Maritime trade has been carried out since ages, and it remains to be the backbone of the world economy by hauling around 80 to 90% of world trade. UAE being the place in between Asia and Europe has been a natural port. UAE is bordering the Gulf of Oman and the Persian(Arabic) Gulf, between Oman and Saudi Arabia where it joins the Arabian Sea.; it is in a strategic location along southern approaches to the Strait of Hormuz which is a vital transit point for world crude oil. UAE is growingly becoming center for imports and re-exports. There is a surge in an international trade giving rise to significant global commercial transactions increasing general commercial and shipping disputes. This article accentuates the vessel arrest regime in UAE for securing debts as shipping companies deal with various claims which are often against the vessel.
1. What is the Law governing Vessel Arrest in UAE?
The Vessel arrest is the way of security under maritime transactions. It is also a statutory right of a claimant under the UAE Commercial Maritime Code No. 26 of 1981, as amended by law No. 11 of 1988 (the ‘Maritime Code’) (hereinafter referred to as the “Law”). It provides and regulates the arrest of vessels. In UAE, a distinction exists between ‘provisional’ arrest and ‘executory’ arrests. The regulations relating to the former get covered in Articles 115 - 122 of the law, while the latter gets regulated by Articles 123 - 134.
The UAE Courts may apply maritime customs and general principles of justice, provided these customs and policies do not conflict with the provisions of the Shari’ah as stated under Article 8 of the Law in the absence of any law on the subject matter of dispute. UAE is currently not signatory to any International Conventions on Vessel Arrest however various provisions of Hague-Visby rules do get imbibed in the Law. UAE is also not a signatory to Hamburg Rules and Rotterdam Rules. However, International Conventions expressly incorporated into bills of lading or contracts will be given the force of law in UAE Courts provided the costly process of translated and certified copy of the convention submitted to the Court.
2. What are the legal provisions for Vessel arrest?
The only ground for Arresting Vessel is Maritime debt as stated under Article 115 of the Law. A maritime debt gets defined as a claim in respect of a right arising in the following circumstances:
Damage suffered by the vessel because of collision or otherwise.
Loss of life or personal injury occasioned by the ship and arising out of use thereof
Assistance and salvage
Contracts relating to the use or operation of the vessel under a charter party or other contract
Agreements relating to the carriage of goods under a charter party, bill of lading or another document
Loss of or damage to goods or chattels carried on board the vessel
Towage or pilotage of the vessel
Supplies of products or equipment necessary for the maintenance or operation of the ship, wherever the sales commence
Construction, repair of machinery or parts of the ship, dock charges and dues
Disbursements made by the master, shippers, charterers or agents on account of the owner thereof
Wages of the master, officers, and crew, and other persons working on board the vessel under a contract of maritime employment
Dispute as to ownership of the ship
A disagreement in connection with the joint purchase or title of the vessel, or with the possession or use thereof, or with the right to the profits arising out of use thereof
The Arrest of Sister Vessel:
Article 116(1) permits the detention of a sister vessel owned by the debtor at the time when debt arose. However, the courts do not tend to lift corporate veil. There is no right to arrest other vessels owned by a defendant in the circumstances stated in Articles 116.2. Therefore, the sister vessel cannot get detained where the claim concerns disputes over ownership, joint ownership and mortgages and the arresting party is only entitled to detain the ship to which the debt refers.
In line with the provisions contained in Article 117 of the Law, a creditor is permitted to arrest vessels not owned by the debtor. This aspect is subject to debtor being a charterer and grant of navigational administrator rights to him. In such event, the creditor will be solely responsible for any maritime debt on the ship. The creditor can arrest such vessel or any other ship owned by the charterer but cannot detain any other ship owned by the disponent owner.
Therefore, contrary to English law there is no difference between Maritime Claims and Liens under UAE Law. It can be the Maritime lien, but the creditor may not be entitled to vessel arrest if it does not fall in above-stated categories of maritime debt as per the Law.
3. Which courts have the competency to deal with vessel Arrest?
The competency of the court gets clarified under Article 122 of the Law. This Article states that the civil court in whose jurisdiction the arrest took place shall be entitled to decide on the subject matter of the claim. In any of the following circumstances, even if the vessel is not UAE flagged, which are in addition to those set out in the procedural laws of the UAE:
If the plaintiff has a regular place of residence (or office) in the state;
If the maritime debt arose in UAE;
If the liability arose on a voyage during which the vessel gets arrested;
If the debt resulted from a collision or an act of assistance over which the court has jurisdiction; and
If the debt gets guaranteed by a maritime mortgage on the arrested vessel, however, in practice, the courts have often granted provisional arrest orders merely because of the vessel’s presence in UAE territorial waters. This aspect can be inferred from Article 21(2) of the CPC which states that the courts of the UAE shall be competent to hear a suit against a foreign defendant who has no domicile or residence in the UAE if the case concerns property located in the state.
4. What is the procedure for vessel arrest?
A written application must be made to the civil court accompanied by copies of all relevant documents relating to the claim which may form prima facie evidence of the existence of the maritime debt. The court will briefly examine such papers and often decide without hearing counsel whether or not to grant a provisional remedy. In some Emirates, as a condition of allowing an arrest, the court may require the arresting party to provide counter security as bank guarantee. This guarantee should be equivalent to claim amount and to undertake to indemnify the respondent for any loss or damage, within the claim amount, and to pay compensation if a final judgment determines that the arrest was wrongful. In addition to the indemnity undertaking, the claimant must also, in particular, cities, undertake to be responsible to the court for the costs and expenses of maintaining the vessel while it is under arrest. Under some circumstances such as where the claimant is UAE national written undertaking may be sufficient. Further, in the cases of claims by crew members for their wages, the courts will not insist upon counter security being provided.
Further to arrest any vessel in UAE, the claimant needs to provide a notarized, attested and authenticated Power of Attorney (POA) to counsel. If the POA is executed abroad, it shall be notarized and regularized by the relevant Ministry of Foreign Affairs of the Country of execution and authenticated by the UAE Embassy in that Country. Further, upon its arrival in the UAE, the POA shall also be validated into Arabic. These lengthy processes have often turned out to impede in the urgent situations of arrest. Moreover, the documents supporting the claimant’s entitlement to arrest the vessel must be translated into Arabic by an official court-approved translator. This aspect makes it unfeasible to obtain ship's arrest on short notice. Hence the lawyer needs to be advised in advance of vessel arrival at port whenever possible.
Maritime claims are often treated on an urgent basis by various jurisdictions all around the world. Likewise, UAE has separate rules embodied in Civil Procedures Code for the date of the hearing if it relates to a maritime claim which can be even an hour following the time of notification to the defendant with no further requirement to prove any urgency and necessity for such short-term notice, unlike other civil cases.
5. What are the other matters to be considered in respect of the arrest?
a. Suit: The substantive suit is required to be filed within eight days from the date on which the attachment was effected as per Article 285 of the Civil Procedure Code.
b. Court fees: The value of the claim determines the Court fees payable for instituting an action before the Court of First Instance in specific Emirate with maximum payable court fee of AED 30,000/- in UAE.
c. Service of order: The order for the vessel arrest is served by the court bailiff and police officers, with the assistance of the port authority and served on the master of the vessel or his deputy, and on the port authority at the place where the ship is arrested. Upon the service of order, the usual procedure of the port authorities took possession of the vessel’s documents and the seamen’s books or the passport of the master and the crew follows.
d. Appeal: Since the time taken for interlocutory appeal and decision for release is lengthy it is advisable to provide security to obtain the release of the vessel.
e. Maintenance of vessel: Usually the party seeking arrest has to account for the costs of maintaining the ship while it is under arrest. Indeed, an undertaking to be responsible for the costs of maintaining the vessel is to be attached to its arrest application. The costs include all port fees, towage, and amounts due to the crew.
f. Bail: Bail provision for the arrested vessel is stated under Article 118 of the law wherein the competent civil court shall order lifting of arrest order on providing security or other surety which is sufficient to meet the claim. However, it also states that a vessel will not be automatically released from arrest if the arrest has been effected in connection with either of the matters concerning:
1. a dispute as to the ownership of the vessel;
2. a dispute in connection with the co-ownership of the ship, or
3. with the possession or use thereof, or
4. with the right to the profits arising out of use thereof. In such cases, the court may permit the person in possession of the vessel to provide sufficient security and use it, and may pass discretionary order to charge a person with the management of the ship during the period of the arrest.
g. Release order: As per Article 118.3 of the law, a release of the vessel under above provision is not considered admission or acknowledgment of claim.
h. Limitation period: Time limit is different for different types of claims for which arrest is sought. Such as claim for personal injury or death has time bar of 2 years as per Article 299 and claims concerning collisions have time bar of 2 years from date of collision as per Article 326.
6. How are the vessels sold after arrest order is final?
Once the final judgment is rendered against vessel the court orders the sale of the arrested vessel. The sale is advertised as stated in Article 126 of the law requiring publication of a notice by the Creditor within 90 days in one of the widely circulated local newspapers, usually an Arabic daily. Court fixes the reserve price and condition of sale. If the creditor fails to complete the publication formality within the time frame the court may order arrest order to be discharged. The sale takes place after fifteen days from the date of publication of the notice and not later than 30 days. In all, three sessions of auctions are held at intervals of seven days. The highest bid in the previous auction is taken as reserve price in next auction and in third session, the highest bidder secures the vessel.
The legal process may become time-consuming and lengthy due to translation and attestation requirement but being influenced by the international laws; maritime customs followed commonly and increasing trade, the courts may consider the arrest by claimants on prima facie evidence of debt in favor of claimant and security being provided. The most important concerning zone is guiding lawyers in advance to finish the process and to pull off arrest as required. For more information on STA's shipping and maritime law practice in Abu Dhabi, Dubai and rest of UAE, please get in touch with one of our senior shipping lawyers in Dubai.