Q&A: ship arrest in Hong Kong

Ship arrest

Which international convention regarding the arrest of ships is in force in your jurisdiction?

Hong Kong is a signatory to the International Convention Relating to the Arrest of Seagoing Ships, Brussels, 10 May 1952.

In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested? Can a bareboat (demise) chartered vessel be arrested for a claim against the bareboat charterer? Can a time-chartered vessel be arrested for a claim against a time-charterer?

Generally, a plaintiff may arrest a vessel for claims pursuant to maritime liens or for claims falling within the following categories:

• any claim to the possession or ownership of a ship or to the ownership of any share therein;
• any question arising between the co-owners of a ship as to possession, employment or earnings of that ship;
• any claim in respect of a mortgage of or charge on a ship or any share therein; or
• any claim for the forfeiture or condemnation of a ship or of goods that are being or have been carried, or have been attempted to be carried, in a ship, or for the restoration of a ship or any such goods after seizure, or for droits of Admiralty.

For the types of claims listed below, in certain circumstances it is also possible to arrest sister ships:

• any claim for damage done by a ship;
• any claim for loss of life or personal injury sustained in consequence of any defect:
  • in a ship; or
  • in its apparel or equipment; or
  • in consequence of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship; or the master or crew of a ship; or any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible; being an act, neglect or default in the navigation or management of a ship, in the loading, carriage or discharge of goods on, in or from the ship; or
  • in the embarkation, carriage or disembarkation of persons on, in or from the ship;
• any claim for loss of or damage to goods carried in a ship;
• any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;
• any claim in the nature of salvage;
• any claim in the nature of towage in respect of a ship or an aircraft;
• any claim in the nature of pilotage in respect of a ship or an aircraft;
• any claim in respect of goods or materials supplied to a ship for its operation or maintenance (note: this claim is in respect of what are commonly described as ‘necessaries’, namely bunker fuel, repairs, spare parts, paints and the like);
• any claim in respect of the construction, repair or equipment of a ship or dock charges or dues;
• any claim by a master or member of the crew of a ship for wages (including any sum allotted out of wages or adjudged by a superintendent to be due by way of wages);
• any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship;
• any claim arising out of an act that is or is claimed to be a general average act; or
• any claim arising out of bottomry.

A demise-chartered vessel may, therefore, be arrested for a statutory claim against the demise-charterer if it is still the demise charterer when the writ is issued. A vessel on time-charter when the action is brought cannot be arrested for a statutory claim against the time-charterer, but sister vessels wholly and beneficially owned by the time-charterer at that time can be arrested.

Does your country recognise the concept of maritime liens and, if so, what claims give rise to maritime liens?

Hong Kong courts recognise the concept of maritime liens. Claims that give rise to maritime liens are those arising from damage caused by a ship, salvage, crew’s wages, master’s wages and disbursements, and (now obsolete) bottomry and respondentia.

What is the test for wrongful arrest?

The arrested party must prove malice or gross negligence on the part of the arresting party. 

Can a bunker supplier arrest a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, rather than with the owner, of that vessel?

A bunker supplier can only arrest a vessel if it shows that it contracted directly with the vessel’s owner or bareboat charterer. Even if the bunker supply contract with the charterer provides that the supplier has a lien on the vessel under the law governing that contract, this would have no effect because the owners are not party to that contract.

Will the arresting party have to provide security and in what form and amount?

Under Hong Kong law, it is not necessary for the arresting party to provide counter-security. That said, the arresting party usually has to provide an undertaking (usually a solicitor’s undertaking) to pay the bailiff’s expenses of the arrest (maintaining the ship under arrest, including watchman’s fees, launch hire, provision of crew, victualling, bunkers, etc).

How is the amount of security the court will order the arrested party to provide calculated and can this amount be reviewed subsequently? In what form must the security be provided? Can the amount of security exceed the value of the ship?

The amount of the security is subject to the court’s discretion. Usually, the amount of security must be reasonable, which means the claimant’s reasonably arguable best case, plus interest and costs. The amount of the security cannot exceed the value of the ship.

Normally, an agreed form of contractual security is provided without an application to court. Usually, a protection and indemnity insurance club letter of undertaking serves this purpose. Alternatively, a bail bond can be provided to the court as security.

What formalities are required for the appointment of a lawyer to make the arrest application? Must a power of attorney or other documents be provided to the court? If so, what formalities must be followed with regard to these documents?

A power of attorney is not required to appoint a lawyer to make the arrest application. Solicitors representing the plaintiff will usually require written instructions before proceeding with the arrest. No notarisation of documents is required for the arrest application. Documents required to make an arrest application include an in rem writ with acknowledgement of service, a warrant of arrest, an affidavit in support of the arrest, a praecipe of warrant of arrest, a praecipe for service of the writ by a bailiff and an undertaking to pay the bailiff’s expenses.

Who is responsible for the maintenance of the vessel while under arrest?

The costs of the arrest, care and custody of the vessel are usually paid by the arresting party and the arresting party is required to reimburse the expenses of arrest to the bailiff. Nevertheless, as the bailiff’s expenses rank first in priority of claims against the proceeds of the sale of the vessel, it is likely that the arresting party is able to recover the bailiff’s expenses from the defendant when the vessel is sold. Although, as a condition of the release, the party that has been arrested may be required to pay these maintenance expenses.

Must the arresting party pursue the claim on its merits in the courts of your country or is it possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere?

The arresting party does not need to pursue the claim on its merits in the courts of Hong Kong. It is possible to arrest the vessel so as to obtain security and then pursue proceedings on the merits elsewhere.

Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

The main remedy and method available to obtain security is by way of obtaining a Mareva injunction in Hong Kong. A Mareva injunction is an injunction order of the court restraining the debtor from disposing of, or dissipating, its assets in Hong Kong (including its bank accounts).

For the Hong Kong court to grant a Mareva injunction, the creditor must show, among other things, that it has a good arguable case against the debtor, that the balance of convenience is in favour of granting the injunction order, that there are assets within Hong Kong and that there is a real risk of dissipation of assets, or removal of assets from Hong Kong, which would render the creditor’s judgment of no effect. Where there is no direct evidence on the risk of dissipation, some kind of dishonest conduct on the part of the debtor may be required for the court to infer risk of dissipation.

Further, it is usually necessary for the creditor to provide an undertaking (or if requested by the court, a payment of security into court) to pay damages to the debtor if the court later decides that the Mareva injunction was wrongfully granted.

Are orders for delivery up or preservation of evidence or property available?

Under section 35 of the Arbitration Ordinance, the arbitral tribunal has the power to make orders to preserve evidence that may be relevant and material to the resolution of the dispute and/or to preserve assets out of which a subsequent award may be satisfied. Under section 56 of the Arbitration Ordinance, orders may include, for example, directing the inspection, photographing, preservation, custody, detention or sale of the relevant property by the arbitral tribunal, a party to the arbitral proceedings or an expert; or directing samples to be taken from, observations to be made of, or experiments to be conducted on the relevant property.

For Hong Kong court proceedings, a party to these proceedings may apply for an order for detention, custody or preservation and inspection of any property that is the subject matter of the proceedings. Additionally, for the purpose of enabling any order, the court may, by the order, authorise any person to enter upon any land or building in the possession of any party to the cause or matter. The application is made in accordance with Order 29 Rule 2 of the Rules of the High Court.

Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

It is theoretically possible to arrest bunkers in Hong Kong. However, many practical issues arise, such as where to store the bunkers that have been arrested.

Law stated date

Give the date on which the information above is accurate.

2 May 2020.