Introduction: In a previous installment of this series, we considered the legal procedure by which ship arrests are effected – admiralty actions in rem – and noted that its main purpose is to compel the ship owner or other persons interested in her to appear and defend the claimant’s action in circumstances where such a ship is alleged to have been the instrument of wrong doing.1 The law also provides for situations where a claimant may invoke the same procedure not necessarily against a ship, but against other property (notably cargo) connected with her or to a related shipment.
Claims Against Cargo
The Admiralty Jurisdiction Act (AJA) lays the foundation – albeit indirectly – of in rem actions against a ship’s cargo by providing that claims arising out of agreements for carriage of goods by a ship – whether by charterparty or otherwise – are general maritime claims.2 In its section 5(3), the law goes further to provide that where a claim involves a maritime lien or other charge on any ship, aircraft or other property, an action in rem action may be brought against such ship, aircraft or other property.
“Charge on Cargo” Sought to be Arrested
Maritime liens – as defined in the AJA3 relate specifically to the ship asset itself and as such are not within the scope of this piece. The relevant claims are those involving a charge on property (cargo) which is the subject of a carriage by ship transaction. In this regard, the exact meaning and scope of the operative words “or other charge” as used in the AJA becomes extremely important. The word charge is not defined in the Act. However the Black’s Law Dictionary4 defines charge as “to impose a lien or claim; to encumber”. From this definition it can be argued that any encumbrance or proprietary claim on cargo which is on board a ship will qualify such a claim for in rem status in terms of S. 5(3) of the AJA.
Clearly, a ship owner or operator who is in possession of cargo and as such able to exercise a possessory lien on same can easily found his in rem action on section 5(3) by equating the lien to a charge on the property. It is however posited that the existence of such possessory lien is not absolutely required in every circumstance. In the Canadian case of Phoenix Bulk Carriers Ltd. v. Kremikovtzi Trade5 the question came up for adjudication whether a ship owner can arrest cargo that was supposed to be carried on his ship which the cargo interest had – in breach of the contract of affreightment with the claimant shipowner – placed on board another ship for shipment. The Court considered Section 43(1) of the Canadian Federal Court Act which specifically deals with the right to arrest a “… ship, aircraft or other property….”6 and answered in the affirmative. The court jettisoned a narrow construction of the law established in a previous case; wherein “physical nexus” was required and held that the important question to be answered is whether the said cargo is the subject of the action. In other words, the action in rem only needs relate to the specific property contemplated in the contract at issue.
Arrest of cargo is a useful legal tool available to claimants in deserving situations. It offers the usual security claims benefit attendant to all in rem actions and also has the additional advantage of generally being cheaper to procure than ship arrest proper.
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