Ayesha Qazi*
The interplay between Maritime Law and Arbitration has been long subsisting. The international character of Maritime Law and the convenience of arbitration encourages parties to resort toitto settle their disputes.
A valuable relief afforded by Maritime Law is the right of a claimant to arrest a ship as security for its claims. With the paradigm shift from traditional litigation to arbitration, it has been observed that a recurring question before Indian Courts is whether a ship can be arrested as security pending arbitration proceedings, especially where there is a foreign seat of arbitration and if so, what procedure ought to be followed. This article thus seeks to examine the current position of Indian Courts. However, before doing so, one must appreciate how this position came to be.
The Position Prior to the Codification of Admiralty Law
Indian Courts, on numerous occasions, have had the opportunity to determine various facets of this question. One of the very first cases to address this issue was Golden Progress[1].The Bombay High Court, by answering this question affirmatively, relied on the important principle laid down in the famous case of M.V. Elizabeth[2]wherein a distinction was drawn between in rem and in personam proceedings, to distinguish obtaining security for arresting a ship under Maritime Law (an action in rem) from obtaining security for an award that has been or may be passed under Arbitration law (an action in personam).
It is to be noted here that the judgment in the Golden Progress was pronounced at a time where no procedure for the arrest of a ships security existed in India. The Court in its reasoning had stated that in the absence of any domestic law or inconsistency with the domestic law, where a ship was sought to be arrested in order to satisfy a judgment or award of an arbitral tribunal, the procedure followed would be that akin to Article VII of the International Convention on the Arrest of Ships, 1999 (“the Arrest Convention”). Thus, Golden Progress was a pivotal judgment in so far as it not only decided a very important question relating to the arrest of a ship as security but also laid down a procedure for the same. However, it must be highlighted that the aforesaid case dealt with a situation where arbitration proceedings were completed and an award was obtained, leaving the question of arrest of a ship as security for a claim pending future arbitration or ongoing proceedings unanswered.
Likewise, in the case of M.V. Prapti[3], the Calcutta High Court whilst relying on an English judgment[4] held that although a claim in an arbitration and a claim in an admiralty suit were similar, arrest of a ship to secure the said maritime claim was permissible as it is based on common law procedure and thus, is not an abuse of process by a Court.
Likewise, reckoning its judgment on a similar reasoning, the Bombay High Court in M.V. Mehrab[5], held that principles incorporated in various Arrest Conventions find their roots in common law and in turn, are part of common law in India. The Court even went a step further in stating that the law ought to be looked at in a contemporary context. The Court also placed reliance on laws of foreign states such U.S.A. and Canada to show the general international notion, permitting the arrest of ships as security pending arbitration. Since, there was nothing in Indian law prohibiting the use of admiralty jurisdiction to arrest a ship for this purpose, the Court held that the same was permissible to secure a claim in a future or an ongoing arbitration.
Subsequently, in M.V. Monchegorsk[6], the Court laid down that in personam proceedings are no bar to admiralty actions in rem.
The Issue with the Enactment of the Admiralty Act
A perusal of the above mentioned judgments cements the historic position of Indian Courts to permit arrest of a ship, whether foreign or domestic, as security; either anticipating, pending or on the completion of admiralty proceedings notwithstanding the seat of the said proceedings. It is noted that the reasons upon which Indian Courts based their judgments ranged from identifying elements of common law forming the basis of ship arrest to treating actions in rem and actions in personam on separate footings. Although the Courts based their decisions on different reasonings, the general view was to permit the arrest of a ship as security for arbitration.
However, this position was taken prior to the enactment of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (“the Admiralty Act”). The enactment of the Admiralty Act has been long awaited. An important provision in the Admiralty Act is the codified claimant’s right to arrest a ship[7]. Additionally, the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”)which bestows a right upon parties to apply for interim measures pending arbitration proceedings, was made to apply to foreign seated arbitrations. Thus, a claimant seeking interim relief pending a foreign seated arbitration can approach Indian Courts[8] to obtain the same.
Although one may be inclined to think a ship maybe arrested as an interim measure under Section9 of the Arbitration Act, it has been held that this falls squarely outside the scope of interim measures as contemplated under the said Section[9].This is likely to be a result of the lack of jurisdiction of an Arbitral Tribunal to have a ship arrested. It is well-settled law that only a Court having admiralty jurisdiction can arrest a ship while it is also well-settled that “no man can confer or take away jurisdiction of a Court”. Hence, one can confidently infer that since, the Admiralty Act, 2017 bestows admiralty jurisdiction only on a handful of High Courts[10], Arbitral Tribunals lack admiralty jurisdiction and therefore, cannot arrest a ship. Conversely, while the Admiralty Act, 2017makes no express provision permitting the arrest of a ship to provide security in foreign seated arbitrations, the Arrest Convention permits the same[11]. Therefore, this begs for the question whether the enactment of the Admiralty Act, 2017would alter the procedure of arrest laid down in Golden Progress[12]and the line of precedents permitting ships to be arrested despite an ongoing foreign seated arbitration? Moreover, can Indian Courts arrest a ship as security for a claim, notwithstanding Section 5 of the Arbitration Act[13]? This question was recently decided by the Bombay High Court in Altus Uber[14].
The Present Position
In this case, the plaintiff had instituted admiralty proceedings to satisfy its claim arising out of a bareboat charter which was identical to the claims submitted by it in its arbitration proceedings in London. The Ld. Single Judge held that the Admiralty Act, 2017, in no manner, affects or alters the position taken by the Court in Golden Progress. The Court based its finding on the reasoning that the said Act merely lays down a test for jurisdiction which allowed a party to arrest a ship upon its satisfaction. The Admiralty Act, 2017, according to the Ld. Single Judge, was silent on a procedure for arrest of a ship, especially in a situation where an arbitration was pending or was yet to be commenced. Relying on what was laid down in Golden Progress, the Ld. Single Judge held that the since there still existed a lacunae when it came to the procedure for arrest of a ship, especially during arbitration, the procedure laid down in the aforesaid case would apply i.e. the Arrest Convention would apply, ergo, the arrest of a ship for security pending arbitration would be permissible.
When this case went to the Division Bench[15] of the same Court in an appeal, the Hon’ble Division Bench in upholding the Ld. Single Judge’s findings clarified that since a ship can be arrested as security for a maritime claim pursuant to the institution of a suit for the said claim, it would be incorrect to assume a claim in a pending arbitration and a maritime claim are one in the same. It was further clarified by the Court that a ship is arrested pursuant to a maritime claim as opposed to a claim in an ongoing or to be instituted arbitration. The two claims, although similar, exist in different spheres. It would here be useful to emphasize on the distinction between an action in rem versus an action in personam which would allow a party to steer clear of the bar imposed by Section 5 of the Arbitration Act on the interference of Courts, where there exists a reference to arbitration. The Court further went on to add that where a suit to secure the claim in arbitral proceedings is instituted, the requirements stipulated in the Admiralty Act, 2017 are to be fulfilled. Thus, what the Hon’ble Division Bench sought to do was clarify the position that an arbitration claim is distinct from a maritime claim, albeit the two maybe similar. In doing so, the Hon’ble Division Bench has given effect to the essence of Section 5 of the Admiralty Act, 2017 which provides for the arrest of a ship only where there exists a maritime claim, although this appears to be a slight departure from what was held in M.V. Mehrab[16], supra. However, this deviation is understandable in light of the codification of Maritime Law in India. Nonetheless, the Hon’ble Division Bench, keeping in line with historic precedents, upheld the arrest of a ship as security pending ongoing foreign seated arbitrations, however subject to the prerequisites contained in Admiralty Act, 2017.
Conclusion
In this regard and at glimpse of the plethora of judgments, it can be seen that the Indian Courts have maintained a consistent view. In doing so, the Courts have protected this longstanding relief offered to aggrieved claimants under Maritime Law. It may here be mentioned that one of the principles on which the Courts order for arrest of the ship can be traced back to the imposition of the Mareva Injunction[17]by Lord Denning, allowing for an injunction on a party’s assets pending traditional litigation or arbitration proceedings. Furthermore, since this view seems to be in line with foreign States such as the U.K., U.S.A. and Canada, Indian Courts appear to be in comity with international law. Moreover, the Courts in upholding the sanctity of a vital relief under Maritime Law have ensured that justice is not just offered but is also seen to be done in fit cases.
In conclusion, it can be said that in India, there is no bar on arresting a ship as security pending arbitration proceedings even where there is a foreign seat of arbitration.
About the Author
Ayesha Qazi is a trainee at Mulla & Mulla & Craigie Blunt & Caroe, Admirality department.
[1]J.S.Ocean Liner LLC v M.V. Golden Progress and Anr. [2007 (2) ARBLR 104 Bom]
[2]M.V. Elizabeth v. Harwan Investment and Trading Pvt. Ltd. [AIR 1993 SC 1014]
[3]Alexandras Dryron S.A. v. Owners and parties interested in the vessel “M.V. Prapti” [1997 SCC OnLine Cal 331]
[4] The Jalamatsya [(1987) 2 Lloyds Rep 164]
[5] Islamic Republic of Iran Shipping Lines v M.V. Mehrab and Ors. [2002 SCC OnLine Bom 604]
[6] M/s Crescent Petroleum Ltd. v M.V. Monchegorsk and Anr. [1999 SCC OnLine Bom 610]
[7] Section 5, The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017
[8] Section 2, The Arbitration and Conciliation (Amendment) Act, 2015
[9] J.S.Ocean Liner LLC v M.V. Golden Progress and Anr. [2007 (2) ARBLR 104 Bom]
[10] Section 3, The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017
[11]Article 2 (3) read with Article 7 of the International Convention on Arrest of Ships, 1999
[12]Supra
[13] Section 5 of the Arbitration and Conciliation Act, 1996 bars judicial intervention save for instances as more particularly set-out in the Act; section 9 being one such instance.
[14] Siem Offshore Redri AS v Altus Uber [2018 SCC OnLine Bom 2730]
[15] Altus Uber v Siem Offshore Redri AS [2019 SCC OnLine Bom 1327]
[16]Supra
[17]Mareva Compania Naviera SA v International Bulkcarriers SA “The Mareva” [(1980) 1 All ER 213]
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