Improving Ship Arrest Procedure in Ukraine
By: Evgeniy Sukachev
Senior Partner in Black Sea Law Company
& Irina Dolya
Associate in Black Sea Law Company
Ukraine is a modern European country situated on the Black Sea shore. There are 12 trade sea and river ports and a great number of private terminals in Ukraine. Several parties in the merchant shipping community face potential ship arrests arriving to Ukrainian ports. In May of 2012, Ukraine ratified the International Convention Relating to the Arrest of Sea-Going Ships, Brussels, 1952. However, the International Convention on the Arrest of Ships of 1999 does not apply to ship arrest procedure in Ukraine. The main Act regulating merchant shipping is The Merchant Shipping Code of Ukraine (herein ‘The Shipping Code”). And, depending upon the nature of the case, The Commercial Proceeding Code of Ukraine (“The Commercial Code”) and The Civil Proceeding Code of Ukraine (“The Civil Code”) may be applicable. In addition to these proceeding codes, the Ukrainian Act On the International Private Law shall be used in cases with foreign participants.
Specialists are currently at work with a large number of various Acts to improve the old legislation system in Maritime Law of Ukraine and to work out misunderstandings in Ukrainian Acts as well as International Law Acts.
The commercial courts of Ukraine decide cases in connection with all aspects of commercial contracts, bankruptcy, corporate disputes, securities, commercial relations, intellectual property rights, etc. Proceedings in Commercial courts follow The Commercial Code. On the other hand, General Courts of Ukraine decide cases on civil, housing, land, family, and labor relations. Disputes between Shipowners and Seafarers, as a rule, are decided by the General Courts of Ukraine, which follow The Civil Code.
Having given this brief insight into the Ukrainian court system, ship arrest procedure is not a usual procedure for Ukrainian courts. It is important to note that many Ukrainian judges are not sufficiently qualified to make decisions in ship arrest cases (obviously this is not a problem unique to Ukraine as many lawyers in various jurisdictions face the same problem in their country, too).
Ukrainian judges support the uniformity of court practice. To direct judges in unregulated matters, the Supreme Commercial Court of Ukraine and Supreme Specialized Court of Ukraine enact Letters of Recommendation and Explanation. Therefore, before initiating a ship arrest, the applicant should be well acquainted with court practices. It is also noteworthy that Ukraine does not accept precedents as a source of law. Court practice does not bind a judge . As references for the legal position argumentation, claimants may use Letters of Recommendation and Explanation issued by the Supreme Commercial Court of Ukraine and Supreme Specialized Court of Ukraine only.
The court may enact a decision that does not correlate with a general court practice and Letters of Recommendation and Explanation when a specific case has significant differences from previously decided cases and international practice.
Initiating the ship arrest procedure
After adopting the International Convention Relating to the Arrest of Sea-Going Ships, Brussels, 1952 on May 16, 2012, any vessel sailing under a Ukrainian flag or located at a Ukrainian port can be arrested in respect of a maritime claim, which are noted in the Brussels Convention, 1952, and The Merchant Shipping Code of Ukraine.
Article 42 of The Shipping Code stipulates that a maritime claim is a claim connected to the vessel ownership, building, managing, exploitation or commercial use, maritime lien, salvage, etc. The Commercial Code and the The Civil Code determine that security for a maritime claim is only obtained at the local court where a ship is berthed or registered.
As a preliminary step, the claimant can apply to the harbor master of the port where the ship is berthed for the ship’s detention. The ship can be detained for three days upon request of a person with a proven maritime claim against the ship. At the end of the three-day detention, an arrest order from the court must be presented, otherwise the vessel will be immediately released. Ship detention provision is determined by Article 80 of The Shipping Code.
As previously said, the applicant must apply to the court of the port’s jurisdiction where the vessel is berthed or registered to get an arrest order.
The application for arrest in respect of a maritime claim must contain
- description of a proven maritime claim;
- information that the claim commensurate with value of the vessel that will be arrested;
- grounds of the ship arrest necessity;
- evidence that the ship is berthed or registered in Ukraine;
- evidence that the party responsible for the maritime claim owns or manages the ship.
All documental evidence and other attachments must be legalized, translated into Ukrainian language and certified by a licensed translator or the notary. Application for arrest in respect of a maritime claim is adjudged in 3 days.
The Commercial Courts of Ukraine apply ship arrest as a preliminary measure to obtain security before presenting the maritime claim. The claimant shall apply the claim in 5 days. General Courts of Ukraine accept preliminary measures applying only for intellectual property rights security. According to The Civil Code, property arrest, as well as ship arrest, will be applied as a claim security after the claim is presented.
It is important to note that ship arrest in Ukraine may be cancelled or changed to other measures by the court. A debtor under the maritime claim has the right to apply for cancellation or a change in the method to obtain security for a maritime claim when the ship is under arrest. As a rule, a bank guarantee is used as a substitute for an arrest. Ukrainian courts recognize practically all bank guarantees as an appropriate form of security for a maritime claim, although priority is given to bank guarantees issued by Ukrainian banks. The bank guarantee must cover all demands of a claimant according to the maritime claim. Despite very few exceptions, Ukrainian courts do not usually accept the Letters of Undertaking issued by P&I Clubs.
Significant changes in Proceeding law of Ukraine are expected
On March 23, 2017, the President of Ukraine initiated an immediate project (“The Project”) “On changes to Commercial Proceeding Code of Ukraine (“The Commercial Code”), Civil Proceeding Code of Ukraine (“The Civil Code”) and Administrative Proceeding Code of Ukraine and other acts submission”.
Since June 8, 2017, The Project is being discussed by the Parliament. The Project provides significant changes that improve Ukrainian proceeding law and make court proceedings faster and more effective.
The new edition of The Commercial Code stipulates the court’s right to use business customs in unregulated relations and establish the small claims adjustment procedure. Small claims are determined as a claim under 168 400 UAH (approx. 5675Euro).
To be precise, changes in Ukrainian proceeding law give parties the right to use electronic signatures, present and receive documents through the Uniform court informational-telecommunication system, present electronic evidence such as electronic documents, graphic files, printed web sites, databases, etc. Parties may obtain reimbursement for legal assistance expenses in full, according to the Attorney Agreement regulations and payment documents.
The new editions of The Commercial Code and The Civil Code stipulate ship arrest as a specific measure of claim security and that ship arrest procedure may be initiated before the main claim is presented.
The new editions of both Codes stipulate that after ship arrest imposition, the applicant has a period of 30 days to present the maritime claim to the court, arbitration, or tribunal. The new editions also give the applicant the right to apply for the ship arrest to the local court where the ship planned to arrive, in addition to the current law that application must be made to local courts where a ship was birthed or is registered.
Application on the ship arrest is decided without claimant and debtor notification according to the new edition. A Court’s decision on the ship arrest may be presented directly to the harbour master of the port.
The new editions of The Commercial Code and The Civil Code are objects of active discussion now in Ukraine. Such changes are only anticipated and should be further developed. Moreover, for provision of effective and sufficient legal assistance, immediate legal projects must be considered.
I, Evgeniy Sukachev, have taken an active part in the development of New Codes in Maritime Law with partners from the Ukrainian Maritime Bar Association and have held many special events for the legal society during the past several years.
Ship arrest Seminar for Ukrainian judges
On April 19, 2017, Denis Rabomizo and I, acting as the President and the Board Member of the Ukrainian Maritime Bar Association, coordinated a Seminar on “Ship arrest in respect of the Maritime claims in Ukraine and Liability for Wrongful arrest” for judges of the Commercial and Civil Courts of Ukraine on the Ukrainian National School of Judgment base during the mandatory, annual special courses for judges in Ukraine. The Seminar covered such aspects as the historic aspect of ship arrest in respect of the maritime claims, claims as grounds of ship arrest, liability for the wrongful arrest, ship arrest in respect of the maritime claims procedure and regulations, and court practice on the ship arrest.
According to the participants’ feedback, judges received new information on the topic, got new experience and noted readiness to participate in other trainings on ship arrest and other aspects of Maritime law. A questionnaire shows that almost all participants rated the Seminar’s organization as excellent, 70% noted that the material for the Seminar was highly informative; 35% of the participants admitted that their view on the topic changed significantly, and 45% of the participants changed their view partially. Approximately half of the participants responded that they understood the ship arrest procedure in the context of Ukrainian Proceeding law. Participants understood what they need to do, how it should be done and in what terms. In addition, the same amount of participants noted that they had never decided cases on ship arrest. Since ships can only be arrested by the local court where it is berthed or registered, the courts of the Odessa region, Mykolaiv region and Kherson region handle the majority of these cases. Most of the participants determined that the Seminar gave them a better understanding of the Brussels Convention, 1952 enforcement.
To sum up the feedback, participants said that the Seminar should last longer to cover all controversial questions and admitted that the Seminar was informative and well balanced to cover the main topics of the ship arrest procedure.
In light of the excellent results of the Seminar, the Ukrainian Maritime Bar Association has already set in motion preparations for the next meeting with Ukrainian judges. Our team expects that much fruit will come of our labor with Ukrainian courts to provide adequate ship arrest procedure in Ukraine according to the international standards and demands of the merchant shipping community.
In conclusion, we are very proud of the opportunity to develop Ukrainian legislation in Maritime law, and to make it more useful, understandable, and closer to that of international standards.