Ship Arrest – A Tool in the Creditor’s Armoury
In the current economic climate, it pays for vessel owners and their sub-contractors alike to be aware of the potential for ship arrest in Scottish ports.
The power of arrest extends to a ‘ship’, its cargo or freight. The question of what constitutes a ‘ship’ has in the past been given a wide definition, including a (semi submersible) drilling rig. Fishing boats of all sizes would be considered ‘ships’ in this regard.
A party typically seeks to arrest a vessel in respect of an outstanding debt which they consider is owed. This forms part of a request to the court at the time of initiating court action. The court has to grant a warrant to arrest the vessel. Importantly however, the arrestment is not in place until it has been formally served upon the vessel. There is only very limited access to judges outside of normal business hours and even then only if urgency can be demonstrated. A party who intends to arrest should therefore give careful thought to where, when and for how long a vessel is likely to be in port.
An application to arrest must be considered by the judge or sheriff before being granted. A party seeking to arrest must present reasons for the arrestment being appropriate. From an owner’s perspective, a caveat (a type of early-warning system lodged with the Clerk of Court), which can be lodged by a party to alert them to interim orders, is not guaranteed to be triggered by an application for a warrant for arrest.
Service of the warrant is usually done by Sheriff Officers/Messengers at Arms, who will inform the harbour authority and also (if the court expressly permits it) take along an engineer to dismantle an essential part of the engine, to prevent the vessel from sailing away!
Where to seek the Arrestment?
Unlike in England, there is no specialist Admiralty Court in Scotland but the Sheriff Courts have jurisdiction over their territorial areas and actions can be raised in the Court of Session, Edinburgh, for a vessel anywhere in Scotland.
Jurisdiction is then determined by:
- The cause of action arising in the Court’s designated area
- The Defender, ie the party being claimed against, residing or having a place of business in the designated area
- The chosen Court already hearing court proceedings arising from the matter in dispute
- Agreement between the parties that a particular Court will have jurisdiction for the dispute
- Whether the vessel can in fact be arrested to ‘found’ jurisdiction
As an example, an engineer who provided services in Peterhead to a Peterhead-based owner could rely upon either heads (i) or (ii). An example of (v) would be the arrestment of a foreign-registered vessel in a Scottish port to found, ie give jurisdiction, although it should be noted that is only permitted under certain limited circumstances.
Types of Arrestment
The most common form of arrestment is one which relates to assets owned by the alleged debtor. This is an action ‘in personam’. This type of arrestment is known as being ‘on the dependence’ of the court action, ie security for a debt allegedly owed by the vessel owner. There are however restrictions upon this: it needs to be the vessel in question (from the example above, the one which the engineer worked upon) or another vessel wholly owned by the same owner. The classes of claims which are covered are set out in statute.
The other form of arrestment is an action ‘in rem’. This is one directed against the actual vessel, rather than the owner. It is used to enforce a maritime lien, which covers a crew’s wages, claims for salvage and for damages arising from a collision at sea. An arrestment in rem is also competent in very particular circumstances relating to the ownership or mortgage of a vessel, as set out by statute.
A Word of Warning
A party who arrests a vessel on what subsequently transpire to be erroneous grounds can face a claim in damages for ‘wrongful arrest’. This can amount to potentially very significant sums if a vessel is detained for a number of days. Parties contemplating arrestment should therefore consider the matter very carefully with their legal advisers.
For more information on this matter, please contact Neil Smith.