Maritime Lien And Arrest of the Vessel to Secure Maritime Claims

      The following claims against the ship owner are secured by a maritime lien on a vessel in compliance with Article 367 of the Merchant Shipping Code of RF:

1)      relating to salaries and other payments due to the captain and other crew members for their work on board the ship, including expenses on repatriation and social security payments effected on behalf of the captain and other crew members;
2)      compensation of damage inflicted on life and health of an individual on the land or water in direct connection with the vessel exploitation;
3)      reward for the vessel salvage;
4)      payment of harbor and channel dues, dues on other navigable waterways and pilot dues;
5)      compensation for actual damage inflicted in the course of the vessel exploitation and resulting from the loss or damage of the property other than cargo, containers, and passengers’ belongings transported on the vessel.

      The above claims are to be satisfied out of proceeds from the sale of the vessel.

      Therefore, the institution of a maritime lien stipulates that in the event the claim against the ship owner (or charterer, etc.) is secured by a maritime lien on the vessel in accordance with legislative acts, a compulsory sale of the vessel is carried out in order to satisfy the above claim, irrespective of the availability of the debtor’s other assets. Respective claims are satisfied out of the proceeds from the vessel sale. Maritime lien does not require an underlying agreement since it arises from the law.

      Arrest of the vessel to secure a maritime claim is an independent institution of maritime law different from maritime lien.

      In compliance with Articles 388-393 of the Russian Merchant Shipping Code when the vessel is within the Russian jurisdiction, it can be arrested to secure a maritime claim pursuant to a judgement, award, or an award rendered by a private maritime arbitration authorized by law.

      The vessel may be arrested in order to get the security irrespective of the fact that in compliance with jurisdiction or arbitration clause specified in a respective contract or otherwise, the maritime claim which is the reason for arrest of the vessel is subject to consideration by a common or arbitration court in another country.

      In the above instance, the proceedings are to be brought against the vessel’s owner or bareboat charterer.

      Also important is the fact that arrested can be any vessels of the same owner against whom a maritime claim has been brought.

      The vessel may be released from the arrest only pursuant to a judgement or arbitration award in case the parties reach an agreement on provision of a guarantee or another security of the claim.

      In absence of the parties’ agreement on the security form and amount, the arbitration court defines the form and amount of the security which should not exceed the cost of the vessel.

      At the same time, if the court in whose jurisdiction the vessel has been arrested is not competent to consider the case on its merits, the guarantee or another security provided for the purpose of releasing the vessel from the arrest must specifically stipulate that it has been provided as a security of enforcement of any judgement/award which may be eventually rendered by the court competent to consider the case on its merits. Simultaneously the court or another competent judicial authority of the country where the arrest has been made specifies a period within which the claimant should file a lawsuit before a competent court. If in any of the above cases the lawsuit has not been filed within the period specified, the respondent may petition for the release of the vessel or cancellation of the guarantee or another security.

      Arrest of the debtor’s vessel(s) does not provide for its (their) subsequent sale. The procedure is aimed at compelling the debtor to discharge his obligations under the threat of losses resulting from the arrest of the vessel. The sale of the vessel may take place in the course of enforcement of the judgement/award on the debt collection.

      A principal difference between the arrest of the vessel and a maritime lien is that the arrest of the vessel to secure a maritime claim, unlike the maritime lien, does not necessarily result in a compulsory sale of the vessel. The vessel is arrested for the purpose of receiving from the debtor a sufficient guarantee or another security for the enforcement of the judgement/award rendered in a dispute between the parties over a particular maritime claim, unless the debtor discharges such claim voluntarily after the arrest of the vessel. In other words, even if the vessel is arrested, the judgement/award prescribing to satisfy the creditor’s claim will be enforced in compliance with the general rules of executory process and the claim may be satisfied at the expense of the debtor’s other assets, first of all – financial funds.

      The above issues are regulated by the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships (Brussels, 1952) in a greater detail than in the Merchant Shipping Code of RF. Russia joined the said Convention in 1999.

      With due regard for the provisions of the above Convention, the debtor’s vessel may be arrested to secure a maritime claim within the jurisdiction of any state – signatory of the Convention.

      Also, a vessel under the flag of the country which has not joined the Convention may be arrested within the jurisdiction of any state – signatory of the Convention, in connection with any maritime claim or any other claim with respect to which the law of the state concerned allows arrest.

      Hence, the arrest of the vessel to secure a maritime claim is a maritime law institution different from the maritime lien. In the Russian Federation this institution is applicable in accordance with the rules of the Merchant Shipping Code of RF and the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships.

      Simultaneously please note that Russia in 1999 also joined the Geneva Convention of 1993 On Maritime Liens and Mortgages. The list of claims secured by a maritime lien in compliance with the Russian Merchant Shipping Code corresponds to the requirements specified in the Geneva Convention.