Putting a ‚lien‘ on vessels

Imagine the captain of a yacht has been fired and is owed a significant amount in unpaid salary. The boat could then sail off to the Caribbean without paying him. If the vessel, say, flies the flag of the Republic of Palau and the owner is a company registered in the Cayman Islands, how is the former captain going to be able to recover his unpaid salary. You don’t need to be a lawyer to see he has almost no chance of collecting his debt. It is not unusual to spend several years winning a legal battle only to find the owners and the vessel have disappeared.

In the glamorous world of luxury yachts you would be surprised at how often boats leave port without paying for the services they’ve used. They can disappear without paying for shopping, engineering work, refuelling or provisions. As we’ve seen in the law courts over the years, the rich are as ready to “do a runner” on their holidays as anybody else.

The law allowing vessels to be taken into preventive custody was created because of the impossibility otherwise of collecting maritime debts. The boat attached to the debt can be seized and immobilised to cover the money owing or until sufficient funds have been deposited to release the vessel. There is an extensive list of circumstances in which vessels can be seized. It is important to note that the debts belong to a specific vessel not to any other.

It is a precautionary measure ratified by most of the countries in the world through an international convention. A lien allows a vessel to be immobilised quickly and effectively before it has time to set sail. Sometimes a lien can be requested and applied in less than 24 hours.

Usually with judicial recovery measures it is necessary to prove the origin of the debt and the appearance of procedural good faith, fumus boni iuris, or to demonstrate that the opportunity to collect the debt will disappear, periculum in arrears, if the vessel leaves. A lien presupposes these through its nature of seizure. It is obvious that a boat can disappear over the horizon and with it any expectation of recovering money owed. Debtors are not notified of lien measures so they can’t escape as soon as they hear of a request.

Usually, the boat’s owners will proceed to make immediate payment as soon as they hear of the court action. They contact us and we arrange the release of the vessel. Of course, sometimes they will challenge the debt. In that situation the amounts are recorded by the court so the boat can be released without any admission of the alleged debt. This means the boat can continue on its travels without interruption pending a final judgment by the courts through an independent procedure.

The lien procedure puts a great deal of pressure on the owner of a boat which means it is sometimes abused. To avoid misuse of the measure, applicants must pay a security deposit which is usually at least 15% of the amount claimed. The exact figure is set by the judge. This bond covers expenses and damages caused if the claim is eventually rejected by the court.