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JUNE 2 01 6 LE GAL BRIEFING Sharing the Club’s legal expertise and experience

A quick ove rview of arrest in some popular LEGAL BRIEFING

THE AUTHOR Sharing expertise Lisa Clarke Claims This briefing is one of a continuing series Lisa Clarke joined which aims to share the legal expertise within Thomas Miller in 2 01 4 from one of Africa’s the Club with our Members. largest firms where she practised law in the Durban A significant proportion of the expertise in the Shipping and Logistics department for Managers’ offices around the world consists three years. of who can advise Members on Direct +44 20 7204 2607 [email protected] general P&I related legal, contractual and documentary issues.

LEGAL BRIEFINGS TEAM These lawyers participate in a virtual team, Jacqueline Tan writing on topical and relevant legal issues Senior Claims Executive under the leadership of our Legal Director, Jacqueline is a qualified and Chao Wu. . She works mainly with Members in If you have any enquiries regarding this Japan. Jacqueline speaks Malay, French briefing, please contact Lisa Clarke and Hokkien. She is a member of the ([email protected] or Club’s environmental team, which informs Members of the latest changes +44 20 7204 2607) and she will be pleased to and their implications. to respond to your query. Direct +44 20 7204 2 118 [email protected] The team also welcomes editorial suggestions from Members on P&I related legal topics and Dr Chao Wu Legal Director problems. Please conact Jacqueline Tan ([email protected] or Chao has a PHD in law from Paris University +44 20 7204 2118) or Chao Wu (Sorbonne). She is ([email protected] or responsible for the legal aspects of Club +44 20 7204 21 57) documentation and cover for Members’ contractual arrangements, the Club’s Rules and Previous issues Bye- and general legal advice. Copies of previous briefings are available to Chao is a recognised authority on international marine pollution law and download as pdfs from our website. Visit US . www.ukpandi.com/publications.  Direct +44 20 7204 2157 [email protected]

2 Legal Briefing June 2 01 6 SOUTH AFRICA

A quick ove rview of in some popular jurisdictions

The uncertain shipping market makes the issue of arrest a topical one. The key questions being; where are the most advantageous arrest jurisdictions? And what makes them so favourable? This article seeks to give a brief overview of some popular arrest jurisdictions, and sets out why they are potentially advantageous.

South Africa corporate veil. A vessel can be arrested looks at who the controlling on an associated basis, where, for shareholder is. One is also able to use Arguably one of the most well-known example, the registered owner of the the associated ship provisions to arrest a arrest jurisdictions is South Africa; it has vessel in respect of which the claim vessel associated with a charterer against numerous procedures which make it arose was at the time the claim arose whom a claim lies. favourable for arrest. controlled, directly or indirectly, by the same over fifty percent shareholding Aside from this associated ship procedure, South Africa has not acceded to any that controls the target vessel at the there are various other favourable arrest convention and ship arrest is dealt time of the arrest. It is then possible to attributes to arresting in this , with under the Admiralty Jurisdiction bring an action in rem, or a security not least that arrest in this jurisdiction is and Act 105 of 1983. There arrest by arresting the associated ship proportionately cost effective. are effectively three ways to arrest or instead of the ship in respect of which attach a ship in South Africa; i) an arrest the maritime claim arose. The test for A further procedure that is popular is in rem, ii) an arrest in personam, and determining whether the are that of the security arrest. An arresting iii) a security arrest. associated has been established through party can arrest in South South African and in effect Africa as security for a claim to proceed An interesting feature of this jurisdiction is that of associated ship arrests. This allows for the arresting party to take a step further than under the traditional sister or surrogate ship arrest procedure.

To understand associated ship arrests it is important to distinguish this from that of sister ship arrests. A sister ship arrest is where two or more ships are, or are deemed to be, commonly owned. To execute a successful sister ship arrest the ships have to have the same registered . With the introduction of separate special purpose vehicle ownership, where each ship is seen as a distinct company the usefulness of arrest by sister ship procedure has been somewhat thwarted.

South Africa’s associated ship arrest provisions by comparison allow an arresting party to effectively pierce the

June 2 01 6 Legal Briefing 3 ????

4 Legal Briefing June 2 01 6 AUSTRALIA, USA AND HONG KONG

in a different jurisdiction, thus the ship (whether by collision or over the defendant, provided that the arresting party does not need to submit otherwise), loss of life or for personal defendant has property in the arrest to South African jurisdiction for the injury, etc. jurisdiction, he is not “found” in that merits of the claim in which the jurisdiction and there is no statutory or security was sought. Importantly with To arrest for a general maritime claim other maritime law to the respect to security arrests, the arresting the arresting party must establish that a . Unlike an arrest under party will need to show that relevant person was, when the cause of Rule C, an attachment under Rule B there is a genuine and reasonable need action arose, the owner or charterer of, does not require there to be a maritime for security, which may be proved, for or in or control of, the ship on the vessel. example, by reports into the solvency of or property, and is, when the the party they are seeking to arrest. proceeding is commenced, the owner Procedurally, the two arrest procedures of the ship or property. are similar in that the plaintiff will be Additionally, this jurisdiction recognises required to file aVerified Complaint the provision of a P&I Club letter as There is also the option for sister ship setting out an admiralty/maritime sufficient security to release a vessel. arrest if the ownership (or bareboat claim, as well as an agreement of charterer) link can be established Indemnity releasing the U.S. Marshal Australia between the relevant person, the from any liabilities resulting from the subject vessel and the vessel to be arrest. The plaintiff will also need to pay The OW Bunker crisis recently casts arrested. The concept of associated ship a deposit in respect of the maintenance Australia into the limelight as an arrest arrest is not one recognised in Australia. costs for the vessel when under arrest. jurisdiction with the Western Australian decision on the SAM HAWK Arrest in Australia is The main procedural difference between [2015] FCA 1005. a Rule C arrest and a Rule B attachment relatively straight- is that a Rule B attachment must be Australia is not a signatory to any arrest forward and there is accompanied by an affidavit from the convention. Ship arrest is governed by plaintiff’s attorneys setting out that the the Admiralty Act 1988.To arrest in the added advantage defendant cannot be “found” within Australia your claim would need to be of a dedicated the District in which the attachment is a , a proprietary maritime sought, whereas with a Rule C arrest, claim or a general maritime claim. Maritime court. the plaintiff will need to approach the court to obtain a Warrant for Arrest and The maritime recognised by the Arrest in Australia is relatively this needs to be accompanied by an act are claims in respect of salvage, straightforward and there is the added affidavit setting out the grounds upon damage done by a ship, wages of the advantage of a dedicated Maritime court. which the arrest is based. master and crew and masters’ disbursements. In Australia, it has been USA Unlike South Africa, the in the unclear before this decision whether a USA will always have jurisdiction over foreign maritime lien is enforceable The US is not a signatory to any arrest the substantive claim unless a forum through a ship arrest, when the convention. Under US law the two selection clause requires that the claim underlying claim would not give rise to primary tools for arresting/attaching a be bought in a different jurisdiction. a maritime lien under Australian law. vessel are to be found under Rule C The Western Australia Federal Court and Rule B of the Federal Rules of There is no associated or sister ship made a groundbreaking decision in the ’s Supplemental Rules arrest available. SAM HAWK [2015] FCA 1005 for Certain Admiralty and Maritime allowing the vessel to be arrested for a Claims. Hong Kong claim for unpaid bunkers, i.e. a foreign maritime lien. Under Rule C, a Plaintiff can bring an Hong Kong is signatory to the 1952 in rem action against the vessel/ Brussels Arrest Convention and ship Proprietary maritime claims are claims property if a maritime lien exists or if arrest in Hong Kong is based on the relating to the possession, , the Plaintiff has certain statutory rights principles of English law. ownership or mortgage of a ship and against the vessel regardless of whether also encompass claims between co- the defendant can be found in the Ship arrest is available to claimants owners of a ship relating to the district. predominantly for possession or possession, ownership, operation or ownership disputes, mortgages, damage earnings of a ship. Under Rule B, a plaintiff has a prima to the ship, salvage etc. and also for facie in personam maritime claim and maritime liens available under Hong General maritime claims are listed at may attach the defendant’s vessel or Kong law including damage done by section 4(3) of the Admiralty Act and property as security for his claim, giving ship, salvage, wages and masters’ include for example, damage done by a the plaintiff a quasi in rem jurisdiction disbursements.

June 2 01 6 Legal Briefing 5 CONCLUSION

A ship or a sister ship may be arrested claims, e.g. mortgages and claims for Conclusion where; the arresting party’s cause of possession of a ship. action allows for arrest in this Whilst the jurisdictions set out above are jurisdiction, a writ has been issued, the …ship arrest in Hong by no means a closed list as to potential ship is within Hong Kong’s jurisdiction arrest jurisdictions, they do provide some and, very importantly, where no caveat Kong is predominantly illuminating examples of the manner in against the arrest has been entered. based on principles of which the remedy of arrest is available to parties. In the current fluctuating Interestingly, if a vessel is arrested in this English law. It is both shipping markets it is important to keep jurisdiction and security provided, this quick and cheap to such jurisdictions in mind. Whilst this security will remain in place – even if article seeks to highlight a few examples the claim is stayed for arbitration – and arrange, and does not of what makes these jurisdictions it then becomes security for the claim require the provision of unique it is always recommended to in the arbitration. The arrest of a ship to obtain an opinion from a in the provide security for a claim is a useful counter-security. jurisdiction before proceeding. tool in jurisdictions where this is allowed. In summary, ship arrest in Hong Kong Ships beneficially owned by, or demise is predominantly based on principles of For more information or further advice on chartered by, the person who would be English law. It is both quick and cheap this topic, please contact Lisa Clarke liable on the admiralty claim may be to arrange and does not require the ([email protected] or arrested in an action in personam. provision of counter-security. +44 20 7204 2607)

Sister ship arrests are generally available Clubs letters will not be accepted as in Hong Kong, but not for ‘proprietary’ security unless agreed between the parties.

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June 2 01 6 Legal Briefing 7 SHIP ARRESTS

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