Article issued for the third edition of “Ship Arrest in Practice”, 2008, published by shiparrested.com network.

By Ulla von Weissenberg
Aminoff & Weissenberg
ulla.weissenberg@jaflaw.fi
www.jaflaw.fi
Kasarmikatu 44,
00130 Helsinki, Finland
Tel: +358-(0)9-6840 477
Fax: +358-(0)9-6840 4740

 

Overview

1.    Please give an overview of ship arrest practice in your country.
The arrest of foreign vessels is possible in Finland if the underlying claim is a maritime claim as defined in the Arrest Convention of 1952, incorporated in the Finnish Maritime Code (hereinafter “MC”) of 1994, Chapter 4. However, Chapter 4 of the MC is not applicable if the applicant is domiciled in Finland and the vessel in question is registered in the Finnish Register of Ships.

The existence of a maritime claim in itself is not a sufficient ground for an arrest. It is only possible to arrest a vessel in Finland if the material claim as such can be enforced against the vessel in Finland. Therefore, the vessel must be owned by the defendant or the claim should be secured by a maritime lien on the vessel. When arresting a vessel in Finland the applicant must provide security to cover the costs of an unjustified arrest.

An arrest is effected in two separate phases. Firstly, the applicant must obtain a court order for the arrest and thereafter apply for the actual enforcement of the order from the executive authorities. To maintain an enforced arrest in force, the applicant must commence legal proceedings against the defendant to obtain an enforceable judgment within 1 month from the date when the arrest was granted.

Generally, the court competent to deal with an arrest order is the Maritime Court within whose jurisdiction the defendant is domiciled, has his principle place of business or where the vessel to be arrested is located. If the claim of the arresting party is already pending before a Finnish Maritime Court, the arrest application will be tried in this court.

Applicable Laws

2.    Which International Convention applies to arrest of ships in your country?
Finland has on 21 December 1995 ratified the Arrest Convention of 1952.

Finland has on 31 August 2000 signed the Arrest Convention of 1999 but the Convention has not yet been ratified.

3.    Is there any other way to arrest a ship in your jurisdiction?
If the ship to be arrested is Finnish and the applicant is domiciled or has its principal place of business in Finland or if the claim is of a public nature, the provisions of the MC concerning arrest do not apply. In these cases the general rules on distraint incorporated in the Finnish Procedural Code apply.

4.    Are these alternatives e.g. saisse conservatoire or freezing order?
When enforcing an arrest order the vessel is in principle taken in to the custody of a Bailiff but due to the nature of the arrested property, this is not possible in practice.
Instead, the Bailiff takes possession of all the vessel´s necessary documents in order to prevent the vessel from leaving port. The vessel can also be chained to the key or prevented from refuelling. The Bailiff can also give notice of arrest and request executive assistance from e.g. the Coast Guard, the pilots, the Customs or the port authority to ensure the vessel remains under arrest. Required means are evaluated and used case-specifically.

Claims subject to ship arrest

5.    For which types of claims can you arrest a ship?
Generally, it is possible to arrest seagoing ships only to secure the enforcement of maritime claims as defined in the Arrest Convention.  However, if the applicant of the arrest is domiciled or has its principal place of business in Finland and the vessel is Finnish the Convention does not apply.

According to the Procedural Code, the granting of an arrest order is subject to:

(i)    prima facie evidence of the applicant’s claim which the defendant can be ordered to pay by a judgement or an arbitral award enforceable in Finland; and

(ii)    the existence of a threat that the defendant will hide, destroy or dispose of his property or otherwise endangers the applicant’s claim

6.    Can you arrest a ship irrespectively of her flag?
Finland has extended the scope of the application of the Arrest Convention to all vessels registered in the Finnish Register of Ships or in corresponding foreign ship register, regardless of the nationality or the trading areas of the vessel. There are no requirements in the MC that a vessel to be arrested should be registered in one of the states which has ratified the Arrest Convention.

7.    Can you arrest a ship irrespectively of the debtor?
A fundamental principle under Finnish law is that to secure a claim, it is only possible to initiate execution measures against property which is owned by the defendant. When ratifying the Arrest Convention Finland limited the possibility to arrest vessels owned by someone who is not liable for the claim of the applicant. Only when a claim is secured by a maritime lien on a vessel such vessel can be arrested irrespective of who the debtor is.

8.    What is the position as regards sister ships and ships in associated ownership?
As stated in question 7 a fundamental principle under Finnish law is that in order to secure a claim it is only possible to arrest property owned by the defendant.  Therefore a sister ship can be arrested if both vessels were owned by the same defendant at the time when the maritime claim arose. The same do not apply to ships in associated ownership.
However, according to the MC arrest of a sister ship is not possible if the underlying maritime claim is based on a dispute of ownership of a vessel or a dispute of ownership, possession or operation of or earnings from the vessel between co-owners of a vessel.

9.    What is the position as regards Bareboat and Time-Chartered vessels?
It will not be possible to arrest bare-boat or time-chartered vessel if the charter is solely liable for the claim.

Arrest Procedure

10.    Do your Courts require counter-security in order to arrest a ship?
An arrest order given by a court is enforced by the local Bailiff of the region where the vessel is located. Before the Bailiff will enforce the arrest order the applicant must provide security for any damage or loss which may be caused to the defendant if the arrest of the vessel proves to be unjustified.

The law contains no guidelines for how to determine the amount of security. The Bailiff enforcing the arrest order will at his own discretion decide what security will be considered sufficient to cover the liability of the applicant and in practice both limited and unlimited securities have been required. Generally only security given by a Finnish bank is accepted.

The Procedural Code contains a provision which entitles the Maritime Court to release the applicant from the obligation to provide security. This is only possible if the applicant cannot provide security and the applicant’s claim is considered justified and fell-founded. It is highly unusual that such release is granted. The authorities are not obliged to provide a security.

11.    Is there any difference in respect to arresting a ship for a maritime claim and a maritime lien?
There are some differences in this respect. The main principle is that a ship can only be arrested if the claim is a maritime claim and the vessel owned by the debtor. If a claim is secured by a maritime lien on a vessel such vessel can be arrested regardless of whether the debtor is the owner of the vessel or not. Further, if the applicant of an arrest has a maritime lien to secure his claim, to obtain an arrest order it is not necessary to show any threat that the defendant will hide, destroy or dispose of his property or take other steps which may jeopardise the applicant’s claim.

12.    Does you country recognise maritime liens?  Under which International Convention, if any?
Finland recognises maritime liens. The claims secured by a maritime lien are listed in the MC which corresponds to the list in the International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages of 1967. However, Finland has not signed or ratified the convention.

A maritime lien is valid even if the debtor is a non-operating vessel owner, a charterer or other person who takes use of the vessel.

Certain claims are secured by a maritime lien on the cargo which is loaded on board the vessel but the scope of claims is more limited.

13.    What lapse of time is required in order to arrest a ship since the moment the file arrives to your law firm?
Generally, the application for an arrest must be served on the defendant and the defendant be given an opportunity to file a defence before the arrest order is finally given. As this procedure often endangers the purpose of the arrest it is possible to obtain an interlocutory order which is immediately enforceable without any service of documents on the defendant. When applying for the arrest of a vessel an interlocutory arrest order is normally granted. In cases of extreme urgency an arrest order may even be obtained on the same day it is filed and enforced provided that the required security is available.

14.    Do you need to provide a POA, or any other documents of the claim to the Court?
A lawyer shall produce a POA personally signed by his/her client unless orally retained by the party in court. An advocate (member of the Finnish Bar) does not need to present a POA in the court.

There are no specific requirements regarding the particulars of the arrest application but it should at least contain details of the applicant and the defendant, particulars of the vessel to be arrested (e.g about the ownership), particulars of the amount of the claim with supporting documentation, a brief account of the grounds of the claim and an explanation why the arrest is considered to be necessary.

15.    What original documents are required, what documents can be filed electronically, what documents require notarisation and/or apostille, and when are they needed?
A written application with supporting documents must be filed with the Maritime Court in order to obtain an arrest.
The claimant must produce prima facie evidence supporting his claim or right. Therefore a mere allegation will usually not suffice. The Maritime Courts will evaluate at their own discretion the strength of the presented evidence. If the applicant wants to invoke the benefit of a maritime lien, he must produce evidence of the existence of such lien.
Normally an extract from the ship´s register or a corresponding document as evidence of the ownership of the vessel is required. Also particulars of the parties and the vessel to be arrested as well as particulars of the amount of the claim can be attached. The attached documents are not required to be original. Neither notarization and nor apostille of a document are normally required.
According to the Finnish law parties are in principle allowed to deliver documents electronically to the authorities to the extend the authority has necessary technical, financial and other resources to receive them. If the document is required to be signed, the requirements of an electronic signature as stated in the relevant act must be met.

16.    Will your Courts accept jurisdiction over the substantive claim once a vessel has been arrested?
According to the MC, a court competent to try an action in civil litigation is the Maritime Court within whose jurisdiction the defendant is domiciled, has his principle place of business or where the vessel to be arrested is present.
An action for damages concerning a contract of carriage of general cargo can be brought before a Maritime Court competent for a place where the vessel was arrested.
If security has been lodged with an authority for release from arrest, an action can be brought before the Maritime Court where the security was lodged. The same applies even if the security has lapsed.

Miscellaneous

17.    Which period of time will be granted by the Courts in order for the claimants to take legal action on the merits?
In order to keep an arrest order in force the applicant must commence legal proceedings against the defendant within one month from the day when the final arrest order is granted. When the court decides on the principal claim, it must also decide on how long the arrest order is in force.

18.    Do the Courts of your country acknowledge wrongful arrest?
Under Finnish law the applicant’s liability for an unjustified arrest is strict. Therefore, the applicant is liable for any loss the defendant may suffer as a result of an unjustified arrest even if the applicant has not been negligent or acted in bad faith when enforcing the arrest.

19.    Do the Courts of your country acknowledge the piercing and lifting of the corporate veil?
The main rule in Finland is that the shareholders of a limited liability company are not personally liable for the obligations of the company. The same applies to a group of companies controlled by same interests. Piercing the corporate veil is generally not possible. Therefore it is not normally possible to arrest property of owner´s associated with the debtor. The only exceptions are partnerships, since the general partners are personally liable for the debts of the company.

According to the Enforcement Code property formally owned by a third party can be attached to secure a claim on condition that the ownership is based on formal arrangements which do not correspond to the actual nature of the transaction and aim at avoiding enforcement. A further condition is that the applicant´s claim cannot be otherwise recovered from the debtor within a reasonable time.

20.    Is it possible to have a ship sold pendente lite; if so how long does it take?
The main principle under Finnish law is that it is not possible to sell the ship pendente lite.

According to the Finnish Enforcement Code, if property which is subject to rapid deterioration or which is expensive to retain in custody has been arrested but the court has not yet given a judgment, the Bailiff is entitled to sell such property at the request of the claimant. In theory these principles may apply also to vessels under arrest.