Ship Arrests

In the volatile world of shipping, particularly in the recent economic downturn, disputes and defaults are an unfortunate fact of life. The number of ship arrests around the world has risen, as banks and creditors seek recompense from shipowners who find themselves unable to pay up on mortgages or loans.The remedy? Ship arrest. It isn’t an attractive proposition, and clearly it’s an action of last resort but, when handled efficiently and swiftly, it can at least deliver a safe resolution to a dispute and bring matters to a close. 

Gibraltar, with its legal system based on English law, has a strong reputation as a highly competent jurisdiction for ship arrest, consistently handling admiralty cases to deliver the best result, quickly. But alongside that and equally important, there is a heavy emphasis on the welfare of the people caught up in the middle of a ship arrest – the crew. “It is a fact of life that vessels get arrested, because people owe money or there may be a dispute,” says Admiralty Marshal Liam Yeats. “However, here we can pride ourselves in saying that, because of our size and the nature of our jurisdiction, we can deal with such a situation to everybody’s benefit, very quickly and painlessly. “We have a very good Admiralty Marshal broker who has been in the industry for many years – so we achieve the highest possible price for the vessel. That means if you are the owner and you owe money, you can be confident that the maximum amount will be achieved when the vessel is sold. “But equally, if you come to Gibraltar with your vessel and get arrested, we still take great care of you from the owner’s point of view. For example, if the ship was wrongly arrested, rather than languishing for months, the expectation would be that within a day or two you would be in court with an application for your vessel to be released.”

Arrest sales are handled by Gibraltar’s Supreme Court, which gives priority to admiralty matters. Liam Yeats oversees the arrest, custody and sale of the vessel. His team is experienced and knowledgeable in the intricacies of the procedures and works hard to keep the process moving forward quickly, liaising with ship agents, judges and others along the way. 

Most arrested ships are sold in a sealed-bids auction within six to eight weeks, once the claim has been proved and judgment given. However, if the arresting party already has a buyer lined up, then sale by private treaty can be sought, literally within days. “Private treaty sales are quite attractive to banks where there may have been a default on the mortgage,” says Liam Yeats. “However, they are no longer carried out in every jurisdiction, with some courts taking the view that private treaty sales do not safeguard the creditors’ interests. Our view is that it depends on the amount of equity left in the vessel compared to the loan and valuation.” During either process, the arrested vessel will be berthed at the Detached Mole on the outer edge of the port, or sent to the Eastern Anchorage if suitable.

Right from the beginning, the interests of the crew are paramount. “We take care of the vessel and crew to a very high standard,” he says. “We put ‘ship keepers’ on board – two security guards to protect the vessel and its contents. We provide the crew with everything from bunkers so they can keep the generators going, to provisions of food and water.” As well as straightforward supplies, a launch is arranged on a weekly basis so that the crew, who would otherwise be stuck onboard, can have some shore leave. If the claim is subsequently successful, the cost of all the crew welfare provision and wages comes out of the proceeds of the ship.

An attractive, successful commercial ship register attracting top-quality shipowners; a burgeoning yacht register; a territory with a strong reputation for handling ship arrests swiftly and efficiently: all of these depend on the strong legal expertise and experience to be found in Gibraltar. Gibraltar offers stability and certainty, thanks to a settled legal system that is based on English common law. 

The oldest law firm in Gibraltar, ISOLAS, dates back to 1892. A full service firm, it has a busy shipping practice working in areas including ship arrest, registration and ship finance. “No law firm has been around in Gibraltar for as long as ISOLAS,” says Christian Hernandez, the head of the firm’s shipping team. “We have a long shipping tradition going back to days when the firm would have been more focused on matters to do with collisions. Today, shipping remains an important area of our practice and one that we are keen to extend – including into superyacht registration.” ISOLAS is an international practice acting for clients across a very broad spectrum, he adds. “Over 95 per cent of my practice is international in nature. On the shipping side, we take on a lot of work from London, and from Northern Europe and Scandinavia.” 

What are the attractions of Gibraltar’s legal system? Christian Hernandez said “Gibraltar is a very efficient jurisdiction for ship arrest; it is very quick to arrest a ship in Gibraltar and there is so much case law that the process offers a greater amount of certainty than in many other jurisdictions. On the ship registration side, Gibraltar offers tax advantages and also the prestige of being a Category 1 member of the Red Ensign Group. “Also, on the ship arrest and finance side, and across the broader picture, the fact that Gibraltar’s legal system is based on English law gives comfort. Clients know we have a very tried and tested legal system.”

One of the main maritime law firms is Triay & Triay, established in 1905 and based in the town centre. On the ship arrest side, Triay & Triay acts in about 80 per cent of ship arrests, mostly representing the mortgagee bank and seeing through sales by public auction and also by private treaty. The English and Singapore courts have taken the decision not to approve private treaty sales but James Ramagge says “We have been granted judgment in a matter recently where although the Gibraltar Court took note of the English and Singapore judgments, it felt that we do have a robust system in place to meet the issues raised in those judgments, including support in terms of valuation, and it therefore felt able to approve the application for a private treaty sale. “In most cases where a ship is arrested, it makes sense for everyone to cooperate – otherwise costs add up.”