In the Admiralty Court, the arrest of a ship is seen as an “administrative act” available to the claimant as of right notwithstanding its potentially drastic consequences for the shipowner. William Stansfield explores some of the most frequently asked questions about the law of ship arrest in England and Wales.

The threat of a ship arrest to obtain pre-judgment security for a claim is a very useful tool for a claimant with a claim against a shipowner.

The concept of a ship arrest will seem strange to non-maritime lawyers. In any other area of civil litigation, pre-judgment attachment over assets is an extraordinary remedy available only at the court’s discretion and only where the claimant can satisfy all the requirements that must be met in order to obtain a Freezing Injunction including demonstrating a risk that the Defendant will dissipate his assets to evade enforcement of a future judgment.

However, in the Admiralty Court, the arrest of a ship is seen as an “administrative act” available to the claimant as of right notwithstanding the potentially drastic consequences that this may have for the shipowner and their business.

Here are some of the questions that are most frequently asked about the law of ship arrest in England and Wales:

1. What property can be arrested?

This article is concerned with arrest of ships. However, the full list of property that can be arrested pursuant to the Admiralty Court’s jurisdiction is:

• all ships or aircraft, whether British or not and whether registered or not and wherever the residence or domicile of their owners may be;
• a ship under bareboat charter, if the bareboat charterer is liable in personam
• Cargo
• Freight

Time chartered bunkers cannot be arrested in Admiralty.

2. For what claims can property be arrested?

In short, any claim that falls within the jurisdiction of the Admiralty Court.

The full list is set out in Senior Courts Act 1981, section 20 (https://www.legislation.gov.uk/ukpga/1981/54/section/20) . Some of the more common types of claim include:

• Claims for damage done by a ship;
• Claims for salvage;
• Claims for crew wages;
• Claims arising out of a mortgage or charge on a ship; and
• Claims arising out of any agreement relating to the carriage of goods or to the use or hire of a ship.

The first three claims on the above list give rise to a maritime lien which follows the ship to a new owner in the event of a change of ownership. The remaining claims only give rise to a statutory lien which is extinguished upon a change of ownership.

3. What is the position regarding sisterships and associated ship arrests?

A sistership may be arrested if the two vessels share the same registered owner.

Associated ship arrest (where two ships are registered to separate single-ship companies but with a common ultimate beneficial owner) is not possible.

4. Security for claims in arbitration or foreign proceedings?

Commencing in rem proceedings involves commencing a substantive claim on the merits.

However, if the underlying claim is subject to arbitration or the jurisdiction of a foreign court, the English Admiralty Court may order that the arrested property be retained as security for the arbitration or foreign proceedings. Alternatively, the English court may order that the stay or dismissal of the English arrest proceedings be conditional on alternative security being provided.

5. What is the court fee?

The court fee to issue an in rem claim form is £10,000 assuming that the value of the underlying claim is more than £200,000. There is a further court fee of £255 to issue the Arrest Warrant.

6. What is the procedure / how long does it take?

The process is usually quick. There are certain court documents (such as the in rem Claim Form) that need to be drafted and filed at Court. An affidavit/witness statement in support of the arrest is not required, and the Claimant does not owe the Court any sort of duty of full and frank disclosure.

There is no court hearing. Once the court forms are filed and accepted by the Court and the court fee paid, the Admiralty Marshal will instruct the UK Border Force to serve the in rem Claim Form and Arrest Warrant on the ship provided that the ship is within the jurisdiction (i.e. within territorial waters). From this point, the ship will be arrested and in the custody of the Admiralty Marshal.

It should be noted that the Court does not provide an out-of-hours service. Unless arrangements are made with the Admiralty Marshal in advance, it is not possible to arrest a ship once the Court closes.

7. What sort of security and how much security can the arresting party request?

The Claimant is entitled to security for their best reasonably arguable case plus interest and costs.

However, since the security represents the arrested property, the Claimant is never entitled to security that exceeds the value of the arrested property.

There is no prescribed form of security. A Letter of Undertaking from the shipowners’ insurer, a bank guarantee or money in escrow are regularly accepted forms of security.

The Court has the power to determine the amount and form of security, for example if the Claimant’s security requirements exceed the value of the arrested property. However, in practice, both the amount and form of security are usually agreed between the parties by negotiation without the Court needing to get involved.

8. Does the arresting party have to provide counter-security?

No. However, the claimant’s solicitors have to give an undertaking to the Admiralty Marshal to pay any fees and expenses incurred in relation to the arrest and preservation of the arrested property.

Typically, as part of the security negotiations, the arresting party will require the Defendant’s solicitors to “step into” that undertaking at the time of the ship’s release. In consequence, any Admiralty Marshal expenses will ultimately end up becoming the shipowners responsibility.

9. I am a shipowner. Can I challenge an arrest?

Not easily. Remember that the Claimant is entitled to arrest the ship as of right, and therefore the Court will normally only order the release of the ship upon provision of security.

The usual grounds for challenging an arrest are that the Claimant’s claim does not fall within Admiralty Court’s jurisdiction (i.e. the list of claims at Senior Courts Act 1981, s.20) or the arrest is vexatious/an abuse of process (e.g. because the Claimant has already arrested the ship elsewhere for the same claim).

English law recognises the concept of wrongful arrest, but the bar for a shipowner to bring such a claim is high: it is necessary for the shipowner to prove gross negligence/malice or bad faith on the part of the arresting party. Given this high evidential hurdle, it will quite often be the case that a shipowner is left without a remedy even if the arrest was incorrectly obtained.

10. What happens if the shipowner is unable to secure the claim?

This is most likely to arise in an insolvency situation. The arresting party may apply for an order that the ship is appraised and judicially sold pendite lite (pre-judgment). The court will make such an order if there is a good reason for doing so.

The proceeds from the sale then stand as security for the Claimant’s pending claim, with any surplus funds being returned to the shipowner.

In the event that the total value of all claims against the ship exceed the value of the arrested ship, the sale proceeds are distributed between creditors in accordance with a ranking system with certain claims taking higher priority.

In brief, the claims of the Admiralty Marshal will always rank with the highest priority; followed by claims of any claimant asserting a pure maritime lien; followed by the claims of any mortgagee bank; followed finally by any parties who assert a statutory lien.

One interesting point to note is that if a ship is judicially sold, the sale clears all liens against the vessel (including maritime liens). This way, the purchaser acquires the vessel with clean unencumbered title.