SOUTH AFRICA: ENFORCING AWARDS AGAINST ASSOCIATED SHIPS: COURT CLARIFIES POSITION ON CHARTERPARTY CLAIMS
South African admiralty law and practice has a remarkably straightforward approach to the enforcement of maritime arbitration awards. The same may also be said for the enforcement of maritime judgments obtained anywhere in the world.
Any judgment or arbitration award relating to a maritime claim (regardless of whether it is given or made in South Africa) is recognised as a maritime claim in its own right. This means that claimants can arrest ships in South Africa on the strength of the award or judgment alone, without the need for any prior local recognition. The arrest is obtained by means of a warrant of arrest issued by the registrar of the High Court, along with a writ of summons which sets out brief details of the claim and an attached copy of the judgment or award.
However, procedure aside, the practicalities of locating a viable target vessel to arrest can be more challenging. This is particularly relevant when the ship which is the subject of the underlying claim has been sold or no longer exists. Arbitration awards against charterers can add a further layer of difficulty.
Associated ship arrest
It is against this background that the South African associated ship arrest can be used to good effect by widening the scope of potential targets. Ships are regarded as being 'associated' when the 'ship concerned' (i.e., the ship in respect of which the underlying claim arose) and the 'target ship' (i.e., the ship to be arrested) are owned or controlled – either directly or indirectly – by the same party.
The structure of an associated ship arrest for the purposes of enforcing a foreign judgment or arbitration award may be explained as follows:
- The underlying judgment or arbitration award on which the arrest is premised must, itself, relate to a maritime claim that is recognised by the Admiralty Jurisdiction Regulation Act (Admiralty Act).
- The associated ship must be owned, at the time of the arrest, by the alleged common owner or controller.
- The ship concerned must have been owned or controlled by the alleged common owner or controller when the maritime claim arose.
- For the purposes of claims against charterers, the relevant charterer or sub-charterer is deemed to be the owner of the ship concerned in respect of any relevant maritime claim for which the charterer or subcharterer is alleged to be liable.
A longstanding point of contention among legal practitioners for some time is whether the reference to "when the maritime claim arose" applies to the time when:
- the judgment or arbitration award was handed down; or
- the underlying claim under the charterparty arose.
It stands to reason that if the Admiralty Act intends to refer to the time when the judgment or arbitration award is handed down, it is highly unlikely that the ship concerned would still be on charter to the defendant charterer and there would be no reasonable prospect of an associated ship arrest.
Helpfully, the Supreme Court of Appeal has now considered the issue decisively in the recent judgment handed down in mt Pretty Scene.(1)
In June 2016 the mt Pretty Scene was arrested in South Africa as an associated ship of the mv Jin Kang, which was on charter to Parakou Shipping from Galsworthy Limited at the time when the claim under the charterparty arose. Parakou Shipping had, in turn, concluded a back-to-back five-year sub-charterparty for the Jin Kang with Ocean Glory. However, the collapse of the charter market during the 2008 financial crisis drove Ocean Glory into liquidation and, as a consequence, Parakou Shipping refused to take delivery of the vessel under the charterparty when tendered.
Galsworthy was successful in a London arbitration against Parakou Shipping and was awarded damages of approximately $38.5 million. In an attempt to enforce its award, Galsworthy turned its sights on the ships in Parakou Shipping's fleet. In doing so, it arrested the mt Pretty Scene on the strength of Parakou Shipping's deemed ownership of the Jin Kang as the charterer of the vessel.
Partner Jeremy Prain wrote an article on this decision for ILO.Read further