Lloyd's Maritime and Commercial Law Quarterly
Arbitrations, Admiralty actions in rem and the arrest of ships in the Hong Kong SAR: in the twilight of The Indian Grace (No. 2)?
Mark West *
“A fiction is not a satisfactory ground for taking one man’s property to satisfy another man’s wrong.”
†
Introduction
Traditionally, English law has differentiated between ships and those that either own or operate them, by characterizing an Admiralty action in rem
as one against the vessel or res
with the corresponding action in personam
being against the owner or charterer of the vessel. Although some have criticized the personification of ships by what has come to be known as the personification theory as being “artificial”, it is precisely this artificiality that allows maritime claimants to enforce their claims against the vessel and side-step what would otherwise be complex problems of issue estoppel, cause of action estoppel, res judicata
and the doctrine of merger—issues which the courts have yet fully to address in an Admiralty context. That said, the House of Lords’ controversial decision in The Republic of India et al.
v. India Steamship Co. Ltd
(The Indian Grace (No. 2)
)1
now stands as high authority in favour of a new school of thought: that actions in rem
are, in reality, actions against the owner or charterer of the vessel and not against the vessel per se
.
Whatever the apparent merits underlying the House of Lords’ rationale in The Indian Grace (No. 2),
on closer inspection it becomes apparent that little consideration had been given to the wider ramifications of removing the in rem/in personam
distinction—particularly in the context of the arrest of ships in common law jurisdictions such as the Hong Kong SAR, where, absent a statutory provision equivalent to either the Civil Jurisdiction and Judgments Act 1982, s. 26 or the Civil Procedure Rules, Part 61, the arrest of ships remains contingent on an underlying action in rem
. Accordingly, this article aims to provide a brief insight into some of the potential implications that The Indian Grace (No. 2)
would have on the arrest of ships in the face of a stay of proceedings in favour of either an arbitration or foreign jurisdiction agreement or under the doctrine of forum non conveniens
should it be followed in the Hong Kong SAR by focusing specifically on:
- The incongruity between arbitrations, Admiralty actions in rem, the arrest of ships and the decisions in The Rena K et al .
- The House of Lords’ decision in The Indian Grace (No. 2) in respect of the anomaly created by the doctrines of merger and issue estoppel.
- The potential ramifications of The Indian Grace (No. 2) on the arrest of ships in the Hong Kong SAR in the face of a stay in proceedings: The Rena K et al . revisited; and, finally, shedding some light on the direction the law may take in Hong Kong.
- The very recent decision of the New Zealand court in The Irina Zharkikh and Ksenia Zharkikh, 2 a case which may provide some insight on the direction the law may take in the Hong Kong SAR.
Background: arbitrations, Admiralty actions in rem and the arrest of ships: the incongruity
Despite its reversion to the People’s Republic of China on 1 July 1997, the Hong Kong SAR’s legal system continues to follow closely in the footsteps of the United Kingdom’s common law system, and in so doing has imported some of its more peculiar idiosyncrasies. One such idiosyncrasy concerns the Admiralty law and practice that has been built up in the UK over the last two centuries which has, by and large, been replicated in Hong Kong by transcribing the Supreme Court Act 1981, ss 20–21 and R.S.C., Ord. 75 directly into Hong Kong’s domestic legislation.3
This has been supplemented further through the continuous flow of what used to be—prior to 30 June 1997—highly persuasive if not binding case law on their interpretation. Although no longer binding per se,
such decisions are still regarded as persuasive authority by Hong Kong’s courts. One of the consequences of Hong Kong’s continued close links with English law is that the arrest of ships in Hong Kong remains inextricably linked to the Admiralty action in rem
and therefore contingent on satisfying both:
- the defining criteria for in rem jurisdiction set out in the High Court Ordinance, ss 12A-B; and
- strict procedural compliance with Ord. 75 of the Rules of High Court, which in Hong Kong remains subject to the Admiralty Court’s overriding discretion under RHC Ord. 75, r. 5(1), which states that:
[A]fter a writ has been issued in an action in rem
a warrant for arrest of the property against which the action or any counterclaim in the action is brought may, subject to the provisions of this rule, be issued on the instance of the plaintiff or the defendant as the case may be.
However, with both the UK and Hong Kong Admiralty Court’s in rem
jurisdiction being confined to the specific category of claims set out respectively in the Supreme Court Act 1981, s. 21(1) and the High Court Ordinance, s. 12B, neither arbitration awards nor in personam
foreign judgments4
can be enforced through an Admiralty action in rem
. It is at this juncture that two common scenarios call for consideration:
| Scenario 1: | A vessel is arrested in Hong Kong as security for a cargo claim and a P.&I. Club Letter of Indemnity (LOI) is provided as security in return for the release of the vessel. However, under the terms of the bill of lading the underlying claim is: subject to arbitration pursuant to an arbitration clause; or, alternatively, subject to an exclusive foreign jurisdiction clause. |
| Scenario 2: | As above, except that no P.&I. Club LOI is provided, the vessel is sold pendente lite and the proceeds are paid into court pending resolution of the underlying claim. |
3. The equivalent Hong Kong provisions are set out in ss 12A-B of the High Court Ordinance and Ord. 75 of the High Court Rules (Cap. 4 of the Laws of Hong Kong). These are considered further below in this section.
4. See The City of Mecca
(1880) 6 P.D. 106; cf. The Despina GK
[1983] Q.B. 214 (Sheen J.), where the judgment was found to be in rem
and therefore enforceable provided ownership of the vessel had not changed prior to the enforcement proceedings. See also: Meeson, Enforcement of Maritime Claims
(2nd edn, Lloyd’s (2000)).
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