Arrests and cross undertakings in damages

In Stallion Eight Shipping Co. S.A. v Natwest Markets (The “ALKYON”) [2018] EWCA Civ 2760 the Court of Appeal reviewed this area and has left a tantalising door open for the future.

Where a party has a claim involving a ship and falling within the in rem jurisdiction of the Admiralty Court it is open to that party, as of right, to arrest the ship in question.  However, the release of the ship once arrested is a matter for the judge’s discretion.  The owner of the ship can point to nothing which, as of right, would oblige a judge to release the ship.  As a matter of practice, of course, that discretion will be exercised where the judge is satisfied that adequate security has been provided for the underlying claim.

In this case, the owner had applied to the Admiralty Court at first instance arguing that the judge’s discretion should also be exercised if the claimant failed to provide a cross undertaking in damages.  That is to say security covering the owner’s losses in the event that the underlying claim failed.

“However, the release of the ship once arrested is a matter for the judge’s discretion.  The owner of the ship can point to nothing which, as of right, would oblige a judge to release the ship.  As a matter of practice, of course, that discretion will be exercised where the judge is satisfied that adequate security has been provided for the underlying claim.”

Although such an application had not been made to the courts before, it has been subject to long debate.  The suggestion is that the position could and should be brought into line with the court’s powers in relation to freezing orders.  Here the applicant is required to provide a cross undertaking.

The Admiralty Judge, Mr Justice Teare, declined to exercise his discretion in this way.  His reasoning was that it would run contrary to the principle that a claimant has an unfettered right to arrest.  Further, that it would be inconsistent with long established practice and not sit comfortably with Court of Appeal precedents which he should respect.

The question for the Court of Appeal was whether he had exercised that discretion correctly or misdirected himself as to the existing law.  They were clear that Teare J was not, in fact, bound by any existing precedent.  He had though exercised his discretion correctly and been right not to make an “overnight” change to settled practice.

At the same time, their view was that a judge could find differently but would have to “…think long and hard before departing from the usual practice”.  As further guidance as to what that might mean, the judgment records that it was open to the courts to reconsider the law on arrests if “properly informed as to the views of the maritime community, including the practical ramifications of any proposed changes and the preferred route to be adopted if any such changes are decided upon.”

That is an interesting way to put it as normally one might think this is the role of the legislature and not the courts.

 The conclusion has to be that law and practice remains as before.  In the standard type of case, the Admiralty Judge is not going to require a cross undertaking in damages when a claimant exercises their right to arrest for a claim in rem.  There is, though, a clear indication that flexibility may be exercised in other areas.

“That is an interesting way to put it as normally one might think this is the role of the legislature and not the courts.”

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