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Web Alert: Australia – Recognition of foreign maritime liens?

03 February 2016

In the recent landmark decision of The Sam Hawk [1], the Federal Court of Australia held that a foreign maritime lien (even if the claim does not constitute a maritime lien under Australian law) is enforceable in Australia and capable of founding the arrest of a ship under the Admiralty Act 1988 (Cth) (Act).

The Sam Hawk has significant ramifications for ships operating in Australian waters. The decision that in rem jurisdiction can be established in Australia by a foreign maritime lien expands the basis on which ships can be arrested in Australia and contradicts the Privy Council decision in the seminal case of The Halcyon Isle [2].

The facts of The Sam Hawk

The ship was time chartered to Egyptian Bulk Carriers (EBC) under a charterparty that had a ‘no lien’ clause. EBC entered into a bunker supply contract with Reiter Petroleum Inc (Reiter), a Canadian company, to stem the ship in Turkey. The contract between ECB and Reiter was subject to Canadian law and purported to grant a contractual maritime lien over the ship stating that US law would apply to determine the existence of any maritime lien for the supply of bunkers.

Reiter was not paid for the bunkers supplied in Turkey and they subsequently arrested the ship in Albany, Western Australia, on the grounds that the owner of the ship, SPV Sam Hawk Inc, was liable to pay for the bunkers by virute of a maritime lien.

The in rem proceedings invoked by Reiter under the Act refereed to section 15 citing the existence of a maritime lien or, in the alternative, a general maritime claim in respect of goods and services supplied to the ship under sections 4(3)(m) and 17.

The owner of the ship put up security, so as to have her released, and thereafter commenced proceedings in Australia to have the arrest struck out i.e. that it was wrongful.

The decision

The law at this point was that an Australian court would consider the question of the existence and enforcement of a foreign maritime lien with reference to Australian law (the lex fori), following the decision of The Halcyon Isle.

The owner argued that the court should therefore decide according to Australian law and, as Australian law does not recognise a maritime lien for the supply of necessaries, including bunkers, that the arrest should be struck out.

Reiter, on the other hand, sought to rely on the existence of a maritime lien for the supply of bunkers, under foreign law. It argued that either US law should apply as the proper law of the supply (the choice of law for questions relating to maritime liens) or, in the alternative, Canadian law (the law of the contract) both of which granted a maritime lien over the ship, regardless of whether the supply was to charterer’s account.

The Court stated that this question remained open in Australia, referring to the High Court decision in John Pfeiffer Pty Ltd v. Rogerson [3] . Based on the principles decided in that case, the Court held that the Privy Council decision in the The Halcyon Isle should no longer represent the law in Australia and Australian courts should recognise and enforce a maritime lien according to the lex causae. This was the law of the US and thus Reiter's arrest was upheld.

Impact

The practical effect of this decision is that Australia is potentially now an arrest and enforcement friendly jurisdiction which has significantly expanded the number of claims that can bring about the arrest of a ship.

However, it should be noted that the Court did state such issues would ultimately have to be decided at a final hearing. As such, unless this matter is resolved by agreement we will have to wait until the final judgement to know whether Reiter's claim for a maritime lien is ultimately upheld.

Nevertheless, this decision has already seen reactive claims being commenced in Australian courts and this is likely to continue especially at a time when the OW Bunker saga continues. 

This article intends to provide only general guidance on the above issues. It is not intended to provide legal advice in relation to any specific query. ​In case of any doubt, the member should not hesitate to contact the authors, or their usual club contact. The law is not static and if in any doubt The Standard Club is always on hand to assist.

1. Reiter Petroleum Inc v The Ship "Sam Hawk" [2015] FCA 1005
2. [1981] AC 221
3. [2000] HCA 36​