Ship Arrest in Greece

Law and Procedure

By Kostas Spaidiotis

 

Α. THE LEGAL FRAMEWORK

Greece has acceded to the International Convention relating to the Arrest of Sea-Going Ships signed at Brussels in 1952 (henceforth “the Brussels Convention or the Convention”) but it has not implemented so far the newer Convention on Arrest of Ships of 1999, which notably, as compared to the former, has been ratified by only few countries up to date. Since in most cases of ships’ arrest, there will be connections to more than one jurisdictions that will necessitate the application of the said Convention, the basic provisions of the same are discussed briefly below.

The notion of arrest

By the term arrest is meant the detention of a ship by judicial process to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgement. It is namely, proceedings that aim at providing security to the creditor and at preserving his rights until a judgment on the merits is made and can be enforced. Except for the detention of the ship, a further consequence of the arrest is that no legal change or other tampering with the ship is permitted as long as the arrest is in force.

The arrest in the above sense should not be confused with other possible security measures as it may be for example, the prohibition of any alterations to the legal or real condition of a ship (e.g. removal of engines, sale etc.) that could also be requested in Greece, if the ship is registered in Greek Registry. In such case, the ship is not detained neither does it need to be physically present during proceedings since the competence of the court is based on the venue of registration.

Also, an arrest pursuant to common law provisions can be imposed on materials and goods that may happen to be on the ship but belong to third debtors, as it is the bunkers in case for example that their supplier has not been paid for them by the charterer (not a charterer by demise) with whom he has directly contracted.

The maritime claims

As it is generally known, the Brussels Convention stipulates that the arrest of a sea-going ship flying the flag of one of the Contracting State may be arrested in the jurisdiction of another contracting State only in respect of a maritime claim but in respect of no other claim. The whole Convention is structured therefore on the basis of the flag of the ship which is considered, so to speak, as the “nationality” of the ship. The maritime claims are explicitly enumerated in a so called “closed list” in article 1 of the Convention, as follows:

(a) damage caused by any ship either in collision or otherwise;
(b) loss of the or personal injury caused by any ship or occurring in connection with the operation of any ship;
(c) salvage;
(d) agreement relating to the use or hire of any ship whether by charterparty or otherwise;
(e) agreement relating to the carriage of goods in any ship whether by charterparty or otherwise;
(f) loss of or damage to goods including baggage carried in any ship;
(g) general average;
(h) bottomry;
(i) towage;
(j) pilotage;
(k) goods or materials wherever supplied to a ship for her operation or maintenance;
(l) construction, repair or equipement of any ship or dock charges and dues;
(m) wages of Masters, Officers , or crew;
(n) Master’s disbursements including disbursements made by shippers, charterers or agent on behalf of a ship or her owner;
(o) disputes as to the title to or ownership of any ship;
(p) disputes between co-owners of any ship as to the ownership, possession, employment or earnings of that ship; (q) the mortgage or hypothecation of any ship.

By contrast, a ship flying the flag of a non-Contracting State may be arrested in the jurisdiction of a Contracting State for security of any claim either maritime or not, as permitted by the law of such State (art. 8 & 2). Therefore, ships of Contracting States enjoy a profound advantage in comparison with ships of non-Contracting States in that they can not be arrested in a Contracting State for non-maritime claims.

On the other hand, it is supported that the provisions of the Convention that are considered to be unfavourable for shipowners (e.g. arrest of sister ship etc.) should apply to ships of non-Contracting States as it would be against the purpose of the Convention to favour the later against the ships of Contracting States.

A further issue arises in case that a ship has a dual registration as it may be the case in which the charterer of the ship has temporarily registered her under another flag or in case of a ship’s sale when the deletion from the old Registry has not yet been effected. Several views have been supported as to which flag will matter and the rather prevailing view in Greece is that it will be taken into consideration the flag of the State with which the ship has the closest connections.

A sea-going ship

The Convention applies to sea-going ships, excluding ships that sail in lakes or rivers.

An issue arises when a ship sails occasionally both in sea and internal waters. It has been supported (F. Berlingieri) that what matters is whether the ship has been registered in her Registry as a sea-going ship or as a vessel for internal navigation.

Though the Convention does not discuss in detail the term ship, it is accepted that same should be interpreted in the broadest possible meaning (in divergence with Greek law which adopts a narrower sense), including any vessel moving in the sea for the transportation of persons or goods, fishing, towage, pleasure, scientific research, drilling, production of oil and any other purpose. Even non self-propelled platforms that are capable however of being moved from one place to another are subject to the Convention.

Ships that fly the flag of the Contracting State in which arrest is pursued

The Convention does not apply to an arrest of ship within the jurisdiction of the flag State by a person who has his habitual residence or principal place of business in that State (art. 8 & 4). This exclusion is justified by the fact that in such case there is no foreign element that would bring about the application of the Convention and therefore the internal law of the State will apply.

It should be noted that as principal place of business is meant in Greek case law, the place where the administration of a company is actually conducted and not the registered offices of the company. To give an example, the Convention will not apply in case that the claimant is an off-shore company with its actual seat in Greece and the debtor is another company with the same characteristics that owns a vessel flying the Greek flag.

On the contrary, though Greece (as well as all the Contracting States) is entitled to exclude from the benefits of the Convention any person (e.g. a creditor) who has not, at the time of the arrest, his habitual residence or principal place of business in a Contracting State, it has not made use of such exclusion so far. Therefore, a creditor residing in a non-Contracting State, can pursue the arrest of a ship within Greek jurisdiction in accordance with the Convention.

Sister Ship

A worth noting provision of the Convention is the one that allows the creditor to arrest a sister ship. Excluding the maritime claims (o), (p) and (q), the creditor can arrest any other ship that is owned by the person who was at the time when the maritime claim arose, the owner of the particular ship in respect of which the claim arose (3 & 1). Ships are deemed to be in the same ownership when all the shares therein are owned by the same person or persons (3 & 2).

Piercing of the corporate veil is possible in Greece in case that a company is under the absolute control of a debtor who moreover uses such company as vehicle for pursuing illegal or abusive purposes as it may be for example the systematic evasion of his obligations.

However, it is normally quite difficult to succeed in lifting the corporate veil in the proceedings for the arrest which are summary proceedings with obvious limitations of time, evidence and scope.

Arrest for claims arising from the activity of other parties

In case of a charter by demise, the ship can be arrested for maritime claims that are related to her operation and in connection with which the Charterer (disponent owner) is liable and not the registered owner. It is also possible to arrest any other ship in the ownership of the Charterer but not in the ownership of the same registered owner (art. 3 & 4).

It is also noted that if Greek law governs the dispute on substance, the arrest of the ship can be also sought against the buyer-new owner of the ship, if such ship was the sole asset of the seller who had become liable of the claim prior to the sale.

Wrongful Arrest

Greek law provides that if the action on the merits is rejected irrevocably, the arrester may be obliged to compensate the respondent only if he knew or he ignored due to gross negligence that the right for which the arrest was imposed was non existent. It follows from this provision, that it is quite difficult and only on rare occasions possible to meet the conditions required by law for filing a successful action for wrongful arrest.

Moreover, the Court, though it has the power to do so, will not usually require from the claimant to furnish counter-security in order to allow the arrest, so that the possible damages of the respondent may be easily recovered, if the claim is eventually rejected.

Jurisdiction on merits

Last, article 7 of the Convention establishes a number of additional grounds of jurisdiction on the merits, in favor of the Court that ordered the arrest as it is for example the case that the claim concerns the voyage of the ship during which the arrest was made etc.

 

 

B. THE PROCEDURE

The proceedings are initiated by filing an application for arrest to the judge on duty of the competent court, that being the court within its district and territorial waters the ship is at the time of initiation of proceedings.

Prohibition of sail

The judge on duty will set a hearing for the petition in a couple of days, but in the meantime and upon request of the applicant, he should decide whether the ship will be detained until the hearing date. It is self-evident that if the ship sails away before the trial, the arrest, even if granted, may be pointless.

In making his decision, the judge has the broadest possible powers (even to decide ex-parte) but as a matter of practice, he will normally call the respondent by phone or any other available means to attend a meeting at his office the soonest possible, either the same day or the day after, so as to hear the arguments of both sides. The parties may be allowed in the short time frame of such meeting to present also any critical supporting documents they possess or examine orally a witness.

If the judge on duty is persuaded that there is a prima facie valid claim, he may grant an interim restraining order enjoining the departure of the ship which will be effective as soon as is served upon the Port Authorities, who will have hence the responsibility to prevent the departure of the ship. Such order will be kept in force until the hearing of the application, subject to an extension by the Court until a decision on the arrest is made. No minutes of the meeting are kept, nor is it necessary for the judge to give any reason for his decision, which is usually a few lines order or a rejection of the relevant request.

As provided also in the Convention, in case that the judge on duty grants the restraining order, he will also offer the possibility to the respondent to release his ship any time by posting a bank guarantee with the secretary of the court which should cover the amount of the claim plus the expenses and interest that are expected to accrue until a final and enforceable judgement on the merits, as such amounts will be determined eventually by the judge.

The court hearing for the arrest

On the date of the court hearing which will be conducted in flexible summary proceedings, the parties are entitled to examine and counter-examine witnesses, submit their supporting documents that should be ratified and translated into Greek language and submit also pleadings usually within 3 days after the hearing. The applicant needs to show to the court that he has a specific valid claim which is under an imminent risk of not being satisfied, if no security is granted. The decision of the court is made on the balance of probabilities and no full evidence is required. The decision may be pronounced any time within usually 30 days and is not subject to an appeal. The respondent can only request the review of the decision, if new important developments have taken place or new important evidence has emerged that the court could not have taken into consideration when it made its decision.

The arrest, if granted, will be kept in force until the case is decided irrevocably on its merits. The Court may further oblige the arrester to file an action on the merits, if he has not already done so, within a time period to be determined by the Court, which can not be less than 30 days and if the arrester fails to do so, the respondent can request the lifting of the arrest.

Last, the lawyers attending to the Court proceedings are presumed to have authority to represent the parties and no Power of Attorney will be required, unless their authorization is disputed by the adverse party.

 

                                                                                                                                                              

The present article should not be regarded as substitute for professional advice and the author will not accept any liability for any information provided or views expressed. Copyrights reserved.