Declining Jurisdiction Following Arrest

Presented at the National University of Singapore Colloquium on the Arrest Conventions 1952 and 1999

1. The power of a court exercising Admiralty or maritime jurisdiction (a maritime court) to arrest a ship is both an expression of sovereignty and an essential remedy for international trade and commerce. The scope or extent of the power, however, varies among maritime States because of the lack of international consensus as to which maritime claims, maritime liens and ships mortgages should be recognised as universally enforceable. And, as the title for this paper portends, in certain circumstances, maritime courts will decline to exercise their power to arrest, or continue the arrest of, a ship.

2. The occasion for a maritime court to exercise its jurisdiction to arrest a ship is often the product of several adventitious circumstances. First, the ship must enter, or be about to enter, the court’s jurisdictional reach. Secondly, the ship herself, the events giving rise to the claim and or the parties to the controversy may have no connection at all to the forum other than the transitory presence there of the ship. Thirdly, the law governing the resolution of the dispute may be, and indeed, is likely to be foreign. Each of these factors can enliven the question whether a maritime court should continue to exercise its jurisdiction to arrest the ship.

3. The two principal reasons why a maritime court will decline to exercise its jurisdiction to arrest, or continue the arrest of, a ship are that, first, the claim asserted by the arresting party, on judicial examination, is found not to be justiciable under the relevant national law and, secondly, although the claim is justiciable under that national law, the court will exercise a judicial discretion not to deal with the claim having regard to all of the circumstances. I propose to discuss each of these bases in turn, principally drawing on the concepts in the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships done at Brussels on 10 May 1952 (the 1952 Convention) and the International Convention on Arrest of Ships done at Geneva on 12 March 1999 (the 1999 Convention).

4. Strictly speaking, at least in the common law system, a court, ordinarily, does not have power to "decline jurisdiction". If a court has jurisdiction in a matter, it is seized of a controversy, or dispute, between parties, that requires resolution according to law. The court must resolve the controversy exercising the authority of the State by whose law it is constituted and determine the rights in issue^[1]. A court will have jurisdiction to arrest a ship only if that court’s national system of law gives the court the legal authority to do so in exercise of its judicial power as an instrument of government. The judiciary is the third arm of government in the Westminster system, that informs the governmental structure of most common law States, where the other two arms are, namely, the legislature and the executive or administration.

5. Judges do not have the luxury of choosing whether or not they wish to decide a case. The jurisdiction of a court is inextricably connected to its judicial power. A well-known, but not exhaustive, explanation of judicial power is that given by the first Chief Justice of Australia, Sir Samuel Griffith, as follows:

"… the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action."

6. I have approached the topic of declining jurisdiction following arrest as referring to circumstances that a court would take into account in deciding, first, whether, when the ex parte arrest of a ship is later challenged, the arresting party had failed to prove jurisdictional preconditions or facts necessary to give the court the authority to hear and determine the controversy concerning the claim that the party advanced to justify the arrest, or, secondly, where the requisite jurisdictional preconditions or facts do exist, there is some legally cognisable reason why the court should exercise a discretion not to hear and determine the claim.

When an arrest is not within jurisdiction

7. The 1952 Convention marked the culmination of attempts initiated by the Comité Maritime International at its 1930 Conference in Antwerp to formulate an agreed instrument on the arrest of ships, as explained by Prof Francesco Berlingieri in his work Berlingieri on Arrest of Ships^[3]. Each of the 1952 and 1999 Conventions defined "arrest" similarly^[4], but with some variation, to mean in effect any detention of a ship by a court to secure a maritime claim other than the seizure of a ship to enforce or satisfy a pre-existing judgment. The 1999 Convention broadened the list of maritime claims for which an arrest can be made and extended the class of persons, other than the owner of the ship, in respect of whose conduct or dealings a right to arrest could be exercised.

8. The list of 17 maritime claims in Art 1(1) of the 1952 Convention foreshadowed the adoption of a common core of legislative provisions in, at least, the United Kingdom, Canada, New Zealand and Australia that expressly created or confirmed the categories of maritime claims that were within the respective in rem jurisdictions of those countries’ maritime courts^[5]. These included claims within Art 1(1)(k), namely, a claim arising out of "goods or materials wherever supplied to a ship for her operation or maintenance". In countries that follow the jurisdictional theory of the Commercial Instruments and Maritime Liens Act^[6] (the US Liens Act), a claim based on such a supply can be used to found the arrest of a ship based on a statutory maritime lien, even though the contract for the supply did not involve the ship’s owners or master as a party^[7].

9. Even then, the number of express categories varies from jurisdiction to jurisdiction. Australia’s Parliament recognised in the Admiralty Act 1988 (Cth) four categories of proprietary maritime claims, including claims relating to a mortgage of a ship or shares in a ship^[8] and 23 categories of general maritime claim^[9] including categories that overlap with the separate statutory right to proceed in rem on a maritime lien for salvage^[10], damage done by a ship^[11], master’s or crew member’s wages^[12] and master’s disbursements^[13].

10. However, the Act did not define or identify all categories of maritime liens, including foreign maritime liens, that could be enforced in an action in rem in Australia under s 15(1). This is because the Australian Law Reform Commission in its 1986 report, Civil Admiralty Jurisdiction (ALRC 33) on which the Act was based, considered that this was best left to the courts^[14]. The Commission chose not to define maritime liens in detail because of uncertainties in the then existing Australian and international law^[15].

11. The 1952 and 1999 Conventions recognised^[16] the lack of international consensus on the recognition and enforcement of maritime liens, by expressly leaving that topic well alone. I will explore the issue of maritime liens below when discussing the recent decision of the Full Court of the Federal Court of Australia in The Ship "Sam Hawk" v Reiter Petroleum Inc^[17].

12. Thus, national laws identify, and to greater or lesser extent, define categories of maritime claims, including maritime liens, that can support an action, akin to the common law action in rem or the civil law process of maritime attachment, for the arrest of a ship. However, a maritime court must decide whether or not the claim asserted justifies the exercise of the power to arrest a ship when a shipowner^[18] challenges the court’s jurisdiction to do so.

13. Very often a challenge to the arrest of a ship will be the occasion for a maritime court to decide whether it had jurisdiction to make the arrest. A challenge to jurisdiction requires the arresting party, first, to prove the underlying facts that give the maritime court its jurisdiction and, secondly, to satisfy the court that its claim falls within a category of maritime claim, or is a maritime lien, that the law of the forum or lex fori can entertain. There usually will be a nexus between the plaintiff who arrests a ship on a maritime claim, although not necessarily on a maritime lien, and her owners that is encapsulated in the Australian Act’s definition^[19] of "relevant person", namely "relevant person, in relation to a maritime claim, means a person who would be liable on the claim in a proceeding commenced in an action in personam".

14. The High Court of Australia, in Owners of "Shin Kobe Maru" v Empire Shipping Company Inc^[20]held that the plaintiff has the onus of establishing that the court has jurisdiction where the defendant challenges an arrest of a ship. Their Honours held:

"Where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction."

15. The question of jurisdiction must be answered by reference to the nature of the plaintiff’s claim as put forward, without reference to the further issue of whether that claim is likely to succeed or not^[21].

16. Thus, the issue of whether someone is a relevant person, for the purpose of establishing jurisdiction to arrest a ship, often will turn on the nature of the claim, not its strength. Lord Diplock explained this concept, in relation to the 1952 Convention and the then United Kingdom legislation in The Eschersheim^[22],saying:

"It is clear that to be liable to arrest a ship must not only be the property of the defendant to the action but must also be identifiable as the ship in connection with which the claim made in the action arose (or a sister ship of that ship). The nature of the "connection" between the ship and the claim must have been intended to be the same as is expressed in the corresponding phrase in the Convention "the particular ship in respect of which the maritime claim arose." One must therefore look at the description of each of the maritime claims included in the list in order to identify the particular ship in respect of which a claim of that description could arise." (emphasis added) 

17. In other words, a maritime court will have jurisdiction only if the plaintiff establishes a sufficient nexus between the ship and the alleged liability in personam of the relevant person on that maritime claim as asserted. The question of jurisdictional fact is whether the relevant person could be found liable, at a trial, on the plaintiff’s claim as it is put forward against that person. Of course, where the plaintiff’s claim in rem is on a maritime lien, then the identity of the relevant person may be irrelevant. That is because a maritime lien is a privilege or claim upon a ship to be carried into effect by legal process, irrespective of whether the ownership or possession of the ship has changed between the circumstance creating the lien and the invocation of the court’s jurisdiction over her^[23].

18. Not all disputed issues of jurisdictional fact are apt to, or will, be decided on a challenge to jurisdiction. Indeed, the ultimate question of whether the plaintiff can establish the merits of the factual basis of the asserted maritime claim is necessarily an issue that can only be determined at a substantive trial. If the facts, as proved at trial, result in a verdict or judgment in favour of the ship, the relevant person or other defendant, then, in some cases, the maritime court will also decide that it lacked jurisdiction, not just because the plaintiff’s claim failed on the merits, but, on a considered examination of the facts and law, the claim was not one that properly characterised could have enlivened the jurisdiction to arrest the ship in the first place.

19. The English approach, that is mirrored in jurisdictions such as Australia and Singapore, uses a two stage statutory test of jurisdiction in creating a right to proceed in rem on maritime claims for owners’ or demise charterer’s, liabilities as well as claims against a sister or surrogate ship. That test requires the plaintiff to prove that the relevant person had a particular relationship with the arrested ship, or sister or surrogate ship, both at the time of the events giving rise to the asserted cause of action and at the time when the proceeding is commenced^[24]. In Australia, the relevant person, first, has to have been, when the cause of action arose, the owner or charterer of, or in possession or control of, the ship, and, secondly, at the time when the proceeding is commenced, one of the owner, demise charterer or owner of the targeted surrogate (or sister) ship^[25], depending on the particular statutory proceeding in rem that the plaintiff asserts.

20. For example, in an Australian case^[26]> the issue was whether the relevant person was a party to the contract for the supply of bunkers to sister ships of the ship that had been arrested. The High Court held that that dispute was concerned with the conditional question that the definition of "relevant person" raised, namely whether the person "would be liable" on the plaintiff’s claim which was an issue for trial. Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ said of the double connection required of the relevant person^[27]:

"… pars (a) and (b) are concerned with facts that may need to be established, whereas the liability to which the definition of "relevant person" refers is hypothetical. The difference between the conditional nature of the inquiry raised by the definition of "relevant person" and the unconditional nature of the inquiry raised by pars (a) and (b) is important." (emphasis added)

21. It follows that not every challenge to jurisdiction can, or should, be decided at a preliminary stage. That is because a person, self-evidently, will not be a "relevant person" if after a trial on contested issues of fact as to liability it is established that he, she or it, was not in fact liable on the maritime claim alleged. In a preliminary jurisdictional challenge, the "unconditional nature of the inquiry" that the Court is usually concerned to identify is whether the plaintiff’s claim, as formulated, identifies a relevant person who, in fact, had the nexus or connection with the arrested ship at each of the time (a) when the cause of action arose and (b) when the proceeding commenced. Ordinarily, the next inquiry is the conditional one, whether that person falls within the description of a person who, because of the identified nexus with the ship, is someone who would be liable in an action in personam^[28].

22. I do not propose to give a comprehensive overview of the approach taken in jurisdictions other than Australia as to the law and practice for determining whether an arrest should be set aside or refused. Nonetheless, some recent non-Australian common law cases may throw light on this for the purposes of discussion.

23. The Singapore Court of Appeal took a similar approach earlier this year in The "Chem Orchid"^[29]. However, the court held that, in Singapore, a defendant could choose to challenge jurisdiction on an interlocutory or final basis and that, if the defendant took the former option by relying only on affidavit evidence, any finding of jurisdiction "will necessarily be prima facie non-conclusive"^[30].

24. The position may be different in the United States of America. There, the US Liens Act creates, first, maritime liens for what the common law treats as the supply of necessaries and, secondly, a rebuttable presumption that, when contracting for the supply of necessaries to a ship, a wide range of persons, including time or voyage charterers and their agents, have authority to bind her owners and effect a maritime lien over that ship. Jurisdictional challenges there appear to proceed on applications for summary judgment. These applications are determined using the standard set by the Supreme Court of the United States in Celotex Corp v Catrett^[31], that summary judgment is appropriate only if "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law"^[32].

25. Recently, the United States Fifth Circuit Court of Appeals followed decisions of its own, the Fourth^[33] and Ninth^[34] Circuits, and distinguished a decision of the Second Circuit^[35] as "alone … arguably contrary"^[36]. The Fifth Circuit said that its jurisprudence "unabashedly enforced, against a non-party to the contract, a maritime lien for vessel insurance, which was created under the auspices of a choice of law clause"^[37]. It held that the maritime lien was effective against the owner, just as much as a subsequent owner, despite "the third party’s lack of knowledge and failure to acquiesce in the creation of the debt"^[38].

26. As the necessarily incomplete discussion above illustrates, each national maritime court will approach the resolution of challenges to its jurisdiction in arrest cases by having regard to its relevant statute law and unwritten or common law rules. The factors that can come into play in that context include the legal rules for interpreting both the written law of the forum and ascertaining, as well as applying, any applicable foreign law relevant to the particular dispute.

Characterising or classifying a foreign maritime claim in the forum

27. From time to time an issue of principle will arise in the forum as to how its substantive law will characterise or classify circumstances or dealings that have occurred outside the forum and that have a particular legal significance under the law of the place (lex loci) or governing the circumstances (lex causae) where they happened or the law chosen by the parties to the dealings as the governing or proper law.

28. In an open common law, judicial field when a novel question arises as to how the courts should determine a legal rule to govern the outcome of a literally unprecedented factual scenario, a judge, ultimately, must make a policy decision that selects from a range of potential legal rules and outcomes, a result that he or she considers best does justice according to law. In making such a policy choice, the judge, often, will examine the history and context of the existing legal rules that apply to the resolution of issues that are relevantly analogous or instructive to the solution of the problem at hand.

29. In doing so, an important consideration is that the selection of a solution must be as harmonious as possible with the forum’s contextual legal rules, including statute law, that apply in similar cases. After all, one aspect of the rule of law, is its aspiration that like cases should be decided consistently and that everyone is equal before the law. Nonetheless, anyone familiar with the common law process of precedent, readily understands that, from time to time, a legal rule develops in a particular area that may appear, at least to some reasonable persons, itself to be arbitrary, or to produce arbitrary or unfair outcomes.

30. The problem for the maritime court of the forum is to identify the way in which, under its private international law rules, it must classify and give effect to the parties’ rights that arose from their interaction or dealings that took place outside the forum either in, or governed by, another polity’s laws or on the high seas. There is a reasonable likelihood of uncertainty in the ready identification of the law that governs any particular international maritime commercial dealing. That is because, in contractual disputes for supplies of necessaries, each party often will have its own standard form of invoice or order that contains boilerplate conditions including a clause that excludes the conditions proposed by the other party to the dealings. This leads to what Lord Denning MR described, with his characteristic elegance, as "a battle of forms"^[39], a phrase echoed by Chief Judge Richard Posner^[40] who suggested that:

"The battle of forms in this case takes the form of something very like a badminton game ..."^[41]

31. Each party’s standard form usually will include choice of law and submission to jurisdiction clauses, and equally usually those will propose different applicable laws and jurisdictions for those purposes. Frequently, the actual contract will be made in a third jurisdiction and, if one of the contracting parties is a time or voyage charterer, will not involve, directly, the owners of the ship to which the necessaries are supplied.

32. The United States courts give a generous operation to contracts that provide for that nation’s laws, and, in particular, its maritime liens, to apply to the supply of necessaries. Necessaries men will not be shy in propounding their standard forms or other contractual terms in a way that will seek to apply a maritime lien to a ship to which they provide goods or services in whatever location in the world she might happen to be. So, if the necessaries men, or other party, whose contract or standard form includes the choice of United States law or the US Liens Act, plays the last shot and wins the battle of forms in creating a contract, the question for the court of the forum is whether, and if so, how that choice of law affects the winner’s the right to arrest the ship.

33. At the risk of being parochial, in Sam Hawk^[42], a Full Court of five judges of the Federal Court of Australia, on which I sat, recently had to consider whether Australian law would recognise and enforce a foreign maritime lien that would not have existed had the relevant events occurred in the forum. If the lien were capable of recognition under Australian law, the arrest of the ship would have been sustained, whereas, if, as the Court held in overturning the primary judge, it were not, the arrest had to be set aside.

34. The reason why the case is germane to the topic of this paper, is that the question whether the Court had jurisdiction to arrest Sam Hawk could be decided only after the Court considered, first, the factual context, including what national law or laws actually governed the parties’ rights, secondly, the Australian private international law rules that applied in those circumstances, thirdly, how, applying the governing law so ascertained, Australian law should characterise and to what, if any, extent it should give effect to, those legal relationships in the forum.

35. The issue of whether the US Liens Act created a maritime lien cognisable in Australia arose in Sam Hawk^[43] in the following factual scenario. Egyptian Bulk Carriers Inc had time chartered the Hong Kong flagged ship from her owners on terms that required, as is usual, the charterer, at its expense, to bunker the ship during the term of the charter. The charterparty did not authorise the charterer to contract for necessaries on behalf of the owners or to bind Sam Hawk with a maritime lien for necessaries.

36. In late 2013, the charterers arranged with a Canadian bunker supplier, Reiter Petroleum Inc, to bunker the ship when she called at Istanbul in Turkey. Before bunkering occurred, the ship’s master issued a "no liability" notice to the initial bunker supply subcontractor and the shipping agent at Istanbul that stated that the owners did not accept liability to pay for bunkers which was the responsibility of the named charterer. After this, Reiter issued a revised quote that the charterer accepted and, on 7 December 2013, Sam Hawk received the bunkers. The revised quote stated that it was subject to Reiter’s standard terms and conditions, that included one clause requiring any contract to be construed according to the law of Canada. However, that clause was itself subject to cl 7 that provided that Reiter was entitled to assert a lien wherever it found the ship and that the law of the United States would apply to determine the existence of any maritime lien regardless of the Court in which proceedings were instituted^[44].

37. Needless to say, the charterer failed to pay for the bunkers. In May 2014, Reiter wrote to the owners informing them of this and seeking their assistance in persuading the charterers to honour their payment obligations. About 11 months after the bunker supply at Istanbul, Reiter filed a writ in rem in the Federal Court of Australia on which Sam Hawk was arrested. The writ made two claims, namely, that Reiter had, first, a maritime lien^[45] and, secondly, a general maritime claim for necessaries supplied to the ship^[46], on the basis that the owners were a relevant person who would be liable were the action commenced in personam^[47].

38. The Full Court summarily dismissed the latter claim, as having no reasonable prospect of success, because there was no evidence that the owners in any way had held the charterer out as having authority to bind them in a contract^[48]. All five judges held that the owners were not a party to, or bound by, the contract between the bunker supplier and the charterer. We held that parties who had no interest in a ship could not create a maritime lien in rem in relation to the ship that would bind her or her owners in respect of either a ship flagged, or events that occurred, in a jurisdiction, the law of neither of which created such a lien of the kind that the US Liens Act and its analogues do^[49].

39. Apart from the bunker supply contract, nothing about the bunker supply in Turkey connected Sam Hawk or her owners, first, to the United States or its laws and, secondly, to the necessaries men: i.e. Reiter. In substance, the necessaries men claimed that a ship owner willingly allowed a time charterer to create a maritime lien over his ship, even though all persons involved (owner, time charterer and necessaries men) knew, both at the time that the bunker supply contract was made and at the place of supply, that the charterer had no proprietary rights over the ship but rather had the obligation to bunker her for the duration of the charterparty^[50].

40. In other words, the necessaries men were seeking to appropriate the ship, being the property of a third party, the owners, as security for payment of the charterer’s debt, without the owners’ knowledge or agreement, based on a contract between the necessaries men and the charterer. Both parties to that contract knew, or in the necessaries men’s case, at least would have thought highly likely, that the charterparty prohibited the charterer from creating any liability on behalf of the owners or any lien over the ship and that, at best, it was speculative whether a maritime lien could arise outside a nation in which the US Liens Act or an analogue applied as a statute governing the transaction.

41. Accordingly, both parties to the bunkering contract were seeking, without the owners’ knowledge or authority, to convert or arrogate the owners’ property in the ship, for their own private interests, as security for the charterers’ personal liability. A sense of commercial morality in respect of such behaviour outside jurisdictions where the US Liens Act and its analogues apply seems to have been bypassed, perhaps because it is sanctioned by such legislation. Indeed, the underlying case theory for a necessaries men’s claim that arises from a supply in a jurisdiction in which the US Liens Act or an analogue does not have force of law, could have met the characterisation by Sir Humphrey Appleby, in the television series Yes Minister, of "courageous".

42. This brings me to the more legally interesting issue in the Sam Hawk^[51] appeal, namely the hitherto unanswered question of whether Australian law should recognise and enforce a foreign maritime lien that had no counterpart in domestic law. The Full Court was confronted by two legal systems of civilised democracies that placed persons in frequently experienced commercial situations in radically different positions. Thus, whatever solution the Court adopted on the question of whether Australian law should or should not decline jurisdiction to recognise and enforce an in rem claim that asserted a foreign maritime lien, inevitably, the choice would produce an outcome discordant with that offered by the legal system whose solution to the same situation would be different, were its entire facts to occur wholly within the one forum.

43. It is necessary to determine what private international law rules should govern the identification of a right that arises under a foreign law as the lex causae and then to ascertain whether and how that right can be enforced in the forum. In Sam Hawk^[52]Kenny and Besanko JJ, jointly, and I separately discussed this issue in obiter dicta. In contrast, Allsop CJ and Edelman J decided, as one of their rationes decidendi, that Australian law would not recognise a foreign maritime lien^[53]. They followed the approach of the majority of the Privy Council^[54] in Bankers Trust International Ltd v Todd Shipyards Corporation (The Halcyon Isle)^[55]. Moreover, Kenny and Besanko JJ said that, without deciding the issue, they favoured the same approach^[56]. I favoured the view that^[57]:

"Australian choice of law principles for both contract and tort claims ordinarily require the lex loci or lex causae to be used to classify the substance of the particular claim. Accordingly, a claim on a maritime lien that is properly so characterised under the law of the place where it attached, ordinarily, will be maintainable under s 15(1) of the Admiralty Act even though no such maritime lien would attach if the same events had occurred in Australia."

44. All five judges considered, like both the majority and minority in The Halcyon Isle^[58], that the unusually ambiguous reasoning of Bankes, Scrutton and Atkin LJJ in The Colorado^[59], like the curate’s egg, was good in part and supported their respective conclusions.

45. The result of the preference of Kenny and Besanko JJ for the approach in the reasons of Allsop CJ and Edelman J, is likely to be that Australian law will classify a claim to proceed in rem on a maritime lien under s 15 of the Admiralty Act as follows. First, the asserted foreign right must be characterised, usually by the lex fori, to determine whether it is properly described as a "maritime lien". Ordinarily, this characterisation process will have regard to the priority that the law of the forum would apply to a claim asserting a local right of the same nature as the foreign right^[60]. Allsop CJ and Edelman J regarded their analysis as being consistent with that contemplated in the ALRC 33 report on which the Admiralty Act 1988 (Cth) is based.

46. Their Honours reasoned that a key consequence of the recognition of a maritime lien by the lex fori is the priority that the law of the forum gives it in ranking of claims. Accordingly, they reasoned it would not be appropriate to "decouple" the analysis of the category of legal right that the law of the forum had to characterise from the remedy that the forum would accord to such a right^[61]. They said that s 15 of the Admiralty Act did not evince a legislative intention or reflect a policy purpose "that a new maritime lien without priority should be recognised". Allsop CJ and Edelman J quoted the following passage from the ALRC 33 report^[62]:

"the consequences of recognising a foreign maritime lien (for example for goods supplied to a ship) where the equivalent local claim does not give rise to a lien is to give the foreign claimant priority over the local one, even where the foreign law’s classification of the claim as a lien is out of line with any international consensus on the scope of liens."

47. Their Honours concluded that^[63]:

"Because the characterisation of a right as a maritime lien involves consideration of the nature of the foreign rights and the priority consequence of those rights, it is necessary when characterising the foreign rights to consider the circumstances in which those rights arose. Those circumstances are essential to determine whether the foreign rights are the same as, or analogous to, those rights which would be a maritime lien in Australia which would be given the priority of a maritime lien."

48. Allsop CJ and Edelman J, together with Kenny and Besanko JJ, reasoned that the priority rules of the lex fori were matters of substance, rather than procedure. Therefore, they held that the appropriate analytical process for categorising a foreign law right in the forum involved two steps, first, ascertaining the nature of that right under the lex causae to see whether it is the same as, or analogous to, a local right and secondly, characterising it by reference to Australian law, including its place in the forum’s priority rules^[64].

49. Importantly, in The Halcyon Isle^[65] both the majority and minority had proceeded on the principle that, because it related to the remedy to be enforced, the ranking of priorities was a matter of procedure, rather than substance, and was determined by the lex fori. Allsop CJ and Edelman J, followed the ultimate decision of the majority in The Halcyon Isle^[66] that a foreign right should be recognised by reference to the lex causae but classified and characterised by reference to its legal effect under the lex fori, although the event might have occurred elsewhere, and then applying the priorities rules of the forum^[67]. However, their Honours held, having regard to modern Australian choice of law principles, that Lord Diplock’s reasoning had been incorrect, when his Lordship described a system of priorities as a matter of procedure, rather than substance^[68]. Their Honours’ said^[69] that this followed from the application of conflicts principles elucidated by the High Court of Australia in John Pfeiffer Pty Ltd v Rogerson^[70] and Regie Nationale des Usines Renault SA v Zhang^[71].

50. The selection of a choice of law rule for these purposes is one on which, I like to think, as the sole voice to the contrary, reasonable minds might differ. In my wilderness, I considered that Australian choice of law rules, against the historical international background that I traced to the early 17^th Century, favoured the recognition and enforcement of a foreign maritime lien by Australian courts in a proceeding in rem. I regarded as a sound guide what Holt LCJ said at the turn of the 18^th Century as to why a foreign maritime lien should be recognised^[72]:

"No master of a ship can have credit abroad but upon the security by hypothecation, and shall we hinder the Court of Admiralty from giving remedy, when we can give none ourselves? It will be the greatest prejudice to trade that can be, to grant a prohibition in this case. Indeed if a ship be hypothecated here in England before the voyage begin, that is not a matter within the jurisdiction of the Court of Admiralty, for it is a contract made here, and the owners can give security to perform the contract." (emphasis added; footnotes omitted)

51. The recognition and enforcement of foreign maritime liens is a subject-matter that has bedevilled international trade and commerce for centuries, as our historical analyses in Sam Hawk^[73] showed, if more proof were needed than was evident in the failures, over the years, of conventions on maritime liens and ships mortgages to attract sufficient ratifications by States parties to give them general acceptance.

Discretionary reasons for declining jurisdiction following arrest

52. The structure of the 1952 and 1999 Conventions is to create the right to arrest in respect of particular categories of maritime claim. In the preceding discussion I have dealt with the situation where the nature of the claim as asserted, as opposed to whether the facts necessary to prove the claim itself, when judicially examined, did not meet the jurisdictional criteria for such a claim.

53. In contrast, there are also occasions when a claim possesses all the formal characteristics to justify the invocation of common law in rem jurisdiction or civilian maritime attachment, yet the circumstances lead to the court ordering the ship to be released from arrest. I propose to discuss four situations in which it may be appropriate for a court to exercise its discretion to decline jurisdiction following arrest namely, first, where the arresting party has failed in his, her or its duty to make a full disclosure of all material facts on the ex parte application when causing the ship to be arrested, secondly, where there is an arbitration agreement warranting a stay, thirdly, where the ship, her owners or demise charterers seek a stay on forum non conveniens grounds and, fourthly, where a stay is in place or sought because the owners are insolvent.

Non-disclosure

54. Each maritime court will have its own rules dealing with the formal requirements that must be satisfied to support the issue of an arrest warrant or other similar court process. Some of those formal requirements concern what the person applying for the arrest must disclose to the court or court officer responsible for issuing the warrant.

55. In Australia, the Admiralty Rules 1988 (Cth) require a party applying for an arrest to disclose specific matters^[74], including matters of which the party is aware, that could affect the safety of the Marshal, master, crew or any other person or ship or other property in, or in relation, to the arrest or custody of the ship, or relates to the risk of pollution by or from the ship^[75], the existence of relevant caveats against arrest, any payment into court including any that has had the effect of creating a stay or the filing of a bail bond^[76].

56. In Altasnavios Navegacao LDA v The Ship "Xin Tai Hai" (No 2)^[77] I discussed disclosure requirements and the different obligations of the party seeking the issue of arrest warrant in Australia, England, Hong Kong and Singapore^[78]. I found that nothing in the Admiralty Rules or otherwise required the party seeking the issue of a warrant to disclose to the Registrar, as the person responsible for issuing it, more than the information specified in the relevant rule^[79] provided that, if the person became aware that evidence or other material originally placed before the Registrar in applying for the issue of the warrant was incorrect, or no longer correct, then the person will have a duty forthwith to place the new matter fully and frankly before the Registrar^[80]. That was because in Australia, there is no discretion provided in the Rules as to whether a warrant should issue, no doubt because the ALRC 33 report^[81] said:

"Arrest is a legal remedy available as of right; the Mareva injunction is equitable and discretionary."

57. In contrast, in both Hong Kong and Singapore, the power to issue an arrest warrant is discretionary. The Courts in each of those jurisdictions require plaintiffs to make full and frank disclosure of all material facts in making applications for the issue of a warrant. In Hong Kong, the English Rules applicable when The Vasso^[82] was decided also operated in the then British Territory and, unsurprisingly the Hong Kong Court of Appeal followed that decision in Sin Hua Enterprise Co Ltd v The Owners of the Motor Ship "Harima"^[83]. The Singapore Court of Appeal^[84] took a similar view of the discretionary power to issue an arrest warrant in O 70 r 4(1) of the Rules of Court^[85].

58. As I also wrote, in Xin Tai Hai^[86]:1

"The treatment of the circumstances in which a ship may be arrested has varied in England in the last 30 years. In The Andria now renamed Vasso^[87], Waller, Slade and Robert Goff LJJ held that it was axiomatic that, in ex parte proceedings seeking the issue of an arrest warrant, the plaintiff had a duty to make full and frank disclosure of all material facts known to it. That was because under the then form of O 75 r 5(1) of the Rules of the Supreme Court 1965 (Eng) (RSC) the power to order an arrest was discretionary, not mandatory and the Court’s exercise of its power could be affected by the manner in which, or the purpose for which, the plaintiff had proceeded. In The Stephan J^[88] Sheen J followed, without referring to it, the principle in The Vasso^[89], requiring full and frank disclosure in an application for an arrest warrant.

As a result of that decision, RSC O 75 r 5 was amended in 1986 to provide for the issue of an arrest warrant as of right, so that it was no longer a discretionary remedy: The Varna^[90] per Scott LJ with whom Rose LJ agreed. Their Lordships held that, as a consequence, the issue of the warrant now being as of right, the requirement for full and frank disclosure mandated by the decision in The Vasso^[91] was not engaged. The current position in England now appears to be the same as that in the early twentieth century described in Halsbury’s Laws of England^[92] where the editors (Lord Merrivale P, Langton J and H Gordon Willmer) said that the warrant was usually issued as of course unless a caveat against arrest were entered^[93]."

Arbitration

59. Article 7(2) and (3) of the 1952 Convention and Art 7(1), (2) and (3) 1999 Convention provide that where the parties have agreed to submit the dispute to the jurisdiction of a court of another State or to arbitration, then, the court of the forum can retain any security or bail provided to obtain the release of the ship to abide, and if necessary satisfy, any judgment in those other proceedings or any award in the arbitration. This policy is reflected in s 29 of the Admiralty Act 1988 (Cth) and its international analogues^[94].

60. Those provisions enable the courts of a forum to hold parties to a maritime dispute to their prior agreement to a forum selection mechanism for either judicial or arbitral resolution of their disputes, while allowing a party who would otherwise have a justiciable claim in the local jurisdiction to obtain appropriate security there. That ensures that, if the foreign proceedings or arbitration results in the party’s favour, there will be funds held as security in the court of the forum to satisfy the judgment or award.

61. This power gives the arresting court an important discretion to enable it to hold parties to their bargains. Moreover, soon after the adoption of the 1952 Convention, the significance of international arbitration came to be cemented by the now widely adopted 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention. That Convention is now complemented by the 1985 UNCITRAL Model Law on International Commercial Arbitration both of which substantially, have force of law in Australia^[95] and at least one of which does in most maritime nations. The significance to trade and commerce of those two international mechanisms for the recognition and enforcement of arbitration agreements and awards cannot be gainsaid. After an arrest to obtain security, for an arbitration, it is legitimate for the court later to release the ship so that the ship and arbitration can both proceed.

Forum non conveniens

62. Quite apart from the situation of a contractual forum selection clause or arbitration agreement justifying a stay under Art 7 of the 1952 and 1999 Conventions, the circumstances in a particular case may call for a stay of proceedings in the forum based on its principles for dealing with the appropriateness of hearing the dispute in one jurisdiction rather than another. These considerations can also arise when a proceeding is already pending in another jurisdiction – lis alibi pendens^[96]. As is well known, the legal tests greatly vary on which different national legal regimes will stay proceedings on, what for convenience at the expense of accuracy I will call, forum non conveniens grounds.

63. Since Lord Goff of Chieveley’s seminal speech in Spiliada Maritime Corporation v Cansulex Ltd^[97], English law has applied a principle of ascertaining "the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice" to determine whether to stay domestic proceedings when the courts of another forum are available. In contrast, Australian law, since Voth v Manildra Flour Mills Pty Ltd^[98], requires that a stay only be granted if the local court is a clearly inappropriate forum. That test does not contemplate a comparison between jurisdictions or court systems. However, the Court can take account of whether the continuation of the local proceedings would be oppressive or vexatious on the defendant.

64. Where parallel proceedings have been brought in a local and a foreign court, Australian law considers that prima facie it is vexatious and oppressive to bring proceedings concerning the same issues in different countries that have jurisdiction in respect of the matter^[99].

65. One factor that Australian law has accepted as relevant to determining whether a stay of proceedings is appropriate in a case of lis alibi pendens is a consideration of which is the natural and obvious forum for the hearing of the controversy^[100]

Cross-Border Insolvency

66. The recent collapse of several large shipping groups has illustrated the impact of globalisation on the traditional remedies available to persons with rights to proceed in rem on maritime liens and maritime claims. In times past, as the 1952 and 1999 Conventions recognised, a person claiming to have a maritime lien or maritime claim could seek to arrest a ship in any country into whose waters she had sailed and then the claim would be heard and determined in the court of that forum, regardless of the solvency or corporate group structure of her owners. The local maritime court had plenary jurisdiction to sell the ship by judicial sale and in doing so would clean her hull of all maritime liens and other claims. The proceeds of sale would be distributed to creditors or claimants in order of priority determined under the local law, irrespective of ship’s owners financial position, or if they were insolvent, the position in the owners’ country of incorporation or centre of main interests.

67. However, in the late 20^th Century the reach of the multinational corporation and group spread and their impact was particularly evident when recessions occurred. The international consequences of a multinational’s economic collapse manifested in the impracticality and capriciousness of using only local assets of the corporation to pay local creditors in a forum and then return any surplus to the place where the company was incorporated or where the group holding company was. That could lead to vastly different distributions to creditors of the insolvent multinational company depending on the particular country in which its assets, debts or creditors happened to be.

68. This led eventually to the development of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law^[101]. The Model Law appears largely to have been based on the European Union Convention on Insolvency Proceedings done at Brussels on 23 November 1995, that was in the process of adoption during the drafting process for the Model Law^[102].

69. The preamble to the Model Law states that its purpose is to provide effective mechanisms for dealing with cross-border insolvencies and to promote, among other objects, fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor and protection and maximization of the value of the debtor’s assets^[103]. The Model Law provides a straightforward structure for a court of the forum to recognise, under Art 17, a foreign insolvency proceeding such as a liquidation, receivership, bankruptcy or debtor in possession reconstruction procedures, along the lines of Ch 11 in the United States Bankruptcy Code^[104].

70. Recognition is a two-step process. First, the person authorised by law to administer the insolvent’s estate in a foreign jurisdiction, called a foreign representative^[105], must apply under Art 15 for the local court to recognise the foreign proceeding, which is either a foreign main, or non-main, proceeding. The former is a proceeding in the place where the debtor has its centre of main interests^[106] while the latter is a proceeding in another jurisdiction where the debtor has an establishment, being, in effect, a place of real and non-transitional economic activity involving individuals and goods or services^[107].

71. Once a foreign representative makes an application for recognition of a foreign proceeding, Art 19 provides for the forum’s court to grant provisional relief, if it is urgently needed, to protect the assets of the debtor or the interests of the creditors including, relevantly staying execution against the debtor’s assets^[108]. Frequently, the foreign representative in cases involving shipping groups also obtains provisional relief in the nature of a general stay preventing the commencement or continuation of proceedings concerning the debtor’s assets, rights, obligations or liabilities (as contemplated on an order for recognition of a foreign main proceeding under Art 20(1)(1) or a foreign proceeding under Art 21(1)(a)). However, Art 22 requires the Court in granting or denying relief, relevantly, under Art 19, to be satisfied that the interests of all interested persons, including the creditors and the debtor, are adequately protected.

72. Very often, foreign representatives of collapsed shipping groups bring recognition proceedings before commercial or insolvency judges with no experience of maritime law or its remedies and obtain court orders staying commencement or continuation of proceedings, in the language of Art 20(1)(a), "concerning the debtor’s assets". Thus, an application to arrest a ship, is a proceeding that concerns the ship which is the debtor’s asset. An arrest can be, and often is, forestalled by such an order. The ship is considered to be a person and is the only defendant in proceedings in rem until the relevant person appears, at least in countries like Australia, where the personification theory still applies^[109] notwithstanding the position in England following the decision of The Indian Grace^[110].

73. The Federal Court of Australia, being a national court with general jurisdiction over both maritime and insolvency matters, has addressed this situation by requiring applications under the Model Law for recognition of foreign proceedings to be made to specialist judges assigned to its Admiralty and Maritime National Practice Area. The Court’s practice in such cases is to modify the stay order by providing that any application to arrest a ship owned or chartered by the debtor brought by a person claiming to hold a security interest in her be made to a judge of the Court and, drawing attention to the reasons for those orders and to the earlier decision in Yu v STX Pan Ocean Co Ltd (South Korea)^[111]. Allsop CJ explained the purpose of this qualification to what otherwise would be a general stay preventing any arrest, in Yakushiji v Kaiska^[112] as follows:

"the protection given by the orders to a shipping company should not be seen as necessarily defeating proper maritime claims that are lien claims, and the question of the status of any claims that are lien claims (as well as the status of any claims that are "quasi lien claims", to which I have referred), would need to be resolved in any litigation unless the matter were agreed. It would be wrong to make orders now that would forestall any vindication by such claimants against the interests of the rehabilitation. Likewise, it would be wrong to prevent the rehabilitation being supported by the Act on the mere possibility of the existence of these claims."

74. Allsop CJ’s reference to "quasi lien claims" included maritime claims against a ship in a proceeding in rem filed in the Court before the making of the recognition order, not being maritime liens, about which his Honour said there was a live issue^[113]. Even though a ship has not been arrested, and may not have entered the forum’s waters, English and Australian cases^[114] have held that the creditor becomes a secured creditor and, then, is not subject to automatic legislative stays preventing an unsecured creditor from commencing or continuing proceedings, once an order for sequestration or winding up is made^[115].

75. In one sense, the preceding discussion is more focussed on asserting, rather than declining, jurisdiction and doing so before, rather than after, arrest. Nonetheless, the discussion is pertinent to considering orders in relation to, first, the continuation of proceedings in an action in rem on a maritime lien or maritime claim that have been commenced, but in which no arrest has been made when a recognition order under the Model Law takes effect and, secondly, the commencement or continuation of proceedings for such a claim after a recognition order is made.

76. In such situations, a court may have to strike balances between competing public policies reflected in statutes conferring rights to proceed in rem, on the one hand, and providing for the orderly administration in another jurisdiction of a debtor’s affairs under the Model Law, on the other. There will be cases where, as I suggested in Hur v Samsun Logix Corporation^[116], the interests of justice require that an unpaid ship’s crew be entitled immediately to enforce their maritime lien over her because^[117]:

"The fact that they are unpaid and are on a ship from which, if penniless, they cannot escape is a very good reason to ensure that however else the automatic stay in Art 20(2) of the Model Law operates, claims to such maritime liens are protected and immediately enforceable without any requirement for prior leave to be sought. If the stay in Art 20(2) were construed to preclude members of a ship’s unpaid crew from exercising their maritime lien by arresting or attaching the ship when she reached port, the consequence might be the de facto forced labour or enslavement of the crew until the ship finally reached the crew’s or ship’s home port."

77. On the other hand, as in cases involving arrests to seek security for an arbitration, it may be appropriate for the maritime court to obtain security before releasing a ship from arrest, but to require the plaintiff to prove, such as by filing a proof of debt, the claimed liability in the jurisdiction where the foreign main proceeding is located so that all creditors in the same class might be treated equally, if the circumstances warrant doing so.

78. In the end, whether a local court should decline jurisdiction after arrest (or beforehand) in cases where a recognition order has been made under the Model Law, is a matter that probably needs to be approached, at least for common lawyers, on a case by case basis, while principles are developed after careful thought and experience.

Conclusion

79. A paper on this topic, inevitably, cannot be comprehensive because each maritime State has its own distinct system of laws affecting arrests, even if those laws are enacted against the background provided by the 1952 and or 1999 Conventions. Jurisdictional twists are as many as factual turns. That is because we are dealing with the almost infinite variety of factual and legal circumstances that human ingenuity or incompetence can produce. The most that can be said at the moment is that the future in this area looks a lot like it may involve some unchartered waters.