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11 May 2005
In Maltese shipping legal circles the name 'Poker' has become synonymous with the debate over whether an action in rem (an action against the vessel) can be instituted against a vessel for debts incurred by the vessel's bareboat charterer.
In March 1994 Sea Containers SRL bareboat-chartered its vessel Poker to Marinzulich SRL for three years. During the period of the charter the vessel needed repairs to one of its two engines and it stopped off in Livorno. Marinzulich liaised and contracted with repairers and suppliers, but although these parties presented invoices to Marinzulich the invoices were never paid. None of the repairers or suppliers took any action against the vessel while it was still in Italy. Following the vessel's departure from Italy, and given that Marinzulich did not perform its obligations under the charterparty, Sea Containers terminated the contract and repossessed the vessel. The vessel subsequently arrived in Malta where it was arrested by seven of the service providers that had been contracted by Marinzulich in Italy, all of which commenced separate actions in rem against the vessel claiming payment for their services and/or supplies.
The seven actions against the Poker were as follows:
Although all seven cases were filed in the same week, they were heard by different judges and thus have progressed at different paces.
The main defence put forward in all seven cases for and on behalf of the Poker was that it is not possible to file an action in rem against a vessel when the person who would be liable in an action in personam was not the owner or the bareboat charterer of the vessel at the time when the action was instituted.
The plaintiffs claimed that, as long as the court had jurisdiction over the merits (which it did), it need not consider the matter further and that it was totally immaterial whether the person who would have been liable for the debt in an action in personam was someone different from the owner of the vessel or bareboat charterer at the time the action was instituted. In support of their position, the plaintiffs relied on voluminous Maltese case law relating solely to when a court can exercise jurisdiction in rem.
However, the problem with this issue is that in Malta there is no law regulating such matters.
Maltese law in this area is limited to the grounds on which the courts can exercise jurisdiction in rem. These grounds are still to be found in the Colonial Admiralty Court Acts 1840 and 1861, and consist of two fairly limited lists of grounds. Among the grounds listed are disputes related to necessaries supplied to the vessel.
In the two cases that have been decided (those brought by Granges Metalock and Metaltrade) the defence for the Poker pleaded that, given that there is no Maltese law on the issue, it was essential to consider how the English courts considered the matter when the Admiralty Court Acts 1840 and 1861 were still in force. At that time substantial case law existed to the effect that the court's right to exercise jurisdiction in rem over the vessel was one issue - clearly if the merits of the case fell within one of the circumstances outlined by the acts, then the court could proceed to exercise its jurisdiction and hear the case. However, the individual's right to file an action in rem against the vessel when the debt had not been incurred by the owner or charterer of the vessel at the time the action was instituted was a completely separate issue.
It was this particular distinction between the views of the plaintiffs and the defendant vessel that was at the crux of the whole issue. The defence for the Poker pleaded that the reasoning behind the ability to sue the vessel in rem was to allow the judgment creditor to sell the vessel in the event that the owner refused to settle the judgment debt. Therefore, the defence asked whether, if a judgment is in favour of the creditors, it is fair or equitable for the creditors to proceed with the judicial sale of a vessel belonging to its owners when it was not the owners but the bareboat charterers that had incurred the debt and that, by the time the action was instituted, were no longer the charterers of the vessel.
In the two decided actions both sides presented detailed and academic submissions. However, in both cases the judge held that the vessel should not have been the defendant in the proceedings and that an action in rem cannot be filed against a vessel in cases where it is not the owner of the vessel that would be liable for the debt in an action in personam.
The plaintiffs in Granges Metalock v MV Poker appealed, but subsequently withdrew the appeal. In the case instituted by Metaltrade, the plaintiffs have appealed and the appeal proceedings are in progress. The other five cases are still ongoing and decisions in those cases are not expected until 2006.
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