Article issued for the third edition of “Ship Arrests in Practice”, 2008, published by shiparrested.com network.
By Peter van der Velden
Kiveld International Lawyers
pv@kiveld.nl
www.kiveld.nl
Parkstraat 83
2514 JG The Hague, Netherlands
Tel. +31 (0)88 254 83 53
Fax. +31 (0)88 254 83 83
Overview
1. Please give an overview of ship arrest practice in your country.
The procedure for obtaining leave for arrest starts with submitting an arrest petition to the court in whose jurisdiction the ship is located or is expected to arrive shortly. These proceedings are ex parte. The arrest petition can be filed even during out of office hours or in weekends.
The petition should contain the full style of the claimant and debtor, the grounds for the arrest and the amount of claim. The courts decision is placed on the arrest petition. The bailiff enforces the arrest by handing the court order to the master. The port authorities will be informed about the arrest and will not allow the ship to order for a pilot without which the ship can/may not leave the port.
When granting the arrest, the court determines a time limit within which the arrestor must file his claim in main proceedings before the proper court or arbitrators, failing which the arrest expires. That can be in the Netherlands or elsewhere. The claim amount is raised with 30% over the capital claim amount to cover future interest and costs while proceedings are pending.
The arrest must be lifted once sufficient alternative security is offered. This can be done either in the form of a first class Dutch bank guarantee or letter of undertaking by P&I Clubs of good standing. An arrest can be lifted without the intervention of the court being needed.
The ship owner may apply for an injunction ordering release. Such proceedings can take place on a very short notice. A decision will follow shortly as well. The court decides whether the claim has sufficient merit to justify maintaining the arrest of the ship. In practice, it is an uphill battle to convince the court that the claim is clearly without merit.
Applicable Laws
2. Which International Convention applies to arrest of ships in your country?
The Netherlands is a party to the 1952 Brussels Arrest Convention since 1983. The provisions of this Treaty are not incorporated into the Dutch Civil Code (like in some other countries), with the effect that the 1952 Brussels Arrest Convention only applies when the arrest is sought of a ship flying the flag of a country being a party to this convention.
Therefore, in cases where the 1952 Brussels Arrest Convention is not mandatory applicable, an arrest on a ship is allowed for any, i.e. also non-maritime, claims against the debtor, on any vessel (or other asset for that matter) owned by him.
There exist a Bilateral Shipping Treaty between The USSR and the Kingdom of the Netherlands ratified in 1969, which prohibits arrests in Dutch waters on Russian state owned ships (or of Dutch state-owned ships in Russian waters) related to the use of subject ship for trade. This treaty is continued by Russia and some other former USSR countries. Due to the privatization of state owned shipping companies, this treaty has mostly lost its function.
3. Is there any other way to arrest a ship in your jurisdiction?
To be distinguished are conservatory and executory arrests on a ship. Executory arrests are a means of enforcing a judgment (or arbitral award). For such enforceable/executory arrest, the arrest is allowed based on a judgment rendered by a Dutch court. Express permission for such arrest is then not needed.
The execution of an arbitration award (either rendered in domestic or foreign/international arbitration proceedings) requires court permission.
4. Are these alternatives e.g. saisse conservatoire or freezing order?
An executory arrest can – if the debtor is despite the arrest not willing or able to comply with the judgment or award – be followed by public sale (see further in answer to question 20).
Claims subject to ship arrest
5. For which types of claims can you arrest a ship?
For any claim, provided the Brussels Arrest Convention 1952 does not apply. In the latter case, the ship can only be arrested for maritime claims as listed in the convention.
6. Can you arrest a ship irrespectively of her flag?
Yes, but with one exception: Russian state owned ships related to the use of subject ship for trade may in principle not be arrested (see under question 2) .
7. Can you arrest a ship irrespectively of the debtor?
In principle only for a claim against the (legal) owner of the ship. Not for claims against any other party involved in the operation of the ship. There are though a few exceptions to this rule. Subject to certain requirements, such as claims against the bareboat charterer of the subject ship, cargo claims and also claims against the time-charterer for services rendered to the ship in order to keep into operation (claims for unpaid bunkers, supplies).
Certain claims even follow the ship regardless in whose hands it may be, e.g. a claim for crew wages, salvage, general average, and the like. For these claims, the ship may be arrested, even if it was sold to another after the claim arose.
State-owned ships may enjoy immunity, provided such ships are not commercially used.
8. What is the position as regards sister ships and ships in associated ownership?
As any asset of a debtor may be arrested in order to obtain security (or for that matter in enforcement of a judgment or award), a sister ship may be arrested. Ships not owned by the debtor cannot be arrested, i.e. only under extra-ordinary circumstances whereby the court “pierces the corporate veil”. Would a ship be owned by more than one owner, the ship can still be arrested for a claim against one of these “associated” owners.
9. What is the position as regards Bareboat and Time-Chartered vessels?
See the answer under question 7.
Arrest Procedure
10. Do your Courts require counter-security in order to arrest a ship?
Dutch courts have a discretionary power to demand counter security but in practice this rarely happens.
11. Is there any difference in respect to arresting a ship for a maritime claim and a maritime line?
The common law concept of “maritime lien” is unknown in Dutch law. However, if a maritime lien means that a certain claim is recoverable from the ship, i.e. even if the debtor is not the legal owner of the ship, a ship may be arrested for such claim/lien.
12. Does you country recognise maritime liens? Under which International Convention, if any?
The Netherlands is not a party to any conventions on maritime liens. However, claims based on a maritime lien, having the legal status of being recoverable from the ship, may qualify for an arrest.
13. What lapse of time is required in order to arrest a ship since the moment the file arrives to your law firm?
Generally between 1,5 and 5 hours. The petition will be dealt with by the court immediately. Once permitted, the bailiff if put on stand-by on beforehand can then execute the arrest forthwith.
14. Do you need to provide a POA, or any other documents of the claim to the Court?
A Power of Attorney nor supporting documents are required when filing the arrest petition. The court assumes and trusts that the lawyer acting for the creditor is in the possession of claim supporting documents.
In case the ship owner applies for release in an injunction, the claimant must be able to show his claim documentation. Documents in another language than English, French or German may have to be translated.
15. What original documents are required, what documents can be filed electronically, what documents require notarisation and/or apostille, and when are they needed?
No supporting documents, including original documents, are required when applying for leave for arrest.
Generally speaking, the requirement of submitting original documents is under Dutch law very rare, i.e. only when the opposing party contests the authenticity of the document. As original documents are not required when applying for arrest permission, nor are notarisation and/or apostille.
Although some communications can, an arrest permission cannot be filed electronically.
16. Will your Courts accept jurisdiction over the substantive claim once a vessel has been arrested?
The arrest creates jurisdiction. Unless international conventions to which the Netherlands is affiliated provide otherwise. If the parties had agreed on another jurisdiction or arbitration, Dutch courts must step aside.
Miscellaneous
17. Which period of time will be granted by the Courts in order for the claimants to take legal action on the merits?
The time limit for filing suit after the arrest has been enforced must be at least eight (8) days after the arrest was enforced. Usually a time limit for filing suit of one to two months is granted when it concerns a foreign ship. Courts are free to determine this time frame and are willing to give more time or an extension of the initial time limit if there are good reasons for a longer period or extension.
18. Do the Courts of your country acknowledge wrongful arrest?
Yes. If the claim on which the arrest is based appears not to exist or appears to be unfounded (because it has been rejected later on in proceedings on the merits), the arrest is deemed to be wrongful/illegal. In such a case the arresting party is liable for all damages suffered by the ship owner due to the wrongful arrest.
This is a strict liability, i.e. the (wrongful) arrestor is by definition obliged to reimburse the ship owner for all his damages and losses, like port dues, but even consequential damages, such as loss of hire. However, the ship owner has a duty to mitigate its damages, such as by way of offering alternative security in the form of a (bank or Club) guarantee, thus avoiding unnecessary detention.
19. Do the Courts of your country acknowledge the piercing and lifting of the corporate veil?
Dutch law is very strict in the definition of “ownership” and in acknowledging company structures. As a result, Dutch courts are hardly inclined to “pierce the corporate veil” and do in principle not allow a ship arrest for a claim against a third party, although having close links to the ship owner.
Even if it concerns a claim on a ship owner that is operating a fleet of separately owned single-ship companies or if a ship owner is holding all the shares in another ship owning company. An arrester must be able to substantiate that the company structure is mainly created and/or used with the purpose to frustrate creditors. There hardly exists case law on this subject as regards ships.
20. Is it possible to have a ship sold pendente lite; if so how long does it take?
If a ship has been arrested and the arrest is not lifted in injunction proceedings or by way of alternative security, the arrest will be maintained until the creditor has obtained a title (judgment or arbitration award). Once such title is obtained, the conservatory arrest will automatically be transformed into an executory arrest. This may be followed by a judicial/public sale of the vessel before the court, if so requested, in which case the court will determine the pre-conditions for such auction.
Auctioning of a foreign seagoing vessel is subject to a detailed time frame and scheme of requirements to be fulfilled prior to the day on which the ship is actually auctioned. These procedural requirements and the bidding system aim at securing proper and fair auction proceedings with the purpose to obtain the highest price for the vessel to be auctioned.
The auction notice must be published in the newspapers as designated by the court at least thirty (30) days prior to the day of the auction. An auction can be organized between 30 and 40 days after the title in which the creditor’s claim was adjudicated is obtained.
