Bad Times Mean Good Business

With banks seemingly in a mood for foreclosing on vessels, the effect of Basel III on the balance sheet is starting to bite and ship arrests are the order of the day. Places such as Rotterdam which has become the European hotspot for vessel arrests are abuzz with legal activity.

With shipping experiencing hard financial times and banks quitting shipping altogether and putting the screws on owners to pay their interest and repayments business is booming for local lawyers specialising in ship arrests.

So why has Rotterdam rapidly becoming the location of choice for banks that want their ships back? According to experts its all about a friendly legal framework. The Dutch system is reasonably efficient, and while not as favourable to arresting parties as it is in certain other jurisdictions, such as South Africa – it delivers when a ship is in the sights of lawyers.

A ship arrest petition must be made as an ex parte request to the local court. If the petition is granted, the court will fix at its discretion a term for the initiation of proceedings, typically varying from eight days to several weeks. The petitioner must be represented by a Dutch lawyer admitted to the bar.

An arrest order will then be issued, usually within 24 hours. The petition is signed by the action president of the court and stamped “in the name of the king”.

This order is then served on the master by the bailiff, with the port authority and the pilots’ association also informed, to prevent a vessel leaving Rotterdam.

The petitioner may, at the discretion of the court, be required to post security for wrongful arrest, although this is not standing practice.

If the claim falls outside the scope of the 1952 convention and is thus not regarded as a maritime claim, it is still possible to arrest objects other than the vessel, such the bunkers. Often this will prove as effective as arresting the vessel itself.

There is also the institution of the so-called Rotterdam Guarantee Form, a special type of template used for a Club Letter or bank guarantee that obviates the need to agree wording.

It should of course be noted that arrests are made at the risk of the arresting party. If proceedings on the merits of the case are lost, the arresting party is liable for damages sustained by shipowner.