MARINE LIENS: HOW MANY TIMES CAN A VESSEL BE ARRESTED IN REM FOR THE SAME CLAIM?

Praxis Energy Agents Pte Ltd. v. M/V PEBBLE BEACH, C.A. No. 17-559-LPS, 2018 WL 4603266, (D. Del. Sept. 25, 2018).

By. Luke Charles Norris

Praxis Energy Agents (“Praxis”) brought an action to arrest M/V PEBBLE BEACH (“vessel”), owned by Sithonia Shipholding S.A.’s, in rem. The claim arose from an unpaid bunker order placed by a charterer to supply the vessel. The bunker agreement included a section on Maritime Liens, which stated that a maritime lien would be created over the vessel for the price of the products or services delivered and the clause would be governed by general maritime law of the U.S. Eventually, the due date of payment for the bunkers arrived and the charterer failed to pay. Praxis, one year after the breach, filed a pleading once the vessel arrived in Brazil. Praxis sought to arrest the vessel asserting a maritime lien until the defendant provided security in the amount of $270,000, which was posted security releasing the vessel. Praxis’s claim was dismissed and the security continued to be held in custody in Brazil. Nevertheless, Praxis brought a second claim for the vessel to be arrested in rem when it arrived in Delaware.The United States District Court of Delaware denied summary judgment for the Plaintiff’s maritime lien against the vessel, while granting the defendant’s cross-motion for summary judgment to dismiss the action. At issue was whether to enforce the choice-of-law clause requiring application of United States maritime law and whether a vessel can be arrested twice for the same in rem claim.Circuits are split on whether to apply the United States choice-of-law clause, electing by U.S. maritime law, in bunker agreements where the vessel owner was not a party to the agreement. The Plaintiff argued that General Maritime Law of the United States and Commercial Instruments and Maritime Lien Act (46 U.S.C. § 31301 et seq.) applied[1] and bestowed a maritime lien on the vessel with a “right to bring a civil action in rem to enforce the lien.”[2] Moreover, the defendant asserted that because it is not a party to the agreement, it is not subject to the choice-of-law clause within the contract. In its analysis, the court  relied on the case Triton Marine[3], a Fourth Circuit decision, which applied U.S. choice-of-law clause when a vessel’s charterer, “prohibited . . . from incurring maritime liens,” ordered bunkers and failed to pay.[4] Nevertheless, this district judge in this case found the defendant’s argument indecisive and applied the U.S. choice-of-law clause because the action was brought in rem and not in personam against Sithonia.Furthermore, for an arrest of a vessel in rem to be valid, there must be a valid maritime lien. Sithonia maintained that the plaintiff performed an invalid arrest on its vessel, because “the vessel cannot be arrested twice for the same claim.” Sithonia added that posting security in the prior Brazilian action relieved the vessel from its maritime lien and transferred it to that posted security. The Plaintiff argued that the action in Brazil was quasi in rem and not in rem because the vessel was not named as the defendant. However, the Brazilian court held that the Plaintiff did not have a quasi in rem action under the laws of Brazil, and thus transformed the claim to an in rem arrest of the vessel. The Brazilian court concluded that by interpreting the language of the claim, which was based on the Marine Lien clause set forth in the bunker contract.Ultimately, this court found the claim in Brazil to be in rem and stated that the plaintiff lacked proper cause to arrest the vessel once more in rem because its maritime lien was transferred to security and was being held by the prior Brazilian Court. [1] Praxis Energy Agents Pte Ltd. v. M/V PEBBLE BEACH, C.A. No. 17-559-LPS, 2018 WL 4603266, at *12 (D. Del. Sept. 25, 2018).[2] Id.[3] Triton Marine Fuels Ltd. S.A. v. M/V PACIFIC CHUKOTKA, 575 F.3d 409 (4th Cir. 2006).[4] Id. at 411-12.