What is Admiralty Jurisdiction?
Admiralty Jurisdiction, also known as Maritime Jurisdiction, refers to the legal authority exercised by courts over matters related to navigable waters, such as oceans, seas, rivers, and lakes. This jurisdiction encompasses various maritime activities, including shipping, commerce, navigation, and other maritime matters. In many countries, admiralty jurisdiction is exercised by specialized courts, known as admiralty courts or maritime courts. These courts have the authority to resolve disputes and enforce laws related to maritime activities, such as ship collisions, cargo claims, maritime contracts, salvage operations, and maritime liens.
What is the scope of Admiralty Jurisdiction?
The scope of admiralty jurisdiction varies by country, as it is shaped by each nation’s domestic legislation and international agreements. However, the fundamental principles of maritime law are often consistent across different jurisdictions, as they are influenced by common historical and legal traditions, such as the international conventions established by the United Nations Convention on the Law of the Sea (UNCLOS).
Admiralty Jurisdiction refers to the authority of courts that handle legal matters related to shipping and maritime activities. These courts have the power to hear cases involving claims against a ship or other maritime property, as well as claims against shipowners in their capacity as such.
Indeed, it is important to emphasize that Admiralty law is not an entirely separate and isolated legal system. Instead, it is an area of law that incorporates and interacts with other fundamental legal principles, such as tort law, contract law, and international law.
In the context of Admiralty Law, the principles of tort law are applied to address issues related to negligence, personal injury, and property damage occurring in maritime activities. For example, a ship collision caused by negligence might result in a tort claim for damages by the affected parties.
Similarly, contract law principles form the foundation for various maritime contracts, such as charter parties, bills of lading, and marine insurance policies. These contracts govern the relationships and obligations between the involved parties, like shipowners, charterers, shippers, and carriers, in the context of maritime commerce and transportation.
Moreover, Admiralty law also incorporates principles of international law, particularly in areas related to the rights and responsibilities of coastal states, maritime boundaries, and the legal framework governing the use and conservation of marine resources. International conventions, such as the United Nations Convention on the Law of the Sea (UNCLOS), play a significant role in shaping and harmonizing Admiralty law across different jurisdictions. In summary, Admiralty law is an area of law that intersects with and builds upon other legal principles, such as tort law, contract law, and international law, to govern maritime activities and disputes.
It’s important to note that there is a separate and distinct body of Admiralty legislation that applies to ship chartering, such as the Merchant Shipping Acts from 1894 to 1988 and the Merchant Shipping (Liability of Shipowners and Others Act 1958), among others. These acts outline the legal responsibilities of ship owners and charterers in areas such as safety, liability for damages, and environmental protection. It’s essential that both parties involved in ship chartering are aware of and comply with these laws and regulations to ensure a safe and successful charter. The current legislation in this area is the Merchant Shipping Act 1995 and the Merchant Shipping (Registration of Ships) Regulations 1993.
What is Admiralty Court?
An Admiralty Court, also known as a Maritime Court, is a specialized court that has jurisdiction over disputes and legal matters related to maritime activities, such as shipping, commerce, navigation, and other aspects of admiralty or maritime law. These courts have the authority to resolve disputes, enforce laws, and issue rulings concerning various maritime issues, such as ship collisions, cargo claims, maritime contracts, salvage operations, and maritime liens.
The structure, jurisdiction, and operation of Admiralty Courts vary from country to country, as they are determined by each nation’s domestic legislation and the international agreements to which they are a party. In some countries, Admiralty Courts are separate, stand-alone courts specifically dedicated to handling maritime cases. In other countries, admiralty or maritime matters may be dealt with by specialized divisions or chambers within the broader court system.
Admiralty Courts play an important role in promoting the uniformity and consistency of maritime law across different jurisdictions, as they often rely on common legal principles, international conventions, and customary maritime practices when adjudicating cases. This helps to ensure that maritime activities are governed by a coherent and predictable set of rules that facilitate international trade, commerce, and navigation.
Any case involving a maritime issue will likely be dealt with in the Maritime Court which is part of the Queen’s Bench Division of the Divisional High Court of Justice.
What is High Court?
A High Court is a higher-level court in a country’s judicial hierarchy that typically has jurisdiction over a particular region, state, or province. High Courts generally deal with more serious cases, appeals, and judicial reviews. They have the authority to review the decisions of lower courts, such as district courts or magistrate courts, and may hear cases involving significant legal issues, complex disputes, or substantial monetary claims.
The role, jurisdiction, and structure of High Courts can vary significantly depending on the legal system and the specific country in which they are situated. In some countries, High Courts are known by different names, such as Supreme Courts, Superior Courts, or Courts of Appeal.
In common law jurisdictions, High Courts often have the authority to create legal precedents through their judgments, which then guide and bind lower courts in similar cases. This process is known as stare decisis, and it helps to ensure the consistent application of legal principles and the development of a coherent body of law.
High Courts play a crucial role in upholding the rule of law, protecting individual rights, and maintaining the integrity and fairness of a country’s legal system. They serve as final arbiters for legal disputes and are responsible for interpreting and applying the law in accordance with the principles of justice, fairness, and the Constitution.
In the United Kingdom, The High Court is the Court of First Instance where civil claims are heard for the first time, and it is used to handle all civil claims that involved an amount of money exceeding £5,000.
What is a County Court?
A County Court is a type of local court found in certain jurisdictions, particularly in common law countries such as the United States, the United Kingdom, and Australia. These courts generally have jurisdiction over civil and criminal matters arising within a specific county, region, or district.
The specific jurisdiction and responsibilities of County Courts can vary depending on the legal system and the country in which they are situated. Typically, County Courts handle a wide range of civil cases, such as contract disputes, personal injury claims, and family law matters, as well as less serious criminal offenses, like misdemeanors or minor infractions.
County Courts are usually presided over by one or more judges, who are responsible for hearing cases, making decisions, and ensuring that justice is administered fairly and efficiently. In some jurisdictions, County Courts may also have a jury system, where a group of citizens is selected to determine the facts of a case and reach a verdict.
As part of a country’s judicial hierarchy, County Courts play an essential role in the administration of justice at a local level. They provide a forum for the resolution of disputes and the enforcement of legal rights, helping to maintain the rule of law and uphold the principles of fairness and justice within a community.
In the United Kingdom, the County Court is responsible for handling smaller claims as the Court of First Instance, typically involving a sum of money up to £5,000 limit. Its procedures and governing legislation are similar to those of the High Court, with the County Court Act 1984 and the County Court Rules providing guidance. In the United Kingdom, the financial distinction of £5,000 between the County Court and the High Court’s jurisdiction is no longer applicable. The Courts and Legal Services Act 1990 is now the governing legislation. The High Court has a lower limit of £25,000, and each court has the power to transfer cases to the other as needed. However, personal injury cases must be initiated in the County Court unless the claim is worth more than £50,000. In other cases, there is a range of options between the two levels of civil court.
The High Court (Appeal Court) and House of Lords are governed by The Supreme Court Act 1981 and the Rules of the Supreme Court (RSC). The Supreme Court Act 1981 sets out the types of civil actions that can be brought and the necessary procedures that must be followed in these courts.
In the United Kingdom, the High Court is divided into three (3) jurisdictions:
1- The Queen’s Bench Division: The High Court Queen’s Bench Division is a division of the High Court in England and Wales that handles various civil cases, including tort and contract matters that are not covered by other divisions. It is the busiest division of the High Court and is divided into three specialist courts: the Commercial Court, the Admiralty Court, and the Administrative Court. The Queen’s Bench Division also deals with cases related to personal injury, defamation, and professional negligence.
The High Court Queen’s Bench Division has two (2) specialist courts:
a- The Commercial Court
b- The Admiralty Court (Maritime Court)
Before 1970, Admiralty cases were dealt with in the Probate, Divorce, and Admiralty Divisions. The Administration of Justice Act 1970 abolished this Division and transferred Admiralty matters to the Queen’s Bench Division.
2- The Family Division: The High Court Family Division deals with all matters relating to family law, including divorce, child custody, adoption, and child support. The Family Division also has jurisdiction over international child abduction cases and cases involving forced marriage. The court’s main goal is to protect the welfare and best interests of any children involved in family disputes. The Family Division operates under the Family Procedure Rules, which set out the procedures for handling family law cases in the court.
3- The Chancery Division: The High Court Chancery Division deals with matters related to company law, intellectual property law, trusts, tax, insolvency, and land law. This division is responsible for resolving disputes between parties in these areas and ensuring that the law is properly applied. The Chancery Division is an important court for businesses and individuals dealing with complex legal issues in these areas. The High Court Chancery Division primarily handles legal matters related to trusts, wills, probate, tax, and other equitable remedies such as specific performance. It is a specialized court that deals with cases that require equitable relief or remedies beyond just monetary compensation. The Chancery Division also has jurisdiction over cases involving bankruptcy, insolvency, and intellectual property disputes.
Admiralty Jurisdiction (Maritime Jurisdiction)
The Supreme Court Act 1981 outlines the rights of the courts to deal with maritime matters, specifically the Admiralty Jurisdiction (Maritime Jurisdiction). It’s important to differentiate between Procedural Law, which pertains to the rules involved in bringing a claim to court, and Substantive Law, which relates to the actual nature of the claim itself.
Shipping Law falls under Substantive Law, including areas such as collisions, salvage, oil pollution, and carriage. Procedural law, on the other hand, is almost entirely codified and consists of statutory law.
In Personam Vs In Rem
Under the Supreme Court Act 1981 (Section 20-24), the Admiralty Jurisdiction (Maritime Jurisdiction) pertains to actions either in personam or in rem. The types of disputes or claims covered by this jurisdiction are specified and defined in the Supreme Court Act 1981.
In the case of The Eschersheim (1976), Lord Diplock had to interpret the meaning of certain terms under the Administration of Justice Act 1956, specifically “agreement relating to the use or hire of a ship” and “damage done by a ship”. The House of Lords found that a salvage agreement fell within the definition of “agreement relating to the use or hire of a ship”, even though the vessel involved was a tug, not the ship being salvaged. The tug had towed the ship from a collision in the Bay of Biscay, but later beached the ship on the north coast of Spain after rescue attempts failed, resulting in the ship being a total loss. The case also involved a claim for “damage done by a ship”, despite the tug only being an instrument in taking the ship to the shore. Lord Diplock ruled that there were no grounds for restricting the interpretation of these provisions and that the claims fell within the terms of the Administration of Justice Act 1956 (Section 1), giving the High Court jurisdiction to determine them.
In the case of The Rama (1996), according to Clarke J, the key point from Lord Diplock’s words is that the damage must be a direct result of the actions of those involved in navigating the ship, and the ship must be the actual instrument that caused the damage. It’s not enough for the ship to have been used in some way to cause the damage. In the case of The Rama, the charterers claimed for damages on the basis that the owners knew they couldn’t complete the charter. However, the High Court ruled that none of the losses suffered by the charterers were caused by the physical vessel Rama. Therefore, Admiralty Jurisdiction (Maritime Jurisdiction) under section 20 did not apply. While the court might have had jurisdiction to hear the claim under other provisions of the Supreme Court Act, there was no Admiralty Jurisdiction (Maritime Jurisdiction) in personam or in rem.
In the case of The Hamburg Star (1994), it was decided that claims for indemnity and contribution under the Civil Liability (Contributions) Act 1978 were considered to be within the Admiralty Jurisdiction (Maritime Jurisdiction). This was due to the fact that the claims arose from an agreement for the carriage of containers and their contents. Therefore, such claims can be brought in the Admiralty Division of the High Court.
Both in personam and in rem actions in Admiralty Jurisdiction (Maritime Jurisdiction) are governed by the Rules of the Supreme Court, specifically RSC Order 75, as well as the Commercial Court Practice Rules. These rules set out the procedural requirements for bringing a claim in the High Court and the Admiralty Court, including the necessary documentation and timelines for filing and serving documents.
In Personam Jurisdiction and In Rem Jurisdiction Difference
In personam and in rem are two distinct legal concepts that pertain to the nature and scope of a court’s jurisdiction, particularly in the context of civil lawsuits.
In personam jurisdiction refers to a court’s authority over a specific person or entity involved in a legal dispute. When a court exercises in personam jurisdiction, it can issue judgments or orders that bind the parties directly and personally, such as imposing fines, awarding damages, or granting injunctions. In personam jurisdiction is generally established by the defendant’s presence, domicile, or other sufficient contacts with the jurisdiction in which the court is located.
In contrast, in rem jurisdiction refers to a court’s authority over a specific piece of property or a legal interest in the property, rather than a particular person or entity. In rem actions primarily concern disputes over property rights, title, or possession, and the judgments or orders issued in these cases directly affect the status or ownership of the property in question. An example of an in rem proceeding might involve a dispute over ownership of a piece of real estate or the enforcement of a maritime lien against a vessel.
The key difference between in personam and in rem jurisdiction lies in the focus of the legal action. In personam actions target specific persons or entities and seek to impose personal liability, while in rem actions focus on the property itself and aim to determine the rights or interests of different parties in relation to that property. These concepts are important in determining the appropriate jurisdiction, procedures, and remedies applicable to a particular legal dispute.
Types of Actions
The Supreme Court Act 1981 distinguishes between two types of actions that may be used in Admiralty proceedings.
1- Action in Personam (Against the Person)
2- Action in Rem (Against the Thing)
1- Action in Personam (Against the Person)
The “in personam” action involves the issuance and service of a writ on the party being sued. However, this process can be problematic when the defendant is not present within the jurisdiction. There are restrictions on serving a writ outside the jurisdiction, and it may not be practical or feasible in some cases. Even if the writ is served, it may not be possible to enforce a response or appearance in court if the defendant is located in another country.
Under the Supreme Court Act 1981, there are limitations on the High Court’s jurisdiction to hear in personam actions in cases of collision and similar incidents. These restrictions are outlined in section 22 and apply to the court’s overall jurisdiction, not just its Admiralty jurisdiction.
According to Section 22(1) of the Supreme Court Act 1981, the High Court cannot hear any action in personam in respect of collision unless certain conditions are met. These conditions are set out in Section 22(2) and include factors such as the defendant’s residence or the cause of action arising in England. In other words, for the High Court to have jurisdiction to entertain an action in personam in respect of collision, the conditions in Section 22(2) must be satisfied.
2- Action in Rem (Against the Thing)
In rem is a legal term derived from Latin that refers to a court’s jurisdiction over a specific piece of property or a legal interest in the property, rather than over a particular person or entity. In rem actions primarily concern disputes over property rights, title, or possession, and the judgments or orders issued in these cases directly affect the status or ownership of the property in question.
In rem proceedings are commonly used in cases involving real estate disputes, forfeiture actions, and certain aspects of maritime law, such as the enforcement of maritime liens against a vessel. In these cases, the focus of the legal action is on the property itself, rather than on the personal liability of a specific person or entity.
One of the key features of in rem jurisdiction is that it allows a court to adjudicate the rights and interests of all parties who may have a claim to the property, even if those parties are not personally present in the court’s jurisdiction. This is because the property itself is considered to be the subject of the lawsuit and is deemed to be within the court’s control. However, courts must follow specific procedures, such as providing adequate notice to interested parties, to ensure that the due process rights of all parties are protected during in rem proceedings.
In summary, in rem is a legal concept that pertains to a court’s jurisdiction over property-related disputes, where the focus is on determining the rights, title, or interests of different parties in relation to a specific piece of property.
What is meant by the In Rem Procedure?
The in “rem procedure”, meaning “against the thing”, offers an alternative form of action to the “in personam” procedure in maritime and aviation disputes. This procedure is available to anyone who has suffered harm, loss, or damage as a result of a vessel’s actions, as defined by Section 742 of the Merchant Shipping Act 1894. Essentially, the in rem procedure allows the plaintiff to file and serve their claim against the “res” or the vessel itself. It is important to note that “res” in Admiralty claims refers to “maritime property”, which can include not only the vessel but also the cargo, freight, and even the proceeds of the sale.
In the past, legal proceedings were categorized as either in rem (against property) or in personam (against a person). However, in modern law, while the nature of property is still classified as such, legal proceedings concerning land have long ceased to be in rem. If a plaintiff is suing a defendant over an interest in land (realty), the action will now be considered in personam.
In modern law, actions or legal proceedings in respect of land are no longer classified as in rem. However, until the mid-19th century, all actions in English law were considered to be in personam. The introduction of Admiralty Court Acts in the 19th century (1840 and 1861) brought about the statutory right to arrest foreign vessels for necessary materials supplied or services rendered such as towage. This marked the expansion of in rem jurisdiction, which was further consolidated by the Supreme Court of Judicature Acts in 1873-1875 and later by the Supreme Court of Judicature (Consolidation) Act 1925. The Administration of Justice Act 1956 replaced the 1925 Act and was subsequently replaced by The Supreme Court Act 1981, which governs Admiralty proceedings in modern law.
In modern law, the writ in rem is a legal tool used against a ship that is believed to have caused harm or damage. It can be used to enforce a maritime or statutory lien or in a possessory action against the ship whose possession is claimed. A judgement in rem is a judgement that is valid against “all the world,” meaning it applies to anyone who may have a claim against the ship in question.
The in rem procedure is implemented practically by arresting the vessel, which is the subject of the action. This means that, just as an arrested person would be prevented from leaving the jurisdiction, an arrested vessel is also prevented from doing so. While the writ in rem and the warrant of arrest are technically separate legal documents, in practice they are usually served on the res simultaneously.
What is “Res” means in Maritime Law?
In maritime law, the term “res” is derived from Latin and generally means “thing” or “object.” Within the context of maritime law, it is commonly used to refer to a vessel or ship, as well as other objects or property related to maritime activities, such as cargo or maritime liens.
The concept of “res” is particularly important in maritime law when discussing in rem jurisdiction. In rem jurisdiction is a court’s authority over a specific piece of property or legal interest in the property, rather than over a particular person or entity. In maritime law, in rem actions often involve disputes over the ownership, possession, or legal rights associated with a vessel or its cargo.
For instance, a court may exercise in rem jurisdiction to enforce a maritime lien against a vessel. In this context, the vessel itself (the “res”) is the subject of the legal action, and the court’s judgment or order will directly affect the status or ownership of the vessel. Another common in rem actions in maritime law include disputes over salvage claims, cargo claims, and vessel arrests.
In summary, the term “res” in maritime law generally refers to an object or property, such as a vessel or cargo, which is the subject of a legal action or dispute, particularly in the context of in rem jurisdiction.
Statutory Arrest of the Res
The procedure for applying the in rem procedure is outlined in Sections 20-24 of The Supreme Court Act 1981. Section 20 defines the Admiralty jurisdiction of the High Court, while Section 20 (2) specifies the circumstances governed by Admiralty jurisdiction. Section 21 outlines the mode of exercising Admiralty jurisdiction, stating that an action in personam may be brought in all cases within Section 20 (2), while subsections 2, 3, 4, and 5 of Section 21 outline when an action in rem may be brought, which is applicable to nearly all claims within Section 20 (2). Essentially, the right to an action in rem exists for most claims for damages arising in maritime disputes, although some claims can only be enforced through an action in personam.
1. Any claim for damage received by a ship.
2. Claims under Section 20 (3) (a).
3. Collision actions under Section 20 (3) (b).
4. Limitation actions under Section 20 (3) (c).
It is important to remember that although the in rem procedure treats the ship as a legal entity, the true defendant is the person who would be held liable in an “in personam” action for the same claim. Therefore, the in rem procedure is used in addition to, not instead of, an “in personam” action. The person who would be liable in personam is identified in Section 21 (4) (b) and may be the shipowner or demise charterer.
Restrictions in Rem Procedure
There are restrictions on the use of the in rem procedure in Admiralty proceedings. For example, an action in rem cannot be brought for a claim arising out of a contract for the sale of a ship or any other contract relating to the use or hire of a ship. Additionally, an action in rem cannot be brought for a claim arising out of loss of life or personal injury. These restrictions are set out in Section 22 of The Supreme Court Act 1981. However, there are exceptions to these restrictions, such as when the claim arises from salvage services or collision damage. It is important to carefully consider the nature of the claim and the available procedures before initiating legal action in Admiralty proceedings.
The in rem procedure can only be used if the vessel belongs to the person who is liable in personam at the time of the arrest. If the person has sold the vessel to a third party, the right of arrest is lost for the vessel.
The writ in rem can only be served on the vessel when it is within the jurisdiction of the court. If the vessel leaves the jurisdiction before the writ is served, the right to arrest the vessel is lost. However, in certain circumstances, the court may grant permission for the writ to be served out of the jurisdiction. Additionally, the court may release an arrested vessel if the claimant fails to provide security for damages in the event that the arrest is later found to be unjustified.
What are the aims of the in rem procedure?
The primary aims of the in rem procedure are to resolve disputes and enforce rights relating to the property. Some specific objectives of the in rem procedure include:
- Establishing title: The in rem procedure can be used to confirm or establish the title to a particular property, such as real estate or personal property like vehicles or artwork. This is particularly useful in situations where there are competing claims or uncertainty regarding ownership rights.
- Resolving disputes over property rights: In rem actions are often used to resolve disputes over property rights, such as conflicting claims of ownership, boundary disputes, or claims to rights of possession, use, or access. By adjudicating the rights and interests in the property itself, the in rem procedure can provide a conclusive resolution to these disputes.
- Enforcing liens and securing interests: In rem actions can be employed to enforce liens or other security interests in property, such as mortgage foreclosures or the enforcement of maritime liens on vessels. By allowing a secured party to proceed directly against the property, the in rem procedure can provide an effective means of enforcing their rights and obtaining payment or satisfaction of their claim.
- Recovery of property: The in rem procedure can be used to recover specific property that has been wrongfully taken, withheld, or transferred, such as in cases of theft, conversion, or fraudulent conveyance. By directing the action against the property itself, the in rem procedure can help ensure that the rightful owner or claimant can recover the property, even if the person responsible for the wrongful conduct is not available or has insufficient assets to satisfy a judgment.
- Preservation of property: In some cases, the in rem procedure can be used to preserve or protect property that is subject to competing claims, disputes, or potential deterioration, such as in cases involving abandoned or unclaimed property, environmental contamination, or the preservation of historic or cultural resources. By allowing the court to exercise jurisdiction over the property and determine the appropriate disposition or remediation, the in rem procedure can help ensure that the property is protected and preserved for the benefit of the rightful claimants or the public interest.
The primary objectives of the in rem procedure are centered on settling conflicts, upholding rights, and safeguarding interests associated with the property. Through the in rem procedure, parties can establish ownership, settle property disputes, enforce liens and security interests, reclaim unlawfully taken property, and preserve and safeguard property that may be susceptible to harm or disputes.
What are the advantages of the in rem procedure as against the in personam procedure?
The terms “in rem” and “in personam” refer to two different types of legal actions that can be brought in a court of law. In rem actions are directed against property or objects, while in personam actions are directed against a person or legal entity. Both types of procedures have their own advantages, depending on the circumstances and objectives of the legal action. Here are some advantages of the in rem procedure compared to the in personam procedure:
- Jurisdiction: In rem actions can be brought in the jurisdiction where the property or object is located, irrespective of the defendant’s residence or domicile. This can be advantageous when the defendant is located in a foreign country or is difficult to serve with the process, as it allows the plaintiff to establish jurisdiction over the property without having to establish personal jurisdiction over the defendant.
- Binding effect: In rem judgments are binding on the property or object at issue and all parties who have an interest in it, regardless of whether they were personally served or appeared in the action. This can provide greater certainty and finality in resolving disputes over property rights and interests.
- Priority of claims: In rem actions can be used to establish the priority of claims or liens against property, particularly in cases involving multiple claimants or competing interests. By obtaining an in rem judgment, a claimant can ensure that their claim has priority over subsequent claims or interests in the property.
- Remedies: In rem actions can provide a more effective means of enforcing property rights or obtaining specific remedies, such as the recovery of property, the establishment of title, or the foreclosure of a lien. This can be particularly useful when the defendant is insolvent or has insufficient assets to satisfy a judgment, as the in rem action is directed against the property itself rather than the defendant’s personal assets.
- Prevention of fraud or collusion: In rem procedures can help prevent fraudulent transfers or collusive arrangements that might otherwise be used to avoid liability or frustrate the enforcement of a judgment. By allowing the plaintiff to proceed directly against the property, the in rem action can help ensure that the property is preserved and protected for the benefit of the rightful claimants.
The in rem procedure provides several benefits over the in personam procedure, especially in cases involving property disputes, title establishment, lien enforcement, or property recovery. These advantages include the establishment of jurisdiction over the property, the binding effect of in rem judgments, the prioritization of claims, the availability of specific remedies, and the prevention of fraud or collusion. Nevertheless, the choice between in rem and in personam procedures is contingent upon the specific circumstances and objectives of the legal action, as well as the applicable laws and procedural rules governing the case.
Sister Ship Arrest
Under the Supreme Court Act 1981, there is a provision for an “alternative ship” or “sister-ship” arrest action to address the restrictions of the in rem procedure. This means that if the ship that caused the harm or damage is not within the jurisdiction or has been sold, the claimant can arrest an alternative ship that belongs to the person liable in personam. However, it should be noted that only one vessel can be arrested, even if multiple vessels are named in the writ. This is specified in Section 21 (8) of the 1981 Act.
Sister Ship Arrest Examples
In the case of The Berny (1977), the claimants shipped sugar on board ‘The Berny’, a Finnish vessel that had 18 sister-ships. The cargo owners issued several writs in rem against the sister-ships of ‘The Berny’, and later brought another action in rem against ‘The Berny’ itself, along with an action in personam against the owners. The writ against ‘The Berny’ was served on the vessel, but the owners tried to have the service and the action set aside, arguing that the claimants had exceeded jurisdiction by issuing writs against the sister-ships of ‘The Berny’ in addition to the vessel itself. The court held that it was acceptable for the claimants to initiate in rem proceedings against multiple vessels owned by the defendant, as long as they did not serve a writ on more than one vessel.
Section 21 of the Supreme Court Act 1981 sets out the mode of exercise of Admiralty jurisdiction, including the in rem action under subsection 2. For claims falling within sections 20(2)(e) to (s), it is necessary to show an in personam link with the ship or property against which the in rem action is brought. This means that if the vessel is sold after the claim arises but before the writ is issued, the ship cannot be arrested because the “relevant person” (the in personam defendant) is no longer the beneficial owner of the ship. However, this rule does not apply if the in rem action is to effect a maritime lien under section 21(3), or any claim falling within sections 20(2)(a), (c), (s), or any question falling within section 20(2)(b).
The phrase “beneficially owned as respect all share therein” in Section 21 (4) can create complications in English jurisdiction where trust ownership is recognized. In the case of I Congresso del Partido (1977), Goff J (as he was then) explained that the intention of Parliament (concerning the same provision in Section 3 (4) of the Administration of Justice Act 1956) was to consider the existence of trusts, to ensure that if a ship was operated under a trust, those with an interest in the ship could not avoid the ship’s arrest. This interpretation was recently applied by the Court of Appeal in The Nazym Khikmet (1997) case, where the court ruled that cargo owners were not entitled to arrest another vessel operated by the carriers, as the carriers did not have the rights of an equitable owner under English law, even if they had significant commercial control over the vessel. The legal title of the vessel was owned by Ukraine, and while there had been a relaxation of state control over the vessel.
In a case involving a cargo of tobacco damaged during the carriage from India to Ukraine, the carriers were found to be liable in personam, but the in rem action under Section 21(4) failed as they were not the beneficial owners of the sister ship that was arrested. This is in contrast to the case of The Guiseppe di Vittorio (1998), where the defendants were regarded as ‘shipholders’ rather than ‘owners’, and the Court of Appeal held that they were within the in rem jurisdiction of Section 21(4) as demise charterers. The court considered the documentation in both cases to determine the ownership and chartering arrangements of the vessels in question. In the latter case, the plaintiffs brought an action in rem under Section 21(4) against the vessel for unpaid bunkers, and the defendants were found to be within the in rem jurisdiction as the demise charterers.
The process of arresting a ship is carried out through a warrant of arrest, which is governed by the Rules of the Supreme Court (RSC) Order 75. The writ in rem and warrant of arrest are usually served simultaneously. The plaintiff is required to make a full and honest disclosure of the nature of the claim and the circumstances leading to the claim on an affidavit under the Supreme Court (RSC) Order 75. Failure to make such disclosure can result in the arrest being dismissed and any security released, as was the case with The Johnny Two (1992). The Admiralty Court emphasized in The Lloyd Pacifio (1995) that parties should comply with the provisions of the Supreme Court (RSC) Order 75 and not seek to arrest a ship without proper compliance. The Admiralty Marshal in London or a Deputy, usually a Regional Customs Officer, handles the arrest procedure in other ports across England and Wales.
Sheen J in The Johnny Two (1992) outlined the current procedure for the arrest of a ship, from the issue of the warrant by Admiralty Marshall to the service of the writ and warrant by an officer of HM Customs. If security is provided and the service of the writ is accepted by solicitors the ship may be released before arrest.
The Civil Jurisdiction and Judgments Act 1992, commonly known as the Brussels Convention, impacts the determination of jurisdiction in civil actions where the defendant is domiciled in a contracting state. According to Article 2 of the Convention, the defendant should be sued in the contracting state of their domicile. It is important to note that the determination of jurisdiction must now be in accordance with the Convention, and the court’s previous approach is no longer applicable. However, when the defendant is not domiciled within the European Union, the court is free to use its own rules. Additionally, Article 57 provides that the Brussels Convention shall not affect any other convention to which contracting states are parties, including the Arrest Convention.
In the case of the Anna H (1995), the court stated that the Brussels and Arrest Conventions must be read together, but the Arrest Convention only applies to in rem actions, not in personam actions. Before the Brussels Convention, jurisdiction could be established for a claim if a writ was served, and the vessel did not have to be arrested. It was common for shipowners and P&I Clubs to put up security when an arrest was threatened and then to accept service of the writ through solicitors. In The Deichland (1989), the defendants (demise charterers) only acknowledged, but did not accept, the service of the writ to contest the jurisdiction of the Admiralty Courts. Their P&I Club had provided security to the plaintiffs by letter of guarantee. The defendants argued that the English court must decline jurisdiction since the ship had been released, and any action must now be in personam. The Court of Appeal agreed, as the vessel had not been arrested, and the Arrest Convention did not apply where bail or some other form of security was given to avoid arrest. The Court of Appeal believed that there would have been a different result if the vessel had been arrested.
In the case of the Prinsengracht (1993), the shipowners tried to avoid English jurisdiction by providing a bail bond to the court instead of the usual P&I Club letter of undertaking. The vessel was then arrested and released. The court ruled that by voluntarily submitting to the jurisdiction and acknowledging the writ, the defendants had become a party to the action. They could not later challenge the jurisdiction of the English court.
In the case of Anna H (1995), the shipowners attempted to avoid English jurisdiction by offering security but refusing to submit to it. They entered a caveat against arrest, but the plaintiffs’ solicitor still arrested the ship. The owners then acknowledged the writ and put up bail, but later contested the jurisdiction, arguing that they could only be sued in Germany under Article 2 of the Brussels Convention. The plaintiffs argued that the owners had submitted to the jurisdiction by acknowledging the writ and putting up bail. The Admiralty judge held that the putting up of bail amounted to a submission to jurisdiction, and the owners appealed to the Court of Appeal. The question was whether the definition of arrest in the Arrest Convention was concerned with the character of the legal process or the motivation of the party that initiates it. The Court held that the Arrest Convention is concerned with the character of the legal process, and the motive of the plaintiffs was irrelevant. It was also irrelevant that the plaintiffs later released the vessel.
Under the Brussels Convention, the general rule is that individuals who are domiciled in a Contracting State should be sued in the courts of their own country. However, there are exceptions to this rule. For example, Article 17 of the Convention provides that if the parties agree that the courts of a Contracting State have jurisdiction to resolve disputes, then those courts will have jurisdiction. This means that a clause in a charter party or bill of lading that stipulates English jurisdiction could be covered by Article 17 of the Brussels Convention.
In some cases, it may not be necessary to arrest a ship to establish jurisdiction, as seen in The Po (1991), which involved a collision between two vessels in the harbor of Rio de Janeiro. The plaintiff owners served a writ in rem on the defendants’ ship, the Po, in Southampton, but the vessel was not arrested because the P&I Club had provided a letter of undertaking. The Italian owners of the Po subsequently applied for a stay of the English proceedings under Article 2 of the Brussels Convention. The Court of Appeal held that the English court had jurisdiction under the 1952 Collision Convention, which provides that one of the courts that has jurisdiction to decide a collision action is the court of a place where the defendant’s ship has been arrested “or where an arrest could have been effected and bail or other security has been furnished.” Therefore, Article 57 of the Brussels Convention applied, and it did not deprive the English court of jurisdiction.
What is Alternative Ship Arrest?
Alternative Ship Arrest refers to a method of securing claims against a ship owner or operator that does not involve the traditional process of ship arrest. Ship arrest is a legal procedure that allows a claimant to detain a vessel to secure a maritime claim or enforce a maritime lien. This is typically done to ensure that the ship owner or operator pays any outstanding debts, damages, or other liabilities related to the vessel.
In contrast, Alternative Ship Arrest seeks to achieve the same outcome of securing claims, but without the actual arrest and detention of the vessel. This can be accomplished through various means, such as:
- Negotiation and settlement: Parties involved in the dispute can attempt to reach an agreement out of court, which may involve payment plans, guarantees, or other forms of security to satisfy the claimant’s demands.
- Provision of security: Instead of arresting the ship, the ship owner or operator can provide alternative forms of security, such as bank guarantees, letters of credit, or insurance bonds, to ensure the claimant’s interests are protected.
- Alternative Dispute Resolution (ADR): Parties can choose to engage in alternative dispute resolution methods, such as mediation or arbitration, to resolve the dispute without the need for ship arrest.
- Court-ordered security: In some jurisdictions, a court may order the ship owner or operator to provide security for the claim without arresting the vessel, allowing the ship to continue operating while the dispute is being resolved.
Alternative Ship Arrest methods are typically considered when arresting a ship might cause undue hardship to the ship owner, operator, or third parties involved, or when the traditional arrest process may not be the most efficient way of securing the claim.
Alternative Ship Arrest (Sister Ship Arrest)
The Alternative Ship Arrest procedure is commonly referred to as the Sister Ship Arrest, but this terminology is not entirely accurate in modern times.
The 1952 Arrest Convention introduced a new feature to Admiralty law by allowing claimants to bring an in rem action not only against the involved ship but also against a ship “under the same ownership” as the involved ship. This provision is also known as the Alternative Ship Arrest procedure, although today the term “Sister Ship Arrest” is considered somewhat outdated. Section 3 (4) of the 1956 Administration of Justice Act incorporated this provision into English Admiralty law. However, this provision was subsequently replaced by Section 21 (4) of The Supreme Court Act 1981.
The 1981 Act addressed this issue by changing the wording to allow for the arrest of a ship owned by the person who would be liable in personam on the claim, rather than requiring an ownership link with the involved ship. This allows for a broader interpretation of the term “sister ship” and enables the arrest of a ship owned by the same person or entity as the one liable in personam for the claim, even if it is not under common ownership with the involved ship. However, the term “sister-ship arrest” is still used, despite the fact that the arrest of a ship under the 1981 Act does not necessarily require a sister-ship relationship with the involved ship.
The interpretation of the 1956 Act by the courts was considered to be too restrictive, as it did not fully align with the intention of the 1952 Convention. In particular, the phrase “sister ship” in the 1952 Convention referred to a ship under common ownership with the involved ship. However, Section 3(4) of the 1956 Act allowed for the arrest of a ship under the same beneficial ownership as the person liable in personam, which the courts interpreted to require an “ownership link” between the involved ship and the alternative ship. This meant that if the charterer of the involved ship was liable, no ship actually owned by the charterer could be arrested as a sister ship.
The wording in Section 21(4) of the 1981 Act has since been revised to remove the requirement for a common ownership link between the involved ship and the alternative ship. Now, the alternative ship selected for arrest must be wholly beneficially owned by the “relevant person” who would be liable on the claim in an action in personam.
Section 21 (4) of the 1981 Act reads as follows:
In the case of any such claim as is mentioned in Section 20 (2) (e to r), where:
a. The claim arises in connection with a ship; and
b. The person who would be liable on the claim in an action in personam (the relevant person) was, when the cause of action arose, the owner or charterer of or in possession or in control of, the ship
an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against:
1. That ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship in respect of all its shares or the charterer of it under a charter by demise;
2. Any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner in respect of all the shares in it
The “relevant person” mentioned in Section 21(4) of the 1981 Act may refer to either:
1. The owner of the “wrongdoing ship”
2. The charterer of the “wrongdoing ship”
3. The person in possession of or in control of the “wrongdoing ship”
Therefore, the “wrongdoing ship” may be arrested by means of the action in rem where the relevant person is either:
1. The beneficial owner of that ship in respect of all its shares, or
2. The charterer of the ship under a charter by demise.
To clarify, the “relevant person” who would be liable in personam can be the owner, charterer, or someone in possession or control of the ship. However, for the alternative ship to be arrested, that person must have been the owner or charterer of the ship. If the person who would be liable in personam was only in possession or control of the ship, there may not be an action in rem, but there could still be an action in personam against that person.
This means that if the relevant person, who would be liable in personam, was only in possession or control of the “wrongdoing” ship, and therefore that ship cannot be arrested, any other ship that is beneficially owned by that person can still be arrested through the in rem procedure.
The term “sister ship” is actually a misnomer because there is no requirement for any ownership link between the “wrongdoing ship” and the ship that is arrested. Instead, any other ship which is beneficially owned by the relevant person, who would be liable in an action in personam, can be arrested through the in rem procedure.
It is worth noting that prior to the implementation of the Supreme Court Act 1981, the Court of Appeal ruled in The Span Terza (1982) that there was no requirement for an ownership link between the involved ship and the alternative ship selected for arrest. This ruling came just before the introduction of the 1981 Act, which relaxed the requirement to only require that the alternative ship be wholly beneficially owned by the relevant person. It is interesting to consider that the ownership link requirement was not imposed by the 1952 Arrest Convention, which formed the basis for Section 3 (4) of the 1956 Administration of Justice Act. Some have argued that English law, in drafting Section 3 (4), was not in line with the spirit of the Convention.
The term “beneficially owned” requires further explanation. In certain situations, equity may recognize a person as the owner of a property even if they do not hold legal title to it. This is known as beneficial ownership, a concept specific to common law jurisdictions such as England, where ownership may exist under a trust arrangement, allowing the beneficiary to conceal their identity. It should be noted that the Arrest Convention does not explicitly mention the concept of beneficial ownership.
Determining the beneficial ownership of a ship for the purposes of Section 21(4) of the 1981 Act has been the subject of much judicial divergence. In cases where the ship to be arrested is owned by a limited company, it may be possible to convince the court to disregard the legal fiction that separates the corporate entity from the actual people who own the company, which is known as “piercing the corporate veil”. However, this is not an easy task as it requires showing that the company was set up as a means of perpetrating fraud or a sham, and is a radical departure from the normal notion of a company being a separate legal entity.
In the case where the relevant person liable in personam is registered as Company X, any ship owned by Company X can be arrested under the alternative ship arrest procedure, regardless of whether Company X owns the involved or wrongdoing ship. However, if Company X does not own any ship, there can be no alternative ship arrest. If the individuals behind Company X are also behind the separate legal entity of Company Y, it would not be possible to arrest a ship belonging to Company Y under the alternative ship arrest procedure. This is because the two companies are distinct legal entities and the fact that the same individuals are behind them is usually irrelevant. Only if the plaintiff can prove that the two companies were set up as a sham or for fraudulent purposes will the court consider looking beyond the corporate entities at the actual individuals involved.
In summary, if the “wrongdoing” or “involved” ship is owned by Company X, there may be no possibility of an alternative ship arrest against a ship owned by Company Y, even if the same persons hold shares in both companies. This is because the two companies are separate legal entities, and the ownership requirements of Section 21 (4) of the 1981 Act would not be met unless the court is convinced to “pierce the corporate veil”.
Sister Ship Arrest Procedure
The sister ship arrest procedure is a legal mechanism used in maritime law that allows a claimant to arrest a vessel, which is not directly involved in the dispute but is a “sister ship” or associated ship of the offending vessel. This procedure is particularly useful when the vessel that caused the damage or loss is not available for arrest or is in a different jurisdiction. Sister ship arrest can be used to secure a maritime claim and ensure that the claimant can recover the amount due if they win the case.
The procedure for a sister ship arrest generally involves the following steps:
- Establish the basis for the claim: The claimant must have a valid maritime claim against the owner of the offending vessel. This can include claims related to unpaid wages, damage to property, personal injury, or breach of contract, among others.
- Identify the sister ship: The claimant must identify a vessel that is owned or controlled by the same legal entity as the offending vessel. The term “sister ship” refers to any ship owned by the same owner or under the control of the same legal entity, even if the two vessels are not identical.
- Obtain legal representation: The claimant should engage a lawyer experienced in maritime law and the jurisdiction where the arrest will take place. The lawyer will help navigate the legal process and ensure that the necessary documentation is prepared and filed correctly.
- File the arrest application: The claimant’s lawyer will file an application with the court to arrest the sister ship. This application typically includes an affidavit detailing the nature of the claim, evidence of the ownership or control of both vessels and an explanation of why the arrest is necessary.
- Court order: If the court is satisfied with the claimant’s application, it will issue an order to arrest the sister ship. The order will be served on the ship’s master or agent, as well as the local maritime authorities.
- The arrest of the vessel: Upon receiving the court order, the local maritime authorities will arrest the sister ship, preventing it from leaving port until the dispute is resolved or security is provided to release the vessel.
- Security: In many cases, the ship’s owner may offer a guarantee, such as a Letter of Undertaking or a bank guarantee, to secure the release of the arrested vessel. Once the claimant accepts the security, the vessel will be released from arrest.
- Resolution of the claim: The claimant and the ship owner may negotiate a settlement, or the claim will proceed to trial or arbitration. If the claimant is successful, the security provided will be used to satisfy the judgment.
It is imperative to acknowledge that the procedure for arresting the sister ship may vary depending on the jurisdiction and the applicable national or international laws. Thus, it is vital to seek guidance from proficient maritime lawyers to maneuver through the intricacies of the arrest process.
Ship Agent’s Right to Arrest
It is important to note that ship agents also have the right to initiate an in rem action against a vessel. They are listed as one of maritime claimants in Section 20(2)(p) of the Supreme Court Act 1981. This means that a ship’s agent can use the legal procedure to recover any outstanding disbursements that were made on behalf of the vessel.
The writ in rem is a legal instrument that allows for the actual detention of a ship within a particular jurisdiction, in accordance with the right in rem as described earlier. Similar to the writ in personam, it is issued by the court and served not on the defendant themselves, but rather on the vessel in question. The writ specifically names the ship and is delivered to the ship by an officer of the Admiralty Court, typically the Admiralty Marshal. Historically, the writ was affixed to the mast, but today it is either personally served to the Master on board or prominently displayed on the ship itself.
Aim of Ship Arrest
Ship arrest is a legal procedure that allows the plaintiff to establish jurisdiction and take action even when it may be impossible to serve the writ in personam and bring the actual defendant into court. By arresting the ship, the plaintiff can effectively take control of the defendant’s asset, which is the vessel, and use it as security for their claim. The plaintiff can then pursue their claim against the defendant, who may be located in another jurisdiction, without the risk of the defendant removing the vessel from the jurisdiction and thereby frustrating the plaintiff’s claim.
In cases where a writ in rem is served for a contractual dispute, there may be an exclusive jurisdiction clause in the contract that indicates which jurisdiction the parties wish to handle any disputes arising from the contract. English judges generally uphold such clauses unless it would be palpably unfair to one side or unreasonably inconvenient and expensive for both parties. However, in cases where the claim arises from a tort, such as a collision, the courts may have to determine whether or not to exercise their jurisdiction. The court’s decision will depend on the particular facts of the case, and it can be more challenging to establish jurisdiction in tort than in contract. Although the court usually holds that they have jurisdiction and apply English law, it can be harder to find a judicial rule that establishes this in tort cases.
An example of the court’s contemplations with regard to the matter of conflict of laws in a contractual scenario can be observed from the lawsuit of The Eleftheria (1969). The circumstance involved the shipment of plywood from a Romanian port to an English port on a Greek vessel. The Bill of Lading stipulated that disputes were to be resolved in Greece with the implementation of Greek law. However, an English enterprise aimed to institute an action in rem against the vessel in England. The court established a set of considerations to be taken into account when determining whether to permit a legal action to proceed, which appears to be in contrast to the provisions of a jurisdiction clause:
1- Does the law of the foreign court differ from English law in fundamental respects?
2- Where is the evidence available?
3- Do the defendants genuinely desire the case to be held in a foreign court?
4- With what countries are the parties connected and how closely?
5- Would the plaintiffs be prejudiced in the foreign court?
6- Would the plaintiffs be deprived of security for their claim if the claim was heard in a foreign court?
7- Would the plaintiffs face a time bar in the foreign jurisdiction that they would not face under English law?
8- Would the plaintiffs for political, racial, religious, or other reasons be unlikely to get a fair trial?
9- Would the plaintiffs be unable to enforce any judgment they may obtain in the foreign court?
In The Eleftheria (1969) lawsuit, the judge directed the discontinuation of the English legal action, primarily due to the fundamental differences between Greek law and English law regarding the matters at issue.
The in rem arrest serves as a guarantee for the plaintiff’s demand by ensuring that once a judgment has been granted, there will be sufficient funds available, in other words from the proceeds of the sale of the vessel, to fulfill the plaintiff’s claim.
An essential and pragmatic implication resulting from the initiation of an Admiralty action in rem is the matter of priorities. Priorities refer to the hierarchical order of various creditors against the funds generated by the sale of the vessel in court. If the sale of the vessel produces an amount sufficient to meet all creditors’ claims, no problem will arise. However, priorities become significant when the amount produced is inadequate to satisfy all creditors’ demands. The fundamental rule of priorities is that a creditor’s entitlement to claim on the fund is based on the nature of their claim. For instance, a person who enforces a claim resulting in a maritime lien has a superior claim compared to a creditor who has provided equipment to the vessel but hasn’t received payment from the vessel’s owner (such a creditor is granted a statutory lien under the provisions of the Supreme Court Act 1981, which is of lower priority than a maritime lien). In turn, the claimant with a statutory lien has a higher claim than a creditor such as a ship repairer who, under common law, is granted a possessory lien. Thus, it is evident that the in rem procedure, besides providing pre-trial security, ensures that once a judgment has been granted, and the court has ordered the sale of the res, the creditor who initiated the procedure through the in rem arrest will have an interest that is secured against the fund.
The aforementioned discussion remains relevant today, even in cases not covered by the Brussels Convention. The Eleftheria (1969) still reflects the judicial standpoint that an individual who voluntarily agrees to a jurisdiction clause should be bound by it unless there are compelling reasons why they should not be. The Admiralty Court considered The Eleftheria in The El Emira (1980), where it was stated that the clause would not be effective. Brandon J opined that the discretion to stay proceedings in the arresting court should favor an exclusive jurisdiction clause unless there are strong reasons for not doing so. In this instance, it was discovered that the substantial connection of the entire matter was in England, and it was critical that much of the evidence would lose its significance if translated into Arabic for the benefit of an Egyptian court.
The El Amira precedent was employed in The Al Battini (1993), where it was determined that despite the defendants demonstrating that Egypt was a more suitable forum, the financial burden of litigating in Egypt was so substantial that justice demanded that a stay should not be granted. In The Rothnie (1996), it was established that the legal burden of proof lay with the defendant to persuade the court to exercise its discretion in granting a stay.
One of the fundamental principles of Admiralty law is that merely considering the balance of convenience is insufficient grounds to deny the plaintiff the benefits of an action appropriately instituted in the arresting court. In The Rothnie lawsuit (which involved a non-exclusive jurisdiction clause for the courts of Gibraltar), the action had a genuine and significant connection with Gibraltar. There were no circumstances that compelled justice to deny the granting of a stay.
According to Article 17 of the Brussels Convention, if there exists an exclusive jurisdiction clause, the court does not possess the inherent authority to halt proceedings.
Mareva Injunction (Freezing Orders)
Injunctions are a creation of equity and serve as an alternative or additional remedy to seeking damages. Plaintiffs can request an injunction to prevent the occurrence or continuation of a tort or breach of contract. Similar to other equitable remedies, the court has discretion in granting injunctions, and it is not obligated to do so. In general, the court will decline to grant an injunction if damages can provide adequate compensation. When deciding whether to grant an injunction, the court will examine the plaintiff’s conduct (“he who comes to equity must come with clean hands”) and consider all the relevant circumstances, including not only the plaintiff’s circumstances but also those of the defendant.
Injunctions can be categorized as either “interlocutory” or “perpetual” (substantive). The substantive injunction represents the primary relief sought by the plaintiff. It is granted after the case has been tried. On the other hand, an interlocutory injunction is granted provisionally, before the hearing of the action, if the court is satisfied that there is a genuine case to be tried. Its purpose is to restrain the defendant’s actions and maintain the status quo until the case has been heard.
In some cases, a dishonest defendant may attempt to avoid an eventual judgment that the plaintiff is likely to obtain by removing assets from the jurisdiction after becoming aware of the impending lawsuit. If the dispute falls under the jurisdiction of English courts, the plaintiff can seek an injunction against the defendant, which prohibits them from removing their assets from the jurisdiction.
What is the purpose of the Mareva Injunction?
The Mareva injunction is a legal remedy in common law jurisdictions that serves the purpose of freezing a defendant’s assets to prevent them from disposing of, hiding, or dissipating their assets before a judgment is reached. This type of injunction is typically sought by a claimant who fears that the defendant may transfer their assets to avoid paying a potential judgment.
The primary objective of the Mareva injunction is to ensure that, if the claimant is successful in their legal action, there will be sufficient assets available to satisfy the judgment. It is a powerful tool for claimants in litigation, as it helps to preserve the defendant’s assets during the course of the lawsuit.
It is important to note that the Mareva injunction is a provisional measure that does not prejudge the merits of the underlying claim. It is granted at the court’s discretion and is subject to strict conditions to ensure that the defendant’s rights are not unduly affected. The claimant seeking the injunction must establish a strong prima facie case and demonstrate a real risk that the defendant may dissipate their assets before the judgment can be enforced.
The Mareva injunction aims to prevent the defendant from rendering ineffective the judgment that the plaintiff is likely to obtain against them.
This form of injunction is interlocutory and is commonly referred to as a “Mareva injunction.” Its name stems from its first granting in the Mareva Compania Naviera S.A. v International Bulkcarriers S.A.; The Mareva (1975) case. Currently, it is granted under Section 37(3) of the Supreme Court Act 1981. In other words, the Mareva injunction is an equitable remedy that has been acknowledged by Parliament and enshrined in statutory form. Nonetheless, its application remains under the provisions of equity.
Although the official title for this injunction is now “Freezing Order,” the term “Mareva injunction” is still commonly used.
The Mareva injunction is a temporary injunction granted while the case is still pending in court, and before final judgment is given. As an interlocutory injunction, it is only ancillary to other ongoing proceedings at the time of its grant. The court has discretion in granting the injunction and will consider the balance of convenience, weighing the advantages to the plaintiff if the injunction is granted against the disadvantages to the defendant if it is granted.
A Mareva injunction will only be granted if:
A- The plaintiff is likely to recover judgment and
B- The plaintiff can show that:
1- Defendant has assets within the jurisdiction and also
2- Defendant is intending to remove those assets to defeat the judgment that the plaintiff is likely to obtain.
The requirement to demonstrate the balance of convenience is strictly enforced and may be quite challenging for a plaintiff to establish. Therefore, it can be observed that the Mareva Injunction is not granted readily.
A plaintiff’s application for a Mareva injunction will not be successful if it is evident to the court that the assets they aim to freeze have no actual commercial value. In other words, if the assets could not fetch a realistic sum of money to satisfy the plaintiff’s judgment, but instead, the defendant’s business would be hindered or harmed by being the subject of a Mareva injunction, the application will fail. Similarly, if the defendant can demonstrate that the removal of the assets (e.g., funds generated during the usual course of business transactions to pay off other creditors), it is improbable that the application to freeze these funds will be granted.
Typically, the plaintiff will apply for a Mareva injunction ex parte, meaning without the defendant being present. This is done to prevent the defendant from removing the assets before the injunction is granted. If the injunction is granted, the plaintiff usually provides an indemnity in case they lose the case and the injunction is deemed unjustified in retrospect. The plaintiff should clearly identify the assets they wish to freeze with the injunction. It is not advisable to conduct a general search through all branches of a bank to discover such assets.
Mareva Injunction differs from the In Rem Arrest procedure
It is important to distinguish between the “freezing” of assets via the Mareva injunction and the actual arrest of the maritime property via the in rem procedure. The Mareva injunction can be applied to any civil action, not just shipping cases. It is interlocutory and requires a primary cause of action. Although the plaintiff may have frozen the defendant’s assets, they cannot proceed against those assets as if they were the defendant. This is the fundamental difference between the Mareva injunction and the in rem procedure. The Mareva injunction merely freezes the defendant’s assets for future judgment, while the in rem procedure actually arrests the maritime property and enables the plaintiff to proceed against that property as if it were the defendant.
The power of the High Court to grant Mareva injunctions is conferred by Section 37(3) of the Supreme Court Act 1981. Similar powers are given to the county court under Section 38 of the County Court Act 1984 for cases within its jurisdiction. Mareva relief may also be obtained in support of arbitration proceedings in England under Section 12(b)(h) of the Arbitration Act 1950. Furthermore, under Section 25 of the Civil Jurisdiction and Judgments Act 1982, the High Court can grant Mareva injunctions in support of proceedings before the courts of other contracting states to the European Judgments Convention. This has weakened the rule outlined in Siskina v Dictos SA (1979), which stipulated that Mareva relief could only be granted concerning a claim entertained on its merits by a court or tribunal within the jurisdiction.
The courts have departed from the original rule, stated in Ashtiani v Kashi (1987), that Mareva relief would only be granted for assets located within the jurisdiction. The English courts have followed the Australian example and granted Mareva relief in support of substantive proceedings abroad, as demonstrated in the case Babanafit Co SA v Bassatne (1990). In that case, the Court of Appeal also examined the extent to which third parties are required to comply with a Mareva order concerning assets located overseas.