Updated ship arrest procedure: new opinion on ship arrest in Odesa Region in the wartime

• Shipping
• Transport & Logistics
• Ports and Terminals

The life of maritime business in Ukraine split up into before and after, in view launching the institute of arrest of sea-going vessels on May 16, 2012, when the International Convention for the Unification of Certain Rules for the Arrest of Sea Vessels dated May 10, 1952, entered into force in Ukraine.

For the state, this is quite a complex process – bringing the national procedural legislation into compliance, developing national judicial practice, while for us it is an effective tool for encouraging the debtor to properly fulfill obligations. Significance of the Convention shall mean optimizing the procedure for imposing arrests on sea-going vessels.

The only procedural tool is filing to the court an application on maritime claim security in the form of ship arrest.

It should be noted that ship arrest shall be carried out exclusively on the grounds of a maritime claim. An exhaustive list of 17 maritime claims is set forth in Article 1 of the International Convention for the Unification of Certain Rules Concerning the Arrest of Maritime Vessels dated May 10, 1952.

The applicant is not limited to filing a lawsuit on the merits, since the claim can be filed before arrest, jointly with the application on ship arrest, as well as within 30 days from the date of ship arrest.

An application on maritime claim security submitted either upon location of the vessel registry port or upon location of the seaport whereto the vessel is calling or where she is staying. It means the following:

 - If the vessel, in respect whereof a maritime claim has arisen, is heading to Mykolaiv Sea Port, an application on ship arrest shall be submitted to the Mykolaiv Region Commercial Court.
 - If the vessel, in respect whereof a maritime claim has arisen, is staying in Odesa Sea Port, an application on ship arrest shall be submitted to the Odesa Region Commercial Court.
 - If the vessel is registered in Kherson Sea Port, an application on ship arrest shall be submitted to the Kherson Region Commercial Court.

The application shall be considered by the court not later than two days after its receiving, i.e. in some cases additional tools should be apply, for example, vessel detention in the port for three days. In this way, we minimize the possibility of the vessel leaving the port before a decision on her arrest is taken, even on weekends.

Geography of ship arrests in the Ukrainian sea ports

Due to full-scale invasion, Berdiansk, Mariupol, Skadovsk, and Kherson sea ports got closed, while Mykolaiv, Olvia, Dnipro-Bug, Ochakiv, and Kherson sea ports are treated as blocked because they are located close to the military zone and there is a high risk of damage due to intense shelling by the enemy.

From August 2022 till March 2023, the Great Odesa ports, which include Odesa, Chornomorsk and Pivdennyi sea ports, worked only in the framework of the Grain Initiative. These ports are currently operating with certain precautions in place.

In this regard, the Danube ports, which include Reni, Izmail, and Ust-Dunaysk ports (the latter also includes the Kiliya port), have become the center of shipping. Ukrainian cargo turnover through these ports increased almost sixfold, as compared to the pre-war period and set a record in 2023.

The main shipping activity is now concentrated in the Danube ports and the Great Odesa ports.

With regards to the aforesaid, it is relevant to generate statistics only for the Odesa Region and for two periods: during the war and two years before its outbreak.

From the beginning of the full-scale invasion until today, there have been 23 attempts to impose ship arrest in the Odesa Region, including 13 successful ones and the other 10 resulting in rejection of ship arrest. By the way, more than half of the successful arrests were imposed by Interlegal law team. Similar statistics also with the prevention of arrest. For instance, in 4 of the abovementioned 10 cases, Interlegal specialists prevented arrest of clients’ vessels.

On the other hand, two years before the outbreak of full-scale war, there were half as many arrest attempts, namely 11, including 7 successful ones and the other 4 rejected.

Geography of ship arrests in the Ukrainian sea ports before and during the war

Statistics upon the number of ship arrests in various ports are quite expected. There were no arrests in Odesa, Chornomorsk and Pivdennyi sea ports during the war. On the other hand, the Danube ports have been leaders for the last two years not only in shipping activity, but also in the number of ship arrests.

The feature of Danube ports is lack of capacity, narrowness and small depth of channels, which limits the size of vessels that can call these ports.

Imagine this: in the Odesa Sea Port it is necessary to enter into delivery contract on one large vessel for loading, while the Izmail Port prescribes entry into a delivery contract for several small-sized vessels.

For these reasons, navigation density on the Danube has increased, causing growth in the number of various disputes, including collisions of vessels, damage to cargo and breach of charter parties.

Since ship arrest is the most effective instrument for dispute settlement in maritime law, the number of arrests imposed on the Danube has also increased.

Grounds for ship arrest

Of course, the war essentially affected activity of the entire maritime industry of Ukraine, therefore, along with geography of shipping, the grounds for imposing arrests also changed.

Odesa Region was quite rich in rendering derivative services, such as agency, shipbuilding, ship repair, ship equipment, crew hiring, as well as supplies of goods or materials for the purpose of vessel operation (ship chandler services).

Since shipping in the Odesa Region is being carried out only for the purpose of grain export, such derivative services as ship repair are not provided at all, while agency services have significantly decreased.

Due to significant limitation of the service market, there is a proportionally reduced number of violations in this industry, thereby increasing the number of arrests under certain maritime claims.

That is, two years before the war, we saw a variety of reasons for ship arrest, namely: disputes regarding the vessel ownership, delivery on board, wages, while the most widespread grounds were vessel construction and repair.

In contrast, during the war, derivative services are not provided; therefore, the focus has shifted from derivative services to primary services. 

The most widespread grounds for ship arrest were violations of the charter party, collision of vessels and damage to cargo. As we have already mentioned, the reason for such changes is the increase in navigation density on the Danube due to its narrowness and shallow depth.

Conclusions:

The war makes day-by-day adjustments not only in the lives of Ukrainians, but also in maritime business – the decline of closed and captured ports.

However, one should not focus only on negative effects. The Great Odesa ports are gradually returning to the past rhythm of life. At first, the ports stayed idle, then they worked only in the framework of the Grain Initiative, and today they are already accepting container ships. Although the pace of development is slow, it is clear that these ports are not in danger of stagnation.

The Danube ports are now at the stage of renaissance, i.e. they have large chances for upgrading and expansion: they primarily facilitated business contribution to the economy of Ukraine. In addition, these chances are used in full in the form of dredging works, monthly updates of handling records and investment projects.

Nikita Kocherba

kocherba@interlegal.com.ua