SHIP ARREST AND SECURITY
A party may seek security for a claim against a vessel owner through a number of avenues, the most notable related to maritime claims being Ship Arrest. Other options include Mareva injunctions otherwise known as “Freezing Orders” intended to prevent the dissipation of a defendant’s assets.
A claim for Ship Arrest may be made by the claimant either in personam or in rem against the vessel depending on the nature of the claim (Administration of Justice Act 1956, section 1) in the Supreme Court exercising Admiralty jurisdiction (rule 50 of the Cypriot Admiralty Jurisdiction Order).
The process commences with the Claimant filing a writ of summons in the Supreme Court along with an application for the arrest of the vessel and an affidavit in support of the said application. The affidavit must include the nature of the claim and the specific claim for which security is being sought. In order to issue a warrant for arrest of a vessel the court must be satisfied that there is a serious matter to be heard, that the claimant has the right to have the matter/s heard, and that on the basis of the supporting documents the Claimant could be entitled to relief.
The claims for which Ship Arrest may be ordered are outlined in the Administration of Justice Act 1956, section 1.
Options available where security is sought from a party other than the vessel owner (or demise charterer) for a maritime claim
A contractual lien can be exercised against cargo, sub-freight or sub-charter hire where a lien clause is expressly included in a charterparty. Common law may also confer a lien against goods for freight due, general average contributions and/or expenses incurred by the owner for the purposes of preserving the goods. This lien can be exercised by the shipowner retaining possession of the goods and refusing to discharge or transfer them until the relevant debt is paid.
Where Ship Arrest cannot be effected for jurisdictional or other reasons, a claimant may seek a Freezing Order against the defendant’s assets both in Cyprus and overseas.
Form of security acceptable in relation to maritime claims, what form of security is acceptable
With respect to security payable by the claimant the Court requires the claimant to post a security bond by way of a Cyprus Bank Guarantee. In some common law decisions the claimant has also been ordered to provide a personal guarantee along with the abovementioned Bank Guarantee in relation to damage which the vessel or ship owner may suffer as a result of the action where the Ship Arrest is found to have been wrongful. The amount of the Bank Guarantee is at the discretion of the Court and varies based on the particular circumstances of each case; however, usually the guarantee is between 10%-15% of the claimed amount.
As part of an action for Ship Arrest the claimant is not only required to post the above guarantee but must also lodge a deposit for any expenses incurred by the Admiralty Marshal connected with or in relation to the detention of the ship for the period that it remains under arrest. The amount is determined by the Court and is subject to increase as required. Finally the claimant must lodge any other amount required by the Registrar to effect the arrest of the vessel.
Separately, in relation to security for the release of a vessel the Supreme Court’s recent decision in the matter of Telia Vasiliko Limited v The Ship ‘FRIENDSHIP’ under Malta flag now lying at the Port of Vasiliko, Action No 26/2012; decision dated January 18 2013, application for ship arrest dated December 3 2012, considered the issue of security for the release of a defendant vessel. The Court outlined a range of factors that are taken into account when calculating security including the value of the claim and ruled that the claimant is entitled to security that is sufficient to cover the amount of its best arguable case, as well as costs and interest, however in any case the amount cannot exceed the value of the vessel.
This publication has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining professional advice. This information should not be relied upon as a substitute for such advice.For more information please contact us at firstname.lastname@example.org; +357 25 823 593