Anthony Woo and Jenny Zhuang of Kennedys share with us their insights following a momentous judgment in the shipping arena in Hong Kong. For the first time, the meaning of ’control’ in the context of a ship arrest was contemplated by the Hong Kong Courts – paving the way for some much needed clarity for ship owners.
 Chimbusco Pan Nation Petro-Chemical Co Ltd v The Owners and/or Demise Charterers of the Ship or Vessel Decurion (‘Decurion’). On 4 May 2012 for the first time in the history of the common law, the Court of First Instance handed down a judgment defining the meaning of ‘control’ of a vessel in the context of ship arrests. This judgment will dramatically shape future interpretations of ‘control’ under Hong Kong law, and other common law jurisdictions. Background (i) it was Maruba’s subsidiary who placed the orders, Against this backdrop, Chimbusco nevertheless successfully arrested the Decurion in Hong Kong; the only ship registered to Maruba at the time, and subsequently secured an order for sale of the Decurion. The in rem action Section 12B(4) of the High Court Ordinance stipulates that, in order for a Hong Kong court to exercise its in rem jurisdiction over a vessel, i.e., to arrest the vessel, in this particular case Chimbusco would have to show that: |
 The meaning of control There was no dispute that Maruba was neither the owner nor charterer, and was not in possession, of the 10 vessels. Therefore, the only issue was whether or not Maruba was in control of those vessels at the material time. Chimbusco argued that despite Maruba, South Atlantic and Clan S.A. being separate legal entities, the court was urged to look behind the corporate veil and examine the evidence that they say suggested Maruba was the ultimate mother company of a group of companies (including South Atlantic and Clan S.A.) that controlled certain shipping operations of the fleet, and as such, by virtue of being able to exercise control over its subsidiaries, the real person that controlled the 10 vessels was Maruba. On behalf of Maruba, Kennedys argued that the court should not be involved in an extensive exercise of fact-finding; the person said to be in control of a vessel must be the time charterer of such vessel, by virtue of Clause 8 of the NYPE time charter that it had entered into with the owners of each vessel. We further argued that there is no question of lifting the corporate veil in this case, and being in control of group companies who may have control of the ship is not the same as having control of the ship itself. Conclusion The ratio decidendi therefore, is that the meaning of control of a vessel under section 12B(4) of the High Court Ordinance means the person who is legally in control of the vessel, for example, by virtue of being a contractual time charterer. No further enquiries or fact-finding will be carried out by a court in order to determine who is in control of a vessel. Chimbusco was therefore only entitled to arrest the vessel in respect of bunkers supplied to the Decurion and not the other 10 vessels. This decision should make an arresting party think twice before assuming the in rem jurisdiction. a.woo@kennedys.com.hk To read the ASIAN-MENA COUNSEL article Click Here (Note, if you are using an iPhone or iPad you can also download this article directly to your iBooks after it opens in Google Docs). |
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