Lloyd's Maritime and Commercial Law Quarterly
PROTECTING AGAINST MARITIME LIENS FOR SUPPLIES AND SERVICES ON CHARTERED SHIPS CALLING AT UNITED STATES PORTS
John P. Love*
John D. Kimball.**
Owners of chartered vessels calling at United States ports have been plagued in recent years by in rem proceedings against their vessels to execute maritime liens brought by suppliers, stevedores, towage companies and the like. Such proceedings are occasioned by the all too frequent failure of time and voyage charterers to pay for necessaries furnished to vessels for the charterer’s account. Often the defaulting charterer is judgment proof and his unpaid bills that are entitled to maritime lien status exceed the hire or freight earned on the charter. For the shipowner unable to pay his charterer’s debts, the consequence may be a judicial sale of the vessel to pay the lienors. This article is not a treatise, but gives practical advice to shipowners on how they may attempt to protect themselves against such maritime liens.
Under the usual time charter the charterer provides and pays for all bunkers, port charges, pilotage, towage, dunnage and shifting boards, fumigations ordered because of cargoes carried or ports visited, stowing, trimming and discharging of the cargo and certain other charges.1 Some of these expenses can be for charterer’s account under a voyage charter; for example, it is not uncommon for a voyage charter for bulk dry cargo to be “free in and out” with the charterer providing and paying for loading and discharging.2
If the charterer does not pay the expenses for its account in accordance with the charter, certain of its creditors will be able to obtain payment by arresting the vessel in an in rem proceeding thereby executing their maritime liens. The creditors may, of course, proceed against the charterer but in practical terms it is at times easier to seek recourse against the vessel, especially in situations where the charterer proves to be unable to pay its bills.
A maritime lien is a privileged claim in the vessel which can be executed only by a U.S. District Court exercising admiralty jurisdiction and acting in rem. Process in rem can be served only within the geographical boundaries of the District Court where the complaint in rem is filed and therefore the vessel must physically come into that district and be served while it is there for the court to be able to execute the lien.3
* Member of the New York and Florida Bars.
** Member of the New York Bar; Case Editor, Journal of Maritime Law and Commerce; Co-author, Time Charters (2d edn. 1981).
1 e.g., cll. 2 and 8 of the New York Produce Exchange Form of Time Charter.
2 e.g., Part II, cl. 5 of the Baltic and International Maritime Conference Uniform General Charter (as revised 1922 and 1976) including “F.I.O.” alternative, etc., form of voyage charter.
3 Rule E(3)(a), Supplemental Rules for Certain Admiralty and Maritime Claims, Fed. R. Civ. P.; Harkness v. Hyde, 98 U.S. 476 (1879); Manro v. Almeida, 23 U.S. 473 (1825); Ships & Freights Inc. v. Farr, Whitlock & Co., 188 F. Supp. 438, 439 (E.D.N.Y. 1960); Colonial Sand & Stone Co. v. Telesco Fuel & Mason Material Co., 201 F. Supp. 187, 188 (S.D.N.Y. 1962); Lewis v. Maritime Overseas Corporation, 163 F. Supp. 453, 455 (D.Or. 1958); L.B. Harvey Marine Inc. v. M/V River Arc, 712 F. 2d 458 (11th Cir. 1983).
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