Summary: Part I of this article examined the interplay between admiralty and insolvency law in India, particularly the effect of insolvency proceedings against a corporate debtor on in rem proceedings against its vessels. Part II turns to the conflict between in rem admiralty actions and in personam arbitration proceedings. It traces how Indian courts have upheld the right to arrest a vessel notwithstanding an arbitration agreement, while devising procedural mechanisms to permit security obtained through arrest to be retained pending arbitration, ensuring that the substantive dispute is resolved by the arbitral tribunal.
Introduction
The maritime industry spans multiple legal regimes, leading to complex jurisdictional issues during disputes. In India, the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (“2017 Act”), governs the arrest of vessels and adjudication of maritime claims through actions in rem, while the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), provides a comprehensive framework for the resolution of disputes through arbitration.
The concurrent applicability of these two self-contained legislations has generated significant jurisprudential discourse on whether a vessel can be arrested in an action in rem, even if there is an arbitration agreement between the parties. This article examines the evolving judicial approach of reconciling admiralty jurisdiction with the arbitration regime. It analyses the distinction between actions in rem and actions in personam, the maintainability of vessel arrest proceedings under the Arbitration Act, and the procedural mechanism devised by Indian courts for retention of security obtained through arrest pending arbitration. The discussion traces the development of key principles through landmark decisions of the Bombay High Court, which have sought to harmonise these competing frameworks while preserving the efficacy of both regimes.
Conflict with the Arbitration Act
Distinction between an in rem and an in-personam action
The Bombay High Court (“BHC”), in its decision in Osv Crest Mercury 1 (IMO 9724398) v. Vision Projects Technologies Private Limited (“OSV Crest Mercury”)[1], has clarified much of the confusion surrounding the conflict between arbitration and admiralty claims. This commercial appeal[2] arose from a July 2022 BHC judgement, which held that whilst disputes between parties were amenable to arbitration, it did not prevent the vessel’s arrest in an action in rem.[3]
The central issuewas whether an Admiralty Court’s jurisdiction could be invoked to arrest a vessel to secure a claim in arbitration proceedings initiated against the vessel’s owners. The Court ruled that where a legitimate maritime claim exists, the Admiralty Court’s jurisdiction was not dependant on the Plaintiff’s ultimate purpose for filing admiralty proceeding.[4] The Bench relied on Siem Offshore Redri AS v. Altus Uber (“Siem Offshore”)[5] and Altus Uber v. Siem Offshore Redri AS (“Altus Uber”)[6]to confirm that referring a dispute to arbitration does not ipso facto prevent a vessel’s arrest in an action in rem. Under the 2017 Act, a vessel is treated as a separate juristic entity that can be sued without joining the owner in the proceedings.[7] The Court drew a clear distinction between an action in rem under the 2017 Act and an action in personam under the Arbitration Act, reaffirming that an action in rem can be converted into an action in personam only upon the fulfilment of three conditions: (a) the defendant enters an appearance; (b) the defendant submits to the court’s jurisdiction; and (c) the defendant furnishes security for the vessel’s release. [8]
The Court held that admiralty jurisdiction under the 2017 Act cannot be circumvented by invoking arbitration. It also noted that parties willing to arbitrate shouldn’t be disadvantaged and have their right to obtain security by a vessel’s arrest extinguished if they have a legitimate maritime claim under the 2017 Act.[9]
Can a vessel be arrested under the provisions of the Arbitration Act?
The Arbitration Act allows parties to seek interim measures from a court for arbitration proceedings.[10] The question, therefore, is whether an application under the Arbitration Act is maintainable for arrest of a vessel to secure an arbitral award.
A Full Bench of the BHC in J.S. Ocean Liner LLC v. M.V. Golden Progress & Anr. (“Golden Progress”)[11] held that the Arbitration Act cannot be construed to include in rem jurisdiction of an Admiralty Court. The Court held that the Arbitration Act does not confer courts with powers to order or continue a vessel’s arrest.[12] The arrest of a vessel has the potential to affect multiple third parties, including charterers, cargo owners, and other holders of maritime claims, who may not be signatories to the arbitration agreement. Consequently, if arrest proceedings were allowed under the Arbitration Act, third parties would not be able to assert their respective interests.[13] The Court concluded that a vessel cannot be arrested under the provisions of the Arbitration Act but can only be done by invoking a court’s admiralty jurisdiction.[14]
The BHC in Siem Offshore reaffirmed Golden Progress and held that a court has no power to arrest a vessel under the Arbitration Act, irrespective of whether an interim measure is sought in a domestic arbitration or a foreign-seated international commercial arbitration.[15]
Arrest of a vessel pending arbitration proceedings
The Court in Golden Progress also addressed the issue of maintainability of a suit for a vessel’s arrest only towards obtaining security in a pending arbitration. It considered express statutory provisions in the UK, USA and South Africa that provide for retention of security towards satisfaction of an arbitral award through admiralty proceedings but recognised the absence of such explicit provision in Indian law.[16]
The Court observed that where there is a lacuna in the law (Golden Progress was decided before the 2017 Act’s enactment), the courts shall device procedural rules by seeking recourse to basic principles. It applied the retention method, i.e. keeping a vessel under arrest as security (“Retention Method”) under the International Convention on Arrest of Ships, 1999 (“Arrest Convention, 1999”). The Court observed that under the Retention Method, this approach is consistent with widely recognised international practice under which security obtained through a vessel’s arrest in an action in rem is retained towards satisfaction of the judgement or award of a court or arbitral tribunal. The Court affirmed the maintainability of an action in rem within the admiralty jurisdiction for claim recovery and arrest of a vessel, notwithstanding the parties’ agreement to refer the dispute to arbitration.[17]
Procedurally, while security is retained, the suit in rem is stayed and the final award may be rendered by the arbitral tribunal. The award-holder is required to demonstrate to the satisfaction of the Admiralty Court that the award is enforceable under the Arbitration Act. Where the award is determined to be enforceable as a decree of the court, the security retained pursuant to the action in rem shall be applied towards the satisfaction of such decree. The Court further clarified that the retention of security remains subject to the Admiralty Court’s discretion.[18]
Subsequently, the BHC in Rushab Ship International LLC v. M.V. African Eagle (“African Eagle”)[19] considered maintainability of an action in rem confined to seeking security pending arbitration. The Court relied on Bharat Aluminium Company v. Kaiser Aluminium Technical Services INC[20] to answer in the negative. It held that an “inter-partes” suit only for interim relief pending arbitration is not maintainable. The Court distinguished its earlier ruling in Golden Progress and stated that the suit in that case was primarily for a claim and for decree; and not merely for security pending arbitration proceedings. The Court held that its admiralty jurisdiction to arrest a vessel in an action in rem should not be exercised to provide security of an award, which may be made in arbitration proceedings. The purpose of exercising its admiralty jurisdiction is to provide security in respect of the action in rem, and not to provide security in other proceedings like arbitration. It concluded that if the plaintiff invokes the court’s jurisdiction to obtain the ship’s arrest as security for an award in an arbitration proceeding, the Court should not issue a warrant of arrest.[21]
Notably, both Golden Progress and African Eagle were decided prior to the enactment of the 2017 Act. However, the BHC in Siem Offshore held that Golden Progress remained good law even post enactment of the 2017 Act, since the procedure for retention of security, if the parties have agreed to refer the dispute to arbitration (which is either pending or yet to be commenced), is not provided under the 2017 Act. Thus, the procedure devised by the Full Bench in Golden Progress was held to be neither inconsistent nor prohibited by the 2017 Act.[22] The Court maintained the distinction between Golden Progress and African Eagle, i.e., the suit in African Eagle was only for interim relief and no decree for claim recovery was sought therein.
In Altus Uber, the Division Bench of the BHC considered the argument that the admiralty suit was barred because it was filed only to obtain security for the ultimate arbitral award. The Court, upon reviewing the plaint and allegations, disagreed and held that determining whether an admiralty suit in rem has been filed merely to secure an arbitral award must be decided on a case-to-case basis.[23] On the facts of the case, the Court concluded that the suit could not be characterised as having been filed only to secure the claim in pending arbitration proceedings, as the suit had been instituted to enforce a maritime claim. The Court, however, declined to formulate any general rule.[24]
Hence, presently the arrest of a vessel can be obtained as per the mechanism laid down in Golden Progress,while the arbitration proceedings continue simultaneously.
In summary, Indian courts have reconciled the competing demands of the two legislations by recognising that merely because the dispute is amenable to arbitration does not ipso facto imply that the vessel cannot be arrested in an action in rem. The Retention Method, as formulated in Golden Progress, provides the procedural bridge between the two regimes, i.e. permitting security obtained through arrest to be retained pending arbitration, whilst the substantive dispute is resolved by the arbitral tribunal.
Conclusion
The convergence of admiralty law with the insolvency framework and arbitration in India is still developing. Each regime serves a distinct objective and overlaps on certain key points. While admiralty law facilitates the swift arrest of vessels and protection of maritime claims; the insolvency framework seeks to preserve distressed assets through moratorium; and arbitration upholds party autonomy. Indian courts have endeavoured to harmonise these self-contained legislations in instances of potential conflict, ensuring that a claimant is not denied its rights under any of the three enactments.
The admiralty law principle of distinction between an action in rem and an action in personam forms the bedrock of this harmonious judicial construction. The recognition of a vessel as a separate juristic entity has been utilised in saving admiralty jurisdiction from being ousted through invocation of CIRP or arbitration proceedings. As courts continue to address conflicts on a case-by-case basis, greater predictability and clarity will help reinforce a more coherent multijurisdictional landscape in India.
[1] Commercial Appeal (L) No. 30604 of 2022 in Interim Application No. 3510 of 2022 in Commercial Admiralty Suit No. 47 of 2022 (“OSV Crest Mercury”). This judgement is presently under appeal before the Supreme Court (SLP(C) No. 020112 / 2024). As of the order of the Supreme Court dated September 9, 2024, the parties were trying to negotiate/ settle the matter. The Supreme Court clarified that there was no stay of the impugned judgement.
[2] Appeals in Admiralty Courts having original jurisdiction (i.e., Calcutta, Bombay and Madras) go before their Commercial Divisions established under the Commercial Courts Act, 2015, as opposed to other Admiralty Courts that do not have original jurisdiction.
[3] Vision Projects Technologies Private Limited v. Osv Crest Mercury 1 (IMO 9724398), Interim Application (L) No. 17189 of 2021 in Commercial Admiralty Suit (L) No. 13462 of 2021.
[4] OSV Crest Mercury ¶13.
[5] 2018 SCC OnLine Bom 2730.
[6] 2019 SCC OnLine Bom 1327. This judgement is presently under appeal before the Supreme Court (SLP(C) No. 027152 / 2019).
[7] M.V. Elisabeth (n 1).
[8] OSV Crest Mercury, ¶15; M.V. Elisabeth (n 1).
[9] J.S. Ocean Liner LLC v. M.V. Golden Progress & Anr., 2007 SCC OnLine Bom 69 (“Golden Progress”).
[10] Section 9, Arbitration Act: “9. (1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court- (ii) for an interim measure of protection in respect of any of the following matters, namely:- […].”
[11] 2007 SCC OnLine Bom 69.
[12] Golden Progress, ¶31.
[13] Golden Progress, ¶35.
[14] Golden Progress, ¶36.
[15] Siem Offshore,¶33.
[16] Golden Progress, ¶60, 61.
[17] Golden Progress, ¶73, 78.
[18] Golden Progress, ¶78(iv).
[19] 2014 SCC OnLine Bom 620.
[20] (2012) 9 SCC 552.
[21] ibid, ¶51.
[22] Siem Offshore,¶38, 39.
[23] Altus Uber,¶100.
[24] Altus Uber,¶98, 99.
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