Maritime liens

Posted on 09 May 2016, by Andreas Lytras

The Admiralty jurisdiction of the Supreme Court of Cyprus can be invoked for both in personam and in rem actions. Maritime liens constitute a prominent category of actions in admiralty law and are enforceable by a claim in rem which enables the arrest and seizure of the vessel, by an order of a competent Court, in satisfaction of the claims against her.

Definition and recognised maritime liens

Although there is no approved definition of a maritime lien, Cyprus courts followed the English case of The Bold Buccleugh (1851) 7 Moo PC 267, thus interpreting a maritime lien to mean a privileged claim over a vessel or other maritime property. In particular, it is a right which accompanies the vessel into whose soever possession she may subsequently pass; it stays attached to her and may be invoked against her even if sold to a bona fide purchaser, no matter whether that purchaser was aware of the claim or not. The ratio is that the vessel is considered liable to pay for the wrong she has done irrespective of her owner. A maritime lien requires no registration. It arises by operation of law at the moment when the incident giving rise to the cause of action occurs.

Different jurisdictions recognise different types of maritime liens. As it is the case with English law, maritime liens are recognized by Cyprus law for the following categories of claims:

  • Bottomry
  • Salvage
  • Master and seamen’s wages
  • Disbursements and liabilities
  • Damage done by a vessel.

A maritime lien is a right of a procedural nature that depends on the remedies available in the country where relief is sought, and as such it is subject to the law of that country (lex fori). Accordingly, in determining the existence of a maritime lien the Cyprus courts will apply Cyprus law (lex fori), and even where a maritime lien seems to exist under a different law (e.g. the lex loci contractus) the Cyprus courts will not recognise it.

This was the case in Hassanein v The Ship Hellenic Island and Another (1994) 1 C.L.R. 578, where the Supreme Court did not accept the submission that, a claim under a contract for the supply of bunkering fuel, which was considered as a maritime lien under Egyptian law (lex loci contractus), could be recogni0073ed as a maritime lien under Cyprus law (lex fori) and accordingly it ranked below the claim of the mortgagees.

Priorities among various claims – the relation to the statutory liens

Several claims may be brought against the same vessel. However, the proceeds of a judicial sale of a ship are not shared equally between all privileged claimants because a priority in ranking of maritime liens and other claims exists. Although the courts have an inherent discretion to vary the ranking of priorities on the basis of equity and natural justice (Tramp Oil and Marine Ltd v The Ship Pigassios (1989) 1 CLR 46), the following ranking has been developed through case law

  • Marshal’s expenses
  • Salvor’s Lien
  • Damage done by a vessel
  • Master’s and crew’s wages
  • Bottomry, i.e. the use of a ship as security against a loan to finance a voyage

Generally, maritime liens enjoy certain advantages over statutory liens which constitute an entirely different concept and which are enforceable against the vessel only after instituting an action in rem. For example, a mortgage is a special type of statutory lien and as such ranks below maritime liens. Even though the validity of a mortgage is determined according to the law of the country in which the mortgage is registered, priority must be decided according to Cyprus law (see Commercial Bank of the Near East Ltd v The Ship Pegasus III (1978) 1 CLR 597).

Similar is the case with necessaries which create a statutory lien. According to Cyprus law, necessaries rank even below mortgages. In the case of Pilefs Ltd and Others v Commercial Bank of the Middle East Ltd (1983) 1 CLR 376, despite the fact that the necessaries were supplied to the vessel before the registration of the mortgage, the mortgage gained priority over the necessaries as an action for them was instituted long after the mortgage was created and the statutory lien did not attach to the vessel until that time.

As it regards cargo claims, it is established that these carry no maritime lien and rank in priority after all mortgage claims (see Nordic Bank plc v The Ship Seagull (1989) 1 CLR 420). Finally, a ship repairer having physical possession of the ship may have a possessory lien over it and a right to proceed in rem against it. In principle, a possessory lien has priority over a mortgage even if the mortgage was executed before the assumption of possession. However, the position in priority of a ship repairer will be much worse if possession is given up and the mortgage will prevail.

Essentially, a maritime lien is always secured in contrast to a statutory lien which only comes into existence upon the commencement of proceedings. Particularly, if the ship is sold before an action is brought a maritime lien will still be capable of enforcement, whilst an action in rem in relation to a statutory lien subsequent to the sale will be defeated. Therefore, a delay in bringing an action can prejudice the enforcement of a statutory lien. The Supreme Court in Demetriou Pampos and others v The Vessel S.S. Sapphire Seas (2000) 1 CLR 1680 ruled that if an action in rem is brought the plaintiff can proceed in order to satisfy his claim against the res by a subsequent judicial sale of the vessel even though a sale to a bona fide purchaser has intervened. What remains always important however, is which claim has priority in case where various claims exist against the vessel.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on your specific circumstances. For further information, please contact Andreas Lytras.