On 7 April this year, the Danish Maritime and Commercial High Court rendered judgment on whether a Danish bunker supplier incurred liability by applying for the arrest in Mozambique of a vessel owned by the same owner as the vessel that had received the bunkers, but which had neither ordered nor purchased the bunker fuel.
Factual Background
A Danish bunker supplier supplied bunkers to the vessel “X”, owned by a Vietnamese shipping company, pursuant to a bunker order placed on 3 July 2023 by the vessel’s time charterer.
The time charterer failed to pay the bunker supplier. Consequently, on 9 May 2024, the bunker supplier filed an application before a court in Mozambique seeking the arrest of the vessel “Y”, which was likewise owned by the Vietnamese shipping company. “Y” was therefore a “sister ship” to “X”. At the relevant time, vessel “Y” had been chartered out by the owner to a charterer. The arrest application was based on the 1952 Arrest Convention, Article 3(1).
On 10 May 2024, a Mozambican court ordered the detention of vessel “Y” pursuant to the bunker supplier’s arrest application. The order
was made without prior hearing of the Vietnamese shipowner.
In its arrest application to the Mozambican court, the bunker supplier had not alleged that the Vietnamese shipowner was liable for payment of the bunker purchase underlying the arrest application. Instead, it maintained that liability rested with the time charterer that had placed the bunker order.
On 27 June 2024, the court lifted the detention of “Y” and dismissed the arrest application. The principal reasoning was that Articles 3(1) and 3(4) of the 1952 Arrest Convention did not permit the arrest of vessel “Y” in respect of the bunker claim relating to deliveries made to “X”, since, under Mozambican law and pursuant to Article 3(4) of the Arrest Convention, a sister ship arrest could not be effected for a claim for which the owner of the sister ship was not liable.
As vessel “Y” had been detained since 10 May 2024 at the time the decision was rendered, the shipowner had suffered losses, including loss of hire. On this basis, the shipowner commenced proceedings against the Danish bunker supplier before the Danish Maritime and Commercial High Court in Copenhagen, claiming damages of USD 619,724.89 for wrongful arrest.
The bunker supplier sought dismissal of the claim.
The parties agreed that the issue of the bunker supplier’s liability should be determined in accordance with Mozambican law.
The Shipowner’s Arguments
In support of its claim for damages, the shipowner argued inter alia that:
- the bunker supplier had acted negligently and wrongfully in seeking the sister ship arrest, as it ought to have realised that no legal basis existed for such an arrest;
- the bunker supplier had referred only to Article 3(1) of the Arrest Convention in the arrest application, but not to Article 3(4), which, under Mozambican law, precluded sister ship arrest in the circumstances; and
- it was irrelevant that the bunker supplier had obtained legal advice prior to applying for the arrest, and that the law firm advising it had failed to point out that the arrest could not lawfully be obtained.
The Bunker Supplier’s Arguments
The bunker supplier, for its part, argued inter alia that:
- prior to applying for the arrest, it had obtained legal advice, including from Mozambican lawyers;
- it had committed no errors or omissions in connection with the application to the Mozambican court or during the subsequent proceedings; and
- it had neither provided incorrect factual information nor otherwise acted negligently or wrongfully.
The Court’s Decision
The Court dismissed the shipowner’s claim. The Court held that vessel “Y” had indeed been wrongfully detained in Mozambique as a result of the bunker supplier’s arrest application, but found that the bunker supplier had not acted negligently or wrongfully in seeking the arrest.
The Court stated inter alia:
“On the basis of the expert opinions submitted and the examination of the two experts before the Court, it must be accepted that liability for damages under Mozambican law in the present case requires that [the bunker supplier] acted culpably, negligently, or without ordinary prudence in filing the arrest application. It must further be accepted, as undisputed, that under Mozambican law the burden of proof regarding such culpable conduct rests with the claimant.
The Court further notes that it is undisputed that [the bunker supplier’s] arrest application of 9 May 2024 contained all factual information required by the court to determine the application, and that the information provided was correct. In particular, it was expressly stated that the arrest concerned a vessel whose owner had not entered into the agreement for the supply of bunkers, and where the bunkers had not been supplied to the vessel sought arrested, but to another vessel owned by the same owner and chartered out under a time charterparty. In this respect, the Court observes that there is a presumption against considering it in itself negligent for a party or its lawyers to submit an application to a court without setting out the legal arguments which may militate against the application being granted […]. Furthermore, it is for [the shipowner] to prove that the application of the exception contained in Article 3(4) of the Arrest Convention under Mozambican law was so obvious that merely filing an application for the arrest of a sister ship in circumstances such as the present constituted an abuse or negligent misuse of the legal system. The Court finds that this burden of proof has not been discharged.”
Comments
Under many legal systems, an arresting party may incur liability for obtaining an arrest if the claim forming the basis of the arrest application does not exist, including where the party against whom the arrest is sought is not liable for the claim, or where the arrest must otherwise be considered wrongful.
In many cases, including disputes concerning liability for payment of bunkers, there will be disagreement as to whether the owner of the vessel to which the bunkers were supplied is liable for payment. In many jurisdictions, vessel arrest is conditional upon the shipowner being liable for the underlying claim.
In the case before the Danish Maritime and Commercial High Court, the bunker supplier had established that, under Mozambican law, an arrest did not necessarily require that the shipowner be liable for the claim underlying the arrest. It should be noted that, at the relevant time, it had not yet been conclusively determined that the owner was not liable for the bunker claim, and the bunker supplier could therefore have argued in the arrest application that, in its view, the owner was liable. However, the bunker supplier chose not to do so, with the result that the case turned solely on whether a sister ship could be arrested for a claim for which the owner of the sister ship was not liable. Mozambican law precluded such an arrest.
Nevertheless, the fact that the arrest application had been made was not, in itself, sufficient to render the arresting party liable. The Court found that it was not in itself wrongful to seek the arrest, since it had not been obvious that the conditions for arrest were not satisfied.
It is not always clear when liability will arise. For example, where the arresting party has received legal advice indicating that the legality of the arrest is doubtful, uncertainty may remain as to whether applying for the arrest would expose the party to liability. However, abuse of the arrest remedy will give rise to liability.
