How To Arrest A Ship

Transcription

1 SHIP ARREST IN ASIA AND U.S.A. A brief overview Ronald Sum, Partner Blank Rome Solicitors 15 October 2011

2 Blank Rome Maritime Practice Blank Rome s notable combinations with the maritime practices of Dyer Ellis & Joseph in 2003 and Healy & Baillie LLP in 2006 gave the Firm a solid foundation as the largest maritime practice in the United States. Our maritime attorneys are based in New York, Washington, DC, Philadelphia, Hong Kong and Shanghai, and regularly handle complex, multi-jurisdictional, and international maritime and admiralty matters for publicly traded and privatelyowned companies throughout the world, including: ship owners operators and charterers cargo owners ship managers Shipyards logistics companies Liability insurers waterfront facilities P&I clubs marine insurers shippers financial institutions private equity investors 1

3 Objectives of Arrest Checklist Introduction Procedure and requirement : Hong Kong & Singapore PRC Japan Australia U.S.A. 2

4 Objectives of Arrest 打官司, 唔怕你惡, 只怕你窮 Found jurisdiction Get security Act quickly Catch me if you can 3

5 Check-list Power of Attorney usual requirements Notarised & apostilled & legalised Writs, Affidavits etc may need to be translated Counter-security (may be substantial) Complaint / details of the claim (short form) Costs of arrest (relatively inexpensive) Forum shopping Sister ship arrest/associated ship arrest (depending on jurisdiction)? 4

6 Arrest in Hong Kong and Singapore Similar procedures in both sister ship arrest permitted in both Claim must fall within the definition of an admiralty claim. Two categories of admiralty claim: Maritime liens; and Statutory claims 5

7 Arrest in Hong Kong & Singapore Maritime liens Attach to the ship Subsist whether or not the vessel changes ownership Damage done by a ship Salvage Crew Wages Disbursements Bottomry 6

8 Arrest in Hong Kong & Singapore Statutory liens give rise to a right of action in Rem. It will extinguish if proceedings have not been brought before change of ownership Possession or ownership claims; A mortgage on a ship; Damage done by or to a ship; Loss of life or personal injury due to a defect; Loss of or damage to goods; Claims associated with use or hire; Salvage, towage or pilotage; Goods or materials supplied to a ship; Construction or repair of a ship; Crew wages; General Average claims; and Bottomry and Collisions. 7

9 Arrest in Hong Kong & Singapore Procedure and Documentation Writ of Summons for an action in Rem ( a thing ) Precipae for a warrant of Arrest Affidavit setting out the grounds of the application for an Arrest (important and takes longest time) Undertaking to indemnify the Bailiff for any costs and/or expenditure that may incur from maintaining the Arrest. 8

10 Arrest in Hong Kong & Singapore Affidavit sets out the legal requirements for arrest. Mandatory information: Nature of the claim If the claim arises in connection with a ship, the name of the ship The party liable in personam ( in person ) The owner or charterer or in possession of or in control of the ship in connection with which the claim arose For sister ship arrest: details as to the beneficial owner of the sistership 9

11 Arrest in Hong Kong & Singapore Ship / Shipowner must provide security: Cash Bail Bond P&I Club LOU Bank Guarantee Insurance Company Guarantee No requirement for counter-security!! 10

12 Arrest in PRC PRC: not a signatory to the 1952 Brussels Arrest Convention. Arrest of ship is governed by the domestic law, mainly the Special Maritime Procedure Law of the People s Republic of China, 2000 ( SMPL ) ( 中華人民共和國海事訴訟特別程序法 ), which is generally in line with the provisions of the 1999 Convention on Arrest of Ships NO CONCEPT of an ACTION IN REM Arrest of a Vessel is regarded as a procedure for property preservation prior to commencement of proceedings 11

13 Arrest in PRC A ship can be arrested irrespectively of her flag. There are 22 types of claims for which a ship may be arrested specifically provided for in Article 21 of the SMPL, which is similar to the provisions of Article 1 of 1999 Convention on Arrest of Ships. No application can be accepted for the arrest of a ship on account of maritime claims other than the said 22 specific types, except for the enforcement of a judgment, an arbitration award or other legal documents. 12

14 Arrest in PRC Vessel which can be arrested a ship can only be arrested if owner is the debtor of a maritime claim. There are essentially two exceptions: Bareboat Charter Such a ship can be arrested if the bareboat charterer of the ship is liable for the maritime claim and is the bareboat charterer of the ship when the arrest is effected and it is limited to arrest the ship involved in the dispute 13

15 Arrest in PRC Maritime Liens Wages, crew repatriations Loss of life or personal injury Vessel s tonnage dues, pilotage dues, harbour dues and other charges Salvage payments Loss or damage to property resulting from previous acts in the course of the operation of the ship 14

16 Arrest in PRC Sister ships can be arrested Sister ship means any ship (other than the particular ship giving rise to the maritime claim) which is owned by the shipowner, bareboat charterer, time charterer or voyage charterer who is liable for the maritime claim. Arrest of associated ships is generally not allowed. 15

17 Arrest Procedures Arrest in PRC Claimant serves a written application with the Court, accompanied by supporting documentation: Applicant s and respondent's name, addresses and the legal representatives names Nationality Nature of the application Vessel s name, port of registry and location Particular vessel involved in relation to the maritime claim Reason for the application/particulars of the claim Court issues the arrest order within 48 hours of receipt of application (NB: short visit of ships) Judges serve the order 16

18 Arrest in PRC Documentation Application should be original Original supporting documents not required immediately POA is required (unlike HK and SG), which should be notarised and legalised if claimant is foreign company Certificate of identity of legal representative and of the Claimant is required (notarised and legalised) Counter-security normally required: Cash deposit LOG issued by first-class PRC banks LOG issued by first-class PRC insurance companies or recognized PRC guarantee companies or any reputable PRC companies 17

19 Arrest in PRC Release Appropriate security is provided; The relevant party files an application for release; All expenses incurred during the course of the arrest are paid; The agreement of the claimant is obtained; and The bailiff releases the vessel. N.B. The claimant must bring an action or applies for arbitration in accordance with the arbitration agreement within 30 days after the arrest, other wise the maritime court shall release the ship or return the security provided by the respondent. 18

20 Arrest in PRC Wrongful Arrest If the application for the arrest is proven to be wrong, the applicant shall compensate the losses suffered by the owners or any interested persons affected by the arrest. 19

21 Arrest in PRC Arresting in PRC will found jurisdiction for the claim in the PRC Judges can stay proceedings in favour of resolution in an alternative jurisdiction in circumstances where there is an arbitration agreement between the parties BUT this is discretionary. 20

22 Arrest Arrest in Japan Action in personam sister ship Arrest possible Arrest to enforce Maritime lien Examples of Maritime liens: The sale of the vessel Expenses of preservation of vessel Public dues Pilotage and towage dues Salvage remuneration and General Average Claims which have arisen from necessity to continue the voyage Crew claims Claims for construction or ship chandlers 21

23 Documentation required: Arrest in Japan Power of Attorney (notarised & legalised) Certificate of Identity e.g. Copy of company register of the arrestor and debtor required Valuation Prima facie evidence of a claim Counter-security required in certain circumstances All documentation MUST be translated into Japanese (expensive) Cash security to release the vessel In certain circumstances, LOI from Japanese banks, insurance companies & P&I Clubs are acceptable for release 22

24 Arrest in Japan Illegal to arrest the ship once she has completed her preparation for her voyage from the port 23

25 Arrest in Australia Not a signatory to 1952 Arrest Convention Domestic law applies: Admiralty Act 1988 Similar to Hong Kong Jurisdiction can be exercised by Federal or High Courts Possible for maritime claims, general maritime claims, maritime liens Sister ship arrest is possible 24

26 Arrest in Australia Proprietary Maritime Claims: relates to ownership and title and mortgage of the vessel General Maritime Claims statutory claims (similar to Hong Kong and Singapore) Maritime Liens (similar to Hong Kong and Singapore) Salvage Damage done by a ship Wages of mater or member of the crew Master s disbursements 25

27 Arrest in Australia Action in rem ( a thing ) is allowed for: Proprietary maritime claim General maritime claim, the relevant person must be the shipowner: When cause of action arose When proceedings are commenced 26

28 Arrest in Australia Procedure: File a Writ in Rem File an Application for Arrest Warrant File an Affidavit File an Arrest Warrant Pay filing fees Writ is similar in content to Hong Kong Undertaking is required for arrest expenses 27

29 Release procedures: Arrest in Australia Arresting party consents in writing Orders of Court with terms Bail bond, cash, P&I Club LOU is filed in the Court 28

30 Arrest in U.S.A. No International Convention applies to arrest of ships in U.S.A. The Federal Rules of Civil Procedure (F.R.C.P.) s Supplemental Rules for Certain Admiralty and Maritime Claims ( the Supplemental Rules ) govern the procedure for arresting or attaching a vessel in the U.S.A. The Supplemental Rules apply to all admiralty and maritime claims within the meaning of F.R.C.P. 9(h). 29

31 Arrest in U.S.A. Rule B NO MORE!! Rule C of the Supplemental Rules ( Rule C ) is the procedural mechanism used to arrest property (i.e.- a vessel) that is subject to a maritime lien or other U.S.A. statute that creates an in rem cause of action. 30

32 Maritime lien claims include: Arrest in U.S.A. ship repairs ship supplies towage use of dry dock or maritime railway or other necessities to any ship crew wages tort claims arising from a collision cargo damage/loss certain maritime contracts (e.g. breach of charter party) preferred ship mortgages Salvage claims for maritime pollution 31

33 Arrest in U.S.A. A ship can be arrested irrespectively of her flag. A ship can be arrested irrespectively of the debtor, except that it is owned by a government or other foreign sovereign, as per the Foreign Sovereign Immunities Act. Arrest of sister ships/associated ships is not possible, unless you can show an alter-ego relationship or other common ownership of assets. 32

34 Arrest in U.S.A. An arrest order can be obtained within a couple of hours, when filing an emergent motion. Rule C(3)(a)(ii) requires the Clerk to issue the summons and warrant for arrest of the vessel where the Claimant s attorney certifies that exigent circumstances exist that make court review impracticable. The Claimant has the burden of demonstrating at a post-arrest hearing that exigent circumstances existed. Court will issue warrant of arrest Only the U.S. Marshal Service may serve the warrant of arrest 33

35 Documentation Arrest in U.S.A. POA is not required. The documents to be submitted to U.S. Courts vary depending on the type of proceeding commenced, includes but not limited to: - Verified Complaint asserting that the Claimant s underlying claim is an admiralty/maritime claim within the meaning of Rule 9(H) of the F.R.C.P., accompanied by supporting claim documentation - Summons - Agreement of Indemnity, agreeing to hold the Marshal harmless for damages if the arrest is later found to have been wrongful - Form USM-285/U.S. Marshal Service Process Receipt and Return - A bank or certified cheque (for an amount which varies by jurisdiction) as a deposit to cover insurance, guard services, and other costs related to arresting the vessel - Motion for appointment of substitute custodian, with supporting declaration of proposed substitute custodian and proposed order (not mandatory) - reduces the costs that must be deposited with the Marshal 34

36 Documentation Arrest in U.S.A. To commence a Rule C proceeding, the following additional documents are required: - Affidavit containing the grounds for arrest - Motion for Issuance of Warrant for Arrest - Proposed Order for Issuance of Warrant Arrest authorizing Clerk of the Court to issue a Warrant of Arrest providing the U.S. Marshal with authority to arrest the vessel - Motion to Permit Vessel to Continue Cargo Operations and to Shift Berths (not mandatory) requests authorization for the vessel to continue cargo operations during the period of arrest and to move within the district - Proposed Order Allowing Vessel to Shift Between Berths allows the Marshal or substitute custodian to move the vessel without petitioning the Court - Warrant of Arrest - Notice of Arrest accompanies Complaint and Warrant of Arrest when the Marshal physically arrests the vessel 35

37 Arrest in U.S.A. Documentation The Complaint must be verified by the Claimant, but if the Claimant resides outside the district where the arrest application is filed, the Complaint must be verified by the Claimants attorneys. The verification must be notarized. The original documents required by each Court and the documents which may be electronically filed vary by jurisdiction. Most Courts require an original signature on all initiating documents, but require electronic filing of subsequent documents. Other Courts permit a claimant to commence an action by filing the Complaint and all related documents electronically. 36

38 Arrest in U.S.A. Counter-Security U.S. Courts do not require counter-security in order to arrest a ship. However, Rule E(7) provides that when a Defendant who has posted security for damages in an action asserts a counterclaim arising from the same transaction, a Plaintiff must post counter-security in the amount of damages demanded in the counterclaim (unless the Court, for good cause shown, directs otherwise). Rule E(2)(b) allows the Court to require any party to post security, in an amount directed by the Court, to pay all costs and expenses that shall be awarded against the party by any interlocutory order, final judgment, or on appeal. 37

39 Substantive Claim Arrest in U.S.A. Once a vessel has been arrested, U.S. Courts will assume in rem jurisdiction up to the amount of the claim. Accordingly, the Courts will have jurisdiction over the substantive claim, unless a forum selection clause requires that the claim be brought in a foreign jurisdiction. Although there is no set period of time in which a Claimant that has caused a vessel to be arrested must commence substantive proceedings, it will depend largely on the judge assigned to the case. Many judges require that such proceedings be commenced as soon as possible, e.g. within 10 days of the arrest. 38

40 Arrest in U.S.A. Wrongful Arrest An arrest will only be set aside as wrongful in exceptional circumstances, i.e. if the Defendant shows that the claimant acted with bad faith, malice or gross negligence 39

41 Security is important Summary No one wants paper judgment Sounds simple Legally complicated especially in sister / associated vessels situation Issue with Counter-security Issue with notarisation and legalisation Issue with translation 40

42 Instruct a firm of competent lawyers!!! Name: Ronald Sum Position: Partner rsum@blankrome.com Tel: /

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44 BLANK ROME 43