INTRODUCTION
Ship arrest is a legal mechanism whereby a ship can be detained as security for a claim pending the outcome of court proceedings. It is a tool unique to maritime law that can have significant legal, financial and operational consequences.
Understanding the concept of ship arrests is essential for maritime stakeholders such as shipowners, charterers, cargo owners, P&I clubs and insurers; financers and mortgagees; suppliers and service providers and flag states, due to the significant legal, financial and other operational implications involved. The arrest of a ship can lead to costly delays, loss of income and reputational damage.
Staying informed about the legal and procedural framework governing ship arrests in the British Virgin Islands (BVI) enables stakeholders to manage potential liabilities effectively and to respond proactively when faced with legal action.
This article provides an overview of the legal framework, procedural requirements and key legal principles surrounding ship arrests in the BVI.
LEGAL REGIME
The ability of an aggrieved party to launch a claim against a ship by way of arrest in the BVI is derived from the 1952 Convention Relating to Arrest of Sea-Going Ships which is incorporated into the domestic law of the BVI by virtue of its extension to the territory by the United Kingdom.
The Eastern Caribbean Supreme Court (Virgin Islands) Act confers jurisdiction on the BVI High Court to hear and determine admiralty disputes.
The procedure for admiralty proceedings, including ship arrests, is governed by the Eastern Caribbean Supreme Court Civil Procedure Rules (Revised edition) 2023 (the CPR Rules) which apply alongside admiralty principles derived from English caselaw, to the extent that such principles are not in conflict with local law and practice derived from statute.
GROUNDS FOR ARRESTING A SHIP
Under BVI law a ship may be subject to arrest where the claim involves:
- a proprietary maritime claim – ownership or possession of a ship.
- a maritime lien – claims for crew wages, salvage and damage done by a ship.
- a statutory maritime claim as defined under the 1952 Arrest Convention: the detention of a ship by judicial means to secure a maritime claim but does not include the seizure of a ship in execution or satisfaction of judgment.
- in rem proceedings – directed against the ship or property itself, rather than the shipowner personally.
SHIPS SUBJECT TO ARREST UNDER BVI LAW
The law governing ship arrests in the BVI applies equally to BVI-flagged and foreign-flagged ships.
Claims may be brought against:
- the ship or property in connection with the claim.
- the person who would be liable in a claim in person if, when the cause of action arose was the owner, or charterer or the person in possession or control of the ship.
- the ship itself, if at the time when the claim is made the relevant person is either the beneficial owner of that ship as respects all shares in it or the charterer of it under a charter by demise.
- any other ship in respect of which, at the time when the claim is made, the relevant person is the beneficial owner as respects all the shares in it – commonly referred to as a sister ship arrest.
PROCEDURE FOR SHIP ARREST
The claimant must first conduct a search of the admiralty register to determine whether there are any cautions against arrest recorded in respect of the ship.
Pursuant to the CPR Rules, an application for the arrest must be commenced by a claim in the prescribed form. This application must include
- an undertaking to pay the admiralty marshal’s fees and expenses associated with the arrest, and;
- an affidavit in support of the application, setting out the nature of the claim or counterclaim and confirming that it has not been satisfied; the name of that ship and the ship’s port of registry.
Once the court is satisfied with the application, the Admiralty Marshal will proceed with issuing the warrant of arrest and effect service on the ship. At the time of arrest, the Admiralty Marshal will also serve the claim form on the ship in accordance with the CPR Rules.
CONTESTING A SHIP ARREST
Under BVI law, there is no formal statutory procedure for contesting the arrest of a ship. However, a ship owner may apply to the court to have the vessel released and/or to have the arrest set aside on any number of possible grounds including the wrongfulness of the arrest if that is the case, lack of jurisdiction and procedural irregularity. If it transpires that the arrest is wrongful, the shipowner may seek damages for wrongful arrest but must show that the arrest was obtained maliciously or without reasonable cause.
PROCEDURE FOR RELEASE OF A SHIP UNDER ARREST
A ship under arrest may only be released either with the consent of the arresting party generally, upon agreed terms for the provision of full security for the claim, or by order of the court.
The decision to release an arrested ship is within the discretion of the court which may grant the release of the ship upon the defendant’s application, provided that sufficient bail is furnished, and an undertaking is given to be responsible for any costs the Admiralty Marshal may incur in effecting the release.
The parties may agree to the appropriate form of security. Bail may be given by way of a bond in the appropriate practice form, or by way of a bank guarantee or other form of security from a reputable financial institution acceptable by the Admiralty Marshal.
Once the agreed or court ordered security has been provided a request for release may be submitted to the Admiralty Marshal.
Upon the grant of an order of release by the Court, the vessel is released, and litigation proceeds with the security as potential judgment satisfaction.
COURT ORDER FOR SALE OF A SHIP
The Admiralty Court has jurisdiction to order the judicial sale of the ship that is under arrest. An application may be made by the claimant or any party interested in the vessel, provided they satisfy the court upon full adjudication that the claim is well founded.
If the claimant satisfies the court that the claim is well founded, the court may order the sale of the vessel preceded by an appraisement of the vessel’s value by the Admiralty marshal. The vessel is then advertised and offers for purchase are invited either by public auction or private treaty, as directed by the court.
The Admiralty Marshal’s expenses incurred in connection with the arrest, appraisement and sale rank in priority in the distribution of the sale proceeds. The net proceeds are held in court and applied towards satisfying the judgment debt.
CONCLUSION
Understanding the legal framework governing ship arrests in the BVI is essential for maritime stakeholders including shipowners, charterers, cargo interests and financiers. Informed navigation of the applicable rules ensures compliance with procedural requirements, reduces the risk of preventable disputes and facilitates the efficient handling of maritime claims. In a jurisdiction such as the BVI where maritime practice largely mirrors English law but also incorporates local law and procedure, awareness of these legal processes is critical to protecting commercial and legal interests in the maritime sphere.
For further information, contact Hermia Tench or Paul Dennis, KC .
