Some issues of the vessel arrest in Romania
7 May, 2018
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Recently, the practice of ship arrest in Romanian ports has become more active. Below, we have tried to concentrate the most frequent topics faced by shipowners.
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I. The risks of non-getting back the vessel from bareboat charter in case of the charterer’s fault if the vessel is operated in Black Sea region.
In this respect we will, refer to the status of vessel under the Romanian jurisdiction. According to our practice, there are 2 perspectives of the clients’ interest.
a) First issue is about relations between the Owner and the bareboat charterer.
The Owner is interested to secure its position and property in relation with the bareboat charterer. The commercial relationship of the Owner and the bareboat charterer is regulated by the bareboat contract-charter by demise. As a conclusion of our experience, we can say that the main and essential duty of an Owner who gave possession of his vessel to a bareboat charterer is to control the Charterer on a very frequent basis, as to be aware of the vessel’s position on the market, i.e. if there are claims generated by the charterers’ non commercial and incorrect behavior. If the Owners would like to take back the possession of vessel, then the only legal way to act in this respect in the Romanian jurisdiction is to notify the cancellation of contract and to immediately take possession of vessel, in fact, physically.
b) The second issue is related to the Owners’ position in respect of the third parties that may be involved in the operation of vessel (agents, companies that supplied the vessel with bunker or various goods, cargo interests etc.) It is essential to be underlined that, in respect of vessel’s liabilities, those kinds of relations are regulated by the 1952 Brussels International Convention Relating to the Arrest of Sea-Going Ships, ratified by Romania and still in force in the Romanian jurisdiction. The legal status of the bareboat chartered vessels is specifically regulated by the provisions of Art. 3 paragraph 4) of the said convention:
“When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claim. The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship.”
We would like to underline that the vessel can be arrested provided that the bareboat charter is in force. If the bareboat charter is terminated and the possession of vessel is taken over by the Owners, then the creditors are not legally able to arrest the vessel. In such circumstances, they have to take action against the bareboat charterer. In other words, any creditor can arrest the vessel for claims generated by the charterers’ non commercial and legally incorrect commercial behavior.
II. The options of the vessel’s arrest to secure the Owners’ or Mortgagee’s right to the vessel.
As above mentioned, the Owners are not able to arrest his own vessel. The only case in which a vessel can be arrest by the owners is the situation in which there vessel is owned by two or more co-owners and it is clearly provided by the art. 1 paragraph p) of the 1952 Brussels Arrest Convention:
“Disputes between co-owners of any ship as to the ownership, possession, employment, or earnings of that ship”
III. It is important not to confuse the claims that give the right to arrest the vessel and
the ranking of claims.
All maritime claims provided by the Arrest Convention give the right to arrest a vessel. There is no ranking in this regard.
The claims that give the right to arrest the vessel are provided by the art. 1 of the arrest convention that applies in Romania:
(1) “Maritime Claim” means a claim arising out of one or more of the following:
(a) Damage, caused by any ship either in collision or otherwise;
(b) Loss of life or personal injury caused by any ship or occurring in connection with the operation of any ship;
(c) Salvage;
(d) Agreement, relating to the use or hire of any ship whether by charter party or otherwise
(e) Agreement, relating to the carriage of goods in any ship whether by charterparty or otherwise;
(f) Loss of or damage to goods including baggage carried in any ship;
(g) General average;
(h) Bottomry;
(i) Towage;
(J) Pilotage;
(k) Goods or materials wherever supplied to a ship for her operation or maintenance;
(l) Construction, repair or equipment of any ship or dock charges and dues;
(m) Wages of Masters, Officers, or crew;
(n) Master’s disbursements, including disbursements made by shippers, charterers or agent on behalf of a ship or her owner;
(o) Disputes as to the title to or ownership of any ship;
(p) Disputes between co-owners of any ship as to the ownership, possession, employment, or earnings of that ship;
(q) The mortgage or hypothecation of any ship.
IV. The matter of claims ranking arises not in the arrest proceedings, but in the claims enforcement proceedings.
Once a creditor succeeded to reach a writ of execution against the Owners/vessel and the vessel is executed/sold (in a public auction, for instance) then, the price is distributed according to:
a) The International Convention for the Unification of Certain Rules of law Relating to Maritime Liens and Mortgages-Brussels 1926, provided that the flag of vessel to be executed belongs to a signatory state of convention;
The ranking as provided by the convention is regulated by art. 1 and 2:
Art. 1):
Mortgages, hypothecations, and other similar charges upon vessels, duly effected in accordance with the law of the Contracting State to which the vessel belongs, and registered in a public register either at the port of the vessel’s registry or at a central office, shall be regarded as valid and respected in all the other contracting countries.
Art. 2):
The following give rise to maritime liens on a vessel, on the freight for the voyage during which the claim giving rise to the lien arises, and on the accessories of the vessel and freight accrued since the commencement of the voyage;
(1) Law costs due to the State, and expenses incurred in the common interest of the creditors in order to preserve the vessel or to procure its sale and the distribution
of the proceeds of sale; tonnage dues, light or harbour dues, and other public taxes and charges of the same character; pilotage dues; the cost of watching and preservation
from the time of the entry of the vessel into the last port;
(2) Claims arising out of the contract of engagement of the master, crew and other persons hired on board.
(3) Remuneration for assistance and salvage, and the contribution of the vessel in general average;
(4) Indemnities for collision or other accident of navigation, as also for damage caused to works forming part of harbours, docks, and navigable ways; indemnities for personal injury to passengers or crew; indemnities for loss of or damage to cargo or baggage;
(5) Claims resulting form contracts entered into or acts done by the master, acting within the scope of his authority away from the vessel’s home port, where such contracts or acts are necessary for the preservation of the vessel or the continuation of its voyage, whether the master is or is not at the same time owner of the vessel, and whether the claim is his own or that of ship-chandlers, repairers, lenders, or other contractual creditors.
The mortgages, hypothecations, and other charges on vessels referred to in Article 1 rank immediately after the secured claims referred to in the preceding Article.
National laws may grant a lien in respect of claims other than those referred to in the said last-mentioned Article, so, however, as not to modify the ranking of claims secured by mortgages, hypothecations, and other similar charges, or by the liens taking precedence thereof.
b) the Romanian Commercial Code(art. 687)-provided that the flag of vessel belongs to a state that has not ratified the 1926 Brussels Convention;
The ranking provided by the Romanian Commercial Code is similar in respect of the mortgagee’s position.
According to the rankings as provided by the two legal norms, the mortgages and hypothecations take rank after the other secured claims; actually, the mortgages are the last ranked secured claims.
V. The options of legal actions to return the vessel’s back to the Owners and/or Mortgagee.
Considering the legal frame as above described, the options for returning the vessel to the:
a) Owners – serving an immediate notice of cancellation of contract and to immediately take possession of vessel, in fact, physically;
b) Mortgagees-arresting the vessel, provided that the obligations for which the vessel has been mortgaged were not properly executed.
Published at International maritime magazine «Shipping»
