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Ship Agency : Tuesday 3rd October 14.00 - 14.30 Zareena Hussain - ITIM, Paul Monteith - ITIM |
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SEIZURE & RECOVERY
Today I am going to discuss the various types of debts which ship agents face and give examples of the options available to you for recovery. I will also be advising you on loss prevention. My colleague Paul Montieth will then discuss the cover which the Club offers and answer any questions. As an agent, you are either instructed by an owner or charterer. We are going to discuss charterer’s debts to begin with….. Charterer’s Debts
An agent is appointed by a time charterer for the transit of a ship through the Suez Canal. The agent extends credit to the time charterer, who subsequently fails to pay due to financial difficulties. The debt is reported to the Club within six months and the ship is placed on our in-house tracking system. The time charterer based in Slovenia promises to pay and arranges a meeting with us in London to resolve the matter. On his way to the airport, he is shot in the head by the local mafia and found dead in his car. The owners of the ship are now placed on notice by the Club as the debt gives rise to a Maritime Lien in a number of jurisdictions. In simple words, this means that the debt itself attaches to the ship and legal action can be brought in certain jurisdictions to recover from the owners, even though they did not appoint the agent. We normally bring this action when the charterer disappears. The ship is then found to be heading for Rouen in France. French jurisdiction allows for the arrest of a ship for charterers debts, as long as the action is brought within six months, after which the Maritime Lien expires. The ship is arrested and the owners put up a bank guarantee for the amount owed to the agent. A court date is set but the owners, realising that they are liable for the charterer’s debt under French law, pay up before hand. If you are appointed by a charterer who fails to pay you, as long as you report the debt to the Club and action is brought within six months, or one year, depending on the jurisdiction where the vessel is to be arrested, there is a possibility to recover the funds owed to you by the charterer, from the owner. Of course, you will have to make a commercial decision as to whether you wish to claim against a particular owner. As previously mentioned, Maritime Liens can last from six months to a year, depending on the jurisdiction in which the action is brought. However, in the U.S.A., if there is a U.S connection, i.e the shipowner is based in the states, or the agent etc, a maritime lien lasts for 5 years regardless of the ship being sold on to new owners. Maritime liens include items such as pilotage and tug dues, harbour dues, but not agency fees. It is important to remember that not everything constitutes a maritime lien. Another forms of action to recover funds from time charterers can be the attachment of bunkers on board a ship. This would happen when a charterer owes funds for the services rendered to a ship, but the hire of this particular ship comes to an end and he then goes on to charter another ship. The bunkers are normally owned by the time charterer, and as long as we have solid information to this effect, we will attach the bunkers. If the time charterer has sub chartered the vessel, there could be a problem as the bunkers on board the ship could have been purchased by the sub-charterer. It is important to make sure that the bunkers have been purchased by the time charterers who incurred the debt in the first instance. Owner’s Debts Debts incurred by owners are much easier to recover. When the Club threatens the arrest of a ship, quite often the owner will pay up. As long as the agent has a maritime claim, it is possible to arrest the ship, however, for owner’s debts, the existence of a Maritime Lien is important when the situation arises where the ship is arrested and auctioned. In most jurisdictions around the world, the mortgagee bank and crew have priority over ship agency claims. However, there are a small number of countries which will give priority to the agents claim for necessaries over the mortgagee bank as long as the agent is located in the same country as the ship is arrested in and the bank is foreign. France is a good example. In many circumstances, it is best not to upset the apple cart and to allow a ship to continue trading. As long as she is trading, she is earning freight. Once the banks move in it is very likely that you will receive nothing. We have been doing this with Coulouthoros/Agean Tankers over the past few months. Last autumn Alandia Tankers collapsed because the mortgagee bank stepped in and arrested five of their vessels, effectively causing the collapse of the company. Sister / Associated Ship Arrest A sister ship arrest occurs where the owning company of a ship A is the same as that of ship B. It is possible to arrest ship B for the debts incurred by ship A. However in recent years, a number of East European owners such as Blasco, Jadroplov have realised this weakness in their owning structure and have set up one ship owning companies to protect their fleet.
Certain countries, such as South Africa and France permit the arrest of associated ships. If it can be proved that the shareholders or directors of the owning company of the ship, which incurred the disbursements, and the shareholders of the other one ship companies are virtually the same. Other Types of Action Seizure of bank accounts are often an option and we have in the past seized a number of accounts mainly in Switzerland and Monaco. In Switzerland, timing is crucial. When you seize an account you attach the amount of funds in the account at that exact time. We have attached up to USD 250,000 and as low as USD 11 at anyone time. Debtor sent to prison. An English shipbroker in this case, remitted a balance of hire of USD 30,000 twice to his European counter-part. In spite of many promises, the European broker failed to pay back the funds and court proceedings were commenced. After several years of litigation in Greece, the English broker obtained a judgement for the claim but the European broker refused to pay, pleading poverty. The European broker then found himself in prison, where he stayed for a week until, miraculously, the funds were found. Legal proceedings can be brought through the courts against a company to obtain a judgement and enforce it against any assets they own. Obtaining a judgement can take years in certain jurisdictions, for example in India, we would all be dead before it comes to a conclusion. However, legal proceedings in other jurisdictions are regularly commenced, with some degree of success. With the EC being so large these days, it is important to note a judgment obtained in England against a debtor in Spain can be registered in Spain and assets seized. A Spanish or French judgment can be enforced in England. Appointments It is important to establish who your principal actually is. Ship Managers In some cases, an agent can be appointed by an extremely reputable and well-known ship management company. The agent will extend credit feeling that he is in good hands. In the event that funds are not paid by the manager, as was the case with Black Sea Shipping Company a few years ago, on inspection of the appointment telex, it appeared that the ship manager appointed the ship agent, in his capacity as agent for the ship owner. The ship agent, then has to look to the shipowner. The ship manager in such circumstances, is owed considerable amounts himself. More Than One Principal………Who Pays?? A ship agent in the Far East was nominated by the voyage charterer to be the agent for the disponent owner. The agent sent his proforma disbursement account to the owner one week prior the arrival of the ship at port, but no response was received. The agent, feeling that he was in safe hands with reputable companies, allowed the ship to sail before receiving funds, even though he had a personal liability to pay all port costs. Two weeks later, the disponent owner advised him that the port costs were not for his account, but for that of the voyage charterer. The voyage charterer insisted that they were for the account of the disponent owner. The agent was caught in the middle of the dispute and twelve months later was still not paid. Only after a threat to arrest the ship was made by the Club did the head owner pay, who subsequently recovered from the disponent owner. The above case illustrates the need to make sure that if one party (e.g the charterer) appoints you for the account of another party (e.g. the owner) you have the owner’s written confirmation that he will be responsible for your fee and disbursements. Make Your Agency Status Clear... A ship agent ordered bunkers for ships chartered by his principal, the operator of a liner service. The agent ordered bunkers for three ships at a total cost of USD 186,000. Six months later the operating company went bankrupt without paying the bunker suppliers. The bunker suppliers then issued a writ against the ship agent, alleging that he had ordered the bunkers for his own account. On review of the instruction documentation sent to the bunker supplier, it was clear that the agent failed to make his agency status clear. Agents, and in particular liner agents, will be in touch with the port, stevedores, haulier and many other vendors to order goods and services for his principal. It is an unfortunate fact that agents become somewhat careless in the way that they order goods and services for their principal. They make the mistake of believing everyone knows they are an agent only and have no personal liability. The agent should always make it clear to vendors (however long he has been using them) that he is an agent only and should for safety name his principal, otherwise he could find himself in the position of having contracted himself. I leave you with……..
5 Golden Rules For Avoiding Bad Debts
The Club Over the past 7 years, the Club has recovered over USD 45 million for its Membership. The Club arrests on average 30 ships a year and commences legal proceedings in over 45 countries worldwide. Cover For those of you with debt collection cover, the Club will handle any debts above USD 3,500 (which is referred to as the minimum sum in dispute). The Club pays for the costs of recovering the debt from the ground up to your limit of liability. In the cases were counter security is asked for when commencing legal action for the recovery of your debt, this is for your account, apart from bail bonds in the U.S., which the Club will fund as this forms part of the legal costs involved in the arrest. Also it is important to note that when a ship is arrested, or any action is taken on your behalf by the Club, it is done so in your name. In the case of wrong information given to the Club, which leads to a wrongful arrest, you will be liable for any damages. In some countries a Power of Attorney is also required which has to be notorised & legalised. The Club has contact with lawyers and correspondents in every maritime port around the world. This position enables us to commence legal action easily anywhere in the world, to find out the status of companies,etc. Debtor’s List ITIC insures over 1,200 companies and about 3,000 branch offices worldwide. Members contact the Club when they are having difficulties in being paid by a particular owner/charterer. This information is fed into our computer and as a result, the Club has a large database of owners and charterers who have defaulted for one reason or another. Very occasionally there may be a dispute. Agents should in all circumstances have strict rules in place before they deal with owners or charterers that they do not know. This especially applies to the extension of credit. A quick telephone call to the Club can alert a Member to the fact that they are about to do business with a company about to go bankrupt etc. The database is not available to Members but it is only a phone call away. It is expected, that for Members with Rule 10 cover, access to this database will soon be available on the Clubs website 24 hours a day. This database has legal implications which are presently being sorted out. Recently a ship agent in London asked about doing business with Kaybee Shipping and we were able to advise them of the error of their ways. At the end of the day the agent declined the business. If a ship calls into South America and does not pay the agent, by the time she reaches Europe we should know, the exact destination, so that we can instruct our lawyers in that particular jurisdiction to arrest the vessel. Our Network of Members and representatives around the world enables us to track down vessels very quickly, added to which we also have available the Lloyds Seasearcher system, which means that no ship can escape us for long. Marcus Iles will now discuss the new Debtor’s Information Centre. To finish with I would like to mention……. Documentation It is imperative that Members provide the Club with the correct documentation from the beginning. We ask you to provide us:
Help us help you…. Thank You. |