The First Hall of the Civil Court, presided over by Mr Justice Mark Chetcuti, in the case “Godwin Xerri on behalf of Pol-Euro Shipping Lines Plc SA and Sea Voyager Shipping Ltd v Zejt Marine Services Ltd” on December 12, 2013, held, among other things, that the flag of the vessel although relevant, was not enough in this case to invoke the application of Maltese law.

The facts in this case were as follows.

The Polish company Pol-Euro Shipping Lines plc SA was the owner of the Malta flag vessel Sider Lipari IMO no. 9119907, which bareboat chartered the vessel to the Malta Company Sea Voyager Shipping Ltd for 24 months, and extended it up to June 30, 2014.

On July 18, 2012, the Malta flag vessel Asso Zejt I which was the property of the Maltese company, Zejt Marine Services Ltd, collided into the vessel Sider Lipari, while it was berthed along the quay at the port of Sousse, in Tunisia. As a consequence of the collision, the vessel Asso Zejt I caused extensive damage to the vessel Sider Liapri as well as other damages, amounting to over €300,000.

The vessel Asso Zejt I was the only asset of Zejt Marine Services Ltd, and in view of the circumstances, it was likely that Zejt Marine Services would try to transfer the vessel before a decision was given on the merits. It was feared that if the vessel was transferred before the case was decided, Pol-Euro Shipping and Sea Voyager Ltd would be unable to enforce their claims.

Pol-Euro Shipping and Sea Voyagers Shipping said that there existed all requisites stipulated in article 37 of the Merchant Shipping Act. Article 742 B (F) of chapter 12 of the Laws of Malta provided specifically that the Maltese courts had jurisdiction in rem in respect of any claim for damages against a vessel arising as a result of a collision.

Faced with this situation, Pol-Euro Shipping and Sea Voyager Shipping filed legal proceedings against Zejt Marine Services Ltd, requesting the courts:

• to order that there would be no sale/ transfer or any dealing in the vessel Asso Zejt I;

• to order that there would be no sale/ transfer or dealings in the shares in Zejt Marine Services Ltd;

• to order that no deletion certificate would be issued by the Registrar of Shipping; and

• that there would be no mortgage registration over the vessel Asso Zejt I.

In reply, Zejt Marine Services Ltd disputed the legal action, which it said was unfounded. It was stated that the vessel was not its sole asset. Apparently, Zejt Marine Services had deposited a sum in Tunisia to cover its exposure to liability. It further appeared that claimants tried to arrest the vessel in Tunisia but the arrest was revoked owing to this fund. Zejt Marine Services pleaded that there did not exist the requisites to issue the order under article 37, and that the incident happened in Tunisia and that therefore the law of Tunisia was the applicable law.

The law in Tunisia gave the owner of the vessel the right to exonerate itself from responsibility by depositing the amount under the authority of the courts in Tunis and this to satisfy any liability of the owner of the ship.

Zejt Marine Services said that it deposited a sum in settlement of any liability. It was argued in its defence that this legal action was not permissible under article 37 of the Merchant Shipping Act, nor would any transfer of shares cause any prejudice to claimants. In addition, it claimed that it could not be ordered not to issue the deletion certificate. This order could only be made against the Registrar of Shipping.

The court noted that according to claimants the collision occurred due to the fault of the vessel Asso Zejt I which hit the vessel Sider Lipari. At the time, Sider Lipari was tied to the quay. The Maltese court had jurisdiction under article 742 1 (b) of chapter 12 of the Laws of Malta as Zejt Marine Services was a Maltese company. The court made reference to EU Regulation 864/07 known as the Rome II, which applied to all member states under the treaty.

In the context of the Irish courts, Liz Heffernan wrote regarding the application of this regulation: “Turning first to geographical reach, the regulation is of ‘universal application’ which means that it is not limited to tort litigation within the EU but extends to any proceedings in tort that contain an international element whether EU or not. In this sense, the regulation will provide a ‘one-stop shop’ for choice of law in tort which will obviate the need for the Irish courts to operate wholly different regimes for European as opposed to non-European cases.”

According to Zejt Marine Services, the applicable law under Regulation 864/2007 (Rome II) was per article 4 (1) of the regulation which provides, unless otherwise provided, that the applicable law for obligations (not contractual) which result from delict or quasi-delict, was the law where the damages occurred. Claimants, on the other hand, argued that the vessels had to be considered an extension of Malta and that therefore Maltese law should apply as the lex loci delicti.

The court, however, did not accept this interpretation. In this case it noted that the collision occurred in Tunis and the damages were also suffered in the same place. The facts came within the parameters of Regulations 4 (1 the applicable law was the law of the country where the damages were caused. The court did not consider the flag of the vessel as the factor which justified an exception to the general application of Regulation 4 (1). Reference was made to Cheshire on private international law.

Under article 4 (1) of the regulation, the applicable law was the law of Tunis. Claimants referred to Regulation 4 (2), according to which Maltese law should apply. Regulation 4 (2) provides: “However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.”

The fact that Maltese courts had jurisdiction did not mean that Maltese law should apply

The court did not accept this argument. The claimants under this article had to establish the seat of the central administration. No proof was brought, save for the fact that two of the parties in these proceedings were companies registered in Malta. The place of the registration was not necessarily the place of central administration. This had to be proven by the person claiming the exception to the general rule under article 4 (1). Any interpretation had to be construed restrictively.

On this point the court noted that not all the companies involved in the dispute were allegedly habitually resident in Malta. The owner of the vessel suffering the damages was a Polish company, which was not habitually resident in Malta. In this respect, the court said that article 4 (2) did not apply.

The fact that legal action was taken in Malta did not make Maltese law the applicable law, pointed out the court. Claimants also referred to the exception in article 4 (3) which provides: “Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question”.

It was stated that there was a manifest connection with Maltese law, and that therefore, Maltese law should apply. Claimants maintained that the nationality of the parties, the flag of the vessels and the damages, were all connected with Malta favouring the application of Maltese law. The court felt that article 4 (3) gave the courts a margin of discretion.

Reference was made to Cheshire: “It is not enough to show that the tort/delict is more closely connected with a country other than that indicated in paragraphs 1 or 2, it has to be ‘manifestly’ designed to underscore the exceptional nature of this escape clause. The use of rules in article 4 (1) and (2), rather than presumptions, is also designed to make clear that the exception really is exceptional.

“The escape clauses use the criterion of connections. The connection must be with a country, rather than the law of a country. The scenario of both parties having a common habitual residence that is dealt with in article 4 (2) will be very much the exception and so article 4 (3) is likely to operate more commonly as an exception to article 4 (1), rather than article 4 (2). Apart from cases where there is a pre-existing relationship between the parties, situations where article 4 (3) would operate as an exception to article 4 (1) are likely to be relatively rare.”

In this case, however, the court was of the opinion that there were no grounds to apply this exception under article 4 (3). The flag of the vessel, although relevant, was not enough in this case to invoke the exception under article 4 (1). This was a case of a collision between two vessels, not an incident on a vessel. The nationality of the parties was not conclusive. There was no proof of any intrinsic connection with Malta. The damage was suffered as a result of a collision and this was not enough not to apply article 4 (1) of the regulation. The fact that Maltese courts had jurisdiction did not mean that Maltese law should apply. The court did not feel, in view of the relations between the parties, that it was fair to apply Maltese law, to determinethe dispute.

For these reasons, on December 12, 2013, the First Hall of the Civil Court concluded that there was not a strong enough connection with Maltese law in order to disturb the application of article 4 (1). The court found Zejt Marine Services’ pleas to be justified. It accordingly accepted Zejt Marine Services’ plea, declaring the law of Tunisia to be the applicable law to determine this dispute. The case had to be continued.

Dr Karl Grech Orr is a partner at Ganado Advocates.