No Singapore ship arrest in aid of foreign court proceedings

DSA Consultancy v The “Eurohope” [31.08.2017]

Date published

16/03/2018

Services

Sectors

In The Eurohope, the Singapore High Court was asked to consider whether a ship can be arrested in Singapore for the purpose of obtaining security in aid of foreign court proceedings. It held that it could not. However, this decision does not affect the courts’ power to retain property arrested as security for foreign arbitration, which is expressly provided for by Section 7 of the International Arbitration Act (IAA).

Brief facts

The charterers chartered the vessel from the shipowners under a charterparty which contained an exclusive English jurisdiction clause. The shipowners purported to terminate the charterparty, which led to the charterers commencing court proceedings in London for alleged wrongful termination.

The charterers then proceeded to arrest the vessel in Singapore. The charterers stated in the affidavit supporting the arrest that the purpose of the arrest was to obtain security in support of the London court proceedings. Further, the charterers stated that once security was obtained, the charterers would apply for a stay of the Singapore proceedings. The shipowners applied to have the arrest set aside and sought damages for wrongful arrest.

Decision

The court held in favour of the shipowners, insofar as the writ of summons was struck out and the warrant of arrest was set aside. However, the court declined to award damages for wrongful arrest.

Reasoning

In reaching its decision that the power of arrest in an action in rem should not be exercised in aid of legal proceedings in a foreign court, the court reasoned as follows:

  • The purpose of the arrest in an action in rem is to provide security in respect of the action in rem, and not in aid of an action in a foreign court.
  • Under O 70, r 15(1) of the Rules of Court, when a vessel is arrested, a bail must be given by bond in Form 168. Form 168 covers only a judgment in the action or a sum payable by virtue of a settlement of the action.
  • There is no statutory provision that empowers the Singapore courts to order that property arrested be retained for the satisfaction of a judgment given in foreign court proceedings. By contrast, Section 7(1) of the IAA expressly allows for ships arrested under the High Court’s admiralty jurisdiction to be used as security for pending international arbitrations.
  • The court also noted that the Singapore position differs from the English position in that Section 26(1) of the English Civil Jurisdiction and Judgments Act 1982 does allow the English courts to retain arrested property in aid of foreign court proceedings.

Accordingly, the charterers’ arrest of the vessel for the sole purpose of obtaining security in aid of London court proceedings was found to be an abuse of process – and the warrant of arrest against the vessel was set aside.

Comment

The court noted that prior to The Eurohope, the legal position on whether a ship could be arrested in Singapore in aid of foreign court proceedings was unclear. This is likely the reason that the court did not find the arrest “wrongful” – and did not award damages. However, as the position is now clear, any future arrests on these grounds are more likely to be held to be “wrongful”.

It is important to note that The Eurohope does not affect parties seeking to arrest a vessel in Singapore as security for foreign arbitration proceedings. Such actions remain permissible under Section 7 of the IAA, which expressly states that security can be retained in support of foreign arbitration proceedings.

Therefore, if charterers (or other parties contracting with owners) wish to keep the option to arrest a vessel in Singapore open, we would recommend that the relevant charterparty contain an arbitration (instead of jurisdiction) clause so that Section 7 of the IAA can be invoked to allow security from the arrest to be retained as security in the foreign arbitration.

Notwithstanding the decision in The Eurohope, there may be room yet to argue that a ship arrest should still be allowed in Singapore, even where the charterparty contains a foreign jurisdiction clause - if the arresting party has not yet started proceedings elsewhere and if it genuinely intends to proceed with the claim in the Singapore courts. However, the arresting party will need to make its position very clear when applying for the arrest and will have to explain how the circumstances differ from those in The Eurohope.

Even if the courts were to allow an arrest however, there would still be a risk that the courts may subsequently order proceedings to be stayed and the security released. In such circumstances, the arresting party would not have gained any real advantage from arresting the ship.