Shipping and the COCP amendments

On August 4, Act XIV was published; it provides substantial amendments to the Code of Organisation and Civil Procedure (COCP), the law that governs the procedure before our Civil Courts, some of which radically affect a matter that has lived in a time capsule for some 166 years.

I am referring principally to the regime that governs the jurisdiction of our courts in rem and, tied up very closely to it, the ability or otherwise to arrest vessels to secure such claims. Apart from providing changes in this regard, the amendments also provide a new concept - court-approved sales - as well as a new warrant of arrest of a ship, which did not exist before.

Here I shall, however, limit myself to the grounds of jurisdiction of our courts in rem and the ability or otherwise to arrest a vessel.

Our legal system, following the British model, always afforded a claimant the possibility to sue either an individual (physical or corporate) in in personam proceedings, or alternatively sue the vessel itself in in rem proceedings.

Until recently, the grounds on which our courts were able to exercise jurisdiction in rem were very restricted and limited to the grounds established by two Victorian Acts of Parliament, dated 1840 and 1861, still in force in Malta until the coming into force of Act XIV of 2006.

Needless to say, the exigencies of shipping, the contractual scenarios that arise relating to shipping both on land and at sea, the development and changes experienced by the shipping sector in terms both of "hardware" as well as associated services, have changed so radically over the years since 1840 and 1861, that the grounds on which our courts could exercise jurisdiction in rem against vessels in 1840 and 1861 stopped serving the interest of traders, businessmen, service providers, service users and other persons in general who are involved, dependant on or connected with this sector. Therefore the need to upgrade this Victorian list was dire.

Restricted grounds for arrest of vessel

Another important part of the equation is that Malta never became a signatory to the Arrest of Ships Convention of 1952 or the Arrest of Ships Convention of 1999. In fact, as far as the latter is concerned, only a handful of states are already parties to it, with the vast majority being signatories to the Arrest Convention of 1952.

Thus, under Maltese law, one can only "arrest" a vessel for the purposes of securing a claim either in rem or in personam and, therefore, for those same grounds on which the courts can exercise jurisdiction in rem or in personam. Consequently, and limiting myself to in rem claims against vessels, the grounds on which one could arrest a vessel to secure a claim in rem were equally limited.

These grounds to be found in the Admiralty Court Acts of 1840 and 1861 were limited to the following: "claims relating to mortgages; claims relating to title or ownership and possession of a ship arising in actions regarding possession, salvage, damage, wages or bottomry; claims for salvage; claims for damages done or suffered by a ship; claims for towage; claims for necessaries supplied; claims for building, equipping or repairing any ship; claims by the holder of a bill of lading of any goods imported into Malta for any damage done to the goods through negligence or breach of contract on the part of the owner or crew; claims regarding possession, ownership, employment and earnings of a ship registered in Malta as between co-owners; claims by seamen for wages; claims by a master for disbursements made by him for use by the vessel".

Anyone involved in the shipping and associated service industry today will immediately realise (usually the hard way, after having to come to terms with the fact that he cannot commence an action) that the above list is far too restrictive.

The development of contracts of carriage and affreightment and containerisation, the development of harbour services, ship agency and freight forwarding, the short duration of port calls due to the huge advances in ship design and technology and shore handling abilities, the continuously developing rights of sea farers, the increased realisation for the need to protect the environment, the need to protect the interest of the insurers covering the risks involved - all of these and more encouraged on an international level, first the creation of the Arrest Convention of 1952 which catered substantially for these new needs, and later on the Arrest Convention of 1999, which further extended the grounds on which one could arrest a vessel in the hope of keeping up with the needs of the industry.

As already stated, Malta never became a signatory to either the 1952 or the 1999 conventions and therefore the need to advance from the position of 1840 and 1861 was more acute.

Failure to pay agency fees

The situation today has changed overnight and very radically. From rules appropriate for the Victorian era, the governing regime today, through the amendments to our COCP, is more than 2006 compatible.

The amendments provide for the creation of entirely new sections in our COCP to regulate the matter. Section 742 (B) is entitled "Jurisdiction in rem against ships or vessels." This section provides an extensive list of grounds on which our courts can now exercise jurisdiction in rem and therefore grounds on which a plaintiff may seek the arrest of a vessel to secure a claim in rem.

From some 11 grounds contained in the Victorian Acts listed above, this list now contains some 25 grounds. A number of these are extremely important. Among the most urgently awaited are the following.

It is now possible to commence an action in rem against a vessel and therefore arrest her for claims arising out of charter parties or other contracts of carriage or affreightment. This was not possible before.

It is now possible for crew members to file a claim in rem when they face a defaulting ship owner refusing to pay them what is due to them under the contract beyond what is strictly their wage, such as repatriation costs and social security contributions.

Very importantly for Maltese ship agents, it is now possible for a ship agent to commence an action in rem and arrest the vessel if the owners fail to pay the agency fees. Prior to this amendment this was not possible although a rather bizarre situation existed under our law in this regard.

Under section 50 of the Merchant Shipping Act, the agent enjoyed a privilege over the vessel in case he was owed agency fees. However he could never on his own account commence an action against the vessel. Quite a contradiction! That has now been remedied.

Insurance companies, which previously had no rights whatsoever against a vessel in rem for outstanding premium, can now commence an action in rem and arrest a vessel. The environment has also been given its appropriate position in the list of claims. There is now a very strong presence of claims relating to compensation for measures taken to prevent, minimise or remove damage caused by the ship to the environment and coastline, and claims seeking to recover the costs involved in reinstating the coastline to its previous condition.

Quite apart from providing this new extensive list, the amendments, through the creation of section 742 (D), have also sought to introduce a degree of clarity in an area that had previously been unregulated by statute. This relates to owners of vessels who were at times finding themselves having to defend claims for debts created by the bareboat charterer of the vessel, who by the time the action against the vessel was instituted would have disappeared from the scene.

The law now clearly states that one can commence an action in rem against a vessel if the person who would have been liable in an action in personam when the cause of action arose is the owner or the demise charterer of it when the action is brought.

The newly created section 742 paragraphs (b), (c) and (d) are indeed most welcome. They bring together the grounds which existed under the Victorian legislation, the Arrest Convention of 1952 and the Arrest Convention of 1999. Suddenly, therefore, today we probably have one of the most advanced sets of rules governing jurisdiction in rem and arrest of ships in Europe.

Dr Fenech is a partner at Fenech & Fenech Advocates and was adviser to the Maltese Government delegation present at the full UN Diplomatic Conference on Arrest of Ships 1999.