What to do if your ship is arrested in Scotland – a Shipowner’s perspective

What to do if your ship is arrested in Scotland – a Shipowner’s perspective

 

A ship arrest refers to a scenario in which a ship may be arrested and held under judicial authority as security for debt because a claim for payment of a sum of money has been made against it or its owner. Scotland has its own court system and has a different process for arresting a vessel to that in England therefore as a shipowner you need to consider the type of advice you will need in this situation.

Review the ship arrest papers

If papers are served on the ship, review and retain all the papers to see why your ship has been arrested, and on what authority. The key point is that the creditor having the vessel arrested will need to have raised a court action with the relevant arguments and documents presented to the court in order to obtain the warrant to have the ship arrested in Scotland. In order to arrest a ship in Scotland, certain criteria must be met:

The ship itself is the subject of the dispute and the defending party must own at least one share in the ship or be the bareboat charterer; or Even if the ship is not the subject of the dispute it can still be arrested if all shares in the ship are owned by the debtor who is defending party.

Always contact your lawyer for advice. You may also need to contact your insurer if arrestment is an insured risk.

Consider if there is a valid claim against you

Has the action been raised against the correct entity? The three types of ship arrest and some of the valid claims for ship arrest are noted below:

Arresting to found jurisdiction. Where the ship is located in Scotland, that is sufficient to obtain warrant to arrest the ship to establish jurisdiction for the relevant Scottish Court to hear the case. However, arresting the ship for this reason  will still require there to be a separate arrestment “on the dependence” of the court action raised for the claim  as noted in point 2 below.
Arrestment on the dependence in an action ‘in personam’. This is an arrestment granted as part of a court action and is the most common type relating to assets owned by the debtor,for example, in a case seeking security for a debt owed by a shipowner. Various circumstances (established under statute) permit arrestment on the dependence including damage done or received by any ship, any agreement relating to the use or hire of any ship whether by charterparty or otherwise, liability for payment of wages of a master or member of the crew of a ship, but do not include every debt of the debtor.
Arrestment ‘in rem’. Here the claim is directed against the ship itself, enforcing a right against it which can trump a mortgage even if the owner has changed since the claim arose. Actions ‘in rem’ would be used to enforce a maritime lien in Scotland, for example, covering crew wages, claims for salvage and for damages arising from a collision at sea.

What if the ship arrest is wrongful?

In Scotland, an arrest is at the risk of the pursuer (claimant), so a wrongful arrest claim can result in damages being awarded against the arresting party, without the need to show that the arrestment was exercised maliciously or without probable cause. Therefore it is important for the shipowner to obtain advice as soon as the warrant is received.

What if the arrest is valid?

If the arrest is considered valid, it is important to take steps to ensure an expeditious release of the vessel, as having a vessel detained can have a significant financial impact.

As the shipowner, you will require to give security to the creditor to secure the release. There are various forms that this could take, for example, a P&I Club undertaking or a bank guarantee.In short, if you are the owner of a vessel under ship arrest, you should:

Review and retain all the papers.
Liaise with your lawyer and provide all relevant papers about the underlying dispute.
Consider if the arrest is valid, and whether the action been raised against the correct entity.
If you are advised the arrest is wrongful, consider your right to a claim for damages.
If the arrest is valid, arrange for security which will allow the vessel to be released pending the resolution of the underlying dispute.

Published: 21-03-2022