MARITIME LIEN

The maritime lien is riddled with exceptions and conflicting judicial decisions. What may usually be accurate in one jurisdiction may not be accurate in the circumstances of a particular case or in different jurisdictions. Historically, maritime liens have provided financial security for those who furnished the goods and services that helped a vessel to continue on its voyage. A maritime lien constitutes a right of property in the vessel. It travels with the vessel wherever it may go.

Not every contractual breach relating to a vessel is secured by a maritime lien. For instance, breach of a vessel construction contract never gives rise to the maritime lien. The vessel is not capable of navigation, hence liens cannot attach. Once the vessel is completed, maritime liens can be easily attached for a wide variety of goods and services. Maritime liens mayarise for want of repairs, crew wages, slip fees , fuel, supplies, documentation services, etc while the vessel in operation. Maritime liens also arise from torts including but not limited to collision and personal injury, to the extent of the vessel’s liability. Maritime liens are governed by special rules of priority.

Maritime liens are often non-possessory. They can be enforced through the judicial process only. Although some claims may give rise to maritime liens and possessory liens as well, a court of competent jurisdiction will have the inherent powers to take custody of the vessel from a self-help lien claimant. Maritime liens can simply be extinguished by payment of the underlying claim.

Cargo Liens

Ship owners are entitled to retain possession of the cargo as security for the outstanding sums, where ship owners aregranted a right of lien over cargo carried on board their ship in respect of a sum or sums due under the charterparty.

Under English law, ship owners cannot sell the cargo to obtain satisfaction of the debt, unless the expressly provided in the charterparty. Unless expressly agreed, lien cannot be exercised over
cargo carried under one charterparty for a debt due under an earlier charterparty between the same parties. It goes without saying that the debt in question should be one which is presently due and payable as the lien cannot be exercised for debts which are not yet payable.

The shipowners must consider the provisions of the law of the land, where the lien is to be exercised namely:

(a) any stipulated formalities to be followed when exercising the lien.

(b) existence of the right of lien over cargo under charterparty may not entitle them to exercise a lien under the bill of lading contract unless (i) charterer is the owner of the cargo (ii) bill of lading gives the owners a ample contractual right of lien over the cargo as against the consignees

Application of a maritime lien

As a matter of fact, a lien can be exercised only over the cargo on board the vessel. The owners must then consider where (jurisdiction) the lien can be enforced. It is not usually possible for owners to exercise a lien by halting a laden ship en route to the port of discharge.

Ingredients that create a valid maritime lien Usually, filing of appropriate documents with the concerned authority is the requirement in most jurisdictions. All other type of liens arises upon the provision of goods or services to the vessel or other maritime property, or at the time when accident or other event happens.

Debts and liabilities that are secured by a maritime lien

The right of lien is extinguished when the shipowners part with possession of the cargo. In the event if the shipowners were to exercise lien, after discharge of the cargo from the vessel, the shipowner must ensure that the possession of the cargo is not passed to the consignees or their agents.

Validity of a maritime lien

Validity of a lien depends on the nature of lien. A carrier’s lien against cargo lasts only as long as the cargo remains in the carrier’s possession. Preferred mortgage lien that secures payment of a promissory note expires when the applicable statute of limitations runs on claims.

Instances of vessel subject to more than one lien

If the shipowner, who is a subject matter of a mortgage lien fails to pay for fuel and services rendered to his vessel, which would give rise to a lien, also fails to pay crew, giving rise to a lien for seamen’s wages, and if he cause an accident with the vessel, giving rise to a lien for personal injury or property damage. All these liens and other maritime and non-maritime liens can co-exist.

Enforcement of a maritime lien

A maritime lien may be enforced or foreclosed by an admiralty action in court of competent jurisdiction.

Lien on sub-hire and/or sub-freights

Sub-hire and sub-freights can be classified as being the property of the charterers. Can they ever have possession – is a moot question. A lien on sub-hire or sub-freights can be termed as an assignment in favour of the owners of the contractual right for the amount, which is due and payable to the charterers by third parties to the charterer as opposed to being a lien. To bind the third party, the owners must place the third party on notice stating that the payment must be made to them and not the charterers for the fact that the charterers have already agreed to the owners and that the owner is alone entitled to receive the payment from the third party if the charterers fails to settle their indebtedness under the charterparty.

Sub-freights payment and Bill of lading Owners do not have to rely on any right of lien, if they are party to the bills of lading. Owners must simply notify the charEssentialterers’ agents of their claim to the bill of lading freight in order to compel them to collect it for the owners as opposed to the charterers.

Sub-freights payment and the charterers

In the event, where the bill of lading freight is receivable by the charterers, the owner’s best defense is to rely on their right of lien.

Sub-freights payments and the sub-charterers

The owners’ rights depends on as to whether the sub-charterers have themselves subjected to the similar rights of lien over those freights which were definitely payable to them either as the charterers or if the owners have subjected themselves over the freights payable to them respectively.

Sub-freights and sub-hire

If the Owners were to exercise as to whether they can exercise a lien on sub-freight, well within the meaning of a charterparty lien provision, they have to first ascertain the type of remuneration which the charterers can expect to receive from the shippers or any sub-charterers. Prima-facie, ‘sub-fieght’ includes any bill of lading freight payable by the shippers and any voyage payable by the charterer’s sub-charterer.