The arrest of a vessel is a very important and powerful weapon. In Malta it is possible to arrest a vessel for the purposes of achieving two objectives. One, through the precautionary warrant of arrest, securing a claim which is as yet undecided - the other, through the executive warrant of arrest, enforcing a favourable judgement already obtained when the judgement creditor refuses to pay the judgement debt.
The bottom line is that an arrest of a vessel can eventually lead to the sale of that vessel to satisfy the judgement debt and in the meantime the vessel is taken away from the possession of her owner and therefore the owner can no longer earn an income from that vessel.
As a result an arrest usually has very serious financial consequences for her owner of disastrous proportions. Typically arrests are unannounced, very often when a vessel is trading, under charter and loaded with cargo. Having such a vessel arrested puts an immediate stop to this activity opening the owner up to all sorts of other claims and losses arising out of the effect of the arrest itself. It therefore goes without saying that the arresting party has to be on the right side of the law and it is crucial that when arresting a vessel, the criteria allowing an arrest and the safeguards provided by the law are followed meticulously. If they are not and if the law allows for a trigger happy arresting party who knows that he has no real grounds upon which to arrest a vessel, that will gives rise to state of lawlessness which is not what the law allowing the arrest of a vessel is all about. That would give rise to an attitude of might is right and a rise in unscrupulous persons with suspect claims taking a chance in arresting vessels knowing full well that they ought not to arrest the vessel in the hope the arrest would cause such chaos in the life of the owner that the owner would simply give in to that pressure and pay up. That would be wrong and illegal.
A recently decided case brought to the fore both the importance of this subject and a loop hole in the law. The case was Cassar Fuel Ltd v. the MV K Dadayli decided on the 12th February 2015 per Madam Justice Jacqueline Padovani Grima.
Cassar Fuel Ltd arrested the MV K Dadayli for unpaid bunkers. The point here was that the vessel was arrested long after the vessel had been sold and when the persons who would have been responsible for the payment of the fuel were no longer her owners by the time the vessel was arrested. This was in breach of Article 742 (D) on our Code of Organisation and Civil Procedure. In 2006 this article was introduced into our law, and as a result it is only possible to arrest a vessel in rem when the person who would have been liable for the claim in personam when the cause of action arose, is the owner or bareboat charterer of the vessel when the action is brought or in case of arrest, the arrest is affected. This introduction was based on principles of justice and equity because it is neither equitable nor just to have a situation where a vessel belonging to X can be sold to satisfy a judgment for a claim for which A the previous owner of the vessel is responsible.
The vessel therefore filed an application in court requesting the Court first and foremost to revoke the warrant of arrest by virtue of the fact that the criteria stipulated in article 742 (D) were not satisfied making the arrest illegal. The vessel also requested the court to order the plaintiffs to pay for the expenses and damages suffered by the vessel as a result of the illegal arrest such as extra bunkers consumed during the arrest, agency fees, port dues, pilotage fees and mooring costs during the arrest, and loss of time charter hire because of the arrest and this by virtue of article 836 (9). Finally the vessel also requested the court to impose a penalty on the plaintiffs on the basis that the arrest was malicious, frivolous or vexatious and this by virtue of article 836 (8) and 861 of the Code of Organisation and Civil Procedure.
The judgement was positive in so much that it stated clearly that the criteria established in article 742 (D) had to be followed religiously and therefore it was simply not possible to arrest a vessel in support of an action in rem if the person who was liable for the claim in personam when the cause of action arose was not the owner or bareboat charterer of the vessel when the vessel was arrested. Therefore the arrest in this case was illegal and the warrant of arrest was revoked.
However and in my view, the judgement stopped short of doing justice with the vessel and her owner who suffered damages as a result of the abusive arrest. This is because in the judge's view the arrest of the vessel notwithstanding the fact that clearly it failed to satisfy the criteria established by article 742 (D) was neither malicious, frivolous or vexatious. Given that the court came to this conclusion then the penalty did not kick in and neither could an award for damages kick in because damages can in terms of article 836(9) be awarded in those cases which attract a penalty.
I will agree to disagree with the Honourable Court in its conclusion that the actions of the arresting party were not malicious, frivolous or vexatious. However irrespective and independent of that, what this case has brought to the fore is a grave weakness in our law. The weakness lies in the fact that the right to damages resulting from an illegal arrest appears to be inextricably linked to the vessel having to prove that the arresting party should be ordered to pay a penalty. In fact the two should be separate and distinct. The vessel should be entitled to damages arising out of the illegal arrest as a natural and automatic consequence of a declaration that the arrest was illegal or wrongful because the necessary criteria were not followed. This right to damages once the arrest is declared illegal should have nothing to do with the court's right to condemn an arresting party to the payment of a penalty if the cases laid down in article 836 (8) apply.
The fact that an arresting party may arrest a vessel when the criteria for arrest are not satisfied and get away with it totally scot free and not pay for damages ensuing from the illegal arrest merely because the court was not convinced that the circumstances did not fit into the criteria for which it could have imposed a penalty on the arresting party, is not good news. It is something which the next round of amendments to our Code of Organisation and Civil procedure need to address.
Originally published in the ILO Shipping & Transport Newsletter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
