Arrest proceeding in Germany, by Thomas Wanckel
SEGELKEN & SUCHOPAR Rechtsanwälte/Solicitors
Thomas Wanckel - Partner -
Direct line: 0049/40/376805-18
wanckel@sesu.de
Baumwall 7 Überseehaus × 20459 Hamburg
General
Germany has not only well-known international sea-ports but also a long history in maritime law, including maritime arrests. Although it is said that German law is generally rather restrictive in allowing conservatory and provisional measures, no doubt an arrest can be achieved within a day and with reasonable costs involved if the applicant prepares himself properly.
Applicable laws
Germany is since April 1973 member of the Brussels Arrest-Convention of 1952, but due to the leading opinions – although not undisputed - in Germany the provisions of the German Code of Civil Procedures (“Zivilprozeßordnung, ZPO”) should prevail. This does, however, not lead to major differences except of one restriction. German courts will only grant an arrest if the creditor is able to demonstrate a good reason for an arrest, which is that “without an arrest the enforcement of a judgment would be rendered impossible or substantially more difficult, see § 917 sub 1 ZPO.
Nature of claims (In German: “Arrestanspruch”):
1. Generally speaking an arrest may be applied for if the creditor’s claim is for payment or may become a claim for payment, which is generally broader than the claims admitted under the Brussels Arrest Convention 1952, however, that does not lead to major differences because – as practice shows – those claims cover the vast majority of claims against ship-owners.
2. The arrest can only be applied for if the shipowner is personally liable for the creditor’s claim. If for example the creditor has supplied bunker to a chartered ship and has not been paid for he has to demonstrate to the court that the managers of the ship or the master acted on behalf of the ship-owners rather than for the charterers.
Good reason to arrest (In German “Arrestgrund”)
As lined out above the basic difference to other jurisdictions is (still) the need to show a good reason for the arrest (“Arrestgrund”), although there are serious opinions stating that German courts may not refer to German Procedural laws (the “ZPO”) as the Brussels Arrest Convention does contain those procedural laws itself which therefore, as they are the more specifically “ship-arrest” related laws, should prevail over the more general laws in the ZPO; and no doubt the Brussels Arrest Convention 1952 does not require an “Arrestgrund” but only an affidavit that the claim is a maritime claim mentioned in the Convention. As the German courts, however, still do not follow this opinion creditors have still to consider this precondition.
The basic rule is lined out in § 917 sub. 1 ZPO and stipulates that:
the enforcement of the judgment would be rendered impossible or substantially more difficult.
Therefore an arrest against a ship flying the German flag will hardly be granted. Since the owners have to be of German nationality or at least under the control of German management the creditor may, before arresting the ship, seize other domestic assets of the owners. To cope with § 917 ZPO it is not sufficient to show that the ship-owners are in financial difficulties, as this is regarded as a sole commercial risk. German law does not protect the creditor against possible or imminent deterioration of the financial situation of his debtor, but will secure the creditor only in situations where the debtor has no assets within the jurisdiction or where he is hiding or selling off his assets, or moving them abroad, i.e. where he is trying to escape from his obligations. This is the general rule.
In order to clarify what might be a “sufficient reason” § 917 sub. 2 ZPO in its amended version with effect as of April 1st 2004 states:
“It is sufficient to create an “Arrestgrund” if the judgement has to be enforced abroad and the reciprocity is not guaranteed”.
This of course might not be as helpful as the old version which considered it sufficient if the judgement had to be enforced outside the EU and gives another good reason to let the Brussels Arrest Convention 1952 prevail. However, where an arrest is really needed, i.e. against ships flying a flag of convenience the reciprocity will probably not be guaranteed. And finally: This restriction does not prevent any creditor to submit to the court good arguments why even where reciprocity is not granted “the enforcement of a judgment would be rendered impossible or substantially more difficult”
Arrest procedure
1. The arrest procedure is simple and starts with an application filed by a lawyer, although this is not compulsory. No PoA is required but advisable to avoid delay if so requested. The application must be in the German language and supported by prima facie evidence (“Glaubhaftmachung”) as to the claim and the “Good reason” (“Arrestgrund”). This is usually been done by a sworn affidavit of a competent manager of the creditor confirming that the facts stated in the application are true. However, no legalisation is required. Very rarely the attached documents have to be translated into German as well because the Courts in the main seaports of Hamburg and Bremen are well familiar with the English language.
2. The competent court is the magistrate court (“Amtsgericht”) for the port in which the ship is berthing unless there is already a dispute between the creditor and the ship’s owners pending, then also that court has jurisdiction.
3. Mostly the courts decide the application without a hearing. If the presiding judge believes the application may be without merits, he usually will inform the creditor’s lawyer before dismissing it and allow him to complete his arguments or to withdraw the application.
4. If an arrest is granted the judge will also determine the amount of security which entitles the ship-owners to have the arrest lifted.
5. The judge may grant the arrest but allow the execution only if the creditor provides for counter-security. This is mainly because German law is rather strict on compensation for wrongful arrests. § 945 ZPO contains a special provision for liability for wrongful arrest. In fact this is a rather strict liability which arises irrespective of illegality or fault on the part of the applicant for arrest but is only due to the decision of the judge that the arrest was unjustified from the very beginning. The counter-security should safeguard the ship-owners’ claim for compensation and therefore the amount of such guarantee is not related to the creditor’s claim but to the damage the ship owners may suffer by his ship being arrested. The actual amount is in the discretion of the judge, but the ship’s charter-rate for the off-hire period may be a reasonable guideline. A counter-security of the creditor will be ordered in cash or – if so requested in the application - may be given by a bank guarantee of a 1st class European bank. Therefore the creditors’ bankers should be involved in due course before the application.
6. An arrest order may only be executed within one month from its delivery to the applicant. The execution will be done by the court’s bailiff (“Gerichtsvollzieher”) on a special order of the applicant. The court will neither automatically execute the arrest-order nor instruct the bailiff. The applicant also has to make sure that service of the arrest-order to the ship’s owners is effected or at least applied for within one week after the ship has been arrested and within the one-month-time-limit mentioned before. If one of these time-limits has not been observed the arrest will be lifted if the ship-owners so applies to the court.
7. The execution may only be done as long as the ship has not started her voyage and is still within a German port.
8. If so requested by the ship-owners the court may set a deadline for the creditor to file his main action. If that deadlines elapses without the main action being filed the arrest will be lifted. Such deadline is in the discretion of the judge but as practise shows will be not more than a month, probably about 14 days. The judge will not nominate the competent court for such action, but as Germany has signed the Arrest Convention the court which has granted the arrest may be competent if no law and jurisdiction clause has been agreed upon.
Maritime liens and Mortgages
Of course the creditor may have to consider maritime liens and mortgages. Germany is neither a member to the International Convention on Maritime Liens and Mortgages 1967 nor 1993, but has transformed the 1967 Convention into the Commercial Code (Handelsgesetzbuch); however, cargo claims arising out of charter-parties or other contracts have been deleted. Liens are accepted for crew wages, port- and pilots-charges, claims for personal injury and death or damage to property, GA-contributions and salvage-remuneration and claims of the social-security-authorities. Maritime liens prevail over all other liens on the ship, also over the ships’ mortgages but they all can destroy the value of the ship for any creditor not being so secured.
Release from an Arrest
Of course the ship-owners may put up security and apply for the lifting of the arrest. Security may given by a bank-guarantee, however, as practise shows, P+I-Club letters of first-class P+I-Clubs (“International Group”) are widely accepted.
The ship-owners may also file an appeal (“Widerspruch”) against the arrest-order and an immediate hearing on the merits will follow.