including claims regarding recovery of means of support) on water or on land in connection with the operation of the ship;

• claims associated with reward for the salvage of a ship;

• claims associated with payments for the use of ports, canals and other waterways and pilotage services; and

• claims arising out of loss of or damage to property or destruction thereof caused by the operation of the ship other than loss of or damage to cargo, containers and passenger belongings carried on the ship.

How soon must the arresting party start proceedings on merits after the arrest?

Usually in a month.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes, Latvian Civil Procedure Law provides that, if a claim brought against a defendant is dismissed, the defendant is entitled to bring a civil suit and to demand compensation for losses they have incurred due to the securing of the claim.

Malta

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Malta is a signatory to neither of the Arrest Conventions.

For what types of claim can a ship be arrested?

(i) Claims to possession/ownership or title to a ship; (ii) questions arising between co-owners as to ownership/possession/employment or earnings of a ship; (iii) claims in respect of a mortgage/hypothec or charge on a ship; (iv) claims arising out of a contract of sale; (v) claims for damages received by a ship; (vi) claims for damage caused by a ship; (vii) claims for loss of life and/or personal injury caused by ship; (viii) claims for loss or damage to goods carried in a ship; (ix) claims arising out of an agreement for the carriage of goods/use or hire of a ship; (x) claims for salvage; (xi) claims for damage to environment by a ship; (xii) claims relating to wrecks; (xiii) claims for towage; (xiv) claims for pilotage; (xv) claims for supplies/services rendered to a ship; (xvi) claims for construction/repair/conversion or equipping of a ship; (xvii) claims for port/dock/harbour dues; (xviii) claims by crew for wages/repatriation; (xix) claims for disbursements made; (xx) claims for commissions/brokerage/agency fees; (xxi) claims arising out of an act of general average; (xxii) claims arising out of bottomry; (xxiii) claims for forfeiture of a ship; (xxiv) claims for insurance premia; and (xxv) claims for fees due to the Registrar/tonnage dues.

No warrant of arrest may be issued if the monetary value of the claim is less than €7,000.

How quickly can an arrest be effected and what, in summary, is the procedure?

A vessel may be arrested very quickly by filing a warrant of arrest (precautionary or executive, depending upon whether or not the person seeking the arrest is yet in possession of an executive title). The warrant of arrest, made out on statutory form, would indicate the nature of the claim, or the executive title concerned as the case may be. A warrant of arrest is usually issued by the courts and served upon the interested parties within a matter of hours.

What are the associated costs and expenses of a ship arrest?

Fees and costs for issuing a warrant of arrest should be approximately in the region of €5,000. Should the warrant of arrest need to be supported by proceedings on the merits of the claim, whether in rem or in personam, then a quotation would need to be obtained on a case-by-case basis since judicial fees and costs are taxed on an ad valorem basis. Additional fees and costs would need to be incurred in order to apply for the judicial sale by auction of the vessel in order to enforce an executive title, as well as and subsequent thereto to participate in any further proceedings for the ranking of creditors as may be necessary. It is always to be borne in mind that a local mandatory required to represent any non-resident claimant in such matters is held to be personally responsible for all judicial costs as may be due to the Registrar of Courts, as well as for any judicial fees and costs as may be adjudged by the courts in favour of the arrested party, so that any such mandatory would seek adequate security from any claimant prior to instituting proceedings.

How do you effect a release of the vessel?

Release of an arrested vessel is effected by depositing in court the amount of the claim and requesting the issuance of a counter-warrant. By agreement with the arresting party, it will be possible to deposit a bank guarantee, or even a P&I undertaking.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

A vessel can only be arrested in Malta to obtain security in respect of foreign court proceedings pursuant to Council Regulation (EC) No. 44/2001 in cases where the courts of another EU member state have jurisdiction as to the substance of the matter. A vessel can always be arrested in Malta in order to obtain security in respect of foreign arbitration proceedings.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, provided that at the time the action is brought the bareboat charterer (being the ‘relevant person’ who would be liable for the claim in an action in personam) is either still the bareboat charterer of the vessel, or has become the owner or beneficial owner thereof.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No, unless the time charterer (being the ‘relevant person’ who would be liable for the claim in an action in personam) has at the time the action is brought become the owner, beneficial owner or bareboat charterer thereof.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Unless for (i) claims relating to possession/ownership/title of a ship; (ii) questions arising between co-owners as to ownership/possession/employment or earnings of a ship; and (iii) claims in respect of a mortgage/hypothec/charge on a ship, when it is only possible to arrest the particular ship concerned, it is possible to arrest a sister or an associated ship in connection with which the claim arose.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security will not be required before an arrest order is granted. However, following the arrest, counter-security may be requested by the person whose vessel has been arrested. Such person may request the court, on good cause being shown, to order that the party requesting the warrant of arrest puts up sufficient security, in the form of a cash deposit or (if agreed to) in the form of a bankers’ guarantee, for the payment of the penalty, damages and interest, in an amount being not less than €11,600, within a time to be fixed by the court; and in default to rescind the warrant.

What claims give rise to maritime liens in your country?

Maltese law does not recognise the concept of ‘maritime liens’, but article 50 of the Merchant Shipping Act lists a number of claims giving rise to a ‘special privilege’. These special privileges partake of the characteristics of maritime liens in that they are accorded a droit de suite over the vessel concerned for one year from the date on which any voluntary sale of the vessel is recorded in the register to which it belongs. Special privileges are also very relevant in proceedings for the ranking of creditors on any fund resulting from a judicial sale by auction of a vessel.

How soon must the arresting party start proceedings on merits after the arrest?

The arresting party must commence proceedings on the merits of the claim, whether before a competent court or arbitration, within 20 days after the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Maltese law does recognise a concept of wrongful arrest. Wrongful arrest would essentially occur in circumstances wherein the claim on the basis of which the warrant of arrest is issued is malicious, frivolous or vexatious; or where the arresting party fails to bring the action on the merits within the time established by law without valid reason. In such eventuality, the court may condemn the arresting party to pay a penalty of not less than €11,600 in favour of the person against whom the warrant of arrest was issued.

Mozambique

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1952.

For what types of claim can a ship be arrested?

A ship can be arrested if, on its arrival at port, the cargo is found to be damaged. A ship can also be arrested if it is indebted to any creditor, including the port authority.

How quickly can an arrest be effected and what, in summary, is the procedure?

An arrest can be granted within a period of 30 days after its submission at court. The applicant shall file at court an application to obtain a security.

What are the associated costs and expenses of a ship arrest?

The conflicting parties may incur court fees, and final court fees are borne by the losing party.

How do you effect a release of the vessel?

Release of a vessel may result from the granting of a bond as a security for the payment of the outstanding amount.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, before any foreign court or arbitration proceedings, or while such proceedings are pending, it is possible to arrest a vessel in order to obtain security.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Yes.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes. The form of security is at the judge’s discretion, and the amount will be that which is deemed adequate to secure the payment of the claimed amount.

What claims give rise to maritime liens in your country?

All maritime liens legally vested to the carrier, purchaser or lien creditor.

How soon must the arresting party start proceedings on merits after the arrest?

Within a period of 30 days after the court order is served to the applicant.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. When an applicant fails to file the main court action within a period of 30 days after the judgment, he or she must compensate the defendant.

Netherlands

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Netherlands has signed the Arrest Convention 1952 but is not a signatory to the Arrest Convention 1999.

For what types of claim can a ship be arrested?

If the flag state of the particular vessel is not a signatory to the Arrest Convention 1952, a creditor is allowed to recover his or her claim from all his or her debtors’ assets. Hence, a vessel can be arrested for any type of claim.

Should the flag state of the particular vessel also be a signatory to the Arrest Convention 1952, arrest can only be made for maritime claims and those listed in this convention.

How quickly can an arrest be effected and what, in summary, is the procedure?

A vessel can be arrested in a matter of hours, depending on the time of day.

A creditor instructs a lawyer to draft the application for the arrest. The application sets out in summary the grounds for the claim and the amount claimed. It also mentions whether the claim on the merits has been instituted or not, and which court or arbitral panel will be competent. There is no requirement for a power of attorney. The application will be heard on an ex parte basis and, after obtaining permission, a bailiff is instructed to go on-board the vessel and effect the arrest.

What are the associated costs and expenses of a ship arrest?

The costs and expenses associated with a vessel arrest are the court registrar’s fee, the bailiff’s costs and the costs of the lawyer drafting the application. The total costs of the arrest will vary between €2,500 and €5,000 in a straightforward case.

How do you effect a release of the vessel?

Release of the arrested vessel can be achieved by:

• payment of the amount claimed, including costs of the arrest;

• issuance of a letter of guarantee by a guarantor acceptable to the creditor; or

• after obtaining a release order from the competent court if the alleged debtor succeeds in convincing the court that the claim does not exist (any longer) and a court deciding on the merits decides in favour of the alleged debtor.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

A vessel can be arrested to obtain security in respect of foreign courts and arbitration proceedings.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

According to the Dutch Code of Civil Procedure, the shipowner is jointly and severally liable with the bareboat charterer for any juridical act that binds the latter and that is directly intended to put the vessel into operation or keep it in operation. Claims regarding the same against the bareboat charterer can be recovered from the shipowner as well, for which reason the vessel can be arrested for these types of claim against the bareboat charterer.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No, a creditor cannot have recourse against a time-chartered vessel for a claim against the time charterer. However, a creditor can apply for an arrest of the bunkers of the time-chartered vessel if the bunkers are owned by the time charterer.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

The main rule is that the creditor may recover his or her claim from all debtors’ assets. Arresting a sister vessel of the vessel in connection with which the claim arose is, therefore, possible.

An associated vessel is not part of the debtors’ assets and may, therefore, not be arrested.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Although, in theory, the presiding judge may grant leave to arrest provided counter-security is put up, in practice, this rarely occurs.

What claims give rise to maritime liens in your country?

• Claims regarding costs of preservation of the vessel, made after the vessel has been arrested;

• claims arising out of employment contracts of the master and crew;

• claims regarding salvage as contribution to the gross average;

• claims regarding port charges and measures, which are necessary to warrant the safety of the port or third parties; and

• claims regarding collisions.

How soon must the arresting party start proceedings on merits after the arrest?

Leave to arrest a vessel is granted upon the condition that the claim on the merits is generally filed within eight to 14 days. However, if duly motivated a longer period of time can be applied for.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

If the claim on the merits is dismissed by the competent court or arbitration panel this constitutes an unlawful arrest. This gives rise to liability for the damage and losses arising from the arrest. On the other hand, the party whose vessel has been unlawfully arrested must take all reasonable measures to mitigate damages, including, in particular, a quick response to such arrest.

Nigeria

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Nigeria acceded to the 1952 Arrest Convention in 1963 but never domesticated it and thus it does not have the force of law in Nigeria. Nigeria is not a signatory to the 1999 Arrest Convention.

For what types of claim can a ship be arrested?

A ship can only be arrested for maritime claims as set out in the AJA. These include the traditional maritime liens of damage, salvage, crew wages and master’s disbursements.

How quickly can an arrest be effected and what, in summary, is the procedure?

An arrest can be effected within 24 to 48 hours from the date of filing of the writ. The arresting party/claimant will file the writ of summons commencing the suit with a statement of claim and an ex parte application for the arrest of the vessel supported by an affidavit of urgency. The suit will be assigned to court immediately and the application for arrest heard and determined. The warrant of arrest will be processed immediately and be dispatched for execution by bailiffs.

What are the associated costs and expenses of a ship arrest?

The associated costs of an arrest are mainly the filing fees for the action, the admiralty marshal’s expenses for the maintenance of the ship while under arrest and solicitors’ fees.

How do you effect a release of the vessel?

A vessel can be released upon an application to the court by the owner or person interested after such person has provided the security demanded by the arresting party, usually in the form of a bank guarantee to cover the amount claimed. A vessel can also be released unconditionally without provision of the security demanded if the claim for which the arrest was ordered is not a maritime claim and as such cannot ground an arrest. A vessel can also be released upon the oral application of the arresting party, if the said arresting party files a written consent to release of the vessel.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

No, a vessel cannot be arrested to obtain security in respect of foreign court and/or arbitration proceedings; however, a vessel arrested as security for a claim in Nigeria may be retained as security for the same claims on arbitration or by a foreign court if the Nigerian proceedings are stayed pending determination of the claims on arbitration or by the foreign court.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, if the bareboat charterer is in possession and control of the vessel at the time the cause of action arose and the action was commenced.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes, it is possible to arrest a sister ship but not an associated ship.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security is generally not required before an arrest order can be granted however security for costs may be demanded in order to maintain the arrest.

What claims give rise to maritime liens in your country?

These include:

• salvage, wreck removal and contribution in general average;

• damage done by a ship;

• wages of the master or a member of the crew;

• master’s disbursements;

• claims for loss of life or personal injuries occurring whether on land or water resulting directly from operation of a vessel; and

• claims for ports, canal and other waterways dues and pilotage dues.

How soon must the arresting party start proceedings on merits after the arrest?

The substantive claim is usually filed with the application for arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Nigeria recognises the concept of wrongful arrest: an arrest is said to be wrongful where it is later found that the arrest ought not to have been ordered. The penalty is payment of damages for wrongful arrest by the arresting party, which damages will cover all proven losses suffered by the vessel owner or demise charterer.

Norway

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Norway is a signatory to both, but only the Arrest Convention 1952 is in force in Norway.

For what types of claim can a ship be arrested?

Generally, for ‘maritime claims’ according to the Arrest Convention 1952.

How quickly can an arrest be effected and what, in summary, is the procedure?

If an arrest ground exists and a risk is inherent by a delay, an arrest can be obtained ex partes in a matter of days. The defendant may subsequently require a hearing on the lawfulness of the arrest.

What are the associated costs and expenses of a ship arrest?

Court fees are insignificant, but port dues may have to be guaranteed. The court may also require security for unlawful arrest. Vessel maintenance is generally for the owner, but may turn out differently in practice.

How do you effect a release of the vessel?

The shipowner may post alternative security with the court or challenge the lawfulness or the continuance of the arrest. The arresting party may withdraw the arrest by notice to the court. The arrest expires after one year.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

No.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

With certain exceptions, other ships directly owned by the debtor for the claim can be arrested. Ships under a different ownership may not be arrested, unless the claimant succeeds in piercing the corporate veil.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

The court may require such security for possible damages due to wrongful arrest or for port dues. The form is to be a bank deposit in or guarantee issued by a Norwegian bank. The amount is decided by the court.

What claims give rise to maritime liens in your country?

As per the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages 1967.

How soon must the arresting party start proceedings on merits after the arrest?

A date may be stipulated by the court, failing which the arrest expires after one year. A subsequent enforcement lien will replace the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes, if the claim ultimately fails, there is strict liability for wrongful arrest.

Bad faith or negligence with regard to an asserted ground for arrest may also incur liability.

Panama

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Panama has not ratified any international convention regarding the arrest of ships. The arrest of vessels is governed by Law No. 8, 1982 amended by Law No. 12, 2009 (Code of Maritime Procedure) and Law No. 56, 2008 (Maritime Commerce). Arrest based on foreign laws is allowed.

For what types of claim can a ship be arrested?

A party can file an action in personam and request the arrest of a vessel or asset belonging to the defendant. An action in rem can be commenced when the applicable substantive law establishes that the arresting party has a maritime lien or a statutory right in rem against the vessel.

How quickly can an arrest be effected and what, in summary, is the procedure?

It is simple to arrest a vessel in Panama. The arresting party must file a complaint and arrest petition with prima facie evidence showing there are grounds for the arrest. The judge will analyse the complaint and if he or she considers there is enough prima facie evidence, will admit it and issue an arrest order. Courts are available at all hours and throughout the week for arrests or release of vessels.

What are the associated costs and expenses of a ship arrest?

Along with the complaint and arrest petition, it is necessary to submit initial costs of arrest (US$3,500). These consist of a US$1,000 bond to cover possible damages arising from a wrongful arrest (reimbursed upon finalisation of the case) and US$2,500 to cover initial arrest expenses. The balance of the expenses is returned upon lifting of the arrest and after deducting the marshal’s transportation, launch service, etc. If the arrest becomes prolonged, the marshal may request additional funds.

How do you effect a release of the vessel?

An arrest can be lifted through any of the following types of security:

• cash or certified check;

• a surety bond from an insurance company doing business in Panama;

• a bank guarantee from a bank doing business in Panama; or

• any other security agreed between the parties, such as letters of undertaking issued by P&I clubs.

The amount of the bond is the sum of the amount claimed, arrest expenses, interest for three years and attorney’s fees set provisionally by the court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, provided that a substantive action (proceedings) on the merits is commenced. You cannot arrest solely to obtain security, even though you can petition the court to stay proceedings in favour of an agreed forum or arbitral tribunal once the arrest has been executed.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

No, as the asset does not belong to the defendant.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No, but bunkers or other assets belonging to the defendant (time charter) can be arrested.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Under Panamanian substantive law, provided that a claim is brought in personam, against a common owner of both vessels involved, yes.

Under Panama procedural law, it would be possible to arrest a sister ship flowing from actions in rem if the applicable substantive law allows sister-ship arrests.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

If the arrest is for purposes of founding jurisdiction or if it is an action in rem, the arresting party only need to post US$1,000 as counter-security. If the court already has jurisdiction over the defendant in an action in personam, the arresting party must post counter-security equal to between 20 per cent and 30 per cent of the claim.

What claims give rise to maritime liens in your country?

• Judicial and arrest expenses incurred in benefit of maritime claimants;

• expenses, salaries and compensation for assistance or salvage rendered during the last voyage;

• crew wages for the last voyage;

• naval mortgage;

• registration fees and taxes;

• wages of stevedores or port workers for services rendered in connection with loading or unloading operations done during the vessel’s last arrival;

• compensation for tort claims;

• general average;

• supplies or necessities;

• bottomry and insurance premiums for the last six months;

• expenses in connection with pilot or watch keeping of the vessel, its maintenance or custody after the last voyage and its entry into port;

• compensation to shippers or passengers for non-delivery of cargo or damage to the same during the last voyage; and

• unpaid purchase price of the vessel’s last acquisition and interests for the past two years.

How soon must the arresting party start proceedings on merits after the arrest?

It has to be done simultaneously with the application for the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Arrest of a vessel can be challenged if it was executed against a vessel not belonging to the defendant; if the maritime lien is extinguished or non-existent under applicable law; or if there is a written agreement between the parties not to arrest the vessel.

Poland

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Poland is a party to the International Convention Relating to the Arrest of Sea-Going Ships, signed in Brussels on 10 May 1952 (acceded to the Convention in 1976).

For what types of claim can a ship be arrested?

Vessels flying flags of states parties to the Convention can only be arrested in Poland under maritime claims that fall within the scope the Convention. Other vessels can be arrested in respect of maritime claims and any other claims.

How quickly can an arrest be effected and what, in summary, is the procedure?

To arrest a ship it is necessary to obtain a court order through the security of claims procedure. In Polish law, a petition for security shall be heard immediately, and in no case later than one week from the day on which the petition is filed with the court. After the court’s decision relating to ship arrest, the creditor may immediately refer the request to the enforcement officer.

What are the associated costs and expenses of a ship arrest?

Besides the costs of the security of claims procedure, there are also likely to be costs associated with the maintenance of the ship.

How do you effect a release of the vessel?

The arrested party may, at any time, request to set aside or vary a non-appealable decision if the reason to provide ship arrest changes or ceases to exist. If the arrested party deposits the amount of security requested by the arrested party in a petition for security into the court’s bank account, the security shall be cancelled.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

There is no obligation to pursue a claim on its merits in Polish courts. It is possible to pursue court proceedings in another jurisdiction. Lack of domestic jurisdiction for a claim does not preclude the recognition of an application for ship arrest.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

The court may make the enforcement of a ship arrest conditional on the arresting party providing bail to secure the claims arising from the enforcement of ship arrest. The arrested party’s claims shall be satisfied from this bail after settlement of the costs of enforcement but before settlement of other amounts due. The court may require a bail ex officio as well as at the request of the arrested party. The court should order the bail if there is a real danger that the arrested party may be exposed to the potential damage suffered by ship arrest and there are serious doubts as to the possibility of obtaining compensation from the arresting party due to its financial situation. The decision of the court regarding bail (as well as its amount) shall also depend on the credibility of the claim. However, bail in connection with ship arrest is not a frequent occurrence.

What claims give rise to maritime liens in your country?

There are five categories of claims that are secured by maritime lien: (i) court costs owed to the state treasury; (ii) claims arising out of labour contracts with the master, other members of the crew and persons engaged in the service of the vessel; (iii) remuneration for the salvage of the ship and participation in the general average; (iv) indemnity for the death of, or personal injuries to, members of the crew; and (v) some contracts conducted by the master in the name and on behalf of the shipowner.

How soon must the arresting party start proceedings on merits after the arrest?

When granting security (including the arrest) prior to the commencement of proceedings in a given case, the court shall determine a time limit within which an initial pleading should be filed, failing which the security shall be cancelled. Such time limit must not exceed two weeks.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

A correct application for ship arrest must show the legal interest in the security and that the claim is probable. The arrested party is entitled to claim from the arresting party redress of damages caused by the enforcement of arrest if: the arresting party did not file the first pleading within a determined time limit or withdrew a complaint or petition; if its complaint or petition was returned or rejected; if an action or petition was dismissed, or proceedings were terminated; in the case of cancellation of security, if it was granted before the commencement of proceedings; and if the arresting party did not pursue the entire claim or pursued a claim other than the claim which was secured.

Russia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Russia is a signatory to the Arrest Convention 1952. At the same time, Russia’s internal law – the Merchant Shipping Code of the Russian Federation – incorporates certain novelties introduced by the International Convention on the Arrest of Ships 1999.

For what types of claim can a ship be arrested?

Maritime claims.

How quickly can an arrest be effected and what, in summary, is the procedure?

One to two days; the state arbitration court issues an arrest order, which should be enforces by the bailiffs.

What are the associated costs and expenses of a ship arrest?

The cost of counter-security and (in case of the provisional security arrest) the state duty amounting to 2,000 roubles.

How do you effect a release of the vessel?

By means of changing the form of security or by means of a motion substantiating that the arrest is unnecessary, unlawful, disproportionate, etc.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, provided that the bareboat charterer was liable under the claim both at the time when it arose and at the time the arrest was claimed.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Yes, following the provisions of the Arrest Convention 1952. However, the judicial practice on the issue of the legal connection between the vessel and the party liable under the maritime claim that may give rise to an arrest of the vessel is incoherent.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

An associated ship or ships may be arrested if, at the moment of the beginning of the arrest procedure, the associated ships are in the ownership of the person who is liable for the maritime claim and who was, when the claim arose, the owner of the ship in respect of which the maritime claim arose, or the bareboat charterer, time charterer or operator of that ship. This follows from the provisions of the Arrest Convention 1952. However, the judicial practice on the issue of the legal connection between the vessel and the party liable under the maritime claim that may give rise to an arrest of the vessel is incoherent.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

The counter-security may be required in the form of a cash deposit, bank guarantee or third-party guarantee. In the case of the provisional security arrest the amount of counter-security shall be equal to the amount of the claim. If the arrest is made within the scope of litigation (arbitration), the amount of counter-security is at the discretion of the court, but it cannot be less than 50 per cent of the amount of the claim.

What claims give rise to maritime liens in your country?

• Wages of the crew, including social security and repatriation expenses;

• compensation of personal injury connected with exploitation of the vessel;

• salvage remuneration;

• port and channel duties, pilotage payments; and

• compensation of the third-party damage other than the damage to the cargo and passengers’ luggage carried on board the vessel.

How soon must the arresting party start proceedings on merits after the arrest?

Not later than within 15 days.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Russian law, inter alia, operates by the notions of ‘unlawful’ and ‘unjustified’ arrest. There is no definite test provided by the law for either unlawful or unjustified arrest. Generally, it can be said that an arrest would be considered unjustified if it is later found to be unlawful by an act of a court (for instance, by way of appeal). Arrest may also be found wrongful in the case of the ultimate failure of the claim. If an arrest is effected in bad faith, for example, with the mere intention to disrupt the activity of the ship for the purpose of causing cash-flow problems for the shipowner, such arrest would be unlawful.

Singapore

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

• Possession or ownership of a ship;

• employment and earnings of a ship, in the case of co-owners;

• mortgage or charge on a ship;

• forfeiture or condemnation of a ship as ‘prize’;

• damage caused or received by a ship;

• loss of life or injury occurring in the course of the navigation or management of a ship;

• loss of or damage to goods carried in a ship;

• agreement for the carriage of goods, or for the hire of a ship;

• salvage services;

• towage;

• pilotage;

• goods or materials supplied for the ship’s operation or maintenance;

• construction or repair of a ship, or dock charges;

• master and crew wages;

• master’s or agent’s disbursements on account of a ship;

• general average act;

• claim arising out of a bottomry;

• claim in respect of a liability under the ‘oil pollution’ legislation; and

• limitation of liability.

How quickly can an arrest be effected and what, in summary, is the procedure?

Arrest can be effected almost immediately upon ascertaining the presence of the vessel in port limits and filing of the requisite court documents. The procedure is:

• filing and submission of six requisite documents, including the writ in rem;

• search to ensure absence of caveat against arrest;

• appearing before the assistant registrar;

• making the requisite payments (eg, deposit of S$5,000 with the sheriff); and

• the warrant of arrest may be executed by a court clerk or authorised representative of the plaintiff’s solicitors.

What are the associated costs and expenses of a ship arrest?

• Stamp fee at S$500 or S$1,000 (issue of the writ);

• stamp fee at S$250 or S$500 (request for warrant of arrest);

• stamp fees at S$250 or S$500 (for lodging the request with the sheriff);

• initial deposit to the sheriff of S$5,000. As and when this deposit runs low, it must be replenished;

• a few hundred dollars (miscellaneous expenses for court document filing fees); and

• miscellaneous expenses by way of disbursements of varying amounts, to pay for supply of fresh water, bunkers, port dues, victuals for crew, security guards and port risk insurance premium.

How do you effect a release of the vessel?

After ascertaining that there is no caveat against release, by filing and lodging with the sheriff a request for the issue of the release. The costs for releasing include stamp fees (S$250 or S$500) and the Sheriff’s commission (S$500 plus a rate of S$0.10 per NRT).

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes. See question 29 of the Singapore chapter.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

The position is governed by the High Court (Admiralty Jurisdiction) Act, section 4(4). The claimant could have a right of arresting the particular vessel if, and only if, the bareboat or demise charterer, as ‘the relevant person’ liable in personam and as ‘the relevant person’ in the second limb of the test in section 4(4), is a bareboat charterer of that ship at the time when the action in rem is brought.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Sister-ship arrest is possible if the criteria set by section 4(4) of the Act are satisfied. A ship owned by a wholly owned subsidiary company is not ‘beneficially owned’ by the defendant holding company and thus is not amenable to an in rem action and arrest. Nor does the right to arrest extend to a ship owned by a sister or ‘associated’ company of the company owning the particular ship.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

No.

What claims give rise to maritime liens in your country?

Bottomry, salvage, master’s and crew’s wages, and damage done by a ship.

How soon must the arresting party start proceedings on merits after the arrest?

As soon as security is furnished and acknowledgement (appearance) is entered by the shipowners, the proceedings will take their normal course and the trial on the merits may take place, usually in approximately seven months in the absence of interlocutory applications.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. It depends on whether the arresting party is guilty of bad faith or gross negligence, which implies malice.

The shipowner may apply to set aside the arrest and all proceedings and is entitled to recover the loss suffered by the wrongful detention of the vessel.

South Africa

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

South Africa is not a signatory to either of these Conventions.

For what types of claim can a ship be arrested?

Those covered under the International Convention on the Arrest of Ships, 1999 as well as claims for, arising out of or relating to:

• any container and any agreement relating to any container;

• the rendering, by means of any aircraft, ship or other means, of services in connection with the carrying of persons or goods to or from a ship, or the provision of medical or other services to or in respect of the persons on being taken to or from a ship;

• the forfeiture of any ship or any goods carried therein or the restoration of any ship or any such goods forfeited;

• the limitation of liability of the owner of a ship or of any other person entitled to any similar limitation of liability;

• the distribution of a fund or any portion of a fund held or to be held by, or in accordance with the directions of, any court in the exercise of its admiralty jurisdiction, or any officer of any court exercising such jurisdiction;

• any judgment or arbitration award relating to a maritime claim, whether given or made in the Republic or elsewhere;

• wrongful or malicious proceedings

• piracy, sabotage or terrorism; and

• any other matter which by virtue of its nature or subject matter is a marine or maritime matter, the meaning of the expression marine or maritime matter not being limited by reason of the matters set forth in the preceding paragraphs.

How quickly can an arrest be effected and what, in summary, is the procedure?

An in rem arrest of a vessel at a berth can be effected in a matter of an hour or two by issuing papers before the registrar of the court and having them served by the sheriff.

An in personam attachment or security arrest of a vessel at a berth will take about a day to process in that an application has to be made to a judge on affidavit for an order and then served.

What are the associated costs and expenses of a ship arrest?

An in rem arrest will generally cost in the region of US$3,000 to US$5,000 unless the arrest or release or both have to be effected at the anchorage in which event the cost will increase by the cost of a helicopter flight or a launch, which is roughly US$3,000 per attendance.

An in personam attachment or security arrest will generally cost in the region of US$8,000 to US$12,000 depending on the complexity of the claim plus the costs of helicopter or launch if attachment/arrest or release has to be effected at an anchorage.

How do you effect a release of the vessel?

By having the sheriff serve it. Generally speaking provision is made to serve it on the agent, vessel’s lawyers or P&I representatives rather than incurring the expense of service on the vessel.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, so long as the bareboat charter is still extant.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Generally no.

What claims give rise to maritime liens in your country?

Seamen’s and master’s wages; salvage; damage received by or done by a ship; and bottomry and respondentia bonds.

How soon must the arresting party start proceedings on merits after the arrest?

The arrest in rem commences proceedings on the merits. The attachment for in personam proceedings stipulates no time period. No time is stipulated by which proceedings must commence for which security has been obtained by way of a security arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. Arresting or attaching ‘without reasonable and probable cause’ renders the arresting party liable in damages. The arrest is wrongful if the arresting party did not have such information as would lead a reasonable person in its position to conclude that it was entitled to arrest or if the arresting party did not in fact believe that it was entitled to arrest.

Spain

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1999.

For what types of claim can a ship be arrested?

Those listed in article 1 of the Arrest Convention.

How quickly can an arrest be effected and what, in summary, is the procedure?

Generally, the arrest warrant can be obtained that same morning. The arrest warrant is not served until the counter-security is lodged at court.

The procedure is as follows: the claimant files a writ of arrest and the court grants the arrest subject to the provision of counter-security and indicates the sum required to be lodged at court. Once the counter-security is in place, the court will send the arrest warrant to the Port Authorities to arrest and detain the vessel.

What are the associated costs and expenses of a ship arrest?

The fees are calculated in accordance with the Law Society Fee Guidelines relevant for the local jurisdiction. Those fees are calculated in accordance with the claimed amount.

A procurator must also be instructed and they charge separately.

How do you effect a release of the vessel?

By application to the court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, pursuant to article 3.1.b) of the 1999 Arrest Convention.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Only when the maritime claim also qualifies as a maritime lien as a matter of Spanish law.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Yes, pursuant to article 3.2 of the 1999 Arrest Convention.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes. Cash or Spanish bank guarantee or insurance bond.

What claims give rise to maritime liens in your country?

Those listed in article 4 of the 1993 International Convention on Maritime Liens and Mortgages and also those of the Spanish Commercial Code article 580.

How soon must the arresting party start proceedings on merits after the arrest?

Within 20 days of the arrest order.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. An arrest is wrongful arrest when it is not in strict compliance with the 1999 Arrest Convention; or is not ratified by proof of proceedings on the merits having been commenced in the competent jurisdiction within 20 days of the arrest order; or the writ of claim in the main action fails. The shipowner can seek damages to the extent that those damages can be proven.

Switzerland

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Switzerland is a signatory to the Arrest Convention 1952, but not the Arrest Convention 1999.

For what types of claim can a ship be arrested?

A ship may be arrested for any type of claim.

How quickly can an arrest be effected and what, in summary, is the procedure?

Normally, within one business day for granting the arrest and one business day for the execution.

The request to the court can be made orally or in writing. The creditor must evidence prima facie that he or she has a claim, a ground for arrest exists and there are assets at hand belonging to the debtor.

What are the associated costs and expenses of a ship arrest?

Granting of the arrest: between 120 and 2,000 Swiss francs.

Execution of the arrest: at least 400 Swiss francs.

How do you effect a release of the vessel?

By providing sufficient security. Security can be given by way of deposit, security bond or other security of equal value.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, if the bareboat charterer is not mentioned in the Swiss Ship Register.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Only if the same person or entity owns it.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

The judge may order the creditor to furnish security by the way of deposit, security bond or other security of equal value. The amount is fixed by the judge based on the probability of the existence of the claim and the possible damages of a wrongful arrest.

What claims give rise to maritime liens in your country?

The liens set forth in the International Convention of 10 April 1926, for the unification of individual rules relating to liens and mortgages.

How soon must the arresting party start proceedings on merits after the arrest?

Within 10 days.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Arrest is considered to be wrongful if no claim existed or if the grounds for arrest were not given.

The creditor is liable for damage suffered by the debtor or third parties as a result of an wrongful arrest.

Thailand

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

Claims related to the vessel (see question 22 of the Thailand chapter).

How quickly can an arrest be effected and what, in summary, is the procedure?

One day. The court will hold a hearing to consider the arrest application, including witness testimony and evidence and issue an arrest warrant on an ex parte basis. Then the applicant can contact and accompany the Legal Execution Department/Pilot Division to enforce the vessel arrest.

What are the associated costs and expenses of a ship arrest?

Court fees, legal execution officer fees and any disbursement to facilitate the legal execution officer to serve the warrant of arrest at the arresting vessel.

How do you effect a release of the vessel?

The release application can be made by the shipowner, the party with control of the vessel, its representatives, or an interested person. Once the court grants the application, the applicant can bring the release warrant to the Legal Execution Department/Pilot Division to effect release.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

The Vessel Arrest Act does not directly address this. It stipulates only that the claim on its merits must be commenced in a Thai court within 30 days from the day the warrant of vessel arrest is posted on the vessel otherwise the court can issue a release order.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Yes.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

It is possible to arrest the sister vessel but not an associated vessel.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes. The court holds the discretion to stipulate the amount of security and the arresting party must provide the security accordingly. There is no standard amount of security but the court will assess the amount of security with reference to the likely amount of compensation due to the vessel arrest.

What claims give rise to maritime liens in your country?

According to the Thai Carriage of Goods by Sea Act, 1991, the carrier has the right to retain the cargo for freight and ancillary charges due.

Thai CCC provides the right of retention for the possessor of a property. If the possessor holds the obligation in favour of that property, he or she has the right of retention on that property until obtaining the payment (when due) from the counterparty. Taking this into account, the shipbuilder or the vessel repairer can have the right to retain the vessel until the payment has been made.

How soon must the arresting party start proceedings on merits after the arrest?

The claim on its merits must be commenced within 30 days from the day the warrant of ship arrest is posted on the vessel otherwise the court can issue the release order.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. The successful claimant must present to the court that the applicant for the vessel arrest acted in bad faith to exercise his or her right to apply for the vessel arrest. The assessment of compensation is under the courts’ discretion, and is determined according to the circumstances and the gravity of the tort.

Tunisia

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

Only for the maritime claims listed in question 23 of the Tunisia chapter.

How quickly can an arrest be effected and what, in summary, is the procedure?

An arrest order can be obtained within around one hour. The court bailiff executes the order within approximately 30 minutes. A ship may be arrested pursuant to an ex parte request for an order of conservatory arrest for any claim, as long as the claim appears to be well founded in theory.

What are the associated costs and expenses of a ship arrest?

The associated costs and expenses of a ship arrest depend on the location of the vessel, translation fees, etc.

How do you effect a release of the vessel?

If the parties reach an amicable settlement, the release of the vessel is effected by an order from the lawyer to the court bailiff. If not, the court will order the release of the vessel.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, if the claim is related to that vessel and refers to a maritime claim (related to that vessel).

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

A bareboat (demise) chartered vessel can be arrested only in respect of a maritime claim related to that vessel.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

A time-chartered vessel can be arrested only in respect of a maritime claim related to that vessel.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

In the case of a charter vessel whose nautical management has been replaced and where the charterer alone is responsible for a maritime claim relating to that ship, the claimant may arrest such ship or any other belonging to the charterer. No other ship of the shipowner can be arrested under such a claim.

These provisions also apply to all cases where a person other than the owner holds a maritime claim.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

No counter-security is required.

What claims give rise to maritime liens in your country?

Those listed in question 35 of the Tunisia chapter.

How soon must the arresting party start proceedings on merits after the arrest?

Within 30 days.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Wrongful arrest would lie in the abuse of the right to arrest a vessel; an absence of legitimacy, malice or the inappropriateness of the measure may constitute an abuse. In the event of such an abuse, the judge may award damages to the arrestee.

Turkey

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

A ship may only be arrested only for maritime claims (pursuant to article 1352 of TCC, which contains the same provision as article 1 of the International Convention on the Arrest of Ships, 1999).

How quickly can an arrest be effected and what, in summary, is the procedure?

The requesting party shall apply to the court by submitting the petition of arrest and all supporting documents duly translated by a sworn translator. Upon lodging the counter security, the court shall consider the request and normally render its decision within one to three days. In the event of a favourable arrest decision, the decision shall be submitted to the enforcement office that is the authorised body to implement the decision by sending relevant writs to the harbour masters and coastguards. The requesting party shall submit the decision of arrest to the enforcement office within three working days, otherwise the arrest shall be regarded as automatically lifted.

What are the associated costs and expenses of a ship arrest?

• Security amounting to 10,000 SDR;

• court fees of fixed quantum; and

• translation expenses, as the supporting evidence should be certified by a sworn translator.

How do you effect a release of the vessel?

The arrested party may request that the court through which the arrest is ordered release the vessel, provided that he or she lodges a counter security corresponding to the claimed amount plus interest and costs. In the event that the principle proceeding is initiated before the enforcement office, such request shall be submitted to the enforcement courts.

Release of the vessel is also possible if the objection to the arrest order is accepted by the court.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes, pursuant to article 1357 of the TCC, arrest can be obtained in respect of foreign court and/or arbitration proceedings.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

If the claim grants maritime lien right or if the dispute relates to the ownership or possession of the vessel, a bareboat (demise) chartered vessel can be arrested.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

If the claim grants maritime lien right or if the dispute relates to the ownership or possession of the vessel, a time-chartered vessel can be arrested.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

The competent court may arrest another ship or ships which, when the arrest is effected, is or are owned by the shipowner, bareboat charterer, time charterer or voyage charterer who is liable for the maritime claim, except for claims with respect to ownership or possession of a ship. Arrest of associated ships is not possible.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes, the arresting party has to provide a fixed quantum security corresponding to 10,000 SDR. The security shall be either in cash or in a definite letter of guarantee unlimited in time issued by a Turkish bank.

What claims give rise to maritime liens in your country?

Under article 1320 of the TCC, the following constitute maritime lien rights:

• claims for wages and other sums due to the master, officers and other members of the vessel’s complement 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, canal, and other waterway dues and pilotage dues;

• claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers’ effects carried on the vessel; and

• general average contribution share.

How soon must the arresting party start proceedings on merits after the arrest?

The arresting party shall start the proceeding on merits within one month after the arrest is implemented. Failure to comply with this rule shall automatically invalidate the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

If the claim for which the arrest was granted is found not to exist or is in any other way unjustified, the arrested party shall be entitled to claim damages.

Ukraine

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

The Arrest Convention 1952.

For what types of claim can a ship be arrested?

A vessel can be arrested whether claims are maritime or not, in principle.

Nevertheless, according to the maritime law of Ukraine a vessel may be arrested only under at least one of the following conditions:

• a claim that falls under the category of privileged claims, particularly:

• claims arising out of labour relations;

• claims for reimbursing damage inflicted by injury, other impairments of health or death;

• claims regarding salvage and payment of general average contribution;

• claims based upon the vessel’s registered mortgage; and

• claims referring to the rights of vessel ownership or possession;

• a claim not indicated above and referring to the owner of the vessel at the moment of origination of the claim, who is responsible for this claim at the moment of commencing a procedure connected with vessel’s arrest; or

• the charterer of the vessel under bareboat charter is liable for the said claim and is the vessel’s bareboat charterer or her owner at the moment of commencing a procedure connected with vessel’s arrest.

How quickly can an arrest be effected and what, in summary, is the procedure?

Usually within three working days.

What are the associated costs and expenses of a ship arrest?

Costs and expenses of a ship arrest vary depending on the merits of the case and sometimes may be significant.

How do you effect a release of the vessel?

The arrested vessel may be released by lodging security in an acceptable form and of sufficient size.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

It is possible in some types of cases.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes, under certain conditions.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

Yes, under certain conditions.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

An associated vessel can be arrested if, at the moment of initiating the arrest procedure, it was the property of a person liable for the maritime claim and who was the charterer of her on a bareboat, time or voyage charter basis. An associated vessel can be arrested if, at the moment of initiating the arrest procedure, it was the property of a person liable for the maritime claim and who was the proprietor or owner of the vessel to which said claim has arisen.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Ukrainian courts may require counter-security to arrest a ship, but they are not obliged to do so. Thus, the court or commercial court may request the person who had placed a claim to provide counter-security on that claim, given the vessel’s arrest or its prolongation. Such practice is rare in Ukraine because it supposedly complicates access to justice.

What claims give rise to maritime liens in your country?

Article 4 of the International Convention on Maritime Liens and Mortgages 1993 provides that the following claims against the owner, demise charterer, manager or operator of the vessel shall be secured by a maritime lien on the vessel:

• claims for wages and other sums due to the members of the vessel’s complement 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 in direct connection with the operation of the vessel;

• claims for reward for the salvage of the vessel;

• claims for waterway and pilotage dues; and

• claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers’ effects carried on the vessel.

How soon must the arresting party start proceedings on merits after the arrest?

The claimants must commence legal action, as a rule, before starting arrest procedures. There are, however, preliminary measures as a legal institution that make it possible to commence legal action on merits within five days after the ruling on the arrest of the vessel has been issued. When the statement of claim is filed, preliminary measures will act as security measures.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

A person who arrests the ship is liable for its wrongful arrest, that is, the person upon whose request the vessel has been arrested is liable for any losses inflicted on the vessel’s proprietor, owner or charterer as a result of wrongful arrest of the vessel or providing excessive security to a maritime claim.

United States

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

Neither.

For what types of claim can a ship be arrested?

For maritime lien claims and statutory claims pursuant to Rule C of the Supplemental Rules. Ships and other property can also be attached pursuant to Rule B.

How quickly can an arrest be effected and what, in summary, is the procedure?

With good counsel in the arresting port, an arrest can be effected within a matter of hours. A complaint, together with a warrant of maritime arrest and other papers, must be filed first with the federal court. A judge reviews the papers and issues the warrant of maritime arrest, which is then served by the United States marshal on the vessel.

What are the associated costs and expenses of a ship arrest?

Legal fees, the upfront costs of the United States marshal for seizing the vessel and initially retaining it (estimated generally to be under $50,000), and the costs of a substitute custodian to maintain and protect the vessel while the matter is pending.

How do you effect a release of the vessel?

A vessel or other property of the defendant may be released from arrest by the posting of a bond or other suitable security.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

A vessel may be attached pursuant to Rule B in aid of foreign proceedings.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

A claimant with a valid maritime lien claim may arrest the vessel unless it has actual knowledge of a no lien claim in the charter.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

A claimant with a valid maritime lien claim may arrest the vessel unless it has actual knowledge of a no lien claim in the charter.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

There is no associated ship arrest regime in the United States. However, any property of a defendant may be attached pursuant to Rule B for a maritime claim, provided the defendant is not found within the federal judicial district for service of process or jurisdictional purposes.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Counter-security will not be required initially in connection with a ship arrest. However, if a counter-claim is raised by the defendant, the court will order that counter-security be posted.

What claims give rise to maritime liens in your country?

• Tort liens;

• crew wages;

• liens for necessaries;

• repair liens;

• salvage and general average liens;

• preferred mortgage liens;

• maritime contract liens; and

• others.

How soon must the arresting party start proceedings on merits after the arrest?

An action on the merits must be commenced prior to the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. If an arrest is commenced in bad faith, with malice or gross negligence, a finding of wrongful arrest may be issued. Damages, including attorneys’ fees, may be awarded.

Vietnam

Is your country a signatory to (a) the Arrest Convention 1952, (b) the Arrest Convention 1999 or (c) neither?

No.

For what types of claim can a ship be arrested?

In conformity with article 1.1 of the Geneva Convention 1992, there are 22 groups of maritime claim allowing a ship to be arrested. See question 22 of the Vietnam chapter.

How quickly can an arrest be effected and what, in summary, is the procedure?

It will depend on the volume of supporting documents as well as the evidence to be submitted to the court. In urgent cases, local judges may issue an arrest order about two or three hours after an arrest application and supporting documents are filed.

Normally, it may take between two days and two weeks for a judge to examine the application and supporting documents before responding to the arresting party as to whether the arrest application is acceptable or not.

In brief, the arresting party shall follow the following main steps mentioned below in order to arrest a ship and secure a maritime claim (in rem action):

• application or request filed with the competent court;

• acceptance of the application and notice of the counter-security and court’s fee for the arrest;

• provision of a security and deposit of court fees; and

• arrest order is issued.

What are the associated costs and expenses of a ship arrest?

Some fees and costs in an arrest case are mentioned below:

• court fees;

• legal fees;

• bank charges for the issuance of a bank guarantee as a counter-security for the arrest request; and

• translation and notarisation costs, as all documents submitted to courts in Vietnam must be duly notarised and translated into Vietnamese.

How do you effect a release of the vessel?

• Negotiating with the arresting party to settle small claims in order to withdraw the arrest order;

• providing the court with a sufficient security in order to obtain a release order from the court;

• challenging the arrest order in order to put pressure on the arresting party and to try to settle the case at the negotiating table or obtain a release order; and

• any other actions depending on the arresting party’s actions.

Can a vessel be arrested to obtain security in respect of foreign court and/or arbitration proceedings?

Yes.

Can a bareboat (demise) chartered vessel be arrested in respect of a claim against the bareboat charterer?

Yes. A bareboat chartered vessel can be arrested under in rem actions.

Can a time-chartered vessel be arrested in respect of a claim against a time charterer?

No.

Is it possible to arrest a sister ship or an associated ship of the ship in connection with which the claim arose?

Arrest of a sister ship is allowable, but arrest of an associated ship is not permitted in Vietnamese waters.

Will counter-security be required before an arrest order is granted and, if so, in what form and amount?

Yes. Counter-security is required before any arrest order can be granted. Some acceptable forms of security include bank guarantees, frozen accounts or letters of undertaking from a local insurer. The quantum of the security is often based on the charter rate and the length of time the ship is arrested.

What claims give rise to maritime liens in your country?

Five maritime claims that are similar to those set forth in article 4 of the Convention on Maritime Liens and Mortgages 1993. See question 23 of the Vietnam chapter.

How soon must the arresting party start proceedings on merits after the arrest?

Normally there is no requirement on how soon the arresting party must start proceedings on the merits after the arrest.

Does your country recognise a concept of wrongful arrest and, if so, what constitutes wrongful arrest and what are the penalties/remedies?

Yes. A defence against wrongful arrest may be based on any of the following grounds:

• whether the claim is defined as a maritime claim under the law of Vietnam;

• whether the arresting party has the title to sue;

• whether the shipowner or bareboat charterer is liable for the claim;

• whether a sufficient counter-security has been promptly provided;

• whether the local court has jurisdiction to issue the arrest order; and

• other legal grounds.