Article issued for the third edition of “Ship arrest in Practice”, 2008, published by shiparrested.com network.
By John Harris
John Harris & Co, Legal Office
2 Palmer’s Gate / 36 Hanamal St. P.O. Box 33199
31331 Haifa, Israel
Tel: 972-4-862 7067
Fax: 972-4-862 5257
Sources of the Admiralty Court’s Jurisdiction
The jurisdiction of the Israel Admiralty Court (which sits in Haifa) is established by the 1840 and 1861 English Admiralty Acts. These acts were extended to the Dominions and Possessions of the United Kingdom by the Colonial Courts of the Admiralty Act 1890. Under the Palestine Admiralty Jurisdiction Order of 1937 these acts were extended to Palestine, then a British mandated Territory.
When the State of Israel was established in 1948, under the Law and Administration Ordinance, the Admiralty Court Acts of 1840 and 1861 became part of the domestic legislation of the newly established State.
The Shipping Law of 1960 relates to a number of matters including maritime liens. So far as these are concerned, this law widens and elaborates on the Admiralty Court’s jurisdiction as established by the abovementioned Admiralty Laws.
Section 40 establishes the existence of maritime liens against the vessel and also creates maritime liens on the freight due and the ancillary rights stated in Section 43. Section 41 determines the liens and their priorities as follows:
(1) The official expenses of selling a vessel pursuant to a judicial sale,
(2) Port and port related charges and expenses,
(3) The costs of preserving a vessel pending Judicial sale,
(4) Payments due to the master and crew including damages for personal injury,
(5) Salvage expenses relating to the vessel, its cargo and equipment on board and expenses incurred in saving the lives of the crew and passengers.
(6) Damages for personal injuries to passengers
(7) Damages resulting from collisions or damage caused by the vessel to port installations and buildings, dry docks, and loss or damage to cargo and to passengers personal effects,
(8) Mortgages – no distinction is drawn between a local or foreign registered Mortgage,
Section 43, extends the maritime liens to include:
unpaid damages due to the vessel’s owner for damage caused to the vessel or
for loss of freight and for amounts due to the vessel’s owner under general average or
for amounts due to the vessel’s owner for salvage services rendered by the vessel.
In order to establish a valid Arrest the Court has to be satisfied firstly that it has jurisdiction, which jurisdiction is established by the provisions of the abovementioned laws and secondly that cause of action constitutes a maritime lien or statutory right in rem under the lex causa. Unless the foreign law is proved as a question of fact, the Court will apply the identity of laws principle.
Arrest and Sale Procedure
The arrest procedure is initiated by filing a claim in rem against the vessel as the Defendant and if required, in persona against the owners, operators or any interested party. The Claim is filed under a summons to which is attached a statement of the nature of the claim, the amount claimed and the remedy required. Concurrently or subsequent to the issue of the Claim Application is made for the arrest of the Vessel. The Application must be supported by an Affidavit which in cases of urgency can be executed by the arresting attorney who will rely upon and attach the Affidavit of the arresting party. The filing of the Arrest Application is dependant upon the issue of the Claim.
The Affidavit should state the nature of the cause of action (supported by documentation) and those facts which establish the maritime lien.
The Application is heard ex parte and if the Court is satisfied on the above matters it will issue a Warrant for the Arrest of the Vessel.
Normally the Applicant does not have to file security but if the Court feels that the cause of action or the maritime lien have not been sufficiently established, it may issue the Warrant subject to the provision of Security. Upon service of the process upon the Vessel (the Master or any senior officer) the Arrest is established.
The Defendants have to file an Entry of Appearance within one week of service. If they have reason to challenge the cause of action or the existence of a maritime lien they can apply for the Arrest to be set aside.
It is not necessary to supply a power of attorney but this is preferable.
Court fees at the rate of 2.5% of the amount claimed are payable of which half is payable at the time of filing the Claim in Rem and the remaining half, one week prior to the trial of the Claim in Rem.
No additional pleadings are filed unless the Court orders otherwise.
As from the time of filing the Arrest Application and pendente lite, the arresting attorney can make application to have himself, alone or together with the attorneys representing major creditors, appointed as ad hoc Deputy Marshals of the Admiralty Court and to formally take custody of the vessel. As such they attend to the, legal formalities of arranging for the sale of the vessel and (through agents appointed by them) practical matters such as crew repatriation, supplies of bunkers, water and provisions and the like.
The Deputy Marshals will arrange for the sale to be advertised in a local newspaper and also in Lloyds List.
It is normally a condition that 10% of the offered price should be deposited in order to make the tenders eligible.
On the day stated in the Notice the prospective buyers either personally or by duly appointed representatives, appear before the Court which conducts the auction. The Court will give the successful bidder 24-48 hours to deposit the balance of the purchase price and under a Court Order transfer of the vessel, free of all liens and encumbrances, can then be effected to the purchaser under a Court endorsed Bill of Sale.
The Marshal then prepares his distribution account in accordance with the priorities as determined by the Shipping Law. The account is then lodged with the Court for approval and any interested party is given an opportunity to object. Having heard the objection the Court then confirms the account with or without modification and authorises payment. After payment is effected, upon application, the Marshal is discharged from his duties.
2. There are no International Conventions which apply to the arrest of ships in Israel.
3. Ships or any other property of the debtor can be provisionally attached in a normal civil claim. This requires that the cause of action is within the Court’s normal civil jurisdiction and the provision of a guarantee.
4. Apart from arrest or attachment no other alternatives for detaining the debtors property are available.
Claims subject to ship arrest
6. A ship can be arrested irrespective of its flag except an Israel registered vessel cannot be arrested for necessaries supplied in Israel.
7. Israel law follows the Procedural Theory of Arrest so that there must be also a valid claim in persona – unless the maritime lien or statutory right in rem is clearly available irrespective of ownership or control of the ship.
8. It is not possible to arrest sister ships and ships in associated ownership.
It is possible to attach same. See para. 3 above. In the case of ships in associated ownership, attachment would be subject to “lifting the corporate veil”.
9. A ship can be arrested for an obligation incurred by a Bareboat Charterer.
It is doubtful whether an arrest can be made for an obligation of a Time Charterer unless the maritime lien or statutory right in rem clearly confers this right.
By Peter G. Naschitz
Naschitz, Brandes & Co.
5 Tuval Street, 67897
Tel Aviv, Israel
Tel: 972 (3) 623-5000
Fax: 972 (3) 623-5005
10. Do your courts require counter-security in order to arrest a ship?
11. Is there any difference in respect to arresting a ship for a maritime claim and a maritime line?
The court can order the arrest of a vessel only if the claimants have a maritime lien.
12. Does your country recognize maritime liens? Under which International Convention, if any?
Yes. According to the Israel Law of Maritime Shipping (Vessels) 1960- 5720.
13. What lapse of time is required in order to arrest a ship since the moment the file arrives to your law firm?
As soon as the relevant documents are received to the law firm it takes about one day.
14. Do you need to provide a POA, or any other documents of the claim to the Court?
Yes. POA and other relevant documents in order to establish the claim. (For example, in a claim for payment for supply of necessaries; the supply contracts, the invoices, demands for payment to the vessel).
15. What original documents are required, what documents can be filed electronically, what documents require notarization and/or apostille, and when are they needed?
No original documents are required. The affidavit should be signed and attested in an Israeli embassy or by a lawyer who is licensed to practice in Israel.
16. Will your courts accept jurisdiction over the substantive claim once a vessel has been arrested?
Yes, provided that the arrest is based on a claim having a maritime lien. Otherwise the proceedings can continue in personam.
17. Which period of time will be granted by the courts in order for the claimants to take legal action on the merits?
Normally, there will be 2 to 3 preliminary hearings and afterwards evidentiary hearings. Normally the entire trial will take 6 to 9 months (if the parties don’t reach a compromise settlement).
18. Do the Courts of your country acknowledge wrongful arrest?
In principle, if there is malicious, wrongful arrest the court may impose damages, although it has never happened.
19. Do the Courts of your country acknowledge piercing and lifting of the corporate veil?
Article 6(a) of the Israeli Companies Law 5759-1999 states that the court is entitled to ascribe a company debt to the shareholders (piercing the corporate veil), if it finds that it is correct and justified to do so in the circumstances, in cases in which the use of the separate legal entity is implemented; in a manner that could defraud a person or discriminate against a creditor; in a manner that harms the company’s purposes, and while undertaking an unreasonable risk regarding its ability to pay its debts.
20. Is it possible to have a ship sold pendente lite? If so, how long does it take?
Only in exceptional cases where irreparable damages could occur. This is not customary.