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Arrest of ships in Mexico, by Murillo, Maldonado, Arredondo y Asociados

editor — Thu, 20 Feb 2003 09:37:40 +0000

Arrest of Ships in Mexico, by Murillo, Maldonado, Arredondo y Asociados, S.C.

Introduction.

The arrest of ships under Mexican law is in general terms no different than the arrest of other assets owned by a debtor or a wrongdoer. However, as is common to the maritime industry, there are some variations in the applicable substantive and procedural laws that render the arrest of vessels in Mexico somewhat different to the ordinary civil and commercial seizure of assets.

The Mexican legal system is based on civil law hence it is codified and all formalities contained in the substantive and procedural laws attaching to the arrest of ships must be strictly met otherwise the Courts will not issue an arrest order or if issued, the arrest may be claimed wrongful by the Defendant which, if successful, will entitle him to claim damages from the Plaintiff.

Applicable Law.

The above is key to understanding the arrest of vessels in Mexican jurisdiction as well as the fact that Mexico is not a party to any of the international treaties dealing with this subject, although many of their main principles have been adopted by our legislation. As is usual with principles contained in international treaties, domestic Courts may give them different interpretations and Mexico is no exception. In Mexico the Courts are open to adopt the interpretation most acceptable to the international milieu provided it is not contrary to the domestic legal system. This grants particular characteristics to the Mexican jurisdiction, which is an aspect which understanding is of wide importance for Mexican attorneys assisting foreign based clients.

Having said the foregoing, Mexican law does recognise maritime liens and mortgages and it contains certain procedural provisions that allow a more expedient procedure although some hindrances will be usually faced throughout the proceedings.

Thus, the applicable legislation is the Law of Navigation, which was enacted in 1994. Article 5 of the aforementioned law envisages the order in which supplementary legislation shall apply in the absence of a provision. In general, the laws concerning ship arrest apply in a supplementary fashion as follows:

1. Law of Navigation and its regulations and International Treaties to which Mexico is party.
2. Code of Commerce.
3. Civil Code.
4. Federal Code of Civil Procedure

Jurisdiction.

The question of jurisdiction of Mexican Courts is solved by Article 4 of the Law of Navigation, which provides that all vessels situated within Mexican waters are subject to Mexican law and jurisdiction. In addition, Article 3 stipulates that all matters concerning maritime affairs fall within the competence of Federal Courts.

When considering the foregoing, it is important to bear in mind that Mexican law is respectful of contractual Law and Jurisdiction clauses. In cases where such a provision is contained in a contract, the claimant can proceed with the rightful arrest in Mexico in order to obtain security and the parties will be at full liberty to either submit to the Law and Jurisdiction clause or waive it and continue with proceedings in Mexican jurisdiction. In each of these cases the procedure will vary depending on the position of the parties. We shall make general comments in this respect further below although it is important to consider that this aspect deserves a thorough case by case analysis.

Type of Actions that can be claimed in Mexican Courts to arrest a ship.

Mexican law, in general, avails creditors with remedies to claim all types of debts and arrest a vessel to secure their payment. The maritime industry is additionally afforded with privileged or preferred claims or liens and in some cases the creditor is entitled to retain assets without a Court order provided the corresponding proceedings are commenced in a reasonable period of time.

The ranking of the claims upon vessels is as follows:

1. Crew wages and other monies owed to crew members.
2. Claims arising out of wrongful death or injury, resulting from the exploitation of the vessel.
3. Claims for salvage awards.
4. Claims for use of port facilities or services.
5. Claims for damages in tort.

These claims maintain their privileged status provided proceedings to arrest the vessel are commenced within one year as from the time they are born. This time frame is different to the statute of limitation applicable to the claim. This is, if a claim loses its privileged status it will remain in force until it is time barred.

Foreclosure.

A mortgagee is availed by Mexican law with the necessary remedies to impose a precautionary arrest upon a vessel in Mexico and continue with formal litigation in the jurisdiction set forth in his contract or to arrest the vessel and complete foreclosure in Mexican Courts.

It is important to consider that the privileged claims enlisted above are preferred upon a mortgage.

Formalities and Proceedings.

As mentioned lines above, formalities are an important part of Mexican law. This is particularly true when it comes to documentary formalities that should be met by the parties to the proceedings which, in general terms, are as follows:

- Power of Attorney prepared as per a specific wording and duly apostilled.

- All documents must be in originals or copies certified by a Notary Public.

- All documents must be in Spanish language or translated by an official translator.

- All documents issued by a foreign authority must be legalized or duly apostilled.

- The party requesting the arrest must post counter-security in the form of a bond to guarantee possible damages for wrongful arrest. This Plaintiff may be excused from fulfilling this requirement in cases where the claim is based on the creditor s right to retain the vessel, as in claims for salvage awards and in cases where the claim is based on a document of title.

Further formalities may be required when reviewing documents on a case by case basis. However, the above summarises the main documentary formalities required to appear in Court.

Save for specific cases, the laws of Mexico do not envisage in rem actions, consequently most proceedings commenced in Mexican Courts are in personam. This peculiarity of Mexican law has its pros and cons since in a number of cases the in personam debtor may or may not be the registered owner of the vessel, which may expose the Plaintiff to indemnify the actual owner of the vessel for wrongful arrest. This hindrance may be surmounted if the appropriate representations are made in Court and the proper documentation is produced to support the claim and the validity of the arrest. On the other hand, a convenience is that the arrest of a sister ship or of other assets owned by the debtor can be made on an easier basis.

Our next comment is directed to discuss at which moment can a vessel be arrested. In this connection Mexican law allows a creditor to arrest a vessel before formal litigation is commenced or during formal litigation.

In the first case, the arrest of the vessel is only precautionary or provisional and there is an obligation to commence formal litigation within three to thirty days, depending on the case. In the case of a petition to arrest a vessel during formal litigation, the Court will usually grant it if the documentary and other formalities are properly met.

In all cases the Court will verify whether or not the petition to arrest the vessel is reasonable based on the criteria set forth in the Code of Commerce, which can be summarised to the possibility that the debtor may hide or dilapidate the vessel.

Release of the Vessel.

The release of the vessel may be achieved in several ways being the most expedient the posting security by the debtor in the form of a bond or in a form satisfactory to the claimant. In this case, if the debtor considers the arrest is wrongful he may claim it in Court and recover damages.

Other ways of obtaining the release of the vessel involve claiming the arrest as wrongful while the vessel is arrested, which is usually time consuming and is not advisable when taking into consideration the mitigation of damages.

Time and Cost.

The documentary requirements involved in the arrest of a ship in Mexico can give an idea of how time consuming the collection of documents and drafting of applications may be. It is always recommendable to establish an open a dynamic dialogue between the client and the lawyer in order to make joint efforts to achieve an expedient and cost effective arrest.

This is also true and may even be more compelling when the vessel has been arrested and it is necessary to take action to release the vessel.

As regards costs, Mexican Courts do not charge for admitting or handling files hence the costs that should be borne in mind are those in connection with collecting the necessary documents and legal fees.

In all cases, the prevailing party will be entitled to recover most costs and damages from the other except for legal fees, which recovery is limited by law.