A conservatory arrest, being an arrest before an enforceable title such as a judgment is obtained, can be effected after leave from the local Court. To obtain leave to arrest a vessel, a written application must be submitted to the Court on behalf of the claimant setting out any relevant information concerning the claim. At the time an arrest application is filed, the claimant is only required to assert his claim in writing. It is however recommended to produce documents or other evidence in support of the claim. Furthermore, a claimant is not required to demonstrate that the ship owner is of doubtful solvency. It is common practice to request leave to arrest the ship for the principal amount increased by 30% to secure any interest which accrues on the claim and costs and expenses of the proceedings.
After leave for arrest has been obtained, the petition together with the leave of the Court must be handed over to a court appointed bailiff, who will affect the arrest on the ship by serving a writ of arrest upon the ship. The whole process from court application to actual arrest can usually be effected within two business days. If parties reach a settlement and the arrest should be lifted, it can usually be done in a couple of hours.
In order to be able to arrange for a judicial sale, a claimant must have an enforceable document, allowing such sale. The various documents, which allow a claimant to sell a vessel by judicial sale, are:
- a judgment by which an order for payment of a certain amount has been rendered by (a) one of the Courts of the Kingdom of the Netherlands (b) a foreign Court which can directly be enforced in Aruba, Curacao or St. Maarten pursuant to a treaty;
- an official excerpt of a notarial (mortgage) deed issued by a civil law notary officiating in the Kingdom of the Netherlands;
- a (mortgage) deed issued by a foreign notary, which can be enforced in Aruba, Curacao or St. Maarten, based on a treaty or exequatur;
- an arbitral award or a foreign arbitral award which can be enforced in Aruba, Curacao or St. Maarten.
In case none of the above apply, the creditor can obtain a title, enabling a judicial sale, from the local Court through (summary or exequatur) proceedings after the vessel has been arrested.
Request time and date for auction
The creditor will have to file a request with the local Court in order to establish a date and time for judicial sale, through public auction of the vessel. In its request the creditor has to illustrate (and provide evidence) that it is entitled to foreclose upon the vessel.
Subsequently, the enforcing creditor will have to deposit with the Court:
- the Conditions for Sale;
- a declaration from a bailiff or creditor’s attorney that the advertisements of sale and notifications of other creditors and claimants have taken place; and
- a list of parties which are known to the enforcing creditor and who qualify as a title holder and/or judgment creditor in respect of the vessel. There is no obligation to inform other known creditors of the sale unless they fall within one of the above categories.
When filing its request, the enforcing creditor will have to take into account a period of 30 days between the date on which the abovementioned documents are deposited with the Court and the date of the auction. However, this period can be shortened, under special circumstances, which may be subject to certain conditions imposed by the Court.
Following (the submission of) this request, the Court will normally ask for a Court hearing to discuss the main features of the auction. Following this hearing, the court will render a judgment in which it establishes a time and date for the auction as well as the terms and conditions for organizing the auction (e.g. date on or before which the advertisements will have to be placed, date on or before which the auction conditions will have to be submitted, date on which the list of known title holders and judgment creditors will have to be submitted etc.).
The sale has to be advertised in a local paper of general circulation and a paper of vessel’s flag state, 30 days prior to the sale of the vessel (please be advised that this period can be shortened, under special circumstances, which may be subject to certain conditions imposed by the Court). In addition, the judge may also stipulate that an advertisement has to be placed in another international newspaper such as Lloyds List.
The sale is furthermore to be made public by the posting of notices of sale in the manner customary at the place where the sale is to take place (to be carried out by a bailiff). Notices of sale are normally posted on the vessel, the premises where the vessel is berthed and the Court. The notices of sale must comply with the same requirements as the advertisements and therefore usually the text of the advertisement is used.
The Conditions of Sale for the auction have to be drawn up by the enforcing creditor. VanEps Kunneman VanDoorne can provide draft Conditions of Sale.
The price to be paid for the vessel consists of the amount of the highest bid made at auction, increased by the costs of the sale proceedings (i.e. legal costs, court and bailiff fees). A statement of these costs has to be put up no later than three days prior to the judicial sale.
After the auction
After the vessel has been auctioned, the proceeds must be divided according to the priorities of the claims that have been presented by creditors. In general, our local law is applicable to determine the rank of a claim. However, whether a claim validly exists and the priority of a claim, is determined by the law governing the claim. Consequently, no priority is attributed to a claim which, under the law applicable to the claim, has no priority on the vessel.
The judicial sale of a vessel is definite. It is not possible to appeal the awarding of the vessel to the successful bidder/buyer at auction. The purchase price of the vessel will normally be payable within eight days from the auction. Once the purchase price and the costs of execution, listed in the statement of costs, have been paid by the purchaser, the vessel is delivered free and clear of all previous liens, encum¬brances and mortgages to the buyer.
In case the vessel owner would cooperate, a period of approximately 30-45 days is involved between arrest before judgment and auction. In case the vessel owner would not cooperate and it would be necessary to initiate court proceedings, this may delay the process with two months. Yet, in case the vessel owner would also object against the arrest and auction (conditions), this might result in another delay of a couple of weeks.
Court approved private sale
Besides the auction, local law also offers the possibility to opt for a Court-approved private sale up to seven days before the scheduled auction date. The effect is the same as with an auction: the vessel is delivered to the purchaser free of pre-existing liens and encumbrances. A judicial auction can be applied for and held concurrently with behind the scenes negotiations for a private sale.