Unlike other countries, which are part of either the international convention on the sea-going ships or the international convention of arrest of ship, UAE has its own rules and regulations for governing the matters related to sea. The Maritime lawyers of Dubai have clearly expressed their point of view on the procedure for ship arrest in UAE and judgments issued by court in such regards.
The provision for ship arrest in UAE is provided under the Maritime Law of UAE, i.e. Federal law no. 26 of 1981. This phenomenon of ship arrest is generally used as a tool against the maritime debt. The court having the jurisdiction of the port is the one where such application is made for the maritime debt and it is totally upon the discretion of the court to provide for punishment of the ship arrest or not. This civil application can be filed as an ex-parte application.
The following article provides with a judgment related to the procedure of ship arrest in UAE
In Court’s Opinion
This judgment was passed by the court of Appeal, based on the UAE laws on ship arrest procedure. The following judgment reflects a prominent decision which the Khor Fakkan Court of Appeal took. It ignored the fact that the provision on which it relied upon for holding the decision of arresting a ship correct, was canceled out by the Cabinet resolution no 57 of 2018 which was based on the Federal Law no. 11 of 1992, better known as the civil procedural law.
The facts of the case
A vessel purchase agreement was signed between two parties, whereby the seller is the claimant and the purchaser is the defendant. The claimant agreed to sell a vessel to the defendant on 10th June, 2019 by ways of the MOA for the value USD 11,700,000 which was decided to be paid through an Escrow account.
The payment was to be made in the following manner:
- An advance payment had to be done before the delivery of the vessel, amounting to 20% of the purchase price.
- The next 80% was to be paid after the delivery of the said vessel and that too within 3 days of such delivery.
The defendant successfully made the payment of USD 2,340,000, i.e. 20% advance payment on 9th October, 2019. On 23rd October, the delivery of the vessel was made at Khor Fakkan Port along with the successful transfer of the ownership deed in favor of the defendant. But, despite the successful attempts of request of payment made by the claimant, the due amount of the 80% of the purchase price was not paid by the defendant till 25th January, 2020.
Rationale behind the Arbitration Proceedings
As a result of which, the claimant resorted to an arbitration proceedings which was carried out in London. Through this arbitration proceedings, the claimant demanded either for transfer back of the ownership title to its name or for the payment of 80% due amount, i.e. 9,983,921.91. Following this, the claimant received an arrest order of the vessel which was present at the Khor Fakkan port. MOA was thus been referred to by the claimant for the purpose of such arrest.
The above mentioned, cabinet resolution no. 57 of 2018 provided that a validity of a debt claim has to be filed by the creditors in case they have obtained an attachment order over the opposite party’s real estate or any moveable asset. The time period for such filing is 8 days from the date of execution of such orders in an appropriate court. The purpose of such filing is to prove that they have the right to such claim. Failing this, the attachment order will be regarded as null and void.
Thus, both, a validity of the debt claim as well as a validity of the attachment order had to be filled by the creditor in accordance to the old resolution. But in case of the new resolution the validity of the attachment order was struck out.
As a result of which the claimant filed a validity of debt claim in the arbitration proceedings which were held in London and there was no need to ensure that any other requisite had to be followed in the jurisdiction of UAE. Also it was assumed that the order with respect to the arrest would be stayed until an award is passed in the arbitration proceedings.
But still the claimant filed for the stay of the arrest order in the court of first instance on the basis or article 121 of the Maritime Law which provided that the judgment related to the debt claim shall confirm the judgment related to the arrest order. This means that the judgment of the order claim shall be technically passed before the judgment of the arrest order.
The defendant argued that firstly the court did not have the jurisdiction to decide the case, secondly, the claim is not a maritime claim and thirdly, an evidence was provided by the defendant of the payment of the rest of the 80% due to him. The judgment was delivered on 3rd February, 2020 in which a decision of stay was given by the court.
According to the court, article 115D, the claimant’s debt is referred to as the maritime debt. The court upheld the provision of article 121 and regarded it as private law which always supersede the general rules. Thus, the stay was held to be valid.
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