SHIP ARREST IN SCOTLAND Handy guide

A more difficult economic landscape often brings with it an increase in queries relating to ship arrest in Scotland. Notably, as Scotland has its own court system it's a different process from that in England, so this handy guide which sets out what you need to know about how it works in Scotland, including the types of arrest, the criteria that have to be met and the steps involved to make a successful ship arrest.

Ship Arrest in Scotland is provided for by Part V of the Administration of Justice Act 1956 and this has to be read alongside the Debtors Scotland Act 1987, both as amended by the Bankruptcy and Diligence (Scotland) Act 2007, with regard to powers of the court and safeguards provided to debtors.

SCOTLAND V ENGLAND Ship arrest differs between England and Scotland in a number of ways:

• There is no dedicated Admiralty Judge or Admiralty Marshal in Scotland.

• If a ship is arrested in Scotland, the Sheriff Court closest to where the vessel is situated, either at port or anchor, has concurrent jurisdiction and the Court of Session (Scotland's equivalent of the High Court) in Edinburgh, has jurisdiction for ship arrests across Scotland for cases where the sums involved exceed £100,000.

• The pleadings required to arrest in Scotland generally have to be more detailed than those at the initial stages in England, highlighting the importance of having the information available at the outset to satisfy the court that there is a good arguable case.

• Unlike England, an arrest is at the risk of the pursuer (claimant), so a wrongful arrest claim can result in damages being awarded against the arresting party if for instance a creditor were to proceed with no legal basis for the arrest, i.e if the ship is not owned by the defending party or the underlying claim fails, without the need to show that the arrestment was exercised maliciously or without probable cause. Ensuring that the correct information and evidence is obtained at the outset, before taking advice on prospects, is crucial.

Ship arrest in Scotland – Handy guide

Ship arrest in Scotland – Handy guide

TYPES OF ARREST IN SCOTLANDAll ship arrests in Scotland require a warrant from the competent court.

1. Arresting to found jurisdiction. Even if there is no connection between the case and Scotland, if the vessel has been arrested in Scotland based on a judicial warrant, this is enough to found jurisdiction. However, arresting the vessel to found jurisdiction does not arrest the vessel itself. There needs to be a subsequent arrestment on the dependence.

2. Arrestment on the dependence in an action 'In Personam'. This is arrestment on the dependence of the court action and is the most common type relating to assets owned by the debtor. For example, a case seeking security for a debt owed by a vessel owner.

Section 47(2) of the 1956 Act lists various circumstances in which arrestment on the dependence is permitted:

(a) damage done or received by any ship;

(b) loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or of the master or crew thereof or of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible, being an act, neglect or default in the navigation or management of the ship, in the loading, unloading or discharge of goods on, in or from the ship or in the embarkation, carriage or disembarkation of persons on, in or from the ship;

(c) the Salvage Convention, 1989;

(ca) any contract for or in relation to salvage services;

(d) any agreement relating to the use or hire of any ship whether by charterparty or otherwise;

(e) any agreement relating to the carriage of goods in any ship whether by charterparty or otherwise;

(f) loss of, or damage to, goods carried in any ship;

(g) general average;

(h) any bottomry bond or contract of respondentia;

(i) towage;

(j) pilotage;

(k) the supply of goods or materials to a ship for her operation or maintenance;

(l) the construction, repair or equipment of any ship;

(m) liability for dock charges or dues;

(n) liability for payment of wages of a master or member of the crew of a ship;

(o) master’s disbursements, including disbursements made by shippers, charterers or agents on behalf of a ship or her owner;

(p) any dispute as to the ownership or right to possession of any ship or as to the ownership of any share in a ship;

(q) any dispute between co-owners of any ship as to the ownership, possession, employment or earnings of that ship;

(r) the mortgage, hypothecation of or existence of any other charge on any ship or any share in a ship;

(s) any forfeiture or condemnation of any ship, or of goods which are being, or have been, carried, or have been attempted to be carried, in any ship, or for the restoration of a ship or any such goods after seizure.

3. Arrestment 'In Rem'. Here the claim is directed against the vessel itself, rather than the owner. Actions In Rem would be used to enforce a maritime lien (or hypothec) in Scotland, for example, covering crew wages, claims for salvage and for damages arising from a collision at sea.

Ship arrest in Scotland – Handy guide

Key points

SHIPS CAPABLE OF ARRESTTo arrest a ship in Scotland, certain criteria must be met:

1. The ship itself is the subject of the dispute and the defending party must own at least one share in the ship or be the bareboat charterer; or

2. Even if the ship is not the subject of the dispute it can still be arrested if all shares in the ship are owned by the defending party.

Ships can be arrested in Scotland regardless of flag, however UK ships owned by the Crown or foreign states are exempt, unless contracted for commercial purposes.

Ships under time charter can be arrested in an action in Rem, however not for a debt of the time charterer. A ship under time charter can still be arrested but for a debt of the owner, i.e. if the owner has incurred tug or port charges. Time charter arrest can be trickier to navigate.

Bareboat chartered ships can be arrested in Scotland if the bare boat charterer is the alleged party owing a debt.

The key point is that as an arresting creditor you need to have proof of your case. This is why it is important to get as much evidence as possible at the outset as it explains the position to the Court.

SEVEN STEPS TO A SUCCESSFUL SHIP ARRESTA successful ship arrest in Scotland requires consideration of various key factors coming together and an element of good timing. When an instruction to arrest is received, moving quickly is often important, but should never be at the cost of accuracy.

The initial steps for a successful ship arrest are:

Step 1. Confirm the identity of all parties involved and the owners of the vessel you are seeking to arrest. Consider the basis for seeking security and obtain evidence to support this; i.e. transcript of registry of vessel, invoice documentation and demands for payment.

Step 2. Check the location or intended destination of the vessel you are seeking to arrest. Sheriff Officers/Messengers-at-Arms will have to execute the warrant for arrest on the vessel itself to put the arrestment in place. Monitor the location of the vessel throughout in case it moves.

Step 3. Consider the value of the claim and where the action will be raised; i.e. local sheriff court or Court of Session. As noted above, the minimum limit for the Court of Session is £100,000 and Sheriff Courts have unlimited financial jurisdiction. The Court of Session is available for urgent applications out of hours. Sheriff Courts are not.

Step 4. Once steps 1-3 have been completed and the risks of wrongful arrest have been discussed, prepare detailed pleadings and supporting documentation to apply to the court for a warrant to arrest. This is generally without intimation to the debtor, although subject to the court's dispensation on application. On receipt the court will fix a time to hear submissions as to why the statutory grounds and evidence justify the court granting the warrant. The court will then fix a future hearing to allow the debtor to be heard whether the arrestment should remain in force, assuming the warrant is served.

Step 5. Instruct Sheriff Officers/Messengers-at-Arms to execute the warrant. An arrestment is not valid until formally served on the vessel. This is colloquially referred to as having a ‘writ on the mast’. Once the vessel is arrested, it is a breach of the court order to move the vessel other than in an emergency for safety reasons. The arrest is also served for information on any harbour master within whose jurisdiction the vessel has been arrested. Application may be made to the court to move the vessel for operational reasons – e.g. to free a berth if it is causing a blockage in a harbour. It is possible, though rare, to include pleadings to justify an application to the court for a warrant to dismantle a part of the engine, which may prevent movement of the vessel under her own power.

Step 6. Serve papers on the defending party within 21 days to prevent the arrestment falling and give notification of the hearing as to whether or not the arrestment should remain in place.

Step 7. Prepare and attend the hearing to establish whether or not the arrestment should remain in place. From the point of view of the arresting creditor, the earlier preparatory steps taken in order to successfully make the application for the warrant to arrest should also be of assistance for the arresting creditor at this hearing in resisting an application by the debtor that there are grounds for the arrest to be recalled.

Duncan MacLeanPARTNER+44 (0)131 656 0152duncan.maclean@brodies.com

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Malcolm MackayPARTNER+44 (0)122 439 2274malcolm.mackay@brodies.com

Sarah PolsonASSOCIATE+44 (0)122 439 2252sarah.polson@brodies.com

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