UAE’s new Maritime Law – a closer look at the revised law on vessel arrests

The UAE government recently issued Federal Decree-Law No 43 of 2023 on Maritime Law, which came into effect on 29 March 2024 (the “Maritime Law”).

The Maritime Law aims to modernise the legal framework for maritime activities, align with international standards, and enhance the UAE's status as a regional shipping hub. This represents a substantial change from the old maritime law, Federal Law No.26 of 1981 Concerning Commercial Maritime Law.

Our previous Law-Now on the Maritime Law previously addressed the changes to vessel registration, liens, chartering, and time bars, which you can access here. The following article addresses the significant changes to a major part of maritime law, vessel arrests.

Maritime Claims and Vessel Arrests

Updated law on Arrest: The Maritime Law has introduced broader provisions for vessel arrest, transitioning from the 1952 International Convention Relating to the Arrest of Sea-Going Ships to the 1999 International Convention on Arrest of Ships, thus aligning more closely with international standards and providing credits with a greater range of actions available to arrest vessels in the UAE.

Sister Ship Arrest: Article 54 stipulates that the party initiating the arrest may seize not only the vessel associated with the maritime debt but also any other ship owned by the debtor at the time of the arrest application. This differs from the 1981 law, which required the debtor to own the sister vessel at the time the debt arose. However, Article 54(2) provides that associated ship arrest is not applicable when the arresting party’s claim is based on specific maritime debts related to vessel ownership, mortgages, or sale.

Protections for Shipowners: The Maritime Law also gives a level of protection to ship owners, as Article 56 requires the arresting party to provide a financial guarantee for the court to accept the arrest application, to cover security and safety measures for both the vessel and its crew during the arrest period. In addition, any expenditures from this guarantee are regarded as judicial expenses, and therefore have priority when the proceeds from execution are divided among the different parties.

This is welcome as previously the procedure for paying security in cases of arrest was less defined and different courts in the UAE followed different practices. These changes will provide an added layer of protection for shipowners and may assist with seafarer wellbeing by preventing arrested vessels simply being abandoned.

With the new legislation, financial security may be standardised across all ports, offering clarity on required guarantee amounts and payment methods.  While the UAE appears to become even more arrest-friendly, the law aims to strike a balance by widening the scope of ship arrest while ensuring safeguards against abuse.

Precautionary Arrest

Article 53(2) of the new law lists the marine debts in relation to which a precautionary arrest may be pursued to secure the payment of the same. In addition to the ones listed under the current Maritime Law, the following now also qualify as “Maritime Debt”.

• Loss or damage caused by the operation of the vessel;
• Damage to the environment, coastal strip or related interests;
• Costs of raising a sunken, wrecked, stranded or abandoned ship and those related to moving it, restoring it, stopping its harmful effects, or destroying it;
• Goods, provisions, supplies, bunkers, equipment or container supplied to the vessel and services provided for her operations management, maintenance;
• Port fees, channels, docks, harbours and other watercourses;
• The insurance premiums for the ship and its Takaful insurance contributions that are required to be paid by the shipowner or bareboat charterer or their representative;
• Any commissions, brokerage or agency expenses payable by the owner or her character or someone on their behalf; and
• Any dispute arising from contract of the sale of the vessel.

Abandoned Vessels: Ships arrested in the UAE previously have faced abandonment issues. To address this, the UAE took a firm stance in 2021, following a resolution to empower authorities to intervene in abandonment cases with strong financial penalties for shipowners. Article 56 provides greater clarity although it remains to be seen whether authorities will utilise these provisions and how they will implement them in practice.

Releasing Vessel Arrests

Improved Security Requirements: Article 57(2) states that a vessel’s arrest can be removed if the non-arresting party provides security, and Article 57(3) states that this security can be given in the form of letters of guarantee issued by Protection and Indemnity (P&I) Clubs or by a financial institution that is authorised by the competent court. The letter of guarantee acts as a security measure, guaranteeing that in the event of a valid claim, the P&I Club will honour a judgment up to the guaranteed amount.

This is a welcome alignment with international practice and a shift from the previous law, which only accepted cash deposits or local bank guarantees. Some uncertainties still remain, particularly regarding the acceptance of a letter of guarantee by the court and the discretion judges hold, which may influence the handling of ship releases. The forthcoming Executive Regulations are expected to provide further clarity on these matters including whether there are any caveats to the acceptance of Letter of Guarantees as security.

Procedural Changes:

Timeframe for filing a substantive case: the arresting party is required to file the substantive case within 5 working days (changed from 8 days) from the date of the arrest order, and the court mandated to schedule a hearing within 15 days following the issuance of the arrest. The owners / charterers or the ship agent are to be notified. This shows further desire from legislators to stop spurious arrests.

Welcome Clarifications on Appeal Procedure: One notable improvement is the clarification regarding appeals. Previously, there was uncertainty about the timeframe for filing an appeal. Now, the new Maritime Law specifies a 15-day timeframe for appeals, which is a positive development. This clarity should prevent situations where appeals are allowed despite the initial 15-day period passing, reducing uncertainty and promoting a better business environment.

Conclusion

The new Maritime Law is a testament to the UAE’s recognition of the vital role of shipping in its economy and its ambition to become a leading maritime hub in the region. The changes to vessel arrests will align the UAE more closely with international standards and provide creditors with a greater range of actions available to arrest vessels in the UAE. 

However, while the UAE appears to become even more arrest-friendly, the law aims to strike a balance by also ensuring safeguards against abuse, providing protection for shipowners and ensuring crew well-being is maintained.

It will still be important as to how the expected Executive Regulations affect the practical application of the law. However, the maritime sector has embraced the changes, which are expected to enhance the standards of operation for ship owners and creditors, facilitating the sector’s growth in the UAE.

This article was prepared with the assistance of Deniz Guzel, Trainee Solicitor at CMS.