The coronavirus pandemic has caused unprecedented disruption but, although diminished, commercial shipping remains ongoing.
Given the problems of cash flow and other economic impacts, suppliers of necessaries to vessels may face difficulties in getting paid and seek to take action against vessels.
What are the issues vessel suppliers — chandlers — face in taking action against vessels in the present crisis?
Commencing Proceedings
To arrest a vessel in the United States, it is necessary to file a verified complaint in the federal district court in which the vessel is located or is expected to be.
If the party arresting the vessel has an office in that district, an officer or director must verify (swear to the truth of) the complaint. If not, an attorney can verify it. If an officer or director has to verify the complaint that may pose logistical difficulties with current governmental restrictions on movement and social distancing.
Obtaining the Warrant of Arrest
The verified complaint is filed with a motion for issuance of warrant of arrest. The district judge will review the pleadings and usually issue the warrant without the need for a hearing. Should the judge have questions, in the present circumstances such hearing would almost certainly be by phone.
Liaising with the United States Marshal
Once the warrant has been issued, it is necessary to liaise with the U.S. Marshal about serving it on the vessel. In some jurisdictions (such as Houston), the U.S. Marshal will serve the warrant on a vessel at anchor so long as the arresting party arranges and pays for a launch. That may be difficult to arrange.
In other jurisdictions (such as New Orleans), the U.S. Marshal will usually only serve a warrant on a vessel that is docked. The availability of the U.S. Marshal to serve warrants may well be problematic in the present circumstances and it is best to check with U.S. Marshal’s office to discuss logistics before even filing proceedings.
Appointing a Substitute Custodian
Assuming the U.S. Marshal can serve the warrant, usual practice is to appoint a substitute custodian to stay on the vessel in place of the marshal until the vessel is released. Jurisdictions with ports where vessel arrests are common have security companies who provide this service.
However, such companies may have issues in finding personnel to serve as substitute custodian, especially if the vessel has sailed from a coronavirus hot spot.
Releasing the Vessel
Finally, it may be more difficult than usual to arrange for the vessel to be released from arrest. Usually this is done by the vessel owner or charterer paying the claim or providing security for it in the form of a bond, a letter of undertaking or a bank guarantee.
Freeing up the cash to pay the claim or obtaining financial security for the claim may well be more difficult than usual, possibly resulting in the vessel being under arrest for longer than necessary.
How to Approach Vessel Arrests
The coronavirus pandemic does not mean that it is not presently possible to arrest a vessel. However, there can be no doubt that it does present challenges. The best approach is to anticipate those problems insofar as is possible and check before commencing proceedings how the various parties whose involvement will be necessary are available or determine what alternatives there may be.
Our team will continue to share the latest developments and provide insights on the spread of coronavirus and its impact across sectors, including the maritime industry.