In Brief

  • The pendency of a foreign arbitration does not, by itself, prevent an Indian court from exercising admiralty jurisdiction and arresting a vessel in respect of a qualifying maritime claim.
  • Section 9 of the Arbitration and Conciliation Act, 1996 is not the source of the power to arrest a vessel. Ship arrest is an action in rem founded upon admiralty jurisdiction, and must therefore be considered by reference to the law governing that jurisdiction.
  • The real issue is therefore one of coexistence. A foreign arbitral tribunal may determine the merits of the underlying dispute, while an Indian admiralty court may exercise its independent jurisdiction over a vessel within its jurisdiction. That jurisdiction, however, arises only where the claimant establishes a maritime claim and satisfies the statutory requirements for arrest.

The Intersection of Admiralty, Arbitration and Conflict of Laws

The most reliable security against a claim in maritime disputes is the vessel itself. It is natural then, for parties to secure their claims by attempting to move against the vessel. .Parties may seek interim measures or security in support of an arbitration; separately, where the underlying dispute gives rise to a maritime claim, they may invoke the admiralty court’s jurisdiction in rem and seek arrest of the vessel.This article focuses on the latter route and specifically on the question of whether an admiralty court may arrest a vessel solely for the purpose of securing the claimant’s claim in a foreign arbitration proceeding. 

For the arrest of a vessel by an admiralty court (in India), two requirements must essentially be satisfied: the vessel must be within the court’s jurisdiction, and the claimant must establish a maritime claim falling within the exhaustive list in Section4(1) of the Admiralty Act, 2017 and satisfy the statutory requirements for arrest. The Admiralty Act, 2017 does not, however, recognise the need to obtain security for a foreign arbitration as an independent maritime claim, nor does it expressly provide a procedure for retaining security obtained through an admiralty arrest pending such arbitration. This statutory silence gives rise to two questions: (1) whether an admiralty arrest may nevertheless be maintained where the underlying maritime claim is being pursued in a foreign arbitration; and consequently, (2) whether presence of arbitration clause or the commencement or pendency of such arbitration prevents an Indian admiralty court from arresting the vessel.

The decisions in Golden Progress and Altus Uber suggest that the answer is not that arbitration displaces admiralty jurisdiction. The relevant question is whether the claimant has a maritime claim capable of supporting an action in rem and whether the requirements for arrest under Indian admiralty law are satisfied.

Golden Progress: The Foundation

J.S. Ocean Liner LLC v. M.V. Golden Progress & Anr., 2007 SCC OnLine Bom 69, was a Full Bench decision of the Bombay High Court. Its significance for the present discussion lies in the distinction it drew between an application under Section 9 (for interim relief pending arbitration) and an independent admiralty action in rem. At paragraph 36, the Court held that Section 9 could not itself be used to arrest a vessel because the relief contemplated by that provision is not an in rem remedy. The conclusion did not, however, leave a claimant without recourse to admiralty jurisdiction.

The Full Bench’s recognised that an action in rem for recovery of a maritime claim and arrest of the vessel could be maintained even where the parties had agreed to arbitrate. It also addressed the manner in which security obtained through arrest could be retained while the substantive dispute proceeded to arbitration. The significance of Golden Progress therefore lies in separating the forum chosen to determine the underlying dispute from the independent admiralty jurisdiction exercised against the vessel. The 2018 Altus Uber judgment subsequently relied upon this reasoning where arbitration had already commenced.

The 2018 Altus Uber Holding: Arbitraion Already Underway

In Siem Offshore Rederi AS v. Altus Uber (IMO No. 9385300), 2018 SCC OnLine Bom 2730, the London arbitration had already commenced before the admiralty suit was filed. The defendant argued that, once arbitration had commenced, the claimant could no longer invoke admiralty jurisdiction in respect of the same underlying claim merely to obtain security for the eventual award. On that view, the claimant had exhausted its remedy by referring the dispute to arbitration and the admiralty suit was merely a means of securing the award.

The Single Judge did not accept that proposition. The Court treated the right in rem as a valuable right available in respect of a maritime claim and reasoned that it could not be denied merely because the claimant had agreed to arbitration. In the absence of a statutory bar or express prohibition, commencement of arbitration did not, in itself, take that right away. Otherwise, a claimant would effectively have to choose between pursuing arbitration and preserving security against the vessel.

The Court developed this further by returning to Golden Progress and Article 2(3) of the 1999 Arrest Convention. The provision recognises that a ship may be arrested to obtain security notwithstanding that, by virtue of a jurisdiction or arbitration clause, the maritime claim is to be adjudicated elsewhere. The 2018 judgment relied upon this principle to reinforce the distinction between the forum in which the merits are determined and the jurisdiction in which security against the vessel may be obtained.

The Court made the position clear and said “It matters not whether arbitration has been invoked or is yet to be invoked.” The commencement of arbitration does not, by itself, deprive the claimant of an otherwise available action in rem. The Court therefore treated the procedure recognised in Golden Progress as capable of operating where the substantive dispute was already before an arbitral tribunal. The proposition is important, but it does not mean that every claim pending in arbitration can be secured through an admiralty arrest.

The 2019 Division Bench: The Limits of the Principle

The subsequent decision, Altus Uber (IMO No. 9385300) v. Siem Offshore Rederi AS, 2019 SCC OnLine Bom 1327, concerned the issue of whether the admiralty suit was, in substance, merely an attempt to protect or secure the claim being pursued in the pending London arbitration. The defendant contended that the prayers for recovery were only a means of securing the eventual arbitral award.

The Division Bench did not accept that characterisation on the facts before it. It noted that the suit was brought to recover amounts claimed by the plaintiff and that the underlying claim was a maritime claim. When the plaint was read as a whole, the action was treated as an admiralty proceeding founded upon that maritime claim, rather than as a proceeding whose sole purpose was to secure the foreign arbitration.

The Division Bench at paragraph 100 made clear that the question could not be answered by a general rule. The plaint and its allegations had to be examined as a whole and in light of the facts and circumstances of the particular case. The Court expressly clarified that a suit brought to secure a claim in arbitral proceedings could not be maintained irrespective of the requirements of the Admiralty Act, 2017. Those requirements and all relevant preconditions had to be satisfied.

In practical terms, this means that the claimant must first establish that the underlying dispute gives rise to a maritime claim falling within Section 4 of the Admiralty Act, 2017, and that the proposed arrest satisfies the statutory conditions governing arrest under Section 5, including the circumstances in which the Court may arrest a vessel within its jurisdiction. It further stated that it was not laying down a general principle that a suit simpliciter to secure a claim in arbitration abroad would always be maintainable in admiralty jurisdiction.

The two decisions are therefore better understood as complementary. The 2018 judgment addresses the effect of commencing arbitration: it does not, by itself, extinguish an independent right in rem that is otherwise available in respect of a maritime claim. The 2019 judgment addresses the limits of that proposition: the claimant must still establish a proper maritime claim, satisfy the Admiralty Act, and demonstrate that the particular admiralty action is maintainable. Foreign arbitration is therefore neither an automatic bar to arrest nor an independent source of the right to arrest.

Key Takeaways

For shipowners, a foreign arbitration clause is not, by itself, an absolute answer to an application for arrest in India. Where a vessel is within Indian jurisdiction and the claimant establishes a maritime claim satisfying the Admiralty Act, the pendency of arbitration does not automatically defeat an action in rem. At the same time, the claimant cannot treat the pending arbitration as sufficient in itself. The maintainability of the admiralty action must be established independently.

For claimants, the arrival of a vessel at an Indian port may therefore remain significant even after foreign arbitration has commenced. The commencement of arbitration does not, by itself, close the door to an action in rem. The starting point, however, must be the maritime claim and the statutory basis for admiralty jurisdiction. The claimant must establish that the claim falls within the Admiralty Act and that the conditions for arrest are satisfied. The fact that security may be useful in protecting a future award cannot, without more, supply the jurisdictional foundation for arrest. The 2019 Division Bench’s insistence upon examining the plaint and surrounding facts is therefore central to the analysis.