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02 July 2008
In the Netherlands, unlike many other countries, crew claims do not always take priority over mortgage interests, as the recent judgment in the Sumara Case illustrates.
Historically the Netherlands has been regarded as a favourable jurisdiction in which to arrest ships in order to secure claims. This remains the case, and in fact the number of arrests is on the increase. Therefore, in the near future an increase in the requirement to foreclose on mortgages may be seen.
Banks seeking to enforce mortgages in the Netherlands through the judicial auction system enjoy a number of advantages. Mortgage claims rank highly when it comes to distributing funds after a judicial sale. Pursuant to Dutch law, only the following claims rank above a mortgage:
However, such claims will rank above a mortgage claim only when the same priority over a mortgage is also given under the law of the vessel's flag country and the law applicable to the claim.
In a recent case before the Amsterdam courts involving the arrest by a number of claimants of the Cambodian-registered cargo vessel Sumara, the crew claim was not given priority over the mortgage claim pursuant to the law of the flag. In fact, only the costs relating to the maintenance of the vessel during the judicial auction process were awarded above the mortgage. The decision was a prime example of how the Netherlands differs from rival jurisdictions in this respect and the judgment will doubtless be greeted with some surprise elsewhere.
There are a number of practical advantages to foreclosing on a mortgage in the Netherlands and parties to shipping disputes are not always aware of these. For example, the process is quick and covers a larger geographical area - and a greater number of potential vessel arrests - than may be expected.
Rotterdam and Amsterdam are strategic ports of call for international shipping; in addition, all vessels calling at Antwerp must pass through Dutch territory and therefore can easily be arrested in Flushing Roads. In fact, the number of Dutch ships arrested in Flushing Roads is second only to those in Rotterdam.
All judicial auctions can be brought before the Rotterdam courts, even if the vessel is arrested elsewhere in the Netherlands. Judicial auctions in Rotterdam are followed closely by brokers around the world, which often serves to push up auction prices.
Dutch judicial auctions are also conducted quickly. The whole process, from arrest to sale, may be completed within a period of two months, thus making it an attractive proposition for interested parties.
For further information on this topic please contact Haco van der Houven van Oordt at AKD Prinsen Van Wijmen by telephone (+ 31 88 253 53 92) or by fax (+31 10 272 54 00) or by email (HvanOordt@akd.nl).
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