The 1999 Arrest Convention came into force on 14 September 2011, having finally been ratified by the requisite ten countries. That this process took over 12 years reflects the lukewarm reception that the Convention has received from the international shipping community. The Convention shall only have effect in the jurisdictions which have ratified it and therefore, initially at least, its impact will be relatively limited. Nevertheless, it does introduce some notable changes from the position under the more popular 1952 Arrest Convention. In this article, we provide an overview of these changes and their potential implications for ship-owners and claimants alike.
Ratification of the 1999 Arrest Convention
Article 14 of the 1999 Arrest Convention provides that it will enter into force six months after it has been ratified by 10 States. Albania became the tenth State to ratify the Convention on 14 March 2011 and thus it entered into force on 14 September 2011. The States which have agreed to be bound by the Convention are Albania, Algeria, Benin, Bulgaria, Ecuador, Estonia, Latvia, Liberia, Spain and the Syrian Arab Republic.
Application of the 1999 Arrest Convention
So far, no further States have agreed to be bound by the Convention. Thus it will, for now, only take effect within the jurisdictions of those 10 States. Article 8 provides that the Convention shall apply to any ship within the jurisdiction of a signatory State. Therefore, ships flying the flag of a State which has not ratified the 1999 Convention will be subject to the Convention when in the waters of a State which has (unless that State has made specific reservations to the contrary). This will be the case irrespective of the nationalities of the parties in dispute and any law and jurisdiction provision they may have agreed between them.
Article 10 allows States to make certain reservations when ratifying the Convention. The only notable reservation so far has been made by Spain which has reserved the right not to apply the rules of the Convention to ships which do not fly the flag of another 1999 Convention State.
Spain is also a signatory to the 1952 Convention and this reservation would, at first glance, appear to maintain the status quo in respect of ships flying the flag of other 1952 Convention States. However, practitioners in this jurisdiction suggest that, following an amendment to the Procedural Law Act, the Spanish Court will not exercise the right not to apply the 1999 Convention to ships flagged in non-ratifying States.
The 1952 Arrest Convention
The 1952 Arrest Convention adopted the common law approach of having a closed list of claims. Article 1 of the 1952 Arrest Convention sets out the limited list of claims for which ships can be arrested. Article 3 permits the arrest of sister ships. In the event of wrongful arrest, it is possible to claim damages pursuant to the 1952 Arrest Convention, although this is a difficult claim to establish because it requires evidence of bad faith on the part of the arresting party which (not least because of the closed list) is rarely the case.
The 1952 Arrest Convention is a success, having been widely adopted, with over 70 ratifications and accessions. Although the 1952 Arrest Convention has proved to be very popular, it has also had its detractors. Some take the view that the closed list of claims in respect of which an arrest can be made is too restrictive and advocate an open list, or at least the expansion of the present list. One significant criticism is that it does not allow arrest in respect of unpaid insurance premiums. The drafting of the 1952 Arrest Convention has also been criticised insofar as certain sections have proved ambiguous in their wording, with the result that completely different interpretations have been placed on them by civil law and common law courts. For example, some civil law courts have interpreted Article 3(4) as allowing a ship to be arrested for the debts of its time charterer. In common law jurisdictions, on the other hand, arrest for the debts of anyone other than the ship's owner or demise charterer is only possible following the sale of a ship and in respect of maritime liens or other in rem claims which survive the sale of a ship.
Changes introduced in the Arrest Convention 1999
The 1999 Arrest Convention contains some notable changes to the 1952 Arrest Convention. Firstly, the list of claims for which arrest is possible has been significantly expanded. Under the 1952 Convention there are 17 categories of claim which can give rise to a right of arrest. Under the 1999 Convention there are 22 categories, with bottomry having been removed and 6 new heads of arrest having been added. Whilst the list in the 1952 Convention is closed, the list in the 1999 Convention contains one category (Article 1(d) - environmental damage) which is somewhat open-ended. In view of the difficulties inherent in defining all possible forms of environmental damage and related costs, this subparagraph lists examples of the type of damage which it envisages and concludes with the open words "...and damage, costs, or loss of a similar nature...".
Under the 1999 Arrest Convention, in addition to the claims listed in the 1952 Arrest Convention, it is possible to arrest ships in respect of:
- damage or threat of damage to the environment
- wreck removal
- port, canal and pilotage dues
- unpaid insurance premiums
- unpaid commissions, brokerages and agency fees
- disputes arising from contracts for sale of the ship
Unlike the 1952 Convention, the 1999 Arrest Convention allows claimants multiple opportunities to secure their claims. Under Article 5, a claimant can re-arrest a ship after it has been released, and has the option of arresting multiple ships, in order to top up the security for his claim. The right to re-arrest or to arrest multiple vessels arises only when:
- the security already provided is inadequate (in the case of re-arrests, the security can never exceed the value of the vessel in question); or
- the person who provides the security is not, or is unlikely to be able to, fulfil its obligations; or
- the ship or the original security was released either with the consent of the claimant acting on reasonable grounds or because he could not by taking reasonable steps prevent the release.
These are important provisions. They are not, therefore, something which a claimant is likely to be willing to contract out of lightly. The traditional wording of letters of undertaking would remove these rights from the claimant's armoury. It seems likely that claimants arresting in jurisdictions applying the 1999 Arrest Convention will seek to reserve their rights under Article 5 in any letters of undertaking or other agreements relating to the release of a vessel. It is difficult to see how a defendant, when providing security in order to have their vessel released, can reasonably refuse a claimant the right to subsequently top up this security under the circumstances envisaged by the Convention. In the absence of agreement between the parties as to the adequacy of the security provided, the Courts in the arresting jurisdiction shall determine the nature and amount of security required for the release of the ship. In the event of a disagreement between the parties regarding the right to further, future arrests, the Courts are likely to favour the claimants.
Although the 1999 Arrest Convention only applies in a limited number of jurisdictions, it is relevant to any ships entering those jurisdictions. As compared with the 1952 Arrest Convention, the expansion of the list of claims for which arrest is possible, and the prospect of multiple arrests in relation to a single claim, are likely to mean that ship-owners will view the 1999 Convention with some concern. This sentiment is only likely to increase, should the 1999 Arrest Convention be adopted more widely in the future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.