This article is written by Pranjali Aggarwal of the University Institute of Legal Studies, Panjab University, Chandigarh. This article focuses on the Admiralty Act, 2017, its development, and can Indian courts arrest the ships that are covered under foreign seated arbitration.
Table of Contents
Introduction
Maritime trade is prospering day by day and is a crucial revenue-generating source for India. The disputes may arise in Maritime trade because of the diversity of activity related to the affairs of the sea: the financing, building, sale, and acquisition of ships, the deployment, related to cargo, freight, and other contractual relationships related to ships. To resolve these disputes parties either file a suit under Admiralty law or go for Maritime Arbitration either within India or in foreign seated arbitration. Jonathan Wood, the Singapore-based consultant, elucidated the difference between courts and arbitration: “Courts can do without arbitration, but arbitration cannot do without the courts. Nowadays being an easy system for redressal, parties opt for arbitration rather than litigation, and because of the globally linked world many contracts have clauses that decide the foreign bench for arbitration, and thus an interplay of Admiral law and Arbitration law can lead to disputes.
Admiralty law, 2017
There was a need for an exhaustive statute that covers all the aspects of admiralty jurisdiction under its realm. Thus, to ensure smooth functioning of maritime trade and for this purpose, steps were taken to enact the Admiralty Act, 2017 in India. On November 21, 2016, the Minister of State for Shipping, Mr. Mansukh Mandaviya introduced the Admiralty (Jurisdiction and Settlement of Maritime Claims) Bill, 2016 in Lok Sabha with the main objective to consolidate all the existing laws and create a single statute. The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 came into force on 9th August 2017 and it repealed all the obsolete laws of the British era. The admiralty jurisdiction that was only restricted to High Courts of Bombay, Calcutta, and Madras now extended to the High Courts of Karnataka, Gujarat, Orissa, Kerala, and Hyderabad after the enactment of the Act, and the Central Government can extend the jurisdiction of any other High Court by notification.
The position before the codification of the Admiralty Law
The Maritime jurisprudence in India was primarily based on the customs and practices that were followed by people involved in the maritime trade and these formed the foundation for the codified statutes in India. In the cases of arrest of the ships when there is foreign seated arbitration, the Supreme Court relied on the International Convention Relating to the Arrest of Sea-Going Ships, 1952, and the International Convention on the Arrest of Ships (ICAS),1999.
Article 2(3) of the 1999 Convention
This Article of the ICAS,1999 lays down an explicit provision for the law of arrest of ships and it allows the arrest of a ship in order to obtain security by any court irrespective of the fact that there is a clause in the contract that will be adjudicated in other state or the dispute is to be managed under any other law.
In simple words, it allows the parties to involve the right in rem in cases of foreign seated arbitrations.
In the case of M.V. Elisabeth versus Harwan Investment and Trading Pvt. Ltd (1993), it was held by the Honorable Supreme Court that the High Courts of India have a better status to try the matters arising within India and they have inherent and plenary powers to try and decide the matters that fall under its jurisdiction. And in case there is any dichotomy while interpreting, or any provision is not sufficient to serve justice then in those cases the principles of justice, equity and good conscience are to be adhered to. After this pronouncement, the International Convention on Maritime Laws was applied in India’s common law as there was no statute in India exclusively dealing with all aspects of maritime.
The Arbitration and Conciliation Act, 1996
The Arbitration and Conciliation Act, 1996 is based on the UNCITRAL (The United Nations Commission on International Trade Law) Model of law. It was enacted to achieve the following objects:-
- Minimize supervisory role played by the courts in the arbitration process
- Ensure the finality and enforcement of any arbitral award as if it was the decree of the court.
Intervention by Indian courts in cases of foreign arbitration
The Indian courts had limited power to intervene in the cases of foreign arbitration that is:-
- To refer a matter to foreign arbitration as provided under Section 45
- At the stage of enforcement of award as under Section 48
But the scope of intervention by the Indian courts in the foreign arbitrations was expanded by the Supreme Court and now the power of courts widened as Part I of the Act (which helps in deciding the seat of arbitration) was made applicable to both foreign arbitrations and foreign awards unless there is any provision that expressly bars the jurisdiction as decided in the case of Bhatia International v Bulk Trading SA(2002). but this decision was overruled in the case of Bharat Aluminium Co v Kaiser Aluminium Technical Service, Inc (BALCO) (2012). In the BALCO judgment, it was laid down that the Indian Courts cannot grant interim relief in the cases of foreign seated arbitrations and as a result, could not arrest ships to obtain security for the maritime claims.
In the case of Rushab Ship International LLC versus M.V. Eagle(2014), the Honorable Bombay High Court relied on the precedence laid down in the BALCO judgment and it was held that Indian Courts do not have any power to pass interim orders in the cases of foreign seated arbitration and thus no order of arrest of ships can be passed in this case.
The Amendment of 2015 in the Arbitration and Conciliation Act, conferred the power over Indian Courts under Section 9 of the Act to provide interim relief in the matters of foreign seated arbitration.
Issues pertaining to arrest of ships subject to foreign seated arbitration
The Admiralty Act deals with the conflicts or issues related to both the aspects -maritime Claims and maritime Lien. Under provisions of the Admiralty Act, the actions that can be taken care of are of two types-‘in rem’ and ‘in personam’.
The action in rem is brought against the ship itself or the cargo or freight whereas the action in personam deals with invoking action against an individual or a company (in some cases they can be the beneficial owner of the ship also). Earlier there was no lucid parameter to distinguish these two aspects. Before codification of Admiral Law, there were several judicial pronouncements like the Golden Progress case, MV Prapti case (2007) that held that arrest of a ship is permitted as it is based on common law and is done to secure maritime claims even though the matter falls under both Arbitration and Admiralty Suit.
JS Ocean Liner v. MV Golden Progress
This case was decided by the Bombay High Court and it differentiated the action in rem and action in personam i.e. whether the nature of an application under Arbitration Act is distinct from an admiralty action for arrest of a vessel. In this case, the Court stated that the right to arrest the ship is right in rem whereas the application filed (as per Section 9) against the individual under Arbitration law is right in personam. Thus, the Indian courts can arrest the ships despite the fact that there exists an agreement for foreign seated arbitration between the parties.
In the MV Monchegorsk case(1999) also, the Court held that proceedings in personam do not impose the restriction to admiralty actions in rem.
This scenario was based before the codification of Admiralty law and when the common law principles were adhered to. In the Admiralty Act of 2017, there is no explicit provision that deals with the power of courts to arrest ships in cases of foreign seated arbitrations. This poses a question that whether the order of arrest of ships that are subject to the foreign seated arbitrations is within the ambit of Admiralty law as two provisions deal with this issue-the Arbitration and Conciliation Act, 1996 (Section 5); and The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.
The present position after the enactment of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.
This question was answered by the Bombay High Court in the appeal case of Altus Uber.
In the above-mentioned case, there was an application filed in London for arbitration proceedings and the same claim was instituted by the plaintiff in admiralty proceedings of India concerning bareboat charter.
The Court held that the Admiralty Act, 2017 does not negate the law laid down under the Golden Progress Case. It only lays down a test for which allows a party to arrest a ship upon its satisfaction. The learned judge is of the opinion that the Admiralty Act is silent in the case where the arbitration proceeding can also be filed and thus no procedure is laid down in the Act regarding the arrest of the ships if the arbitration proceedings are already in progress or are yet to begin. So the Court relied on the Golden Progress case that granted the power to the Admiralty Courts to arrest a ship for security.
The case was appealed and the Honorable Division Bench upheld the decision of the Ld. Single Judge court and even laid down some clarifications related to this aspect that are:
- The arbitration claim and maritime claim are two different aspects irrespective of the fact that the claims in both cases are similar. This is because the redressal approach followed under both is extremely different.
- The courts in deciding such matters should draw a distinction based on ‘action in rem‘ and ‘action in personam‘, this will be in consonance with the provision of Section 5 of the Admiralty Act, 2017 as the party will not be subject to the bar under this section
- If the claim is to be made under Arbitration Act, all the requisites provided under Admiralty Act, 2017 are to be satisfied.
Thus, in this case, the Honorable Division Bench relying on the common law principles as laid down in various judicial pronouncements stated that the arrest of the ship as security is allowed and is valid, while there is ongoing or pending foreign seated arbitrations but all the conditions of Admiralty Act, 2017 are to be met with.
Conclusion
The Indian courts have allowed the arrest of ships in order to provide relief to the aggrieved party. And this principle has been followed in various judicial pronouncements even before the codification of the Admiralty law in India. This consistent approach was followed in the codified statute. The inception of The Admiralty Act has made the clear demarcations between in personam and in rem actions and even laid down the provisions of the arrest of the ship. Section 5 of the Admiralty Law deals with ‘Arrest in rem’, according to which the admiralty courts have the power to order the arrest of any vessel within its territorial jurisdiction as the security in the cases of a maritime claim. And the action in personam can be taken against the people within the territorial jurisdiction of the court.
The power vested with the court is unlimited unless there is an express provision that restricts the power of the court. If any claim against a foreign ship and its owner falls under the jurisdiction of any High Court then the claimant can avail all the remedies against them as available under this Act unless any provision explicitly bars the jurisdiction of the court. The court in the exercise of such power can pass interlocutory orders for arrest and attachment before judgment in the interest of justice. A similar view is being followed by the foreign states such as the U.K., U.S.A., and Canada, thus it shows that Indian law conforms with the International law.
References
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