Notwithstanding the advances made in the automated tracking systems used to identify and monitor vessels’ movements, arrested vessels still occasionally manage to abscond from the territorial waters of the particular jurisdiction in which they were arrested. Unfortunately, this is an inherent risk linked to the mobile nature of ships.
Maltese law tries to circumvent such occurrences by imposing penalties to dissuade unscrupulous shipowners from ordering ships to flee. Article 865 of the Code of Organisation and Civil Procedure provides for one of these deterrents. This article states that when a vessel that is subject to an arrest warrant escapes Maltese waters, the owner, bareboat charterer or other person in possession of the ship or vessel at the time of the breach will be jointly liable to pay a €116,470 penalty.
A Maltese civil court recently examined the application and nature of this remedy in Cassar Fuel Limited v MV Madra.(1)
Facts
The proceedings revolved around the arrest and subsequent escape of the vessel MV Madra.
Following the issuance of an arrest warrant by a Maltese court against the MV Madra, the vessel, together with the relevant local authorities, were duly served with the arrest papers. Following the arrest, the master and crew of the MV Madra decided to switch off the ship’s automatic identification system and fled from Maltese waters. Consequently, the arresting creditor, a Maltese bunker supplier, effectively lost the only security it had for its claim.
The bunker supplier commenced proceedings in rem against the vessel MV Madra requesting payment of the penalty stipulated in Article 865 of the code. Curators were appointed to represent the interests of the vessel in these proceedings. One of the key issues was whether an action of this nature could be brought against the vessel.
Decision
The court analysed Article 865 and explained that it affords an aggrieved creditor a partial remedy where a vessel absconds. An arrest warrant against a vessel can be considered as a form of security granted by the courts pending final determination of the action on the merits. The law seeks to offer the creditor a form of compensation where a vessel breaches a court order and escapes Maltese waters. Further, the court noted that the right to claim the penalty outlined in Article 865 is without prejudice to the creditor’s other rights to pursue its claim. Payment of the penalty by the liable party does not reduce or affect the outstanding principal debt.
The court also examined whether such an action could be commenced in rem directly against the vessel. The court stressed that the wording used in Article 865 presupposes that any such action is purely personal in nature and is brought against whichever party violated the court order. As such, the court concluded that the creditor must commence proceedings in personam against the owner, the bareboat charterer or any other person in possession of the vessel at the time of the alleged breach. The law therefore implies that the action can be commenced only against persons (both legal and natural), and not against a vessel in rem.
The plaintiff argued that since it had a claim in rem against the vessel, an action of this nature could likewise be brought in rem against the vessel. The court disagreed with this interpretation and correctly confirmed that the right to claim the penalty under Article 865 is completely independent and separate from the underlying claim, as such proceedings are commenced against a person or persons that removed the vessel from Maltese waters in violation of the court order.
Comment
The court’s conclusions are seemingly correct, as proceedings commenced under Article 865 must be brought in personam against any of the individuals mentioned in the article. However, arguably, the court’s analysis stopped short, as it should have addressed the requirements for jurisdiction in rem, which would have illustrated how jurisdiction is diametrically opposed to an action for penalties commenced under Article 865.
The Maltese courts have consistently held that a prerequisite for Maltese courts to have jurisdiction over a claim in rem is the physical presence of the defendant vessel in Maltese waters.(2) The only exception to this cornerstone rule is where the owner of the vessel deposits the claim amount in court as alternative security in lieu of the vessel.(3) In such cases the vessel will be free to leave and the courts will still have jurisdiction in rem due to the physical presence of the alternative security in Malta.
On the other hand, proceedings under Article 865 are commenced following the escape of an arrested ship. As such, no deposit will have been made (as otherwise the vessel would have been released). Therefore, an action of this nature presupposes that the vessel is no longer within Maltese waters. Accordingly, one of the fundamental elements for jurisdiction in rem is missing. It is thus clear that a claim for penalties under Article 865 cannot be commenced against a vessel in rem.
For further information on this topic please contact Adrian Attard at Fenech & Fenech Advocates by telephone (+356 2124 1232) or email (adrian.attard@fenlex.com). The Fenech & Fenech website can be accessed at www.fenechlaw.com.
Contributed by Fenech & Fenech Advocates
Source: ILO – September 30 2015
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