Ship boat

Rotterdam court dismisses non-EU guarantor in vessel arrest case – Commentary

Facts
Decision
Comment

A recent decision by the Rotterdam court considered an application for interim relief seeking the release of an impounded vessel by providing alternative security – a common practice in the Netherlands.

The Court’s rejection of the claim, which involved a Norwegian guarantor, raises several important questions for future ship arrest cases.

Facts

The dispute before the Rotterdam court concerned the vessel Grumant, a bulk carrier registered in Russia and operated by Murmansk Shipping. In an effort to recover an arbitration award for claims under a charter party, Maxon Global Trading Limited (Maxon), registered in the British Virgin Islands, detained (seized) the Grumant in the port of Amsterdam.

In January 2022, the ship’s Moscow-based charterer, Reshenie, asked for the arrest to be lifted in exchange for alternative security.

Reshenie offered Maxon a warranty based on the Rotterdam 2008 warranty form, but with modified terms. The guarantee was to be issued through the Norwegian insurance intermediary, Hydor AS.

Maxon objected to the guarantee offered by Reshenie, arguing that it did not provide sufficient security to justify releasing the ship.

Decision

The issue to be decided was whether the security offered by Reshenie constituted sufficient security to justify lifting the seizure. The Court ruled in favor of Maxon and dismissed the claim.

In its judgment, the court said it would not address the issue of whether Reshenie’s proposed changes to the Rotterdam guarantee form were justified. The Court clarified that it was up to the two parties to agree on the wording. Failure to do so would not be resolved by the Court.

The Court then considered the financial strength of the surety. Unlike a typical guarantor, Hydor was neither a bank nor an insurer, but rather an insurance broker. Moreover, Hydor’s equity was not even three times the value of the security offered, and there was no evidence that the exposure was reinsured.

The Court later found that Maxon was correct in claiming that Hydor did not have sufficient creditworthiness to provide the security, although the Court did not rule its dismissal of the claim on that basis alone.

Noting that Hydor was based in Norway, the Court also ruled that any judgment against the company would be too burdensome to enforce due to the fact that Norway was not a member of the European Union and therefore was not bound by the recast Brussels regulation.

Instead, the court continued, Maxon would be required to seek recognition under the Lugano Convention to which Norway is a party, which would be a more complicated and costly procedure to follow.

Comment

The Kingdom of the Netherlands (including the Dutch Caribbean islands of Aruba, Bonaire, Curaçao, Sint Eustatius, Sint Maarten and Saba) has long been considered one of the most arrest-friendly jurisdictions. ships. The arrest process is quick and creditor-friendly, while the costs are moderate.

Releasing a vessel is just as easy by providing an alternative guarantee issued by a first class bank or insurer based on the Rotterdam 2008 Guarantee Form. The Rotterdam 2008 Guarantee Form is a form balanced that does not affect the rights of the parties and is therefore commonly used.

However, things get complicated when parties propose amendments to the standard text. The Rotterdam court decision shows that it is reluctant to approve such amendments unless there is specific justification.

More surprising is the implicit rejection by the Rotterdam court of a non-EU guarantor. Although it is not clear whether the Court intended to challenge the long-standing practice of accepting guarantees provided by first-rate Norwegian insurers, the decision could also affect other non-European insurers, such as those in London.

In fact, the possible consequences for English insurers may be more serious because, unlike Norway, the United Kingdom is not a signatory to the Lugano Convention.

Insurers who regularly provide guarantee against ship arrest should be aware of this development and keep an eye out for future decisions by the Rotterdam court.

For more information on this subject, please contact Haco van der Houven van Oordt or Pepijn Hamer of the AKD by telephone (+31 88 253 50 00) or by e-mail ([email protected] or [email protected]). The AKD website can be accessed at www.akd.nl.