Arthur A. Nitsevych, Interlegal Ukraine nitsevych@interlegal.com.ua
There are no doubts that the main occasion, which will determine the Ukrainian legal trends in sea carriage in 2018, is the entry into force of the Law of Ukraine on October 03 2017 “On amendments to the Commercial Procedural Code of Ukraine, Civil Procedural Code of Ukraine, Administrative Court Procedural Code of Ukraine and other legislative acts”. This law substantially modifies law provisions regarding the ship arrest as a precautionary measure to secure a maritime claim.
Procedural novelties
We may highlight the following major changes in procedural law with respect to ship arrest:
– The jurisdiction of the courts in respect of ship arrest is extended: there is now an additional possibility for the Ukrainian courts to consider the arrest of vessels heading to Ukrainian sea ports. Such novelty eliminates some practical obstacles, when the claimant had to prove the actual presence of vessel at the sea port. Previously, it took certain time to obtain information about the vessel from harbour masters, and the vessels were able to leave the sea port during this period. Meantime, some legal issues are remaining open, particularly with regards to proper evidence which may prove that the vessel is bound for Ukrainian sea port, and the admissibility of data obtained from open AIS trackers in the Internet (e.g. MarineTraffic etc.). Even when judicial practice does not accept the abovementioned information as proper evidence, the claimant will have, in accordance with new procedural rules, much more time to obtain the appropriate confirmation from the competent sources empowered to facilitate navigation safety in Ukraine.
– The provision regarding correlation between the amount of claim and value of the vessel being subject to arrest is cancelled. In many cases before, the courts, while rejecting applications on ship arrest, pointed at inadequacy of the claim and precautionary measures requested.
– The period of arrest before filing the claim on merits is significantly extended. Now, in case of filing an application on ship arrest, the claimant must submit the claim on merits within 30 days from the date of the ruling granting the precautionary measures.
– The duty to take actual measures preventing the arrested vessel to leave the sea port now rests on Ukrainian Sea Ports Authority branches, State Border Service and customs offices.
– The requirements as regards the contents of the application for arrest are now given in more details.
– The amount of counter-security is now limited to possible losses incurred by the shipowner due to ship arrest. Previously, courts used to lay the applicant under the obligation to lodge a counter security amounting from 70 to 100 per cent of the amount of claim.
– It is now expressly provided that the counter security must be lodged by means of remittance of funds to the court’s deposit account, bank guarantee, surety of solvent person/entity, other financial securities or other actions prescribed by the court in order to eliminate the shipowner’s potential losses and other risks related to ship arrest.
A few court decisions, made during the period of new wording of the law (such as the Mykolaiv Region Court Rulings cases No. 915/72/18, No. 915/217/18, the Odesa Region Court Rulings cases No. 916/184/18, No. 916/225/18 and No. 916/261/18), demonstrated that the courts, while considering arrest cases, reduced the amount of additional evidence previously requested for the purpose of proving the possibility for the vessel to leave Ukrainian jurisdiction. Another positive feature is the obvious progress in determination of sums of counter-security due to ship arrest.
Summarizing the abovementioned amendments to the Commercial Procedural Code of Ukraine and Civil Procedural Code of Ukraine regarding ship arrest, we should admit their progressive nature, which brings Ukrainian legislation closer to the International Convention Relating to the Arrest of Sea-Going Ships from May 10, 1952 (the Brussels Convention). On 07.09.2011 Ukraine joined the Brussels Convention, which entered into force in Ukraine on 16.05.2012.
Problems
The basic problem of the ship arrest institute in Ukraine is the fact that such institute is perceived as merely procedural one. Certainly, it is impossible to object the fact of procedural aspect in the institute of ship arrest, but such institute bears substantive essence. The goal of sea-going ship arrest is to encourage the shipowner to secure the maritime claim. Such maritime claim shall be expressed not in kind, since the arrested vessel is the security form itself – of both maritime claim and the already filed lawsuit, but in the financial form: either monetary deposit or guarantee.
One more problem of the Ukrainian jurisdiction is that P&I club guarantees are not accepted by the Ukrainian courts. Anyway, the person making such counter-security shall prove at the court that it was issued by the solvent person in compliance with the current legislation, and shall refute the other party’s objections against such counter-security. By the way, we noted the following: when the opposing party to the dispute objects to such counter-security and insists on monetary deposit to be contributed by the opponent, there is quite a high probability that such opposing party has a weak position.
Even the claimant having only an alleged maritime claim may apply on arrest of sea-going vessels. It serves as grounds to criticize the institute of ship arrest as maritime claim security, as is. There are some cases when the shipowner secured the alleged maritime claim or even paid the alleged indebtedness. But it cannot serve as grounds to criticize seriously the law institute, because the shipowner has all the possibilities to object to ship arrest on the basis that there is no maritime claim or debt – either unpaid or partially paid. In case when the vessel is unduly arrested or the debt is paid by mistake, the shipowner may claim for reimbursement of losses incurred due to improper ship arrest or for reimbursement of costs paid without reasonable legal grounds as illicit enrichment.
Failure to inform the shipowner on the court consideration of the application on ship arrest as maritime claim security, due to absence in new wording of the Commercial Procedural Code of Ukraine of the court’s obligation to summon persons related to the judicial awards issued under the results of considering the appropriate issue, may cause additional problems for the shipowner, which could have been avoided in case of prompt notification.
Legal security of relationship with regards to sea-going ship arrest is also subject to quite serious critics. The fact is that Ukraine joined the International Convention on Maritime Liens and Mortgages 1993 (Geneva, 6 May 1993), in compliance with the Law of Ukraine “On joining the International Convention on Maritime Liens and Mortgages 1993”, while no relevant amendments were made to the Merchant Shipping Code of Ukraine. Obviously, it does not touch the essence of law regulation, since international treaties in Ukraine have the priority against the national legislation, unless they contradict to the Constitution of Ukraine, although it causes some confusion.
The main problem is that in Ukraine there are no special courts similar to admiralty courts; nor lawsuits are filed in rem, i.e. in respect of the vessel; nor there exists ship arrest in rem as maritime claim security. There is no subtle and detailed regulation of ship arrest procedure, as compared to jurisdictions of general (English) law. All these facts complicate work of attorneys and judges. But our law practice shows that today judicial practice in respect of sea-going vessel arrest got quite stable.
Furthermore, the Ukrainian legislation contains a provision on the grounds whereof we may state that Ukraine implemented into its national maritime law separate regulations of the International Convention on Arrest of Ships 1999, in particular, the list of maritime claims (Article 42 of the Merchant Shipping Code of Ukraine). It means that Ukraine perceives up-to-date trends in the law institute of sea-going ship arrest, which are set forth in the International Convention on Arrest of Ships 1999.
Conclusion
Ukraine becomes the more amicable jurisdiction in respect of the right on sea-going ship arrest. Novelties in procedural law, both in civil and commercial proceedings, facilitate correct application of the right on ship arrest in practice. But full stabilization of judicial practice is still far away, because absence of special courts which could consider and settle maritime disputes, similar to the Admiralty Court, hinders understanding correctly essence of the institute of sea-going ship arrest as maritime claim security in Ukraine.
There are predispositions of various types. Sometimes courts satisfy the claims upon ship arrest having no essential grounds, sometimes do not satisfy such claims filed in full compliance with the maritime law provisions.
The recent novelties in procedural legislation should not obscure the substantive law nature of the institute of ship arrest. Of course, actual prospect of ship arrest may give a nudge for debt recovery by improper debtor – shipowner, to have been repaid long ago. This is one of the institute’s goals. Even when any shipowner fears performance of prospective ship arrest as maritime claim security and therefore agrees to satisfy the alleged claim, we recommend applying to professional lawyers who are able to defend lawful interests of both shipowners and claimants with regards to arrest of sea-going vessels.