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Power of attorney
The filing of a lawsuit, the presentation of an application as well as any legal activity before major Italian Courts are made by a solicitor by virtue of a power of attorney issued in his/her favor.
Powers of attorney issued outside Italy must be legalized and apostilled pursuant to Hague Convention 5 October 1961 (ratified by Italy by law 20 December 1966 n. 1253), or alternatively legalized by the Italian Embassy or Consulate in the country of issuance.
Italian Courts are quite demanding in assessing the validity of powers of attorney issued abroad, it is therefore important to make sure that all formal requirements are duly met: the validity of powers of attorney has been, for instance, excluded in cases where the Notarization was made at a time and a place different than the ones of signature.([1])
The apostille is unnecessary, though, for powers of attorney released in countries party to the Brussels Convention 1987 which abolished the need of the apostille for deeds issued inside the EU, which has been ratified to date by Belgium, Denmark, France, Ireland and Italy; the apostille may be furthermore excluded by virtue of bilateral agreements.
Italian solicitors have the authority to legalize powers of attorney issued before them, provided that they have had the opportunity to identify the party signing the deed. ([2])
In arrest or urgent proceedings an option is furthermore provided by article 77 c.p.c. which permits the possibility of an agency appointment, generally made in practice by appointing (by fax or e-mail) as agent for urgent matters (including the one for which the measure is sought) a lawyer who in turns appoints (usually) another lawyer of the firm as attorney in law. A formal duly legalized power of attorney is often disclosed at a later stage in order to prevent exceptions and technicalities.
Procedure
Arrest of ships is available in a wide variety of situations, including claim for damage done by or suffered to a vessel, claims for goods, bunker or materials supplied to a vessel for its operation or maintenance; the actions can be taken by a bank that has terminated the loan facility and wishes to draw on its mortgage, crew members that have outstanding wages, cargo interests and insurers for claims for loss of – or damage to – the goods.
Arrest is admitted regardless of the fact that Italian Courts have jurisdiction for the merits of the case: the Italian Court competent for the arrest is the Court of the port of call, and the application is subject to the condition that the vessel is within Italian territorial waters.([3])
Italian Courts normally grant the arrest of ships ex parte (provided they are satisfied with the prima facie evidence of the ground of the claim) upon presentation of the application, setting the hearing for the appearance of the parties (normally within a short term).
In non maritime arrest proceedings the judge summarily examines the request and grants the measure if the claim brought is at first glance well grounded (“fumus boni iuris“) and the applicant proves that it is exposed to damages beyond repair during the course of the ordinary proceedings (“periculum in mora“).
The requirement of the periculum in mora is generally not requested for maritime arrest, though, at least in case the arrest is sought pursuant to Brussels Convention 1952, on the ground that the Convention does not contemplate such a requisite.
The Court may alternatively issue an order preventing the vessel from leaving pursuant to article 646 Navigation Code: the order does not state the quantum for which the arrest is granted and is not, strictly speaking, an arrest, but has in practice the same effects.([4])
Unlike other legal systems, no security is required as a preliminary condition to seek an arrest of ship. The Judge may order the applicant to tender a countersecurity, although this is rather uncommon at the time of the filing of the application, and a security is normally requested only where the Court considers that the arrest is controversial or the merits of the claim have not been assessed with sufficient depth.
Where the arrest is obtained and confirmed, the applicant is compelled to commence the proceeding for the merits (unless one is already pending) before the Court having jurisdiction within 30 days.
In case the application is rejected it is possible to file an appeal within 15 days. It is disputed whether an appeal can be pursued once the ship has left Italian waters: the possibility to seek an appeal should be unquestionable under Italian law, but a few decisions have held that an appeal cannot be pursued where the ship cannot actually be placed under arrest.([5])
If the claim is subject to foreign law and jurisdiction (for instance, where the arrest is sought as security for a claim arising from a charter party containing an English law and jurisdiction clause) the applicant is required to provide suitable evidence of the ground of the claim: this could be provided for example by means of affidavits or disclosing foreign authorities and case-law proving the grounds for the claim.
A peculiar position exists for arrests aimed at securing the successful enforcement of arbitration awards or foreign judgments: jurisdiction for the exequatur is in the Court of Appeal, and the position often expressed by Italian Courts ([6]) is that an arrest preceding the exequatur should be sought before the Court having jurisdiction for the recognition of the award or the judgment. This may have (and frequently has in fact) practical pitfalls, since it may turn out quite complex to obtain an order of arrest from the Court of Appeal at the speed normally allowed by Tribunals.
Italian Courts have started in the last few years (and in very few cases) to recognize the possibility of lifting the corporate veil, but this is quite exceptional, and the burden of proof resting on the applicant is severe. Italian law is indeed very strict in the definition of ownership in the context of companies and in applying the principle of autonomy of companies which are distinct and separate entities. As a result Italian Courts are reluctant to pierce the corporate veil, and the applicant intending to do so must be able to prove that the company structure has been actually created or employed with the purpose to frustrate creditors’ actions.
Arrests under Brussels Convention 1952
Italy is a signatory of the Brussels Convention 1952.
If a ship is flying the flag of a state party to the 1952 Arrest Convention, arrest in Italy can be sought only with respect to maritime claims listed under article 1.1; if the ship is not flying the flag of a contracting state she can be arrested for the aforesaid claims as well as for any other claim for which arrest is allowed under Italian law (i.e. virtually any credit or claim against the owner of the vessel, including those not mentioned in the list of maritime claims set out by article 1 Arrest Convention).([7])
Italian Courts generally apply the 1952 Arrest Convention also for arrest of ships flying the flag of a non-contracting state, on the basis of a rather extensive construction and application of article 8.2 of the Convention.([8])
An issue still controversial is the possibility to seek the arrest of a ship based on article 3.4 of the Convention if the claim is not secured by a lien: several Courts ([9]) have declined to grant the arrest on the grounds that article 9 makes clear that the Convention does not create maritime liens, and that an arrest based on article 3.4 in the absence of a lien could not be subject to further enforcement against the owners and the ship.
Arrest of sister ships is possible, provided that the sister ship is owned by the same entity which owns (or owned) the ship connected to the claim at the time the cause of action arose.
It is furthermore possible to arrest assets other than the vessel (eg., the bunkers on board) to secure a claim, for instance for hire payment or a claim for insurance proceeds.
From a practical viewpoint, arrest of the vessel’s bunkers may be as effective as arresting the vessel itself, and may often lead to security being put up by the owners; however, the bunker must be owned by the debtor, and it is important to keep in mind that under a time charterparty, the bunkers are normally owned by the charterers, not the shipowner.
Maritime liens
If the claim is secured by a maritime lien, this may operate to allow the arrest of a vessel even if it has changed ownership, the doctrine being that the lien attaches to the property at the time the cause of action arises and remains so attached until satisfied or time barred.
Maritime liens take priority over registered mortgages, yet need not be registered themselves.
The existence of a lien is determined by the law of the flag at the time the claim or credit arose.
Italy is a signatory to the 1926 Liens and Mortgages Convention, and recognizes a list of maritime liens under article 552 of the Italian code of navigation, which largely coincide with the list contained under article 1 of the 1926 Convention.
The lien is subject to a short deadline for the enforcement, and the arrest of ship is the standard measure under Italian law to prevent the lien from expiring; hence, in case the claim is secured by a lien on the ship and the arrest is aimed at enforcing the lien, the measure is generally granted without requesting any evidence of the periculum in mora.([10])
Guarantees and Letters of Undertaking
Either under Italian law (art. 684 c.p.c) or pursuant to the provisions of the Brussels Convention 1952 on arrest of ships (art. V) Owners may obtain the release of the ship arranging the issuance of a suitable guarantee.
The options available in this respect are actually two: escrow or bank guarantee (or Club’s LOU).
The first solution implies that the sums are deposited into a special bank account and authorization from the Court is sought to shift the arrest from the ship to the sums.
Funds are kept under escrow and released upon authorisation of the Court if the claimant proves that it is entitled to receive the payment out of the money (i.e. that an enforceable judgment has been obtained and that an exequatur in Italy has been granted).
The escrow solution is generally adopted either where the applicant refuses to accept a guarantee, or where the Owners wish to challenge the arrest, since the arrest order is simply shifted onto the sums and the defendant is therefore allowed to challenge the arrest after the release of the ship.
A further advantage for the defendant is that the actual recovery for the applicant may be much more time consuming, since sums are paid upon condition that claimant has obtained an enforceable judgment and that same has been recognized in Italy: the overall procedure is quite long and this may be used as an element of pressure to induce a settlement.
The downside is of course that the sums are under escrow and unavailable for a long time.
The second option is a guarantee payable against an enforceable judgment issued by a Court having jurisdiction, or payable against an award or agreement, based upon wording which normally is the one currently used for the standard P&I LOU forms (a standard form of LOU generally accepted by Italian claimants is enclosed). In this case the arrest is withdrawn against the release of the guarantee, and there is no more possibility to challenge the arrest. ([11])
In case the offer of a guarantee or a Club’s LOU is rejected, the Judge of the arrest proceeding will appraise the suitability of the guarantee offered, and will order the release of the ship where the guarantee is considered appropriate.
A crucial issue is the wording of the guarantee, which may be difficult to agree upon where the arrest is sought (for instance pursuant to article 3.4 of the 1952 Convention) for a claim against the disponent owner/charterer; it is generally possible to agree upon the issuance of a LOU with such a wording to cover also a claim against the disponent owner/charterer on the ground that the claim is secured by a lien on the ship; alternatively a LOU issued on behalf of the r/owners indicating them as carriers may be accepted against confirmation that the ship is not (and was not at the time of the event giving rise to the arrest) under bare boat charter or any similar demise charter.
As to bank guarantees, an issue often disputed is whether the guarantee may have a term, since Italian banks usually do not accept or issue guarantees with unlimited validity.
The Supreme Court ([12]) has recently held the nullity of the provision of a bank guarantee issued for the release of a ship setting a validity of 10 years, on the grounds that the applicant cannot be exposed to the risk of losing the security pending the time necessary to obtain a final judgment.
Requests for limited validity and expiry in guarantees or LOU could therefore be rejected in the future on the grounds that such a guarantee would be unsuitable.
Owners do not have effective instruments to prevent the presentation of the application. Several years ago Italian lawyers occasionally used to file an application as a preventive measure when they suspected that an arrest was impending, asking the Court to refuse to grant the arrest ex parte, but local Courts have generally refused to consider such an application, and the practice nowadays has virtually disappeared.
Liability for wrongful arrest
Damages for wrongful arrest are relatively uncommon, and generally awarded when it is clear that the applicant sought the arrest acting in bad faith or with gross negligence, disregarding the evidence available, or intentionally providing the Court with partial or misleading background information.
The burden of proof of the circumstances proving the abuse and the damages incurred rests upon the party claiming the wrongful arrest.
Sale of the ship
The arrest does not give an automatic right to initiate judicial sale proceedings of the vessel.
Arrest merely provides security, and judicial sale proceedings are conditional on the claimant having an enforceable claim in accordance with the rules of the Civil Procedure Code.
In practice, this means that the claimant can proceed with the sale of the vessel only once an enforceable and binding Court decision on the claim itself (the merits) has been issued.
The proceeds of sale will be divided among the creditors in accordance with certain rules of priority. After all costs in connection with the judicial sale proceedings have been deducted, claims secured by a maritime lien or a mortgage on the vessel will be paid first. Any balance thereafter will be divided among the other creditors, with the time of registering the claim being a crucial factor.
[1] Cassazione n. 3410/2008 Media Barter c. Cairo Communication; Cassazione n. 13228/2008 Tomoana Pelt Processors Ltd c. Conceria Pellami Gasm.
[2] Cassazione n. 5840/2007, Alpina Versicherung A G c. Royal & Sun Alliance.
[3] Court of Venice, 25 August 2001, El Sayed Aly Alla c. Sayed Nasr Navigation Lines
[4] Court of Venice, 5 June 1998, TMB c. Dal Bon
[5] Court of Gorizia, 25 May 2006, Stx Pan Ocean co. ltd. c. Adam Swoboda
[6] Court of Gorizia, 2 May 1998, Ministero trasporti ucraino c. Pied Rich BVA. Court of Appeal of Genoa, 12 February 2000, Morsviazputnik Satellite Navigational c. Azov Shipping co.
[7] Court of Appeal of Genoa, 12 February 2000, Morsviazputnik Satellite Communications Navigational c. Azov Shipping co.; Court of Venice, 6 October 1999, Elmar Shipping Agency c. Turkmen Shipping
[8] Court of Genoa, 22 March 1994, Galaxy Energy International ltd. c. Soc. agenzia maritt. Dolphin
[9] Court of Ravenna, 23 march 2000, Jakil c. International Transportation co. ltd; Court of Ravenna, 4 August 2001, Aagaard Euro Oil c. Sea Frantic co. ltd; Court of Venice 5 June 1998, Exnor Craggs ltd. c. Companie Navigatie Maritime Petromin
[10] Court of Genoa, 11 November 1994 Rimorchiatori Riuniti Porto Genova c. Morfini; Court of Appeal Lecce, 12 January 1995 Bibolini c. Barretta.
[11] Court of Genoa, 6 December 1994 Marline Universal Shipping co. c. Mediterranean Overseas Shipping Agency
[12] Cassazione 30 Novembre 2006 n. 25481, Impresa Barretta c. Comit Spa, The West of England, Lloyds Bank Tlc.
