Arrest of Vessels INTRODUCTORY NOTE

Part I. Arrest of Vessels INTRODUCTORY NOTE The legal system of Portugal extends over the mainland in the continent of Europe and the archipelagoes of Madeira and the Azores all of which together form the Republic of Portugal. The law is identical in all these parts of the jurisdiction. 1. SOURCES OF LOCAL LAW The principal source is statute. The role of case law is limited to interpretation of statutes although that role can on occasions be of considerable significance. Maritime courts were created by the Law no. 35/86 and they are in operation from October 1987. Although the creation of five Maritime Courts was originally proposed by the legislators, respectively in Lisbon, Leixões (Oporto area), Faro (South), Funchal (Madeira) and Ponta Delgada (Azores), only the Maritime Court of Lisbon was actually constituted and is presently operational. The constitution of the remaining four proposed courts is not expected in the near future. Maritime courts (tribunais marítimos) have exclusive jurisdiction to deal in the first instance with cases involving maritime law. Appeals are heard by the Tribunais da Relação and the Supremo Tribunal da Justiça. Other statutes of relevance to maritime jurisdiction are: Código de Processo Civil, (Civil Procedure Code). Código Comercial, (Commercial Code). Código das Sociedades Comerciais, (Companies Act). Lei no. 35/86, dated 4 September 1986 (Maritime Courts Act). Decree-Law no 352/86, dated 21 October 1986 (Maritime Transport Contract Act). Decree-Law no. 265/72, dated 31 July 1972, (which regulates the powers of port authorities). Lei no. 33/77, dated 28 May 1977 (which contains regulations relating to territorial waters and to economic zones). Decree Law 191/87 dated 29 April 1987 (Charterparty Act) Decree Laws 43, 44, 45 and 46/2002 dated March 2 2002 (containing provisions relating to the Maritime Authorities) Decree Law 2001/98 dated 10 July 1998 (Legal Definition of Ship Act) Decree Law 2002/98 dated 10 July 1998 (Vessel s Liability Act) Decree Law 2003/98 dated 10 July 1998 (Salvage Act) Suppl. 35 (December 2009) Portugal Part I 1

MANUEL P. BARROCAS Decree Law 384/99 dated 23 September 1999 (which contains provisions relating to crew, master and sea events) 2. INTERNATIONAL CONVENTIONS International conventions have direct application in Portugal when ratified or acceded to by the Portuguese government and will then prevail over internal law. Relevant conventions which have been ratified or acceded to by Portugal include the following: Convention for the Unification of Certain Rules Concerning the Immunity of State-owned Ships, Brussels 10 April 1926 and 24 May 1934. Convention Relating to the Arrest of Seagoing Ships, Brussels 10 May 1952. Note: This Convention was signed and ratified by the Portuguese Government in 1957. The rights provided for in Article 10 of the Convention were not reserved. Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages, Brussels 10 April 1926. Note: This convention was acceded to by the Portuguese Government in 1931 and the right provided for in the last paragraph of Article 9 was not reserved. Maritime claims not governed by this Convention are governed by Article 574 and the following articles of the Commercial Code see Chapter 9 below. Convention upon the Limitation of the Liability of Owners of Sea-Going Ships, Brussels 10 October 1957. Note: Portugal ratified this Convention on 8 April 1968 As Portugal is a member of the EU, all the respective maritime legal protection packages, namely the Erika I and II, are in force. In relation to foreign judgments, EC Regulation 41/2004 on the recognition and enforcement of judgments in civil and commercial matters is effective in Portugal. In connection with foreign arbitration awards, Portugal is a signatory to the New York Convention on the enforcement of foreign arbitration awards dated 10 June 1958. Whenever the above mentioned Regulation and Convention apply, the foreign judgment or arbitration award cannot generally be reviewed on its merits as long as it meets certain basic principles. The decision will merely be subject to the Portuguese courts reviewing the authenticity of the document containing Portugal Part I 2 Suppl. 35 (December 2009)

PORTUGAL the decision. Recognition of the decision may be refused only if the authenticity is not proven; if the decision infringes public policy principles; if it is shown that that the decision relates to matters which are within the exclusive jurisdiction of the Portuguese Courts and subject to Portuguese law or that the foreign decision was intentionally obtained to circumvent the Portuguese jurisdiction or the application of Portuguese law. In cases outside the scope of EC Regulation 41/2004 and the New York Convention, the Portuguese Courts may confirm the decision or award subject to a revision procedure which evaluates the respective merits. 3. COMPETENCY OF COURTS OR OTHER AUTHORITY 3.1. Introduction The arrest of vessels in civil actions is exclusively a matter for the Portuguese courts. The Maritime Court of Lisbon (see Chapter 1) is the only court with jurisdiction to order arrests and this jurisdiction extends over all the territory of Portugal. 3.2. Territorial extent of the jurisdiction of the Portuguese courts The territorial waters of Portugal extend twelve miles from the coastal baseline but, in practice, it is possible to arrest only those which can be found in a port or anchorage within those waters. 3.3.1. General 3.3. Conflict of laws Strict rules govern the issue of whether the Portuguese courts will accept jurisdiction over cases which have a foreign element. Consequently, the doctrine of forum non conveniens, for instance, is dealt with in a different manner from that which applies in many Anglo-Saxon jurisdictions and the courts have no discretionary power to decline jurisdiction unless such discretion has been clearly conferred by statute. The concept of staying proceedings in unknown in Portuguese law. But it will always be permissible to arrest any vessel in Portuguese waters even though the Portuguese courts may not have jurisdiction to deal with the merits of the claim. This principle derives from Article 65(a) and Article 83(1)(a) of the CPC. Suppl. 35 (December 2009) Portugal Part I 3

MANUEL P. BARROCAS 3.3.2. Jurisdiction over the merits An arrest is always carried out as an adjunct to proceedings on the merits the main action. The circumstances in which the Portuguese courts will assume jurisdiction over the main action are set out in Article 65 of the CPC and are as follows: i) When the action is of the kind defined in Article 73 et seq. of the CPC; namely when the parties to and facts of the dispute have a close connection with Portugal in one or more of the following respects:- a) in ship mortgage actions, where the vessel is registered in Portugal; b) in general average claims, if the cargo was or should have been delivered in Portugal; c) in collision cases, if the collision took place in Portuguese waters, or if defendant shipowners are domiciled in Portugal or if the defendant vessel has been arrested in Portugal, or if the defendant vessel put into a Portuguese port after the collision; d) in salvage claims, if the salvage was performed in Portuguese waters, or if the defendant shipowners are Portuguese or if the salved property has been brought into Portugal; e) in an action for general termination of maritime liens on a vessel, if she was sold, or is to be sold, by the Portuguese court; f) in contractual claims, if Portugal is the jurisdiction in which the contract was, or should have been, performed; g) in tort claims, if the tort was committed in Portugal. ii) In addition to the specific rules set out above, there is a general principle that the Portuguese courts will accept jurisdiction over any cause of action which has arisen in Portugal. iii) On the basis of the principle of reciprocity the Portuguese courts will exercise jurisdiction over foreign legal entities in proceedings commenced by Portuguese entities if, in the reverse situation, the foreigner would in the courts of his own jurisdiction be able to implead a Portuguese entity. iv) In cases where the plaintiff s rights cannot be enforced except by the Portuguese courts. If a plaintiff can show that Portuguese jurisdiction is essential, rather than a mere matter of convenience, Portugal will accept jurisdiction. v) Under Article 30 of Decree-Law number 352/86 dated 21 October 1986 the Portuguese courts will exercise jurisdiction over actions concerning the carriage of goods by sea in circumstances where:- a) The port of loading or discharge is in Portugal; b) The contract of carriage has been performed in Portugal; c) The relevant vessel is registered in Portugal; d) The shipper, receiver, consignee or carrier has an office in Portugal. Portugal Part I 4 Suppl. 35 (December 2009)

PORTUGAL If none of the above factors is found to exist then the general rule laid down in Article 65 CPC applies. 3.3.3. Jurisdiction clauses and foreign law clauses 3.3.3.1. Jurisdiction clauses Any jurisdiction clause or other agreement which purports to deprive the Portuguese courts of jurisdiction granted to them under Article 65 CPC and Article 30 of Decree-Law no 352/86 is null and void except in cases where the parties to a dispute are foreign and where the contract was or will be performed abroad and does not involve any Portuguese assets see Article Seven, Law no 35/86. This principle must be borne in mind in any case where it may become necessary to enforce in Portugal an arbitration award or foreign judgment because the courts will not enforce any such awards or judgment if the courts themselves had jurisdiction over the merits. An exception exists in relation to those awards and judgments which are enforceable in Portugal pursuant to either the Convention on Judgments in Civil and Commercial Matters, 1971, or the Geneva Convention on the Enforcement of Foreign Arbitration Awards 1927. 3.3.3.2. Foreign law clauses These clauses are enforceable unless they contravene public policy see Article 22 of the Commercial Code. (Similarly, arbitration awards and foreign judgments will not be enforced if they contravene public policy see Article 1096(7) of the CPC). 3.3.4. Voluntary submission to Portuguese jurisdiction Parties are entitled to submit a claim by agreement to the Portuguese courts in circumstances where such jurisdiction would not otherwise exist, provided they have a real interest in so doing see Article 99 of the CPC. The question of what constitutes a real interest is at the discretion of the court but generally it must be shown that Portuguese jurisdiction would confer some benefit on one or more of the parties for example because evidence is available in Portugal; or because any judgment may require to be enforced in Portugal; or because Portugal offers a less expensive or more convenient forum than other relevant jurisdictions. 3.3.5. Conservative arrest The powers of the Portuguese courts to arrest vessels in Portuguese waters are not affected by the question of whether the main action is to be determined by Suppl. 35 (December 2009) Portugal Part I 5

MANUEL P. BARROCAS the Portuguese courts. It is therefore possible to arrest vessels in cases where the main action is to be determined by arbitrators or foreign court proceedings. 4. IMMUNITY OF STATE-OWNED VESSELS Vessels owned by the Portuguese government may be arrested only in actions in rem if they were being used for commercial purposes at the time the cause of action arose see Article(s) 409 and 823 of the CPC. As regards vessels owned by foreign governments, a distinction is drawn between those jurisdictions which do and do not subscribe to the 1934 Brussels Immunity Convention. The principles of the Convention are applied to vessels belonging to those states which are parties to the Convention. The principle of reciprocity is applied to vessels owned by other governments. Such vessels will be liable to arrest in Portugal at least to the same extent as a Portuguese stateowned vessel would be in the relevant foreign jurisdiction. There are several reported decisions dealing with the question of whether the courts of Portugal will exercise jurisdiction in actions which impinge upon the sovereignty of foreign states see, for example, judgment of the Supremo Tribunal da Justica dated 11 May 1984 (published in BMJ/377/305), and judgment of Tribunal da Relação, Oporto, dated 5 January 1981 (published in Colectãnea de Jurisprudência 1981 1983), in both of which cases jurisdiction was declined. 5. TYPES OF CLAIM FOR WHICH AN ARREST MAY BE REQUESTED In cases where the owner of a vessel is the party liable in personam, any vessel belonging to that owner may be arrested in respect of any kind of civil claim. In cases where the shipowner is not personally liable for the claim the considerations set out in the following paragraphs apply. Portugal has subscribed to the 1952 Brussels Arrest Convention. Accordingly, if the Convention applies (i.e. if the vessel to be arrested flies the flag of another subscribing jurisdiction), then Article 2 defines the kinds of claims which may lead to an arrest. If the Convention is not applicable (i.e. if the vessel flies the flag of a non-convention jurisdiction), then the claims in respect of which an arrest may be requested are set out in Article 4, Law no. 35/86, as follows:- (1) any claim for damage done by or to a vessel; (2) any claim related to the construction, repair, purchase or sale of a vessel; (3) any claim arising out of any agreement relating to the carriage of goods by sea in a vessel; (4) any claim arising out of any agreement relating to the carriage of goods by river or canals; (5) any claim arising out of any agreement relating to the maritime use or hire of a vessel (namely concerning charter and leasing contracts); Portugal Part I 6 Suppl. 35 (December 2009)

PORTUGAL (6) any claim arising out of any insurance agreement relating to a vessel or her cargo; (7) any claim related to mortgages and maritime liens or other charges on a vessel or her cargo; (8) any other maritime claim provided for elsewhere in Portuguese law. This category includes:- a. an action for permission that an attached vessel may sail Article(s) 852 and 853 CPC; b. a claim that a vessel be surveyed to determine her seaworthiness; c. an action to compel judicial survey of a ship or cargo Article 1503 CPC; d. an action seeking the forced sale of a ship due to her unseaworthiness Article 1505 CPC; e. an action that the Master be authorized to carry out certain acts related to the management of a vessel for which he has normally no authority Article 1506 CPC; f. an action to appoint a trustee to receive and to take into custody cargoes not received by, or rejected by, a consignee Article 1507 CPC; g. an action for the adjustment of general average Article 1063 CPC; h. an action to set up the fund provided for in Article 2(2) of the Brussels Convention on Limitation of Liability, dated 10 October 1957. (In this regard it should be noted that Portugal is not a party to the 1976 Brussels Convention on Limitation of Liability). (9) any claim which may lead to an arrest or other restraint of a vessel, her cargo, bunkers or appurtenances; (10) any claim in respect of general or particular average; (11) any claim in respect of salvage; (12) any claim arising out of any towage or pilotage agreement; (13) any claim in respect of pollution caused by a vessel; (14) any claim in respect of damage done by a vessel to State assets dedicated to maritime use (e.g. port and harbour installations); (15) any claim of a general maritime nature, such as claims in respect of: (a) the possession or ownership of a vessel; (b) the employment of a vessel; (c) loss of or damage to goods carried in a ship; (d) goods or materials supplied to a vessel in respect of her operation or maintenance; (e) disbursements made by the master, shipper, charterer or agent on account of a ship; bottomry etc. All of the abovementioned claims may be pursued in rem and may, as a result, lead to an arrest. Suppl. 35 (December 2009) Portugal Part I 7

MANUEL P. BARROCAS It is clear that in the Portuguese courts an arrest may be obtained over the vessel which gave rise to the respective maritime claim, whether or not the owner was responsible for the debt in question Supreme Court decisions dated 14.04.99, 18.03.97 and 25.11.97. 6. OTHER SPECIFIC PRECONDITIONS TO AN ARREST An arrest may be maintained only in respect of a claim which has vested at the date of issue of the arrest proceedings. It is not necessary for the claim to have been exactly quantified, (272 BMJ, 169). Arrest proceedings are always simply an adjunct to proceedings on the merits of the claim. It is not required that the main action must have been commenced before arrest proceedings are issued. Usually, in fact, the arrest proceedings are commenced first, but in such cases the arrest will be lifted by the court if the claimant has not commenced his main action within thirty days after the arrest or if, thereafter, the plaintiff at any time negligently fails for a period of thirty days to take a required step in the proceedings. If the Portuguese courts do not have jurisdiction over the main action then, pursuant to Article 7(2) of the 1952 Brussels Arrest Convention, the Portuguese judge dealing with the arrest application may stipulate the period within which the claimant must commence proceedings on the merits in the appropriate foreign jurisdiction. In accordance with Article 9 of Decree law 201/98, a vessel may be arrested even if she has already obtained outward clearance from the harbour master. Under Portuguese law a shipowner cannot apply for an arrest order to be stayed. The application for an arrest order is dealt with once only and at that hearing the court either grants or refuses it. Article 387 CPC provides that if a claimant has failed to obtain an arrest order as a result of insufficiency of evidence or if the arrest has been revoked because of the claimant s negligent failure to commence or pursue with diligence the main action, then no further arrest application will be granted in respect of the same claim against the same vessel. See also Article 3(3) of the 1952 Brussels Arrest Convention. 7. DEFINITION OF SHIP AND VESSEL. WHAT OBJECTS AND PROPERTY MAY BE ARRESTED? 7.1. Ships, vessels and floating constructions Article 1 of Decree Law 201/98 defines ship (in Portuguese nomenclature navio ) as any floating device made to navigate in water. However, we must take into account the presence of the wider concept of vessel which may be understood as corresponding to the Portuguese word embarcação, where its arrest is concerned, the legislator adopted an open formula. In fact, Article 4(1) Portugal Part I 8 Suppl. 35 (December 2009)

PORTUGAL of Law no 35/86 provides that the maritime courts have jurisdiction to arrest ships, vessels, boats and any other floating constructions whether capable of selfpropulsion or not. The term floating construction clearly includes barges, maritime platforms, floating docks and hovercraft. Article 587 of the Commercial Code provides that a vessel under construction is to be regarded as a vessel for the purposes of maritime mortgages. Accordingly therefore it is permissible to arrest a vessel under construction, at least in respect of a mortgage claim. 7.2. Salved property Any vessel, cargo or other property which has been the subject of salvage services may be arrested see Article 1(1)(c) of the 1952 Brussels Arrest Convention, Article 2(3) of the 1926 Brussels Liens and Mortgages Convention; and Articles 578(2) and 580(2) of the Commercial Code. 7.3. Property belonging to a third party If, when a vessel is arrested, she has on board her property such as bunkers or equipment belonging to someone other than the defendant, such property is not in law subject to the arrest, even if it is apparently part of the vessel. The third party may institute proceedings to recover his property and these proceedings take the form of either embargo de terceiro (as provided for in Article 1037 CPC) or an action in rem named acção de reivindicação. 7.4. Maritime liens Where the claim being advanced constitutes a maritime lien over the property to be arrested it is not necessary for the claimant to establish a claim in personam against the shipowner. Furthermore, Article 28(1) of Decree-Law no 352/86 provides, in relation to contracts for the carriage of goods by sea, that if the identity of the carrier is not made clear in the bill of lading or if the bill of lading is issued by someone other than the actual carrier, then the vessel shall be liable in rem irrespective of whether the shipowner was a party to the contract of carriage. 7.5. Arrest of bunkers, cargo and freight In certain cases a claimant may arrest bunkers, cargo and/or freight without arresting the vessel itself see Chapter 24. Suppl. 35 (December 2009) Portugal Part I 9

MANUEL P. BARROCAS 8. EVIDENCE REQUIRED TO SUPPORT AN ARREST APPLICATION The party seeking an arrest must demonstrate a need for security and must therefore prove that he has reasonable grounds for believing that any subsequent monetary judgment in his favour may remain unsatisfied unless he is permitted to obtain security (38 BMJ, 28). Article 402(1) CPC provides that the plaintiff must establish a prima facie case both as to the existence of a maritime claim and as to the need for security. In practice the courts will invariably grant arrest applications because it is apparent that any seagoing vessel may leave Portuguese waters or have new maritime liens created over her at any time. However, Portuguese courts have been consistent in finding that in cases where the 1952 Brussels Arrest Convention applies, the claimant does not have the burden of alleging and demonstrating the need for security. Proving the mere existence of a maritime claim as defined in the Convention is sufficient. The claimant s lawyer files a written application with the court, setting out details of the claim and including photocopies of relevant documents. A list of the claimant s witnesses may also be filed. In certain cases it may prove possible to dispense either with copy documents or with witnesses but usually it is desirable both to lodge relevant documents and to enroll two or three witnesses. Portuguese procedure does not permit the filing of an affidavit by the claimant s lawyer. Evidence as to ownership of the vessel usually takes the form of an extract from Lloyd s Register of Ships or other publication. In the case of Portuguese vessels, a certificate from the registry office will suffice. 9. SISTER SHIPS The only express provision in Portuguese law permitting the arrest of sisterships is contained in Article 3(4) of the 1952 Brussels Arrest Convention, which applies only to Convention vessels. But under the general principles of Portuguese law, any maritime claim which lies in personam against a shipowner may be enforced by arresting any vessel belonging to that shipowner. If a maritime lien exists over a vessel in circumstances where her owner is not personally liable then that lien cannot be enforced against other vessels belonging to that owner. 10. DEMISE-CHARTERED OR TIME-CHARTERED VESSELS Where a maritime claim has been created against a vessel but it is a demisecharterer of that vessel, rather than the shipowner, who is liable in personam in respect of that claim, the vessel may still be arrested according to the following principles. If the vessel is a Convention vessel (as defined in Chapter 5 above) then Article 3(4) of that Convention governs the matter. If the vessel Portugal Part I 10 Suppl. 35 (December 2009)

PORTUGAL is a non-convention vessel, she may be arrested only if the claim arises from the operation or management of the vessel. Article 28 of Decree-law no. 358/86 provides that if a claim arises under a bill of lading and it is not possible to determine from the bill of lading the identity of the correct defendant then it is permissible to arrest the vessel in any event. A decision enforcing that principle is to be found in a judgment of the Court of Appeal in Lisbon, dated 16 April 1985 ( Colectanea de Jurisprudencia 1985 II). In the case of time-chartered vessels, it is permissible to arrest a vessel in respect of a claim against that vessel arising from the operation or management of that vessel by a time-charterer. Non-maritime claims which are the personal responsibility of the time-charterer cannot be enforced against the time-chartered vessel. The existence of a demise-charter or time-charter over a vessel does not affect a claimant s right to arrest the vessel for claims for which the shipowner is personally liable. 11. FORM OF APPLICATION The claimant s lawyer must make a written application to the court setting out the facts of the claim, establishing a need for security and providing a list of relevant witnesses. For further details see Chapter 8 above. 12. MUST THE ARRESTING PARTY PUT UP SECURITY? Pursuant to Article 620 Civ Code and Article 390(2) CPC, the courts have power to require an arresting party to provide security but such orders are rarely made. If, after an arrest has taken place, the defendant shipowner establishes that the arrest was procured as a result of the gross negligence or malice of the claimant, the court may at that stage order the claimant to provide security pending the assessment of damages see Article 620, Civ Code. In such cases the claimant or his witnesses may be held liable for damages but successful actions of this kind are very rare. 13. REPRESENTATION BY COUNSEL; POWER OF ATTORNEY A claimant seeking the arrest of a vessel must be represented by a Portuguese lawyer and that lawyer must be provided with a power of attorney. The document must be drawn up in accordance with the requirements of the jurisdiction in which it was issued. If that latter jurisdiction requires that the power of attorney be executed before a notary public then Portuguese law requires that the signature of the notary be formalised either by an apostille under the provisions of the 1961 Hague Convention or by having it certified at a Portuguese Suppl. 35 (December 2009) Portugal Part I 11

MANUEL P. BARROCAS consulate. If the law of jurisdiction where the power of attorney is issued does not require the involvement of a notary public then the best course is to avoid notarisation completely. In urgent cases a Portuguese lawyer may commence arrest proceedings before he receives a power of attorney. That document must however be issued to the lawyer and filed by him in court in Portugal as soon as possible, not least because the lawyer remains personally liable for all legal and arrest costs until he establishes that he has been duly instructed by the claimant. In cases where proceedings on the main action are being submitted to a jurisdiction outside Portugal it is sensible that the defendant shipowner should be able to provide security directly in respect of these foreign proceedings rather than through the court in Portugal. To enable this to be done the power of attorney issued to the claimant s lawyer must specifically authorise that lawyer to terminate the arrest procedure and to execute any relevant documents accordingly. All practising Portuguese lawyers are admitted as an advogado and have rights of audience in all courts throughout Portugal. An acceptable text of a power of attorney to be used in a Portuguese court may be written either in Portuguese or in the English language and in the latter case with the following wording. (In this form the principal is a company but the text is mutatis mutandis the same for any other entity):- POWER OF ATTORNEY (Name of the principal ), a company based in (registered seat) herewith confers authority on Mr. (name(s) of the individual lawyer(s)) to represent it to Portuguese Courts and to exercise all forensic powers including authority to waive any action or to enter into any composition in the Courts as well as to receive from the latter any refunds of legal costs. Place of issue, date and signature Note: do not notarize unless so required by the law of the country where the power of attorney is issued. If it is notarized, such power of attorney needs an apostille in accordance with the Hague convention dated 5th October 1961 on Abolishing the Requirement of legalisation for Foreign Public documents or, alternatively, the signature of the notary public needs to be verified by a local Portuguese consulate. 14. COURT HEARING Once the claimants lawyer has filed a written arrest application with the court as described in Chapter 8 the court must decide within 24 hours whether it is prepared to consider the application. If it is, then the vessel will be detained by the court pending full consideration of the arrest application Portugal Part I 12 Suppl. 35 (December 2009)

PORTUGAL which must take place within five days of the submission of the arrest application (see also chapter 18). The Maritime Court of Lisbon has an accepted reputation for dealing with arrest applications quickly and efficiently. However, the 5 days deadline is rarely respected since it is difficult to apply in practical terms; this is so even for the applicant who will usually have foreign witnesses testifying. The hearing for confirmation or refusal of the arrest usually takes place between 5 to 20 days after the application is served. The defendant shipowner is not entitled to be represented at any stage. At the full hearing of the application the court will usually require to hear oral witnesses for the claimant. The result of the application is then made known to the claimant and to the harbourmaster. Arrest proceedings will in theory by dealt with urgently even during legal vacations, weekends or public holidays. It may prove very difficult however to make an arrest during a weekend or public holiday. 15. PROVISION OF BAIL BY DEFENDANTS Bail is normally arranged privately between the parties and takes the form of a bank guarantee. A private letter of undertaking (e.g. from P and I Club), may be agreed between the parties informally, but same can only be lodged in the court proceedings if the third party accepts joint and several liability with the defendant Articles 623 one and two, Civ. Code. If the terms or amount cannot be agreed then the court will resolve the dispute. Two situations exist A. If the court has granted an arrest order but the vessel has not yet been formally detained by officers of the court (even though she may have been effectively detained by the harbourmaster) then the defendant is entitled to lodge security with the court. The judge must decide within 24 hours whether the security offered is sufficient and, if it is, the arrest will be lifted immediately. In such circumstances the claimant has no right to make representations. B. If the vessel has been formally detained then the court cannot accept security and release the vessel from arrest without hearing the claimant. The final decision rests with the court, so that it is not essential for the defendant shipowner to obtain the claimant s agreement to the proposed security arrangements. The claimant is, however, allowed a period of eight days in which to present his objections so it is usually in the interests of the defendant either to obtain the claimant s agreement or to provide security before the vessel has been formally arrested. Any guarantee or letter of undertaking issued by a Portuguese bank or other entity in favour of a foreigner must have the prior approval of the central bank the Banco de Portugal. That bank may impose limits as to the maximum sums of interest and legal costs which can be secured by a guarantee. Usually the claimant will be permitted provision for two to four years interest. Otherwise the claimant is Suppl. 35 (December 2009) Portugal Part I 13

MANUEL P. BARROCAS entitled to such amount of security as is fixed by the court (assuming that no agreement is reached between the parties). In fixing the amount of security the court must have regard to any applicable limit of liability relevant to the main action. 16. PROCEEDINGS FOR MAINTAINING AN ARREST In Portugal, arrest proceedings are separate from the main action on the merits of the claim. An arrest may be obtained irrespective of whether the main action is to be heard in Portugal or elsewhere. When making an arrest order the court will normally order that the main action, if not already commenced, be commenced within a certain period see Chapter 6 above. 17. COSTS AND ADVANCES FOR COURT PROCEEDINGS AND CUSTODY The lawyer acting in Portugal for the claimant will usually request a payment on account at the outset in respect of his own fees, court costs and other disbursements. Some court fees must be paid when the arrest proceedings are issued. Court fees are assessed in relation to the size of the claim. For example the court fees in relation to arrest proceedings for a claim of US $100,000 would amount to about US $1,000. The costs of custody of the vessel are also fixed by the court, but at the time when the vessel is released from arrest. Advance payment is required in respect of arrest costs. Lawyers fees are not subject to any fixed scale. They are fixed having regard to such factors as the time spent, the difficulty of the matter and the final result, but contingency fees are illegal. 18. ENFORCEMENT OF THE ORDER OF ARREST When an arrest application is filed, the court must decide within 24 hours whether the application deserves full consideration or not. If the application is not rejected at that stage the court will telephone the harbourmaster and order the interim detention of the vessel pending a full hearing of the application see Chapter 14. The full hearing then takes place within five days from the filing of the arrest application and if an arrest order is made the vessel will continue to be informally detained until the court process is served. 19. SERVICE OF THE ORDER OF ARREST The formal arrest order is served by an officer of the court. Such service is not affected immediately but this makes no difference because, in the interim the Portugal Part I 14 Suppl. 35 (December 2009)

PORTUGAL vessel is detained informally following a telephone call from the court to the harbourmaster see also Chapters 14 and 18. 20. TIME ELEMENT Arrest applications are dealt with urgently both on normal working days and, in theory at least, during weekends or public holidays. See also Chapter 14. 21. APPEAL BY THE DEFENDANT The arrest procedure takes place without the participation of the defendant shipowner. Once his vessel has been arrested the defendant has two possible methods open to him of attacking the arrest, namely to contest the facts or to appeal. 21.1. Contest on the facts Once the arrest order has been served, the shipowner may within eight days lodge an appeal in court to contest the factual basis upon which the arrest was obtained or to seek a reduction in the amount of security being sought. This procedure is known as embargos ao arresto. 21.2. Appeal on a point of law (agravo) Alternatively, the shipowner may appeal to the Court of Appeal on a point of law and thereafter (in the case of larger claims) to the Supreme court. Both of these measures may be taken concurrently. A defendant may also apply to the court for security for a counterclaim for damages for wrongful arrest. Such damages may be awarded if the arrest has been obtained through gross negligence or malice or if an arrest was not genuinely necessary see Chapter 6 above. If, after the arrest, the plaintiff does not issue or pursue the main action within the time limits imposed by Article 382, CPC the defendant may apply to have the arrest or security discharged see Chapter 6 above. 22. FORCED SALE IN THE ARREST PROCEDURE; PRIORITY OF CLAIMS IN REM 22.1. Forced sale Vessels cannot be sold in the arrest procedure. If, when judgment is given in the main action, the vessel is still under arrest then a sale order may be made in Suppl. 35 (December 2009) Portugal Part I 15

MANUEL P. BARROCAS the main action in order to enforce the judgment. Sales after judgment may be conducted under an accelerated procedure pursuant to Article 85 CPC if the vessel is a wasting arrest or if a particularly favourable opportunity of selling the vessel arises. The procedure for forced sale will be dealt with in another part of this Handbook. 22.2. Priority of claims in rem The chronological order of arrests is irrelevant to priorities these depend solely upon the nature of the claim. Whenever a vessel is sold by the court the legal costs of the sale procedure and the arrest and custody of the vessel together with any sums due to the Portuguese government in respect of the vessel are paid out first. Thereafter the order of priorities depends partly upon whether the vessel is registered in a state which is a party to the 1926 Brussels Convention on Maritime Liens and Mortgages. If it is, then maritime liens are paid out pursuant to the Convention. If it is not, then Article 578 Civ Code specifies the following definition and ranking of maritime liens as follows:- 1. Liens accruing the last voyage a. Legal costs incurred in obtaining the sale of the vessel in the common interest of all creditors; b. Salvage (and collision); c. Pilotage and towage; d. Harbour dues; e. Costs of custody; f. Crew wages; g. Repair costs; h. Insurance premiums. 2. Other maritime liens i. Any unpaid portion of the purchase price; j. Repair costs accruing during the last three years; k. Any unpaid portion of the cost of building the vessel; l. Outstanding insurance premiums other than those relating to the last voyage; m. Sums due to shippers in respect of loss or damage to cargo. 3. Mortgages, hypothec and similar charges. 4. All other claims in rem thereafter rank pari passu. 23. CLAIMS FOR DAMAGES BY THE OWNER OF AN ARRESTED VESSEL Such claims are rare but they may be pursued in certain circumstances see Chapters 12 and 21 above. Portugal Part I 16 Suppl. 35 (December 2009)

PORTUGAL 24. SPECIAL REMARKS 24.1. Vessels may be permitted to trade whilst under arrest In certain cases as described in Articles 852 and 853 CPC, the court may permit a vessel to trade whilst under arrest. This is a rare occurence and is permitted by the court only if both the claimant and the shipowner agree. 24.2. Arrest of bunkers It is possible simply to arrest bunkers or other property aboard a vessel belonging to a defendant who is someone other than the shipowner. The procedure is the same for arresting a vessel, mutatis mutandis. 24.3. Arrest of cargo and/or freight Similarly it is permissible to apply arrest procedures to cargo and freight. Article 580 Com. Code establishes the following maritime liens over cargo:- 1. Legal costs incurred in the common interests of all claimants to preserve the cargo. 2. Salvage. 3. Official charges levied at the port of discharge. 4. Debts in respect of carriage, demurrage and discharge. 5. Warehousing charges. 6. General average contributions. 7. Insurance premiums. Maritime liens over freight are: 1. Legal costs incurred to protect the common interests of all claimants. 2. Crew wages. 3. General average. 4. Insurance premiums. 5. Damages due to shippers. 24.4. Injunctions The injunction is a procedure which does exist under Portuguese law but not as a means of obtaining security for a claim. If the motive of the applicant is simply to obtain security then he must resort to the arrest procedure Article 399 CPC. Suppl. 35 (December 2009) Portugal Part I 17

MANUEL P. BARROCAS Portugal Part I 18 Suppl. 35 (December 2009)