JANUARY 2013

Legal Focus

71 Shipping: Vessel Arrests

Estonia

This month, Lawyer Monthly turns its gaze to the shipping industry and in particular vessel arrests. In late 2012, a Ghanaian court granted its approval of the seizure of an Argentine ship as part of an on-going dispute between the country and its creditors. This on-going dispute highlights the array of issues involved in the use of vessel seizures and arrests as a means by which to recover costs from a debtor. To find out more, we speak to Indrek Nuut and Merle Vanikver from Estonian law firm, MALSCO Law Office. The firm’s main practice areas include ship-building, ship finance, ship sale and purchase, flagging, insurance, charter parties as well as carriage of goods, maritime employment, ship arrest, forced sale, towage and salvage, making Indrek and Merle well-placed to comment on this interesting and topical subject.

How common are vessel arrests? Have you ever been involved with one?

MALSCO Law Office has extensive experience in advising clients on ship arrests in Estonia and across Europe. Vessel arrests are common in Estonia and arrest orders are issued promptly (normally on the same or next working day). Without getting into the details of the arrest of m/v ARA Libertad then when it comes to arrest of government-owned ships then there have been no such cases in Estonia to this date, but local legal practice does recognize the fact that when party to commercial contract, state cannot use its immunity and may be subjected to enforcement of judgments against them.

can you give me an overview of the legislation governing vessel arrests and seizures?

Estonia is a member of the latest conventions governing ship arrest, such as International Convention on the Arrest of Ships (1999), International Convention on Maritime Liens and Mortgages (1993), International Convention on Civil Liability for Oil Pollution Damage (1969) and its amendments, Convention on Limitation of Liability for Maritime Claims (1969). In other words we have the modern legal framework to effectively handle ship arrest cases in Estonia. In terms of maritime liens and claims then only those named in the conventions above can give a right for a ship arrest.

What are the main challenges involved in cases like this?

As always the main challenge is to obtain a court order for arrest and have it seized by the bailiff, before the vessel leaves the local port. Our courts do not work over weekends so this must be taken into account.

How complex is the approval process for seizure and injunction cases?

It depends on the clarity of the case (for this reason as much evidence as possible should be available

promptly), if the judge is not convinced that the creditor has a legitimate claim against the debtor, then sometimes an arrest order may not be granted. Prior to issuing an arrest order the court will demand a security from the creditor, which by law is at least 5% of the claim amount, but in practice usually 10-15% of the claim amount. Maximum security amount that the court is allowed to demand is €32 000. So the creditor must have a certain amount of funds ready for immediate payment. Court may exempt the claimant from this obligation if the claimant has no financial possibilities to offer such security (e.g. claims for crew’s wages). In an arrest order the court gives the claimant up to one month to bring the case before competent court, unless settlement is reached before that. Estonian court as arresting court will not assume jurisdiction to resolve the dispute, when parties have clearly agreed on a different place of arbitration or litigation. By law all documents submitted to court must be in Estonian.

can you tell me about defence strategies?

Once the vessel is arrested there are three ways to obtain a release – (i) settlement of the parties, (ii) monetary deposit to court, (iii) irrevocable and unconditional bank guarantee of Estonian or EU credit institution, which must be filed to court in original.

The procedure to release the vessel is straightforward after one of the above conditions has been met. However, guarantee letters may always trigger a proceeding where court asks opinion of the claimant before ordering release of the vessel against guarantee letter.

Club letters do not serve as a release tool without consent of the claimants.

What are the challenges your clients face when involved in shipping and maritime in your country?

The Estonian shipping industry is naturally very www.lawyer-monthly.com

Indrek nuut, managing partner

Visit: www.malsco.ee

Merle Vanikver, lawyer

influenced by global trends, particularly the state of shipping in Europe and it faces the same hardships as other businesses in this field. Locally the biggest issue is that the Estonian government doesn’t see shipping as one of state’s vital industries and therefore insufficient attention is given to the industry’s needs, which has had a very negative effect in the past years of recession.

are there any legislative changes you would like to see?

The social and tax issues of seafarers working under foreign flags have not been dealt with properly. Not a single effective state aid program to shipping has been introduced in Estonia. Tax exemptions regarding crew wages should be introduced to ship-owners with vessels under Estonian flag. LM

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