Maritime trade has been carried out since ages and it remains to be backbone of world economy by hauling around 80 to 90% of world trade. UAE being the place in between Asia and Europe has been 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 centre for imports and re-exports. There is a surge in international trade giving rise to extensive global commercial transactions resulting into rise in 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 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, distinction is made between ‘provisional’ arrest and ‘executory’ arrests. The regulations relating to the former are contained in Articles 115 - 122 of the law, while the latter are regulated by Articles 123 - 134.
The UAE Courts may apply maritime customs and general principles of justice, provided these customs and principles do not conflict with the provisions of the Shari’ah as stated under Article 8 of the Law in the absence of any law pertaining to the subject matter of dispute. UAE is currently not signatory to any International Conventions pertaining to Vessel Arrest however various provisions of Hague-Visby rules are imbibed in the Law. UAE is also not 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 is provided 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 is defined as a claim in respect of a right arising in the following circumstances:
a) Damage suffered by the vessel by reason of collision or otherwise.
b) Loss of life or personal injury occasioned by the vessel and arising out of the use thereof
c) Assistance and salvage
d) Contracts relating to the use or operation of the vessel under a charter party or other contract
e) Contracts relating to the carriage of goods under a charter party, bill of lading or other document
f) Loss of or damage to goods or chattels carried on board the vessel
g) General average
h) Towage or pilotage of the vessel
i) Supplies of products or equipment necessary for the maintenance or operation of the vessel, wherever the supply is effected
j) Construction, repair of equipment of the vessel, dock charges and dues
k) Disbursements made by the master, shippers, charterers or agents on account of the owner thereof
l) Wages of the master, officers and crew, and other persons working on board the vessel under a contract of maritime employment
m) Dispute as to ownership of the vessel
n) Dispute in connection with the joint ownership of the vessel, or with the possession or use thereof, or with the right to the profits arising out of the use thereof
o) Maritime mortgages
Article 116(1) permits the arrest of a sister vessel owned by the debtor at the time when debt arose. However the courts do not have tendency of lifting 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 be arrested where the claim concerns disputes over ownership, joint ownership and mortgages and the arresting party is only entitled to arrest the vessel to which the debt refers. However as per Article 117, the creditor can arrest vessel not owned by the debtor who is also a charterer and is granted navigational administration rights, he shall be solely responsible for any maritime debt on it and the creditor can arrest this vessel or any other vessel owned by the charterer and cannot arrest any other vessel 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 Maritime lien but 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 competency to deal with vessel Arrest?
The competency of court is stated under Article 122 of the Law stating 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:
1. If the plaintiff has a regular place of residence or main office in the state.
2. If the maritime debt arose in UAE.
3. If the debt arose on a voyage during which the vessel was arrested.
4. If the debt arose from a collision or an act of assistance over which the court has jurisdiction; and
5. If the debt is 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 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 existence of maritime debt. The court will briefly examine such documents and decide often without hearing counsel whether or not to grant a provisional remedy. In some Emirates, as a condition of granting an arrest, the court may require the arresting party to provide counter security as bank guarantee 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 certain Emirates, 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 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 countersecurity 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 having right to audience in UAE and if the said 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 be further authenticated into Arabic. These lengthy processes have often turned out to be an impediment 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 makes it unfeasible to obtain arrest of vessel in short notice. Hence the lawyer needs to be advised in advance of vessel arrival at port whenever possible.
As maritime claims are often treated on urgent basis by various jurisdictions all around the world for obvious reasons similarly UAE has separate rule 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 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 vessel is arrested. Upon the service of order the usual procedure of the port authorities taking 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 in order 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 vessel whilst 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. This includes all port fees, towage and amounts due to the crew.
f. Bail: Bail provision for 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 vessel, or
3. with the possession or use thereof, or
4. with the right to the profits arising out of the 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 vessel during the period of the arrest.
g. Release order: As per Article 118.3 of the law any release of 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 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. The reserve price and condition of sale is fixed by court. If the creditor fails to complete the publication formality within 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 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 favour 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.