Ships being arrested to force owners to settle unpaid debts: ITIC


The International Transport Intermediaries Club (ITIC) – a mutual insurer that provides professional indemnity cover for transport intermediaries operating in the marine, offshore, renewable and aviation industries – is warning stakeholders to ensure measures are in place to cover additional financial obligations when settling unforeseen invoices.

In the latest edition of its Claims Review, published bi-annually, ITIC shared a case study where a ship was arrested to force the ship owner to compensate their agent for unpaid debts for a tug owner’s services during previous rescue efforts of a different ship within its fleet.

The ship owner, whose ship experienced difficulties in the Atlantic, requested a ship agent to arrange tugs to attend to the ship. The agent arranged for tugs to participate in the ship’s rescue, but the ship subsequently sank.

The agent later received invoices totalling US$ 220,000 from the tug company, which they passed to the owner.

The owner claimed they were in financial difficulties due to losing their ship and could not pay the invoice. They promised to pay once one of their other ships had been sold, but it was undetermined when this might be. In the meantime, the agent was coming under pressure to settle the invoices of the tug company directly.

ITIC wrote to the owner but did not receive a response.

ITIC noted that another ship operated by the same owner was heading to a French port. France is considered an ‘arrest friendly’ jurisdiction as it usually allows for the arrest of sister ships. The ship in question had a different registered owner, but advice from French lawyers confirmed that an arrest should be possible as the beneficial owner appeared to be the same.

The ship was arrested, and to obtain its release, the owner placed security through a cash deposit into the court’s account. The ship was released and negotiations for the payment of the invoices began.

Ultimately, the tug owner agreed to lower their demands to US$ 100,000, and the matter was settled for this sum by the owner.

Mark Brattman (pictured), Claims Director at ITIC, says: “If a shipping line becomes bankrupt, suppliers will look to get paid by any means and from any party. Having suitable insurance in place can therefore be very helpful for agents finding themselves in these situations.”