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Arrest of Vessels
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Arrest of Vessels: Frequently Asked Questions

The arrest of vessels is a topic frequently raised in Panama due to the international traffic which results from the geographical location of the Panama Canal. One of the primary international conventions which governs this matter is the 1952 Convention, signed in Brussels, of which Panama is not a party. Nonetheless, a number of the matters covered in that Convention are applicable to Panama.

Can a ship be arrested for claims other than those listed in the 1952 Convention?

Panama is not a party of the 1952 Convention, related to the arrest of seafaring vessels, signed at Brussels on May 10,1952. However, ships can be arrested in Panama for claims similar to those under the Convention.

If so, under what circumstances?

According to Law No. 8 of 30 March 1982, which created the Maritime Court and regulated the Maritime proceedings, the attachment of a vessel may be ordered in the following cases:

	To prevent the proceedings from being rendered futile and to prevent the defendant from transferring, dissipating, encumbering, alienating or impairing such assets as are susceptible to attachment procedures.
	To enable the enforcement of maritime claims before the Maritime Court in Panama against foreign defendants whether the cause of action arose inside or outside Panama.
	To effect physically seizure of property susceptible to attachment in order to enforce maritime liens over the same.

As you can observe, the Panama Maritime Code establishes two separate types of action: one to enforce maritime liens over vessels, cargo or freight, which are actions “in rem”, and a second to enforce any maritime claim against the owner or the charter, which are actions “in personam”.

Which maritime liens are recognised on your jurisdiction?

The claims which give rise to privileges (maritime liens) and their order of priority, are set forth in Article 1507 of the Code of commerce of the Republic of Panama, as follows:

Judicial expenses incurred in the common interest of maritime creditors;

Expenses, indemnities and wages due in respect of assistance and salvage rendered during the last voyage;

Wages, emoluments and damages falling due to the master and members of the crew in respect of the last voyage:

Wages and emoluments due to stevedores and other dock-based employees employed directly by the shipowner, his shipping agent or the master of the vessel for the loading or discharge thereof on its last arrival.

Liabilities incurred for damages due to fault or negligence;

Amounts due for contributions in general average;

Amounts secured by ship mortgages;

Outstanding debts due in respect of necessary supplied to the vessel;

Debts incurred upon the security of the vessel in respect of supplies, equipment and tackle provided such contracts were entered into and executed prior to departure of the vessel from the port where such obligations were contracted; and insurance premiums relating to the last six months;

Wages of pilots and watchmen and expenses of conservation and custody of the vessel, its apparel and supplies after the last voyage and entry into port.

Damages due to shippers and passengers for failure to deliver the cargo or for damage thereto, attributable to the master or crew during the last voyage;

The price of the last acquisition of the vessel and interest due thereon for the last two years.

In addition to the foregoing, the Revenue Code of the Republic of Panama imposes a lien against the vessel for outstanding taxes owed to the Panamanian Government on Panamanian registered vessels. This lien has been interpreted to have a priority over those established by the Commercial Code.

Is it possible to arrest solely for the purpose of obtaining security? Is it possible to arrest for security for a claim in arbitration?

We confirm that it is possible, under Panamanian law, to obtain the arrest of a vessel for the sole purpose of obtaining a security for a claim, which could be ultimately decided in another jurisdiction. The claim could be subject to arbitration or to a forum selection clause, and will not prevent the Maritime Court from arresting a vessel.

After the vessel is arrested, the Court has, at discretion, will decide, upon a motion, for abstentions and to forward the claim to arbitration or to another forum.

Security could either be sent along with the claim, or retained in Panama until a final decision.

Is it possible to arrest sister ships/ships under the same management/ ”associated ships” etc.?

The concept of sister ships does not exist in Panamanian law. A vessel is considered as an entity with its own limited obligations relating to the payment of the debts of its owner, whether common or privileged.

Proceedings “in personam” against a shipowner give raise to the arresting of any property of the shipowner, including other vessels, registered in his name, at the time when the action commenced, if vessels are connected or not to the claim. The concept therefore of Sister Ships as same managed or associated vessel does not exist, and it is very difficult to pierce the corporate veil.

Is it necessary for Claimants to put up counter-security? If so, how much?

Counter security required to be posted by the Claimants is for the amount of US$1,000, if the action is “in rem” (to enforce a maritime lien). From 20 to 30% of the amount of the complaint, if the action is “in personam” against a shipowner.

An additional deposit must also be presented for US$2,500 to cover expenses concerning the cost of custody and conservation of the vessel (if the vessel were more than 7,500 GRT, another US$2,000 must be included.

What documents are required in order to arrest a ship? Is a power of attorney necessary?

In order to support a claim “in rem”, the plaintiff must present with the petition for arrest, a complaint including “prima facia” evidence of the obligation derived from a maritime lien (copies by fax are accepted). Documents can be filed in any language and translation can be obtained locally.

A Power of Attorney does not have to be presented with the claim, but must be presented at a later date with the confirmation of prior undertaking. If the Power of Attorney is not presented with the complaint, a bond must be posted, approximately between US$500.00 and US$3,000.00, depending on the amount claimed.

The Power of Attorney and a corporate certificate of existence or Good Standing of the plaintiff are to be presented to the court at a later date, and must be notarized and authenticated by a Panamanian Consulate or the Apostille Convention.

What security is normally acceptable? Is a P&I Club letter acceptable?

Article 100 of the Maritime Code in Panama, authorizes any of the following securities: cash, certified checks, bank guaranty letters, local insurance bonds, Government bonds. Panama law also permits any other security when expressly agreed by the parties, including P&I Club letter.

How are lawyers’ and Court costs assessed and what is the approximate cost of an arrest? Who is liable to pay the costs and expenses of the ship while she is under arrest?

The Maritime Court at Panama calculates initially, when issuing the arrest order, a percentage of the amount in dispute as a temporary cost. At the time of the judgment, the Court will assess the total cost, taking in consideration the legal work exercised in the case, the expenses and other costs, such as experts’ opinion, etc., the importance of the matter and the amount litigated.

The initial cost of the arrest is the sum stated in point 6: US$1,000, when the action is “in rem”, or 20% to 30% of the complaint, when the action is in personam, plus the custody and maintenance expenses of US$2,500. The final cost will be supported by the party adversed by the judgment.

Is your country a party to the 1952 Convention? Is your country likely to become a party to the 1999 Convention and if so when? If yes, what impact will the new Convention have on the law relating to arrest of ships? If not, what are the reasons for not adopting the 1999 Convention?

Our country, as stated above, is not a party of the 1952 Brussels Convention, relating to the arrest of sea going ships. We do not foresee that our country will become a party to the 1999 Convention within the foreseeable future.

Prepared by Angela Amarís, LL.B.

For more information regarding the arrest of vessels or the maritime litigation services of Shirley & Associates, please do not hesitate to contact Luis Shirley.