How Will Your Vessel Be Affected By A Maritime Debt?

Hamdan AlShamsi Lawyers & Legal Consultants


Established in 2011, Hamdan Al Shamsi Lawyers & Legal Consultants (HAS) is a full-fledged law firm based in Dubai – the economic heart of the UAE. We provide bespoke legal services by combining broad international expertise with in-depth local knowledge. Through the vision and dedication of our founder, Hamdan Al Shamsi, HAS established itself as one of the leading Emirati firms.
The UAE's maritime business has grown significantly; however, every coin has two sides, and with the increase in maritime transactions, maritime disputes have become unavoidable during the course of business.
United Arab Emirates Transport
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The UAE's maritime business has grown significantly; however, every coin has two sides, and with the increase in maritime transactions, maritime disputes have become unavoidable during the course of business. The governing legislation for all maritime-related issues is Federal Law Number 26 of 1981 on the Commercial Maritime Law (the Maritime Law), as amended by Federal Law Number 11 of 1988. During the course of business, it may be necessary to detain the vessel (ships) in order to recover maritime debts.

UAE Maritime Law

The UAE Maritime Law distinguish between two types of vessel arrests: provisional and executory arrests. Articles 115 to 122 of the Maritime Law govern provisional arrests (preservatory arrests), while articles 123 to 134 govern executory arrests. When it comes to maritime debts, a provisional arrest can be used. Article 115 of the Maritime Law specifies the grounds for filing a claim for maritime debts and stabile the following:

1. The damage caused by the vessel as a consequence of an accident or collision.

2. The use of a vessel caused the death of someone or has resulted in causing personal damage.

3. On the occasions of salvage or assistance.

4. When it's regarding the usage of a ship under the charter party or any other such contracts.

5. When it's pertaining to agreements as to conveyance of goods under a charter party, bill of lading or any other such documents.

6. Loss of or any kind of injury to the goods or chattels on board.

7. In the matters relating to general average claims.

8. Towage or pilotage of the vessel.

9. Supplying necessary products or equipment in order to maintain or operate the ship.

10. Matters involving construction, reparation of the ship's machinery, dock charges and other dues.

11. Payments made by the masters, shippers, charterers or agents on behalf of the owner;

12. Regarding the salary of the master, officers, crew and other employees working onboard the vessel under a contract of maritime employment.

13. When it's a question of the ownership of the ship.

14. A dispute regarding the joint purchase or title of the vessel or regarding the possession or use of the ship, or with the right to the profits emanating from the use of the ship.

Maritime mortgages

According to Article 116 of the Maritime Law, the claimant may arrest not only the vessel in dispute, but also any vessel owned by the defendant at the time the claim is filed. The sister's vessels refer to the other vessel. However, in these cases, the UAE courts are generally unwilling to pierce the corporate veil. Nonetheless, the claimant is forbidden from arresting the sister ships under the following conditions:

- If it's a dispute that pertains to the ownership of the vessel.

- If it's a dispute over joint ownership, possession or use of the vessel or its matter of right to the profits produced from using the vessel in dispute.

- If it's a dispute over maritime mortgage; and

- If the vessel was hired by the demised.

Procedure for the release of the arrested vessel:

The procedure for releasing the ship from arrest is outlined in Article 118 (2) of the Maritime Law. If the court is convinced that the security or guarantee submitted by the owner whose ship has been arrested is equivalent to paying the amount in dispute, the arrest order will be revoked. However, the shipowner's action does not imply that he has accepted his liability or waived his right to limited liability. If the ship's owner fails to provide such security, the only way to seek the release of the arrest is to contest the claim and thus obtain the ship's release.

Exceptions to the release of the ship arrested, despite the presence of a guarantee or security presented by the defendant could be in the circumstances where the matter in dispute is regarding the ownership of the ship, possession or use or rights to profits arising from the use of the ship.

In these cases, the court will not nullify the arrest order on the ship but, upon receiving the security, it may order a third-party company to take control of the ship and allow the owner to make commercial use of the ship. The courts tend to accept three types of security bonds in cases of maritime debt, such as cash or a manager's cheque deposited into the court's treasury, or a bank guarantee from a bank located in UAE or the parties are allowed to offer alternative assets as a security. The amount of security shall be equivalent to the value of the full claim.

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.

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