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Consequences of the accession of the Ukraine to the Ship Arrest Convention of 1952

25.10.2011

 

Content:

1.        Introduction

2.        Before

3.        After

4.        Consequences

 

1. Introduction

 

Ukraine has acceded to the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships (Brussels, 1952).

 

A corresponding Law Act was approved by the Verkhovna Rada (the Ukrainian Parliament) on September 7, 2011. This Law Act entered into force on October 10, 2011. The Convention shall extend to the territory of Ukraine six months after the date of the receipt of the notification in written by the Belgian Ministry of Foreign Affairs.

 

2. Before

 

What we had before the accession of Ukraine to the Convention?

 

First and most important prerequisite for arrest of a vessel in Ukraine was a jurisdiction of Ukrainian court on merits of a case. Usually it was quite difficult to obtain such jurisdiction due to very strict provisions of national civil and commercial procedural codes. A second prerequisite was an ownership of the vessel by a defendant - proceeding in rem is not permissible in Ukraine so only ships which are owned by the debtor may be arrested. So Ukrainian court had its jurisdiction and might arrest a vessel only in the following cases:

 

(a)    If one of defendants is domiciled in Ukraine.

(b)   Proprietary claims relating to the possession of a ship, title to or ownership of a ship or a share in a ship.

(c)    Claims arising out of employment contract with ship's crew if a claimant is domiciled in Ukraine.

(d)   Claims arising out of loss of life or personal injury to a person who is domiciled in Ukraine or in case the accident took place in Ukraine.

(e)    Claims arising out of damage caused in Ukraine to property of private persons or legal entities during the operation of a ship.

(f)     Claims arising out of any contract which specified a place of its execution or has to be executed in Ukraine only.   

(g)    Claims arising out of collisions and compensation relating to salvage operation.

 

As you may see, and it was very unexpected to foreign shipowners -  national court practice was that a vessel could be arrested for any types of claim regardless whether the claim has a maritime nature or not.

 

3. After

 

What we expect of the accession of the Ukraine to the Convention?

 

The new rules will enter into force on the territory of Ukraine approximately in March - April 2012.

 

Presently a few amendments to the national Civil Procedure Code and the Commercial Procedure Code are in the process of consideration by relevant Committees of the Verkhovna Rada.

 

Pursuant to the mentioned amendments, if a vessel is found in any Ukrainian port a local court has its jurisdiction on the merits of a maritime claim. Having the jurisdiction the court may issue an arrest warrant on request of a plaintiff.

 

A vessel can be arrested only as the security of maritime claim. Sister ships are exposed.

 

4. Consequences

 

We expect dramatic increase of arrests of ships in Ukraine due to the following factors:

(a)    High level of corruption in Ukrainian court system (Transparency International ratings the Ukraine has been placed at 134 position of 178) and low professional competence of Ukrainian judges will lead to abuse of the power and unfair judgment.

(b)   As usual judges do not require counter-security from a plaintiff for potential damages to the defendant.

(c)    Ukrainian legislation does not allow getting a caveat against arrest.

(d)   Ukrainian courts do not accept P&I Clubs LOU in exchange of release of a vessel, - only cash deposit or letter of guarantee from a local bank is acceptable.

 

We are of opinion that Ukrainian judges are not ready to consider a maritime claim on its merits when foreign laws are to be applied, so we recommend when it is possible, to specify a clear arbitration clause and make such the clause in written with signatures and seals of parties. It could be very useful in charter parties, sale and purchase of a ship, bunkering and other contractual relations. However claims in tort will be considered on its merits by Ukrainian court if a vessel is seized in Ukraine.

 

We shall keep our Clients advised of further developments of this issue in due course.

 

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