New UAE Maritime Law: An insight into the overhaul of Ship Arrest in the UAE
Decrypting the UAE's New Maritime Law – Episode 1
The recently issued Federal Law No. 43 of 2023 concerning the Maritime Law (the “New Maritime Law”), repeals and replaces UAE Federal Law No. 26 of 1981 (as amended) (the “Old Maritime Law”). The New Maritime Law will come into effect as of 29 March 2024.
The issuance of the New Maritime Law is a legislative milestone which is not only underscores the UAE’s commitment to adhering to rigorous international standards but also signals a transformative era for the UAE's maritime sector. As a key player in global trade and logistics, the introduction of this new legislation positions the UAE as an attractive hub of maritime excellence, offering a regulatory framework that mirrors and aligns with the highest global benchmarks.
As part of our series commenting on the key changes introduced by the New Maritime Law, this article will focus on providing an overview of the framework governing ship arrest(s). The area of ship arrest(s) is one of the cornerstones of any maritime law framework, impacting both local and international stakeholders (creditors, shipowners, charterers and agents).
To initiate the arrest of a vessel, it is imperative to establish that the debt owed by the debtor falls within the meaning of a “maritime debt”. The Old Maritime Law listed specific debts as “maritime debts”. While the New Maritime Law adopts a similar approach, it has expanded on the list of specific debts and also broadened the scope of what qualifies as a “maritime debt”. We set out below a list of the new types of debt introduced under the New Maritime Law which each now qualify as a “maritime debt” in addition to the ones listed under the Old Maritime Law.
Loss or damage caused by the operation of the vessel
Damage to the environment, coastal strip or related interests.
The costs of wreck removal.
Goods, provisions, supplies, bunkers, equipment or containers supplied to the vessel and services provided for her operation, management, maintenance.
Port fees, channels, docks, harbours and other watercourses.
Vessel insurance premiums and her Takaful Insurance Contributions which the owner or the charterer is obliged to pay.
Any commissions, brokerage or agency expenses payable by the owner or her charterer, or someone on their behalf.
Any dispute arising from a contract of sale of the vessel.
It is important to note that the New Maritime Law not only introduces new types of debts but also broadens the scope of certain debts that were previously listed under the Old Maritime Law, as set out above. This expansion signifies a comprehensive review and adjustment of the legal framework, extending the circumstances under which a creditor may exercise the right to arrest a vessel.
Furthermore, under the New Maritime Law, a creditor is empowered to arrest a sister vessel if, at the time of submitting the arrest application, said vessel is owned by the same debtor entity. This marks a departure from the Old Maritime Law, which only granted creditors the ability to arrest a sister vessel to the extent it was owned by the same debtor entity at the time the debt originated.
Accordingly, the pool of assets (i.e. vessels) available to creditors to seek to secure their maritime debt claims, in addition to the types of those debts, has widened.
A further change introduced by the New Maritime Law is to clarify the position in respect of the payment of counter-security by a creditor claimant. Such counter-security is designed to secure any damages arising out to ensure the security and safety of both the vessel and her crew members throughout the duration of the arrest. As of now, some of the UAE courts request the arresting party to deposit a countersecurity in order to execute the arrest against the vessel, while other UAE Courts request the arresting party to submit an undertaking to pay the expenses of the crew members and their repatriation costs. The New Maritime Law has clarified the position by obliging the arresting party to submit a countersecurity in any arrest application. The funds obtained from the countersecurity will be categorized as priority rights under category 1 of Article 29 of the New Maritime Law during the distribution process.
Another notable change, emblematic of the New Maritime Law aligning with international standards, is the recognition that a Letter of Undertaking (LOU) issued by P&I Clubs or a financial institution, accepted by the competent court, shall be recognized as a means for a debtor/owner to release and lift the vessel's arrest. Additionally, the New Maritime Law explicitly provides that an executive regulation will be published to delineate the conditions for accepting such LOUs. This development is likely to enhance the efficiency of the vessel arrest and release processes.
Concerning the execution of a vessel arrest, the New Maritime Law now permits the delivery of the arrest order within minutes to the vessel's agent or Master using modern technology, as long as it is verified that the notified party has understood the content of the communication received. Additionally, if a foreign vessel is subjected to arrest, the Ministry of Energy and Infrastructure is mandated to inform the Vessel Flag State Registration Office about the arrest, ensuring that the details are duly recorded in the registry.
The Old Maritime Law, which lacked provisions addressing the procedure for initiating a substantive case, meant that the arresting party usually adhered to the general rules for filing substantive claims concerning maritime debts outlined under the UAE’s Civil Procedure Code. This allowed the arresting party to file a substantive claim within 8 days from the date of issuing the arrest order. Previously, there was substantial debate surrounding the necessity of seeking validation and affirmation for the vessel's arrest, given the absence of such a requirement in the UAE Civil Procedure Code.
However, with the arrival of the New Maritime Law, a pivotal change has been introduced. The arresting party is now obligated to file the substantive case within 5 days from the date of the arrest order; failure to do so would render the arrest null and void. Additionally, the court is mandated to schedule a hearing within 15 days following the issuance of the arrest minutes, ensuring that the Owners or the ship agent of the vessel are duly served notice of the order.
Another significant change pertains to the timeframe for filing an appeal. It was previously unclear whether the time period for appealing a substantive judgment validating an interim arrest order was governed by the UAE Civil Procedure Code, which provides for a period of 30 days from the issuance of the judgment or the maritime law which provides for 15 days period. There was inconsistent application by the courts between a 30-day period or a shortened period of 15 days. The New Maritime Law clarified the position and expressly provides that the appeal must be submitted within 15 days from the date of the judgment.
While the aforementioned shortened time frames may not, prima facie, seem attractive to a creditor, they are positive in that they provide a fair balance between the interests of shipowners and creditors and ultimately ensure speediness of a final resolution.
The significant alterations introduced by the New Maritime Law underscore the UAE's commitment to expeditiously resolving maritime cases while adhering to international standards, especially those related to ship arrests. The inclusion of new types of debts as “maritime debts”, coupled with the clarifications on counter-securities and tightened timelines for filing substantive cases, signals a commitment to expeditious and efficient resolution of maritime matters. Notably, the acknowledgment of Letters of Undertaking (LOUs) issued by reputable insurers as a means of releasing vessel arrests demonstrates a progressive and pragmatic approach.
Authors
Mohamed El Hawawy, Joint Managing Partner
Mahmoud El-Sayed, Managing Associate
