Legal Article: India - Admiralty (Jurisdiction & Settlement of Maritime Claims) Act, 2017
The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (The Admiralty Act) came into force in India on the 1st April 2018. Almost six months to the day that the Act came into force, Mr V. Subramaniam (Kumar), Advocate , Venky’s Chambers, 114, Maker Chambers 3, Nariman Point, Mumbai 400021, India provides the UK P&I Club with his thoughts on whether the new Act has bedded in well, what improvements this highly ambitious Act has brought about and what issues remain outstanding. The Admiralty Act has been a much awaited legislation to codify the rules and practices relating to enforcement of Maritime Claims and Liens, and arrests, in India, as well as to incorporate and codify the principles of International Conventions into Indian Law.
The Admiralty Act repeals the archaic laws which had been applicable in India, namely the Admiralty Courts Act, 1840; Admiralty Courts Act, 1861; the Colonial Courts of Admiralty Act 1890; Colonial Court of Admiralty (India) Act, 1891 and provisions of the Letters Patent, 1865 pertaining to the Admiralty Jurisdiction of the Bombay, Calcutta and Madras High Courts.
The Admiralty jurisdiction hitherto being vested in, and exercised by the High Courts of Bombay, Madras, Calcutta, concurrently over vessels wherever they may be in the territorial waters of India, as also vested in and exercised by the High Courts of Andhra Pradesh, Gujarat & Kerala, over vessels in those states’ waters, has by the Admiralty Act now been conferred upon the High Courts of all coastal states in India, including Karnataka, Telangana, and Odisha, in addition to the above mentioned High Courts, over vessels which are found within the State waters of the respective states, and consequently their High Courts. Accordingly, the concurrent jurisdiction being exercised is a thing of the past, and it would be the concerned State’s High Court within whose waters the vessel should be found when the Suit is instituted that will have jurisdiction, irrespective of the place of residence or domicile of the Owner. Accordingly, an Indian vessel can also now be arrested in India for enforcement / recovery of a maritime claim.
The Admiralty Act aligns Indian laws with the International Conventions for Arrest of Ships, 1952 and 1999 as well as the International Convention on Maritime Liens, 1993; and provides for the adjudication of identified maritime claims, provision of security for such claims, arrest of vessels, and so on.
Improvements and clarifications
Previously, “vessel” / “ship” had not been defined, and by case law was understood to mean ‘anything which was capable of navigation’. The Admiralty Act now defines “Vessel” in Section 2 (1) (l), to include any ship, boat, sailing vessel or other description of vessel used or constructed for use in navigation by water, whether it is propelled or not, and includes a barge, lighter or other floating vessel, a hovercraft, an off-shore industry mobile unit, a vessel that has sunk or is stranded or abandoned and the remains of such a vessel. The Explanation to this section specifically excludes a vessel that is broken up to such an extent that it cannot be put into use for navigation, as certified by a surveyor.
This puts to rest the issue which was the subject of numerous applications pending before the Courts challenging arrests of dumb barges, offshore units etc. on the grounds that they are not “Vessels”. This also puts to rest the position where a single Judge of the Bombay High Court had held that a vessel arriving India for the purposes of breaking ceases to be a vessel capable of being proceeded against and arrested in an Admiralty Suit for enforcement of a maritime claim. Until such time the vessel is beached and broken to such an extent that it is incapable of navigation as certified by a surveyor, she can be proceeded against for enforcement of maritime claims, and arrested.
Section 4 of the Admiralty Act sets out a list of Maritime Claims in respect whereof, the High Courts can exercise their Admiralty Jurisdiction. The list of Maritime Claims are similar to the Maritime Claims defined under the International Convention in relation to the Arrest of Sea-Going Ships 1952 and the International Convention on the Arrest of Ships, 1999. However, the Admiralty Act incorporates the following additional claims as Maritime Claims in relation to which a vessel can be proceeded against and arrested. They are claims related to port or harbor dues, canal, dock or light tolls, waterway charges and such like; particular average claims; claims by master or crew or their heirs/ dependents for wages, cost of repatriation or social insurance contributions; insurance premiums, mutual insurance calls; commission/ brokerage agency fees payable by vessel owner or demise charterer; environment damage claims or threat thereof; and wreck removal claims. Thus, the Act widens the Indian Admiralty Jurisdiction for vessel arrests as compared to the scope under the International Conventions.
Although the claims under the Admiralty jurisdiction is enlarged, the enforcement of the Maritime Claims by an action in rem has been narrowed down under the Admiralty Act. Arrest of vessels owned by Time Charterers and Voyage charterers in respect of Maritime claims against them is conspicuously absent from the new Act; i.e. Article 3 (2) of the 1999 Arrest Convention, does not find a place in the Admiralty Act; which gives rise to issues in this behalf and in relation to enforcements of maritime claims against time/voyage charterers in India.
Section 5(1) of the Admiralty Act inter alia provides that a vessel can be arrested only if :
i. Person who owned the vessel at the time when the maritime claim arose is liable for the claim and is the owner of the vessel when the arrest is effected; or
ii. The demise charterer of the vessel at the time when the maritime
claim arose is liable for the claim and is the demise charterer or the owner of the vessel when the arrest is effected; or
iii. Any other vessel in lieu of vessel above, subject to the provisions of (i) and (ii) above.
The above provision of the Admiralty Act and its divergence from the Arrest Conventions has led to questions/ issues relating to arrest of ships / sister ships for claims against time charterers, which issue is presently pending for decision before the Bombay High Court.
Section 5(2) permits sister-ship arrests. But, what a sister-ship is, would be subject to Section 5(1). Consequently, beneficially owned ship arrests, is not permissible in India.
Section 6 of the Admiralty Act also confers Admiralty Jurisdiction in personam in respect of certain Maritime claims, subject to certain restrictions as contained in Section 7. Under Section 7, for claims arising out of a collision and related claims, an in personam action can be initiated against the Defendant only if the cause of action, wholly or in part arises in India, or if the Defendant, at the time of commencement of the action actually and voluntarily resides or carries on business or personally works for gain in India.
For the first time in India, by legislation, the Admiralty Act defines ‘maritime lien’ under section 2(1)(g) and recognizes certain claims as Maritime Liens; and sets out their priorities in Section 9. The Admiralty Act also specifies the period of limitation for Maritime Lien, and states that the maritime lien shall stand extinguished after expiry of one year unless the vessel is arrested / seized and such arrest / seizure has led to a forced sale by the High Court. However, in respect of Maritime Liens relating to claims for wages or other employment related payments, including cost of repatriation and social insurance contributions, the limitation period is two years. The period of limitation would run continuously without any suspension or interruption, except the period during which the vessel was under arrest or seizure which time is to be excluded.
Likewise, the Admiralty Act also provides for priority of Maritime Claims in Admiralty proceedings in Section 10. Maritime Liens have the highest priority, followed by registered mortgages and charges, and thereafter all other claims. If there are more than one claim in any single category of priority, they shall rank equally and salvage claims rank in inverse order of time to when the claims accrued.
The Admiralty Act empowers the High Court to order the Plaintiff seeking an order of arrest, to provide counter security either at the time of arrest or to continue an arrest. This provision for the Plaintiff to provide security is to cover the vessel / owner in the event the arrest is held to be wrongful or unjustified or excessive security has been demanded, or provided. Presently, Plaintiffs give a written undertaking to the Court under the Admiralty Rules, to pay such sums that the Court may award as damages in case any party sustains any prejudice by the order of arrest of the vessel being obtained by the Plaintiff. Under the Admiralty Act, in addition to such written Undertaking under the Rules, Court can order the Plaintiff to furnish security (which would be a cash deposit or a Bank Guarantee in Court), which has been introduced to curtail wrongful arrests and/or demands for excessive security, which would be beneficial to vessel owners.
The High Court is empowered to auction and sell a vessel that has been abandoned by the owner within 45 days of such arrest or abandonment, which may be extended by a further period of 30 days for reasons to be recorded by the court in writing. This would obviate an indefinite wait for the vessel to be sold by the court post arrest with no one entering appearance for the vessel and/or arranging her release.
Outstanding issues and anomalies
The Act provides for Rules to be framed for the purposes of the Act, which are as yet till date to be framed. Until such times as the Rules are framed and notified in the Official Gazette, the existing Rules of the relevant High Court shall continue to be applied as appropriate.
Although the Admiralty Act is the first step towards codification of the Admiralty jurisdiction and related practices and rules followed under Indian law, the Admiralty Act has led to certain anomalies which are yet to be addressed by the Legislature or the Judiciary. One such issue is in respect of the retrospective application of the Admiralty Act under Section 17 (2) which provides that all admiralty proceedings pending in any High Court immediately before the commencement of the Admiralty Act, are to be adjudicated by such court in accordance with the provisions of the new Act. There is no savings provision in the Admiralty Act that protects proceedings initiated before the Admiralty Act came into existence on 1 April 2018.
Another issue is that by virtue of the Admiralty Act, the issue of whether a dumb barge can be arrested and whether the Court can exercise its jurisdiction over Indian vessels is put to rest. However, by operation of Section 17, all such pending applications are rendered infructuous i.e. pointless. This issue is yet to be addressed by the Courts or the Legislature.
Likewise there are other issues and teething problems. For example, some of the coastal High Courts have never exercised and/or dealt with Admiralty cases before the advent of the Admiralty Act and would have to put in place appropriate procedures for arrest etc., which is still not done as of date (September 2018).
Courts would be called upon to address these issues in due course in appropriate cases, which should then bring about more clarity and definitiveness to this new Act.
From the Admiralty Act, it would be noted that the same pertains only to arrest of vessels, and does not permit arrest of cargo, freight or bunkers, under the Admiralty Jurisdiction of the High Courts. Likewise, reading section 4 along with section 5 of the Act, in my view, arrest of vessels for security in pending arbitrations or proceedings filed elsewhere, is not permissible. This issue under the Admiralty Act, however, is presently being considered before the Bombay High Court, and a decision is expected in due course.
In conclusion, while it has only been six months since the new Admiralty Act entered into force, the Act has brought about some much needed clarification to the maritime law in India albeit that many areas of the law still remain to be clarified and procedures still need to be introduced and/ or refined. The Act is starting to achieve its main aims which are to streamline procedures, clarify and iron out uncertainties and anomalies to make the previous outdated maritime legal regime in India fit for purpose in a modern world.
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Legal Article: India - The Admiralty (Jurisdiction & Settlement of Maritime Claims) Act, 2017
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