Ship arrest in Ukraine: new approaches

• Shipping

The concept of one shipowner – one vessel

The concept of one shipowner – one vessel arose due to shipowners’ reasonable desire to secure their business against ship arrest. Today the shipowner, having understood the possibility of imposing arrest on any vessel owned thereby (e.g. in case of indebtedness for bunker supply or ship repair), has to incorporate a unified center (holding company) engaged in actual (not legal) control over other companies – vessel owners or operators.

It should be noted that it is too difficult to disclose corporate structure in the framework of Ukrainian court proceedings, with regards to judicial practice and poor regulations concerning the above issue. As shown by absolute majority of our case studies, ship arrest takes place by means of claim security before filing a lawsuit, while the court itself has neither procedural capacities nor sufficient time for analysis of corporate relations between the entities, in respect whereof the application on claim security has been filed. Thus, in the framework of Ukrainian court proceedings, there is a large probability of unsuccessful attempts to arrest vessels belonging to shipowners who have no direct debts against their creditors.

Our practice shows that an actual way to settle the above issue shall be compulsion of shipowners, being affiliated to each other, to enter into dispute settlement agreement. Such agreement should stipulate structure and compound of affiliated entities and prescribe joint liability for all the shipowners: one for all and all for one. Since the Ukrainian law does not provide any opportunity to disclose corporate structure of legal entities – shipowners, the aforesaid approach facilitates avoiding the concept of one shipowner – one vessel due to joint liability of shipowners and their affiliation.

Therefore, there is a chance to obtain a proper instrument of filing an application on claim security against affiliated entities, whose vessel would call at the Ukrainian sea port.

Actual vessel detention without maritime claim

In practice, we may face quite often the fact of vessel detention in the absence of maritime claim or any other claim against shipowner. Such case got widespread due to global financial crisis and therefore is treated as temporary case. The above situation occurs in case of filing claims not against shipowner itself, but against owner of cargo loaded on board and arrested by the court.

Due to impossibility to commit any actions with respect to cargo, as usually indicated in appropriate court decisions, shipowner has to wait for dispute settlement between owner of seized cargo and third party, acting as floating warehouse. In such case, shipowner is a hostage of circumstance and shall only wait for dispute settlement between third party and consignee, as well as calculate in due time and apply for all expenses incurred by shipowner due to vessel detention (idle stay, discharging the cargo, towage and pilotage etc.).

Therefore, we may state that an independent procedural institute has emerged in Ukraine: arrest of sea-going vessels aimed at maritime claim security, facilitating wide opportunities (e.g. for ship repair yards or bunkering companies) for debt recovery, payment of court fees and costs of legal support.

Taras Dragan

dragan@interlegal.com.ua