Settlement by the arresting party of expenses in keeping a vessel safe whilst under arrest.

Settlement by the arresting party of expenses in keeping a vessel safe whilst under arrest.

Author: Ann Fenech

On the 19th March 2022 the chemical tanker Chem P registered in St. Kitts and Nevis, with no engine power got caught in a very violent storm whilst off shore Malta.  The storm  pushed her closer and closer to land until she was salvaged by tugs  and stopped  from grounding off the north east coast of Malta by Ghallis Tower.  In the meantime her anchor dragged the bottom of the sea bed and became lodged in the underwater interconnector cable between Malta and Sicily.  This cable is  owned by Enemalta Plc (“Enemalta”) and supplies Malta with electricity from the Italian mainland. Enemalta Plc is Malta’s energy services provider, the majority shareholder of which is the Government of Malta.

The damages suffered by Enemalta have now been estimated to run close to the 50 million Euro mark, however at the time, the vessel was arrested to secure the sum of 30 million euro. The vessel remains under arrest  to this day since no security has been provided notwithstanding the fact that the owners filed an application seeking to limit their liability in accordance with the 96 Protocol to the Limitation of Liability Convention 1976 which is law in Malta. The request was granted establishing the limit of the vessel’s liability to euro 18,513,319.41

Subsequent to the arrest and as the weeks and the months progressed, Transport Malta  responsible for safety in Maltese territorial waters, started to get worried about the fact that since  winter was approaching with more serious weather they felt that the Chem P with no functioning engines and with only one anchor was a cause for concern.  The main source of concern was the fact that the owners of the Chem P were disregarding requests by the same authorities for the Chem P to either repair her engines to make them fully functional, or to take on a tug for safety and security purposes or to take the ship to a berth at a terminal.  The owners appeared to disregard these specific orders by Transport Malta,  notwithstanding the fact that the owners had not abandoned the vessel, had agents representing them and had employed lawyers to represent them in the fullest possible manner.  Owners simply decided to disregard the requests coming from the Authorities. There was a complete dereliction of duty.

Transport Malta was rightly concerned that the status quo posed a real potential risk to safety of navigation, national security and the possibility of environmental damage impacting Malta’s resources should the vessel drift on to the shore due to inclement weather or develop a structural fault in the vessel’s only anchor.

Transport Malta therefore filed an application before the Maltese courts highlighting that: “The Authority has already given directions to the owners of the vessel Chem P for the vessel to be continuously assisted by a tug; or for the engines to be mobilised subject to the certification by the competent authorities like the Class or a recognised organisation; and for the anchor to be recovered; or for the vessel to be accommodated at a terminal with a berth; however to no avail to date.”

Transport Malta sought direction from the court identifying article 857(4) of Chapter 12 of the Laws of Malta which states that:

All expenses as may be necessary for the preservation of the arrested ship or vessel shall from the moment that the warrant of arrest is served on the Authority for Transport in Malta be borne by the party issuing the warrant saving his right to recover such expenses together with his claim.”

Acting for Enemalta we pleaded before the Court that:

  1. The vessel had not been abandoned by the owners of the Chem P, and they had actually filed a note in court to this effect confirming that they had not abandoned the vessel.
  2. That the intention of the legislator behind Article 857 (4) of Chapter 12 of the laws of Malta when this article of the law was introduced in 2006 was to cover situations of strict abandonment. In other words, the law was drafted that way to  protect the Authority, which is considered to be the consignatory of an arrested vessel, to ensure that the Authority is compensated in the event that it needs to take care of the vessel following arrest and the abandonment of the vessel by her owners.  It was drafted to ensure that the Authority as consignatory of the vessel, can recoup the moneys expended by the Authority from the arresting party which would then be entitled to claim against the vessel.
  3. The law was not intended to be used in a scenario where the owners had not abandoned the vessel, where they were very much present, had appointed an agent to represent them and had appointed lawyers to represent them and who simply decided to ignore their duties, run roughshod over the system and ignore the maritime authorities of the country. The law was not there to protect the wrong doer and to get the arresting party to pay in such circumstances.
  4. The law spoke about “preservation of the vessel” and that the words “preservation” had to be given the same interpretation as they were given during the deliberations on the Arrest of Ships Convention in Geneva in 1999, when as recorded in the Travaux Preparatoires of the Convention: “ The proposal of the Maltese delegate to add the word “preservation” in view of the possible intervention of the port authority in connection with a ship abandoned by its owners was adopted.”

Regrettably the Court in handing down its decision on the 5th of September, did not share Enemalta’s view.  The Court held that:

The law does not make any distinction between a vessel which is arrested and subsequently abandoned, and a vessel which is still under the control of her master and owners.  If the legislator wanted to make this important distinction he would have said it. …Enemalta complains that it is adding insult to injury to observe that quite apart from the substantial damages caused to it by the vessel, it rather than the owners, are going to have to pay for its preservation.   This is indeed a very uncomfortable and difficult situation for the creditor. ….The Court understands that he who requests the issuing of a warrant of arrest, in so far as this relates to the Authority, must pay for the preservation of the vessel because it is not the Authority who after all would have kept the vessel in our ports and seas. …. On what the expenses necessary for preservation are, the law is silent.  Therefore it is the opinion of this Court that the word “preservation” must be interpreted restrictively;  the expenses must be those strictly necessary… For these reasons, the Court orders that the vessel is placed in a secure place … at the provisional cost of Enemalta,…Every other daily expenses remain the responsibility of the owners of the vessel.”

The writer remains of the view that there is no doubt whatsoever that the intention of the legislator behind the introduction of article 870(4) in the Code of Organisation and Civil Procedure in 2006 was precisely to give the Authority a level of protection, in the event that a vessel was abandoned by her owners and disappeared off the face of the earth.  However there is no denying that as the Court very correctly pointed out in its judgement the law does not distinguish between a vessel which is arrested and subsequently abandoned and a vessel which is arrested and not abandoned.

This however leaves the arresting party like Enemalta in a very challenging position indeed.  Not only has the claimant suffered millions in damages, it needs to pay to keep her secure.  Clearly there is an urgent dire need for the law to be amended so that it is made crystal clear that an arresting party should only be expected to pay for such expenses in the event that the owners really and truly abandon the vessel in Malta.

However, the story does not end there.  Not content with having a court order which effectively obliged Enemalta to pay for the costs related to taking the vessel into  port and keeping her safe,  the owners very probably thought it was their very lucky day and filed an application requesting the court to order Enemalta to also pay for all of  the crews wages, agency fees, berthing fees, supplies and every other daily running cost  whilst the vessel was under arrest.

The court delivered a very short and succinct decree on the 24th of October 2022.  It held that:

The decree handed down by this court of the 5th of September, was in relation to Enemalta as the issuer of the warrant of arrest in favour of the Authority and was a provisional decree.

That decree makes no decisions in favour of the applicant who remains responsible according to maritime law for their vessel.”

The author’s interpretation of the first and second decision is that the Court felt obliged to react to the plea by the Authority who was seriously concerned about the fact that with winter weather approaching the disabled vessel with one anchor would be at the mercy of probably strong wind and waves during the winter months. This would pose a danger to itself and navigation and other vessels anchored close by at the anchorage.  The Authority is the consignatory according to law and consequently in view of the fact that as the court said the law does not distinguish between a vessel which has been abandoned and a vessel which has not,  it came down in favour of giving comfort to the Authority by ordering the arresting party Enemalta to pay for the expenses associated with bringing the ship into safe harbour – expenses which as consignatory, the Authority would have  had to pay out itself.  The court however wanted to make it clear that this was not to be understood as giving the owner the right to seek reimbursement of all the normal expenses incurred by the owner himself whilst the vessel was under arrest.  That would really add salt into Enemalta’s wound who remains ultimately the party which has suffered millions in damages.  The action for damages by Enemalta against the Chem P and her owners RV International DMCC continues before the Maltese courts.

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©Fenech & Fenech Advocates 2022

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