Entity

The meaning of ‘beneficially owned’ must be considered. You will remember on previous discussions that at times equity will hold that a person who is not the legal owner of the property should also be treated as and allowed the rights of ownership over that property or part of the property. Beneficial ownership is a concept peculiar to common law countries such as England, whereby ownership can exist under the ‘cloak’ of a trust, thus hiding the beneficiary from easy recognition. The concept of beneficial ownership does not appear in the Arrest Convention itself. There has been much judicial divergence on this question of how to determine the beneficial ownership of a ship for the purposes of Section 21 (4) of the 1981 Act. In respect of where the ship to be arrested is owned by a limited company, it may be possible to persuade the court to ‘pierce’ what is known as the ‘corporate veil’. This ‘veil’ is of course the legal fiction which separates the corporate entity (which of course assumes the liabilities of the company) from the actual people who in reality are the ‘owners’ of the company. Where it can be shown that the company has been set up as a means of perpetrating a fraud (i.e. to hide a ship away from being used as security or sold to satisfy a judgement) or as a sham, it may be possible to persuade the court to go behind the corporate veil and declare that the people involved should themselves be liable. It must, however, be noted that it is not easy to persuade the courts to pierce the veil as this is quite a radical departure from the normal notion of the company being a completely separate legal entity.