Ship Arrest

• The procedure for arresting ships in Israel is swift albeit based on antiquated laws. Usually, a warrant of arrest order may be obtained within a few hours of clients providing the appropriate instructions and full supporting documents.
• Israel is not a party to the International Convention relating to the Arrest of Sea-Going Ships 1952 or the Arrest Convention 1999.
• Under Israeli admiralty law, a ship may be arrested by virtue of the provisions of the English Admiralty Court Acts of 1840 and 1861 which were introduced during the British Mandatory period.
• In general, these provisions are similar to the list of claims provided in Article 1(1) of the 1952 Arrest Convention. However, Israeli admiralty jurisdiction excludes agreements relating to the use or hire of any ship whether by charterparty or otherwise agreements relating to the carriage of goods in any ship whether by charterparty or otherwise and damage to goods carried outside the country.
• The existence of a maritime lien or statutory action in rem is determined by the “lex causa“, i.e., the law under which the lien or action arose. The issue of priorities, which is procedural in nature, is determined by the lex fori, i.e., Israeli law. Similarly, issues of forum non conveniens, i.e. the appropriate forum to hear the matter, is determined by Israeli law in the absence of an exclusive jurisdiction clause determining a different jurisdiction in the underlying agreement between the parties.
• Jurisdiction clauses in agreements do not necessarily prevent claimants from seeking an arrest in Israel as security for legal proceedings to be commenced in foreign jurisdictions; issues of arrest for purposes of security only have not yet been fully considered by the Israeli courts.
• If a party wishes to prove the substantive law (“lex causa“) applicable to an underlying agreement (where such law is not Israeli law) – that party must provide an expert opinion testifying to the foreign law. In the absence of such an opinion, the court will usually hold that the foreign law is equivalent to Israeli law and consequently apply Israeli law principles to the issue at hand.

Sections 41, 49 and 57 of the Israeli Shipping Law (1960) set out the maritime liens which are recognized under Israeli law.

In terms of priority, these are:

1. The expenses of judicial sale and the distribution of the proceeds of the sale, and related taxes and charges;
2. Wharfage, anchorage, pilotage, lighthouse and port fees;
3. Expenses of preserving the vessel pending sale;
4. Payments due to the master and crew in consequence of their employment;
5. Salvage and general average;
6. Compensation for death or bodily injury of passengers;
7. Collision damage at sea, damage caused by the vessel to structures in ports and damage to cargo or passengers’ effects;
8. Mortgages – whether local or registered abroad
9. Necessaries

Pursuant to Section 57 of the Israeli Shipping Law (1960) relating to mortgages – a charge to secure a mortgage debt shall take precedence over any other charge except a charge to secure any of the debts listed above.

It is important to note that under Section 49 of the Shipping Law (1960) the transfer of the ownership of a vessel or the transfer of the right to freight does not affect the validity of existing liens unless the vessel has been sold under a court order or in execution proceedings.

Under Israeli law, it is not possible to arrest sister ships or ships under the same management known as “associated ships”.

• According to Supreme Court judgment rendered in 1988, security may be obtained in the context of a temporary attachment order in civil proceedings (as opposed to Admiralty proceedings) by virtue of Section 16(5)(a) of the Arbitration Law (1968) provided that the applicant undertakes to commence arbitration proceedings in Israel or elsewhere in accordance with the terms and conditions set in the agreement between the parties but after the attachment order has been granted.
• Insofar as concerns arrest for the purpose of obtaining security for judicial proceedings to be commenced abroad, the Israeli courts have not yet fully considered their willingness to allow such actions although apparently the tendency is to permit it in the appropriate cases.

• Plaintiffs in admiralty proceedings seeking the arrest of a vessel are normally not required to put up any security for the arrest.
• In ordinary civil proceedings where an attachment is sought, claimants are required to provide a Letter of Undertaking on their own behalf, as well as a Third Party LOU to reimburse the defendant should the temporary application be set aside and/or the claim be dismissed on the merits, causing the defendant to incur a loss.
• The court may exempt the claimant from providing a Third Party LOU if it deems it just and proper to do so.
• In ex-parte proceedings (which is the norm) the claimant must furnish further security in the form of a “real security” (cash or a bank guarantee). The amount of the “real security” is determined by the court. The court may exempt the plaintiff from this obligation if it deems it just and proper to do so.

• Any application for an arrest / attachment must be supported by an affidavit sworn and signed by the person who possesses the best knowledge in respect of the claim.
• Additional supporting documents:
  • In cargo claims – the supplier’s invoice, bill of lading (two sides), preliminary survey report, and, if possible, certificate of insurance;
  • In claims for unpaid necessaries – invoices and confirmations of delivery of the goods / services rendered, as well as demands for payment.

• Power-of-Attorney must be signed by an authorized person on behalf of a legal entity.  A scanned copy of the Power-of-Attorneywill normally suffice to commence urgent proceedings, such as the arrest of a vessel.  An original Power-of-Attorney, confirmed by a public notary, may be required in the course of the proceedings.

To become effective, the warrant of arrest is served on the Master, the Port Authority and the Border Police. Usually, service is effected by electronic means.

Normally, a P&I letter of undertaking issued by a member of the International Group of the P&I Clubs will suffice, alternatively a first class Israeli bank guarantee may be provided.

• 2.5% of the amount of the claim.
• Of this, 1.25% is paid upon filing the Claim in Rem or upon filing the application for arrest (whichever is first).
• The second 1.25% must be paid 7 days before the hearing of evidence.

The Israeli first instance courts do not ordinarily award the real costs of the victorious party; the costs awarded are usually on the low side.

This is not a subject which has been considered by the Supreme Court of Israel or indeed by any of the lower courts in any depth.

The court ordered sale of a vessel is usually conducted as follows:

• A Receiver or Co-Receivers are appointed. Ordinarily the court appoints the attorneys acting for the first two plaintiffs in the arrest proceedings.
• The Receivers are vested with powers to maintain and preserve the vessel as is, care for the welfare of the crew and arrange for the supply of all necessaries.
• Within one to three weeks of the warrant of arrest and upon determining that the Owners have abandoned the vessel, the Receivers may apply to the Court for an order to publicly auction the vessel.
• Upon obtaining the order, the Receivers will ususally move to advertise the sale in the local and international professional press.
• The auction is usually conducted within three to four weeks of the date on which the order of sale is granted.
• The public auction is conducted in the Admiralty Court in Haifa.
• Proceeds of the sale are distributed within four weeks of the date of sale unless objections are raised by prima facie creditors of the vessel in which case the court will give directions as to the order of claims and manner in which arguments will be heard.