Western Cape Business News

Send  Share  RSS  Twitter  10 Nov 2009

SHIPPING: SA First Choice For Ship Arrests


Recent Western Cape Business News

IN the wake of a landmark US judgement last month, global maritime litigants will once again be looking to South Africa as the world’s prime ship arrest jurisdiction. Most claimants will no longer be able to seek security for claims in New York courts, so will be looking for other ways to obtain security for their claims. South Africa is perfectly positioned to offer this service to foreign litigants.

The Second Circuit Court of Appeals in New York in the case The Shipping Corporation of India Ltd. Vs Jaldhi Overseas Pte. Ltd has overruled the seven year old decision in Winter Storm Shipping, holding that electronic fund transfers (EFTs) being processed by intermediary banks in New York are no longer subject to attachment under Rule B of the Admiralty Rules.

Rule B allowed companies to attach a defendant’s assets where the plaintiff has a maritime claim, such as collision damages and breaches of contract. The procedure allowed for the attachment or freezing of tangible or intangible property which need not have had any connection to the maritime claim. The result was that claimants could attach defendant’s funds which passed through the New York banking system. Such attachments were sought to provide security for maritime arbitrations or litigations in foreign jurisdictions such as Hong Kong, London or Singapore.

Instead of Rule B, it’s back to plan B,” says Gavin Fitzmaurice, maritime lawyer and partner at Webber Wentzel in Cape Town.

The effect of this judgement is that creditors can no longer attach EFTs on businesses with funds passing through NY banks, but can attach a ship docking in South Africa. Generally the ship’s owner will then provide security by way of a bank guarantee or letter of undertaking form an insurer or financial institution.

Fitzmaurice says this decision is very significant as it comes at a time when many companies are failing so contracts are being breached, resulting in rising numbers of claims for which security is required.

South Africa is a long and well-established ship arrest jurisdiction with arrest friendly legislation. This return to South Africa as the first choice as a ship arrest destination comes at a stage when we have refined and enhanced the service to potential litigants. From maritime lawyers, to sheriffs, the port authorities and indeed the courts themselves, all are well acquainted with the finer details and practical requirements associated with ship arrests.”

Fitzmaurice says while the decision may be appealed it is unlikely to be overturned. “The US courts have been whittling away at Rule B for some time now, and most US shipping attorneys say such an appeal is bound to fail.”

South Africa was established as a leading ship arrest jurisdiction when the Admiralty Jurisdiction Registration Act 105 of 1993 was promulgated, establishing South Africa as a ship arrest jurisdiction for foreign litigants.

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