Enforcing awards against associated ships: court clarifies position on charterparty claims

South African admiralty legislation and apply has a remarkably easy strategy to the enforcement of maritime arbitration awards. The identical may additionally be mentioned for the enforcement of maritime judgments obtained wherever on the earth.

Any judgment or arbitration award referring to a maritime declare (no matter whether or not it’s given or made in South Africa) is recognised as a maritime declare in its personal proper. Because of this claimants can arrest ships in South Africa on the power of the award or judgment alone, with out the necessity for any prior native recognition. The arrest is obtained by the use of a warrant of arrest issued by the registrar of the Excessive Court docket, together with a writ of summons which units out temporary particulars of the declare and an hooked up copy of the judgment or award.

Nonetheless, process apart, the practicalities of finding a viable goal vessel to arrest could be tougher. That is notably related when the ship which is the topic of the underlying declare has been offered or now not exists. Arbitration awards in opposition to charterers can add an extra layer of issue.

It’s in opposition to this background that the South African related ship arrest can be utilized to good impact by widening the scope of potential targets. Ships are thought to be being ‘related’ when the ‘ship involved’ (ie, the ship in respect of which the underlying declare arose) and the ‘goal ship’ (ie, the ship to be arrested) are owned or managed – both immediately or not directly – by the identical celebration.

The construction of an related ship arrest for the needs of imposing a international judgment or arbitration award could also be defined as follows:

• The underlying judgment or arbitration award on which the arrest is premised should, itself, relate to a maritime declare that’s recognised by the Admiralty Jurisdiction Regulation Act (Admiralty Act).
• The related ship have to be owned, on the time of the arrest, by the alleged frequent proprietor or controller.
• The ship involved should have been owned or managed by the alleged frequent proprietor or controller when the maritime declare arose.
• For the needs of claims in opposition to charterers, the related charterer or sub-charterer is deemed to be the proprietor of the ship involved in respect of any related maritime declare for which the charterer or sub-charterer is alleged to be liable.

A longstanding level of competition amongst authorized practitioners for a while is whether or not the reference to “when the maritime declare arose” applies to the time when:

• the judgment or arbitration award was handed down; or
• the underlying declare below the charterparty arose.

It stands to purpose that if the Admiralty Act intends to discuss with the time when the judgment or arbitration award is handed down, it’s extremely unlikely that the ship involved would nonetheless be on constitution to the defendant charterer and there could be no cheap prospect of an related ship arrest.

In June 2016 the mt Fairly Scene was arrested in South Africa as an related ship of the mv Jin Kang, which was on constitution to Parakou Transport from Galsworthy Restricted on the time when the declare below the charterparty arose. Parakou Transport had, in flip, concluded a back-to-back five-year sub-charterparty for the Jin Kang with Ocean Glory. Nonetheless, the collapse of the constitution market throughout the 2008 monetary disaster drove Ocean Glory into liquidation and, as a consequence, Parakou Transport refused to take supply of the vessel below the charterparty when tendered.

Galsworthy was profitable in a London arbitration in opposition to Parakou Transport and was awarded damages of roughly $38.5 million. In an try and implement its award, Galsworthy turned its sights on the ships in Parakou Transport’s fleet. In doing so, it arrested the mt Fairly Scene on the power of Parakou Transport’s deemed possession of the Jin Kang because the charterer of the vessel.

One of many points to come up in the middle of the authorized proceedings in South Africa was whether or not it was competent for Galsworthy to have carried out an related ship in South Africa for the enforcement of an arbitration award in circumstances the place the Jin Kang was now not on constitution to Parakou Transport on the time when the arbitration award was handed down. Because the courtroom succinctly put it, the query was “[w]hen does the declare on an arbitration award come up?”

In reply to the query, the courtroom held as follows:

• Though the Admiralty Act contemplates an arbitration award as a “self-standing” declare not depending on the deserves of the underlying declare, that doesn’t imply that the declare on the arbitration award could be indifferent from the underlying declare.
• An arbitration award alone shouldn’t be a maritime declare; solely an award which has the standard of “referring to a maritime declare” is a maritime declare. The 2 are inextricably tied collectively and it’s essential to plead and show that it was an award in relation to a maritime declare.
• It follows {that a} declare based mostly on an arbitration award is a completely spinoff reason for motion. In different phrases, there have to be an underlying declare that’s important to the existence of an award. The award itself is solely the willpower of the existence and extent of the pre-existing legal responsibility in respect of that maritime declare.
• The declare on which the award relies should essentially have arisen earlier than the award was made. Subsequently, the award refers back to the authentic declare.
• Within the case of charterparty claims, the charterer is deemed to be the proprietor of the ship involved “in respect of any related maritime declare for which the charterer and never the proprietor is alleged to be liable”. Right here, the ship involved was the Jin Kang. The related maritime declare is, within the first occasion, the underlying declare which provides rise to the award. It follows that the deeming have to be a deeming of possession when the declare arose.
• When a declare lies in opposition to the proprietor of the vessel, the truth that its possession is subsequently terminated, and even that the vessel now not exists, is irrelevant. All that issues is that it was the proprietor on the time that the declare arose. Thus, the deeming provision serves to put the charterer, which is answerable for the declare, in the identical place because the proprietor. Subsequently, the Jin Kang was below constitution and Parakou Transport, not the proprietor, was answerable for sure claims which arose in relation to the vessel.

The place a profitable celebration seeks to implement an arbitration award in relation to a declare below a charterparty, the date on which the award was handed down shouldn’t be a related issue to think about. All that have to be established is that the defendant was the charterer of the ship involved when the declare arose below the charterparty.

The judgment in mt Fairly Scene not solely clarifies an space of the legislation which has been unsure for a while, but additionally demonstrates good frequent sense and must be welcomed by practitioners and arresting collectors alike.

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