France: 1952 Arrest Convention Applies To Non-Convention Flag Vessels

June 2001

Petredec were the charterers of the vessel "Sargasso" under a charterparty dated 18th February 1987 concluded with D.K. Lines of Panama who were the registered owners. Subsequently Petredec were informed that Tokumaru of Japan would be treated as the owners, according to a telex dated 4th September 1990 in the following terms:

"Sargasso"

Re owner- Tokumaru (the real owners of the vessel) wish to use the name Tokumaru Kaiun Co Ltd in the charterparty instead of D.K. Lines from 1st September 1990, this for their own internal convenience and particularly their accounting system which is being re-structured…

signed D.K. Lines"

Petredec did not protest and continued the employment of the vessel.

Subsequently, during the course of the charterparty, cargo was contaminated. Petredec were pursued by the sub-charterers and commenced arbitration proceedings essentially for an indemnity against Tokumaru in London, successfully obtaining an award for approximately US$1.7 million against Tokumaru, who did not satisfy it.

To obtain security and ultimately to enforce the claim, the "Sargasso", which flew the flag of Panama, was arrested in France in Fos-sur-Mer, following an arrest order of the Commercial Court of Aix-en-Provence of 8th March 1996.

The main issue resulting from the arrest is whether it is possible to arrest the "Sargasso", which belonged to D.K. Lines, for a claim against Tokumaru.

The arrest was based on 2 principal arguments:

1. Article 8(2) of the 1952 Arrest Convention, which has been ratified by France, provides that vessels which do not fly the flag of a contracting state may be arrested by virtue of a maritime claim as defined at article 1. The flag state of the "Sargasso", Panama, is not a contracting state. Cargo damage gives rise to a maritime claim as set out at article 1 of the convention. Therefore article 8(2) of the convention applies and authorises an arrest under the convention for this cargo claim.

Article 3 of the convention authorises the arrest of the vessel in respect of which the claim arose, namely the "Sargasso".

2. Even if the above argument is not correct, the "Sargasso", belonging to D.K. Lines could be arrested for a claim against Tokumaru (the "real owners") by reason of a so-called associated arrest.

Following the arrest of the vessel, the UK Club posted security.

D.K. Lines then exercised their right to apply to set aside the arrest and request the return of the security, to which they were only entitled following a final determination by the French courts of the question. The 1st application to the Commercial Court (which had granted the original arrest order) failed, by an order dated 12th March 1996 confirming the arrest order. D.K. Lines appealed to the Court of Appeal of Aix-en-Provence.

On appeal, the argument concerned mainly whether an associated arrest was possible (the court summarily decided it wasn’t without analysing the facts), though D.K. Lines also raised an argument concerning the application of the arrest convention, which was retained by the court as the reason for overturning the arrest.

In summary, the Court of Appeal of Aix-en-Provence decided in its judgment of 25th September 1997 that article 8(2) of the convention means that an arrest is permitted under the convention for a maritime claim as defined at article 1, but the rest of the convention does not apply; the French non-convention rules should apply to determine which vessels could be arrested. Further, the latter rules provide that only vessels belonging to the defendant can be arrested. The "Sargasso" does not belong to the defendant and therefore cannot be arrested. This argument was fatal to Petredec, and the previous order maintaining the arrest was effectively overturned.

Now it was Petredec’s turn to appeal to the Cour de Cassation, or Supreme Court. This court differs from the English House of Lords in that it only decides if the regional Court of Appeal decision was correct. If it wasn’t, the case is remitted back to a different regional Court of Appeal to be determined again. Petredec were successful in persuading the Cour de Cassation that the Court of Appeal had erred and the relevant part of the judgment was rendered in the following terms:

1. France has ratified the arrest convention and a French judge shall therefore apply it to the arrest of the "Sargasso" which flies the flag of Panama, it is not important that the flag state has not ratified the convention;
2. The claim is a maritime claim within the convention and the arrest of the "Sargasso" is justified even though the defendant is not the owner;
3. A French judge is entitled to consider the "appearance" when considering the real ownership, and the Court of Appeal should have considered Petredec’s factual arguments.

Thus, by its decision of 30th October 2000, the Cour de Cassation overturned the decision of the Court of Appeal of Aix-en-Provence, and remitted the case to the Court of Appeal of Montpellier to be heard again. The judges in Montpellier will need to be brave to decide the arrest of the "Sargasso" should not be upheld!

 With thanks to Richards Butler, Paris* for preparing this article.

*Richards Butler, Paris, acted for Rifor Petredec in France in this case.