If you were to open any legal document related to the maritime industry, one term that would catch your attention is “lien”, according to Marine Insight.
About Lien
The dictionary definition of lien states, ‘The right to take another’s property if an obligation is not discharged.’
In simple terms, Lien means that if a person owes something to another person, the latter can take custody of the former’s property until the debt due to him is cleared. Even in maritime law, the concept of a maritime lien exists.
This article will look at this important facet of the shipping industry and its role in maritime litigation. One of the biggest problems that plague shipping firms is an incomplete knowledge of Admiralty Law.
With this article, you will know about the pros, cons, and technical details that govern a maritime lien. With a wide array of information on the topic, this is your go-to article on everything to do with a maritime lien.
What are the features of Maritime Lien?
A maritime lien is a very important aspect of maritime law. A maritime lien can arise even when the ship owner does not directly contract the goods or services. Traditionally, such liens did not arise for goods or services provided in the home port as owners were local and would possibly know the supplier, who decided whether to furnish credit or not.
However, the Federal Maritime Lien Act, enacted in 1910, offers a maritime lien to the supplier of necessities irrespective of the location. The US is one of the few nations that accept a lien for “necessaries”.
The fundamental difference between a maritime lien and the normally applicable Lien is that in the case of the former, the liability of the contract falls on the ship and the other particulars (equipment and parts) of the ship rather than the ship’s owner, as it is the case of the latter where the person responsible is liable to pay the Lien. Briefly put, a maritime lien assumes that the guilty party in case of a maritime problem is the ship by itself rather than the shipowner.
Also, another difference between maritime liens and other liens is that the former can only be enforced under the jurisdiction of a federal court. Interestingly, unlike other countries, the United States is not a signatory to ship arrest conventions. A federal maritime lien need not be recorded anywhere, but one can register it with the US Coast Guard.
Although the ship is considered guilty in case of an accident, the vessel owner must represent the vessel in all legal proceedings. Thus, they must repatriate, re-compensate, or suitably comply with the regulations of the admiralty court “on behalf” of the vessel.
Such a legal clause that considers inanimate objects for Lien is known as a “proprietary instrument”.
It has two main components:
- Jus in re – Right on the property
- Jus in Rem – Right against the property
The reason for this seemingly convoluted system of maritime litigation is that a vessel is integral to the investigations conducted for an accident. The vessel may be sold and refurbished if charges are only brought against the owner. This change of ownership affects integral aspects of the investigation, which is the primary purpose behind a maritime lien being a proprietary instrument.
How can a maritime lien be Terminated?
A maritime lien is designed to prevent the shipowner from selling the vessel with a clear record while it is still under investigation. Thus, it is paramount that the Lien must be discharged or terminated for future sales with a clear record. An analogy of this Lien is as follows:
For a car involved in an accident, the car’s condition before the incident is important for investigators. Details of past services, accidents, and owners are also required to establish the role played by the driver (or car owner) in the incident.
If the vehicle is sold during the investigation, it may be difficult to trace and resume work. The new owner might have serviced it or moved to a different location.
Thus, a certificate must be issued before transferring ownership, stating that the vehicle is not involved in any ongoing investigations and has a clean record. Note that this certificate is for the vehicle and NOT for the car owner.
Similarly, for transferring ownership of a vessel, the Lien must first be terminated. This is commonly achieved by way of settling the claim.
The owner can pay the fines, waive his ownership of the vessel, sell or auction it to the authorities for realizing payments of the affected parties, or legal foreclosure of the vessel. If the owner intends to pay the fines rather than auction the vessel, they must inform the court of maritime law at the earliest.
Rem auctions are commonly applied in case of international accidents, where legal authorities sell the vessel to a bidder to clear the vessel of any involvement in the incident. This ensures that the vessel can begin a new lease without being party to the incident, while the authorities can receive payment to fund the compensation efforts.
In extreme cases, the destruction of the property under consideration (vessel or other equipment) can remove the shipowner’s liability and the subsequent Lien. This can only be achieved by the vessel’s destruction and not in part. Thus, attempting to salvage a section while continuing to operate the vessel is not grounds for terminating the Lien. In such cases, the lien transfers to the operational section.
A few of the important features and characteristics of maritime Lien can be explained as follows:
- A maritime lien can be terminated if the vessel is destroyed. However, if the ship has been demolished partially, then the Lien will still be applicable. Another way of terminating the Lien against the person who holds the lien papers is if the marine admiralty finds that enforcing the Lien has not been done on time.
The lateness in the enforcement of the maritime Lien by the lien holder to judge whether the Lien needs to be terminated or not is decided based on the causes and factors of the delay. There is a specified period provided by which the lienholder has to file the claim for the Lien.
- The ship’s parts that come under the purview of maritime Lien are the hull, engines, lighters, scows and tackles. The amount raised by the sale of this equipment is used to settle the maritime Lien to the lienholder
- The causes for a maritime lien arising are accidents to the vessel and thereby injuries to the ship’s personnel in the oceanic waters or because of mortgage transactions. This means that any damage caused because of the ship and indirectly because of the ship’s equipment will invoke the application of a maritime lien.
- To claim the damages, the lienholder must take action by applying in the courts. In case of multiple maritime Lien and shortage of funds, the claims with the highest amount of priority get the compensation
What are the Problems or Controversies?
A maritime lien is not without its controversies. One of the most popular ones is the concept of the ownership of the liability. Since a maritime lien invokes the liability on the ship and its equipment, it is sometimes said that this aspect of the marine law opposes ‘the entire world.’
The contractual parties to any agreement must follow the jurisdiction of a specific country determined based on mutual intergovernmental trade agreements. However, using a maritime lien brings the conflict of law to the fore. The various legal authorities that are eligible to make regulations or rulings on maritime law are:
- Country of accident
- Flag country
- Country of operation (organizational headquarters in a certain country)
- Country of origin/cargo onboarding
However, controversies or no controversies, it cannot be denied that maritime Lien as maritime law is a highly influential force.
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Source: Marineinsight
