Ship Arrest, Maritime Liens, and Ship Mortgages in the United Arab Emirates - Revisited

This article has been updated to reflect recent changes in the United Arab Emirates (“UAE”) Maritime Law regarding ship arrest, maritime liens, and ship mortgages. These updates clarify the implications of the new provisions of the UAE Federal Decree-Law No. 43/2023 on the Maritime Law(“ML”), which came into effect on 29 March 2024.

While maritime liens and ship arrest are approached differently across various legal systems, they remain contentious issues when considered together in the UAE. This paper examines the creditor's ability to arrest and enforce a contractually agreed maritime lien over a ship within UAE jurisdiction.

Importantly, the UAE has yet to ratify any major international maritime conventions related to maritime liens, mortgages, and ship arrest, which aim to establish uniformity among different legal systems. These include the International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages of 1967, the International Convention on Maritime Liens and Mortgages of 1993, and the International Convention on Arrest of Ships of 1999.

In terms of ship arrest, the UAE adopts a “closed list” approach to defining a “maritime claim.” A ship can only be arrested for a limited number of claims, specifically the 22 classes listed in Article 53(2) of the ML. Although the ML provisions on priorities seem to have been influenced by the1967 Convention, the concept of “maritime lien” as recognized internationally is not acknowledged in the UAE. Instead, the term “Privileged Debts over a Ship” is used, as outlined in Chapter 6 of the ML.

Consequently, contractually agreed maritime liens are not recognized by the ML. Thus, creditors cannot secure priority for their debts through mutual agreement with the shipowner, other than for the eight classes of priority debts listed in Article 29 of the ML, which are ordered as follows:

1.   Legal expenditures incurred for the preservation, sale, and distribution of the ship’s sale proceeds, including port fees, lighthouse fees, and similar charges, as well as expenses related to navigational obstacles and maintenance.

2.   Rights arising from employment contracts of the master, seafarers, and other maritime personnel.

3.   Compensation for assistance and salvage, and the ship's contribution to general average losses.

4.   Compensation for marine accidents and injuries to passengers and crew, excluding cargo losses.

5.   Debts from contracts executed by the ship's agent on behalf of the operator or contracts entered into by the master within legal authority.

6.   Debts from loading, unloading, pilotage, and towing operations.

7.   Liabilities for damages necessitating compensation by the ship's charterers.

8.   Insurance premiums for the ship’s hull and equipment, due for the last insured voyage or the end of the insurance period, limited to one year’s premiums.

Based on this classification, we can draw the following conclusions:

1.   Although cargo claims are classified as maritime debts under Article 53 of the ML, they do not constitute priority debts as recognized in other jurisdictions. They do not fall under paragraph 4of Article 29, even if they involve a vessel that collided with the cargo-carrying vessel.

2.   A creditor may have priority debt, such as court costs, but cannot arrest the vessel at fault since these debts are not recognized as maritime debts under Article 53(2).

3.   Priority debts are merely prioritized over other debts on the vessel, regardless of whether they are maritime.

4.   Contractual liens cannot be enforce din the UAE if the circumstances do not create a priority debt under the ML. In contrast, a ship mortgage may serve as a viable alternative, ranking as apriority debt under Article 44.

Additionally, it is noteworthy that the definition of “shipowner” in Article 77 of the ML is partially derived from Article 4(1) of the 1967Convention, which includes the demise or other charterer, manager, or operator of the vessel. Therefore, while a priority debt attaches to the vessel upon the claim’s emergence, it persists even if the debt arose while the vessel was operated by a charterer. However, a claimant must file an action in personam against the shipowner or charterer, as Article 7 of the ML stipulates that the ship cannot be sued in rem or arrested for certain priority debts.

Creditors entitled to arrest a vessel for any maritime debt listed in Article 53 must wait until it calls at a UAE port, regardless of whether itis operated by the shipowner or charterer. In cases involving ship mortgages, creditors (mortgagees) cannot take possession of the ship but may request the court to arrest and sell it.

While contractually agreed liens may seem beneficial to creditors, they are not recognized under the mandatory provisions of the ML. Therefore, creditors should not rely on them. It raises the question of the benefit of having a debt ranked among priority debts if the creditor cannot exercise the fundamental right of arrest, particularly since maritime creditors primarily seek security through the arrest of the offending vessel.

Overall, ship arrest and maritime liens continue to pose ambiguities and challenges in light of the new provisions of the Maritime Law, which distinguish the UAE from other jurisdictions. Since its enactment, no cases have been brought before the Courts of Cassation or the Federal Supreme Court. It remains to be seen how these courts will interpret and apply the new legal provisions. Until those rulings are issued, creditors are strongly advised to seek expert guidance to mitigate their risks.

This article aims to give a summary and overview. Nevertheless, this topic has many open questions remaining, and the https://attalah.law experts are always available to hear new inputs and discuss further. Should the above give rise to any questions, please contact our Partner Abdelhak ATTALAH at abdelhak@attalah.law

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