Download here the chapter on Israel from the last edition of our Ship Arrests in Practice publication.
The law is stated as at December 1st 2011.

By John Harris & Yoav Harris
 jharris@017.net.il & yoavh@taxlawyers.co.il
2 Palmer’s Gate/36 Hanamal St.
P.O. BOX 33199, 31331 Haifa, Israel
Tel:  972-4-8627067
Fax: 972-4-8625257

1. Please give an overview of ship arrest practice in your country

1.1 Sources of the Admiralty Court’s Jurisdiction

The jurisdiction of the Israel Admiralty Court (which sits in Haifa) is established by the 1840 and 1861 English Admiralty Acts.  These acts were extended to the Dominions and Possessions of the United Kingdom by the Colonial Courts of the Admiralty Act 1890. Under the Palestine Admiralty Jurisdiction Order of 1937 these acts were extended to Palestine, then a British mandated Territory.
When the State of Israel was established in 1948, under the Law and Administration Ordinance, the Admiralty Court Acts of 1840 and 1861 became part of the domestic legislation of the newly established State.

In the year 1960 the Israel Shipping Law (Vessels) was enacted.  Section 41 of this law determines the Maritime Liens and their priorities, as follows: 
(1) The official expenses of selling a vessel pursuant to a judicial sale, 
(2) Port and port related charges and expenses,
(3) The costs of preserving a vessel pending Judicial sale,
(4) Payments due to the master and crew including damages for personal injury,
(5) Salvage expenses relating to the vessel, its cargo and equipment on board and expenses incurred in saving the lives of the crew and passengers.
(6) Damages for personal injuries to passengers
(7) Damages resulting from collisions or damage caused by the vessel to port installations and buildings, dry docks, and loss or damage to cargo and to passengers personal effects,
(8) Mortgages – no distinction is drawn between a local or foreign registered Mortgage,
(9) Necessaries.

The question of the existence of a Maritime Lien or a Statutory Claim in Rem is determined by the “Lex Causa” and the priorities, being procedural by the the “Lex Fori”.  If a party wants to prove the Lex Causa this is done by providing the Court with an expert opinion. If no such opinion is provided in accordance with the identity of a laws principle, Israel law will be applicable.

1.2 The Application for Arrest

The Application for Arrest must be filed with the Claim in Rem.
The Application must be supported by an Affidavit.  In practice a scanned Affidavit confirmed in front of the foreign lawyer or by an Israeli lawyer (by fax or e-mail) will be sufficient.  Additionally the Affidavit can be given by the arresting attorney. Copies of all the relevant documents in support of the arrest are attached to the Affidavit.
A Power of Attorney is not required.

The Court has a discretion to order that the arresting party furnish security.  The Court will order so on rare occasions such as when there is a serious doubt as to the validity of the documents constituting the application for arrest.

Special mention should be made of the Haifa Admiralty Court’s rather liberal attitude when ordering an arrest for necessaries.  The Court will order an arrest even if the necessaries were not supplied directly by the Claimant (for example when they were supplied by a subcontractor or a local agent) and even if the Master did not sign the agreement for the supply of the necessaries.

The arrest procedure is relatively swift and the arrest can be effected within 24 hours of receiving instructions.

If the application is made on a Saturday or Public holiday, this period may be extended as a result of the necessity to appear before the roster Judge and obtaining the formal Order of Arrest which is issued by the Marshal of the Admiralty Court.

The Order of Arrest will be normally discharged by the provision of a P&I Club or other acceptable guarantee.  In the latter case this would be normally a local bank guarantee.

The Vessel can apply to set aside the Arrest by contesting the merits of the claim or, on the grounds that the claim does not constitute a maritime lien or a statutory right in Rem under the Lex Causa or that the Admiralty Court does not have jurisdiction.

In order to avoid delay to the vessel, security can be furnished without  prejudice and subject to the vessel’s rights to contest the Arrest and to have the security provided cancelled.

Upon serving the Order of Arrest on the vessel’s Command, the Port Authority and Border Police, the Arrest becomes effective.

1.3 Court Fees and Legal Costs

The Court fees payable are 2.5% of the amount claimed in the Claim in Rem of which half is payable at the time of filing the claim.  No additional Court fee is payable for the Application of Arrest.

The legal fees for attending to the Arrest excluding VAT (at present 16%) and disbursements, are between US$3,000.- and US$6,500.-, depending on the complexity and urgency of the matter.
 
2. Which International Convention applies to arrest of ships in your country?

There are no International Conventions which apply to the arrest of ships in Israel.

3. Is there any other way to arrest a ship in your jurisdiction?

Ships or any other property of the debtor can be provisionally attached in a normal civil claim.  This requires that the cause of action is within the Court’s normal civil jurisdiction and the provision of a guarantee.

4. Are these alternatives e.g. saisie conservatoire or freezing order?

Apart from arrest or attachment no other alternatives for detaining the debtors property are available.

5. For which types of claims can you arrest a ship?

Those claims in respect of which the Admiralty Court has jurisdiction in terms of the enactments stated in Clause 1 above.

6. Can you arrest a ship irrespectively of her flag?

A ship can be arrested irrespective of its flag except an Israel registered vessel cannot be arrested for necessaries supplied in Israel.

7. Can you arrest a ship irrespectively of the debtor?

Israel law follows the Procedural Theory of Arrest so that there must be also a valid claim in persona – unless the maritime lien or statutory right in rem is clearly available irrespective of ownership or control of the ship.

8. What is the position as regards sister ships and ships in associated ownership?

It is not possible to arrest sister ships and ships in associated ownership.  It is possible to attach same.  See Clause 3 above.  In the case of ships in associated ownership, attachment would be subject to “lifting the corporate veil”.

9. What is the position as regards Bareboat and Time-Chartered Vessels?

A ship can be arrested for an obligation incurred by a Bareboat Charterer.  It is doubtful whether an arrest can be made for an obligation of a Time Charterer unless the maritime lien or statutory right in rem clearly confers this right.

10. Do your Courts require counter-security in order to arrest a ship?

Not normally, only in exceptional cases where the Court has material doubts as to the cause of action as same appears from the documentation filed in support of the Arrest.

11.  Is there any difference in respect to arresting a ship for a maritime claim and a maritime lien?

For Arrest purposes the Courts make no distinction between the historical maritime liens which are embodied in the 1840 and 1861 Admiralty Acts and the additional maritime liens (which are in effect statutory claims in rem) constituted by the Section 40 of the Shipping Law 1960.
See Clause 1 above.

12. Does you country recognise maritime liens?  Under which International Convention, if any?

Yes, as in Clause 11 above. None of the International Arrest Conventions apply in Israel.

13. What lapse of time is required in order to arrest a ship since the moment the file arrives to your law firm?

Normally one day.

14. Do you need to provide a POA, or any other documents of the claim to the Court?

A POA is not obligatory.  The Claimant must furnish an Affidavit which should clearly set out the cause of action and the documents in support thereof should be attached to the Affidavit.

15. What original documents are required, what documents can be filed electronically, what documents require notarisation and/or apostille, and when are they needed?

For the Arrest Application and Order no original documents are required, but the originals would have to be produced if the claim proceeds to trial.

16. Will your Courts accept jurisdiction over the substantive claim once a vessel has been arrested?

The Court will only accept jurisdiction if the Claim in Rem is recognised under the laws mentioned in Clause 1 above.  The Application for Arrest is ancillary to the Claim in Rem which means that if there is no jurisdiction over the Claim in Rem – an arrest cannot be effected.

17. Which period of time will be granted by the Courts in order for the claimants to take legal action on the merits?

After preliminary hearings the matter is normally concluded within one year as from the date of filing the Claim in Rem.  As a matter of practice the Arrest in itself normally determines the matter.

18. Do the Courts of your country acknowledge wrongful arrest?

The Court can award damages for wrongful arrest if the arrest or attempted arrest is malicious or grossly negligent.

19. Do the Courts of your country acknowledge the piercing and lifting of the corporate veil?

The Corporate veil can be lifted in circumstances of fraud, deceit or maliciousness.

20. Is it possible to have a ship sold pendente lite; if so how long does it take?

A ship can be sold pendente lite if it can be shown that the continuation of the arrest will substantially affect the value of the ship.  In this case the net sale proceeds are regarded as having substituted the ship for all purposes, including the eventual determination of the validity of the claims in rem and the priorities.

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Other Offices: Jerusalem, Israel; Tel Aviv, Israel

A brief historical background is required in order to better understand the present principles of the Israeli Admiralty jurisdiction.  Prior to the establishment of the State of Israel (in 1948), during the period of the British Mandate, the Supreme Court of Palestine was established by the provisions of the Palestine Order in Council of 1922, in terms of powers set out in the Foreign Jurisdiction Act of 1890. Thereafter, following the Palestine Admiralty Jurisdiction Order of 1937, which was enacted under the powers of the Colonial Courts of Admiralty Act of 1890, it was ruled that the Supreme Court of Palestine shall be the Admiralty Court and shall exercise Admiralty jurisdiction.

The Palestine Admiralty Court applied the admiralty law adopted by the English High Court of Admiralty in 1890, and therefore statutes enacted in England following 1890 did not apply in Palestine.  The Admiralty Court had  thus  the same jurisdiction as that exercised in admiralty matters by the High Court of Justice in England in 1890, subject to any enactments by the local legislative authority, and could exercise such jurisdiction in the same manner and to the full  extent as the High Court in England.

Upon the establishment of the State of Israel, and following the Law and Administration Ordinance enacted at that time by the Provisional Council of State, it was ruled that the law which existed in Palestine on 14th May 1948 shall remain in force and that the law courts existing in the territory of the State shall continue to function within the scope of the powers conferred upon them by law.  In 1952 in terms of the Israeli Maritime Court Law, it was provided that all the powers and procedures of the Supreme Court, in its capacity as a Court of Admiralty, shall be vested in the District Court of Haifa, which shall act as the Maritime or Admiralty Court (the “Court”).

Thus, basically, the Admiralty law and practice in the State of Israel are still based on the provisions of the British Admiralty Court Acts of 1840 and 1861 and the rules of procedure as set out in the Vice Admiralty Rules of 1883.  Accordingly, the above laws and procedures will govern the proceedings for enforcement of a foreign vessel’s mortgage before the Court.

The Court has the exclusive and full jurisdiction to admit and deal with all claims and causes of action of any person in respect of any mortgage on a ship or vessel, and to decide in any suit instituted by any such person in respect of any such claims or causes of action, subject to the said ship or vessel being under arrest by process issuing from the Court, or the proceeds (from the sale thereof) having been so arrested.

The consequences of this conditional jurisdiction are that the commencement of “in rem” proceedings based on a claim in respect of a mortgage over a foreign flag vessel requires the ship or vessel to have been arrested by another third party based on a different cause of action in respect of which the Court has jurisdiction (such as, for instance, claims for necessaries supplied, for damage to imported cargo, damage done by the ship, wages due to a seaman, etc.).  Similarly, the jurisdiction of the Court over claims for building, equipping or repairing of a ship is also subject to the ship or proceeds thereof being under arrest by the Court.

A question arises as to the applicability of the Israeli Shipping (Vessels) Law of 1960 (the “Shipping Law”), which deals with mortgages over Israeli registered vessels, to foreign vessels.  The Shipping Law determines, inter alia, the rank of priority of 8 causes of action secured by a maritime lien.  The applicability of the Shipping Law to foreign vessels has been debated in Israel for some years and is of great importance when attempting to enforce a foreign vessel’s mortgage before the Court.  This issue was brought (on appeal) before the Israeli Supreme Court in 1990 in A.C. 352/87 Griffin Corporation v. Koor Trade Ltd. et al (the “NADIA S”) within the framework of a claim for the enforcement of a mortgage over a foreign vessel and various other claims of creditors of the vessel which were allegedly secured by a maritime lien.  The vessel had been originally arrested by the crew to secure their in rem claim for unpaid wages and thereafter various other creditors obtained additional arrest orders to secure their alleged maritime liens.  The vessel was auctioned by the Court and as the proceeds could not satisfy all the claims, the question which was debated was the validity of the various alleged maritime liens and their order of preference and priority in conjunction with the validity of the mortgage.

The Israel Supreme Court ruled (by majority) that the validity and existence of a maritime lien will be determined by the “lex causae” governing the merits of the claim in the same manner as the validity of the mortgage.  The rank, priority and preference of the liens, being classified as being of procedural nature, will be determined by the law of the forum (in accordance with the principles of the rules of choice of private international law).

It follows from this ruling that Chapter 4 of the Shipping Law, which determines the liens and their rank of priority vis-à-vis a mortgage, will apply (for the purpose of determining the rank of priority) also to a foreign vessel and to a claim for the enforcement of a mortgage registered on a foreign vessel, despite the reference in the Shipping Law to a mortgage over an Israeli registered vessel only.

In light of the ruling in the “NADIA S” case (application of Chapter 4 of the Shipping Law as to the rank of priorities), the jurisdiction of the Court to enforce a foreign mortgage over a foreign vessel, would appear not to be subject to the pre-condition of the Admiralty Court Acts that the ship or vessel must be under arrest prior to institution of in rem proceeding for the enforcement of the mortgage.

According to the Shipping Law, a charge to secure a mortgage debt shall take precedence over any other charge except for a limited list of charges enjoying a first lien on the vessel, which are in summary as follows:

(1)    the expenses incurred in order to bring about the sale of a vessel
(2)    port dues and similar fees
(3)    expenses of guarding and maintenance of the vessel from the day of her entry to the last port to the day of her sale
(4)    crew wages and other payments claimed by the crew
(5)    salvage claims
(6)    compensation for the death or bodily injury of passengers in the vessel
(7)    compensation for damage resulting from collision at sea or from other navigational accident.
(8)    payments in connection with supplies or services provided to the vessel.

Notwithstanding the foregoing, the Shipping Law provides that the only lien which has no priority over a mortgage is that under (8) above.

Usually, it will be in the mortgagee’s interest to appoint a receiver on its behalf in order to safeguard the vessel’s interests against the claims of other creditors whose rank of priority supersedes that of the mortgagee.  This will probably be the case when the action is uncontested by vessel’s owners and this option is granted by virtue of the Vice Admiralty Rules allowing any person who is interested in the action though not named in the writ of summons to join  either as plaintiff or as defendant, subject to the Court’s terms and instructions.

Finally, it is to be noted that the Court may either before or after final judgment order that the vessel under arrest of the Court be appraised, or be sold with or without appraisal, by public auction or by private contract, and if the vessel is deteriorating in value, the Court may order it to be sold forthwith and the sale proceeds shall serve as substitute security for the claim, pending judgment.

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Contact 2: Gabi Disegni, Adv. (Associate)

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