It is no secret that freight, through the use of ships, plays a vital role in international trade. All the parties involved in international trade, including importers, exporters, ship owners, and financiers, must collaborate internationally for it to function at its best. Due to this complex setup, disputes often arise between those involved in the field, many of which end up being resolved in the courtroom.
As an island situated in the heart of the Mediterranean, a multitude of ships used for trading purposes pass through Maltese waters on a regular basis. Therefore, it is a surprising fact that Malta is not a signatory state to any international convention regarding the arrest of ships, such as the 1952 Arrest Convention. Alternatively, the arrest of ships in Malta is solely regulated by the provisions of the Code of Organisation and Civil Procedure, namely article 742B.
The arrest of a ship in Malta may only take place upon the issuing of a warrant of arrest by a competent Maltese court and can take the form of a precautionary warrant or an executive warrant. For a ship to be formally placed under arrest in Malta, the warrant must be served, by any individual or company, to the relevant Maltese authorities and to the Captain of the vessel.
What claims allow for an action in rem
- any claim to the possession, ownership or title to or of a ship;
- any question arising between the co-owners of a ship;
- any claim in respect of a mortgage, hypothec or charge on a ship;
- any claim arising out of the contract for the sale of the ship;
- any claim for damage received by a ship;
- any claim for damage done or caused by a ship, either in collision or otherwise;
- any claim for loss of life or personal injury caused by any ship;
- any claim for loss of or damage to goods;
- any claim arising out of any agreement relating to the carriage of goods in a ship;
- any claim in the nature of salvage operations;
- any claim for damage or threat of damage caused by the ship to the environment;
- any claims regarding costs or expenses relating wreckage;
- any claim in the nature of towage;
- any claim in the nature of pilotage;
- any claim in respect of services or supplies rendered to a ship;
- any claim in respect of the construction of the ship;
- any claim in respect of port, dock or harbour dues and charges;
- any claim by officers and crew of the ship in respect of their wages;
- any claim in relation to disbursements;
- any claim for commissions, brokerages, or agency fees payable in respect of the ship;
- any claim arising out of an act which is or is claimed to be a general average act;
- any claim arising out of bottomry;
- any claim for the forfeiture or condemnation of a ship;
- any claim for insurance premia;
- any claim for fees and other charges due to the Registrar-General of Shipping and Seamen arising under the provisions of the Merchant Shipping Act, and any claim for tonnage dues.
The arrest of a Ship Via Precautionary Warrant
A precautionary warrant is used by creditors who want to arrest a ship as security for a claim that has not yet been decided by a court of law. In such a case, the complainant may request the court to issue a warrant of arrest on a ship as a precursor to an actio in personam, against a person or company who owns the ship or an actio in rem against the ship itself. This would take the form of a precautionary warrant and would be issued in order to give the applicant an added security for the sum that will be awarded to him should he present his case successfully.
For the warrant to be issued, the vessel in question must be longer than ten (10) meters and within Maltese territorial waters, i.e. within 12 Nautical Miles from the Maltese shores. Furthermore, once the warrant is issued, the arrestor is given twenty (20) days from the issuance of a said warrant to commence an action on the merits of the case before the courts. One must also be sure not to abuse this form of action as he may be made liable for any damage caused by the arrest if the application for such a warrant is found to be frivolous or vexatious.
The arrest of a Ship Via Executive Title
Under Maltese law, a court judgement constitutes an executive title which subsequently allows the bearer to apply to the courts to order the sale of the debtor’s property to liquidate funds for the benefit of the creditor. In the case of a ship, this would take place by the issuance of an executive warrant of arrest on the ship which would, in turn, be sold by a judicial auction or through a private sale, which must be first approved by the court. In both scenarios, the vessel is sold as free and unencumbered.
In the event of a judicial auction, the bearer of an executive title must first file an application to the court requesting that such a sale takes place, whereby the latter would then appoint an auctioneer and set a time and date for the auction. Upon the conclusion of the auction, the amount due to the creditor shall be deposited with the court in his favour, while the remaining amount, if any, shall be returned to the owner.
When a buyer is found directly by the creditor or debtor, they may file an application to the court requesting a private sale. This method is usually preferred as the sale price is certain and is usually higher than that of the highest bid at a judicial auction. For this application to succeed, the creditor must submit two separate valuations of the ship to the court and the sum agreed upon with the private buyer must match or exceed those valuations.
Lastly, a creditor may opt to either buy or bid for the ship himself. In such a scenario, the creditor is only bound to pay the difference in price between the selling price and the amount owed to him
Release from Arrest
After the ship is arrested, in order to request the release of the vessel, the defendant must do so by means of a court application and by providing an adequate security for the claim in order to release the ship from arrest.
A second option – Injunction in terms of Article 37 of the Merchant Shipping Act
The Arrest of vessels as a security (precautionary measure) may only take place when the vessel is within Maltese territorial waters. Should this not be the case, and the vessel is not in Malta’s territorial waters, creditors have the option to apply for an injunction in terms of Article 37 of the Merchant Shipping Act which if granted has the power to prohibit the transfer of the vessel of any shares therein.
The article is intended to serve as a general guide on the subject matter. For further information and guidance on the subject we recommend seeking professional assistance.
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