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December 06 2017
The US Court of Appeals for the Eleventh Circuit recently reinforced the availability of a maritime attachment pursuant to Supplemental Admiralty Rule B of the Federal Rules of Civil Procedure as a means of obtaining security for a foreign arbitration. However, in so doing, the court highlighted that a maritime attachment must include an element of obtaining jurisdiction and may not be used solely to obtain security from a party already subject to the court's jurisdiction.
In SCL Basilisk AG v Agribusiness United Savannah Logistics LLC, US App LEXIS 22801 (11th Cir November 14 2017), the Eleventh Circuit upheld a district court decision to deny a request for maritime attachment. The case involved a charter dispute between the vessel owner and charterer. Pursuant to the charter agreement, the charterer was required to post security if the vessel was arrested or detained. The vessel was detained pursuant to a writ of attachment in Louisiana at the request of a non-party on an unrelated claim. There was a delay in the charterer posting security, which resulted in damages to the vessel owner. The owner initiated arbitration proceedings against the charterer in a London arbitration, as required by the charter agreement. The owner then filed a petition seeking to attach the vessel in Savannah, Georgia, to obtain security for the foreign arbitration. The requested attachment was denied by the district court.
In affirming the district court, the Eleventh Circuit explained the availability of maritime attachment as a tool to obtain security for a foreign arbitration and detailed the limitations of that procedural tool's availability. The court first explained that a maritime attachment pursuant to Supplemental Admiralty Rule B "allows a plaintiff to secure its claim against a defendant's property found within a district and simultaneously to subject the defendant to the personal jurisdiction of the corresponding district court up to the value of the property attached."(1)
The court also confirmed that a maritime attachment was permissible to obtain security for a foreign arbitration. The court cautioned, however, that Supplemental Rule B could not "be used purely for the purpose of obtaining security". It explained that the two purposes for the rule – obtaining jurisdiction and obtaining security – may not be separated: "security cannot be obtained except as an adjunct to obtaining jurisdiction."(2)
In the case at bar, the defendant was present for the purposes of personal jurisdiction in the district where the maritime attachment was sought. Consequently, the court confirmed that the requirements of Rule B were not met and the remedy of maritime attachment was therefore not available because "the plaintiff's purpose in invoking Rule B is not 'to gain jurisdiction over an absent defendant'".(3)
The court also addressed the plaintiff's argument that a district court possessed equitable powers under maritime law to grant security in aid of arbitration outside the relief specifically authorised by Supplemental Rule B. The Eleventh Circuit, after a thorough analysis of applicable precedent, determined that a district court holds the power to issue a writ of attachment independent of its authority derived under Supplemental Rule B. The court observed that "when the Constitution was adopted, the existing maritime law became the law of the United States 'subject to power in Congress to alter, qualify or supplement it as experience or changing conditions might require'".(4)
Because the power to issue a maritime attachment existed at the time of the adoption of the Constitution, it remained an inherent power of a federal court sitting in admiralty. That inherent power, however, was restricted by the supplemental procedural rules enacted by Congress. The Eleventh Circuit noted that the supplemental rules were not to be construed as limiting or impairing the traditional power of the district court, but set out the procedures pursuant to which those powers were to be exercised. District courts may still apply their inherent admiralty power to issue a maritime attachment, provided that they do so consistently with the supplemental procedural rules. Accordingly, the Eleventh Circuit held that a district court may not order a maritime attachment solely for the purpose of obtaining security, as that would be contrary to the supplemental rules which require that "security cannot be obtained except as an adjunct to obtaining jurisdiction".(5)
This opinion is a valuable reminder that, while maritime attachment is available to obtain security for a foreign arbitration, all of the requirements of Supplemental Admiralty Rule B must be satisfied in order to effectuate an attachment.
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(5) Id at *25. The court also determined that a maritime attachment was not appropriate under Georgia state law in the circumstances presented. The details of the state-specific analysis are not discussed in this article, which focuses on the issues related to the federal rules that are applicable throughout the United States.
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