As I write this in London, the sky is gray and the talk on the street is all about the U.S. financial crisis. While much of the banter is about the housing market, the reality is that tough times can erode anyone’s economic position, including vessel owners.
Unlike the many protections society extends to the home and hearth, a vessel has no such recourse. Vessels are susceptible to swift seizure and sale under maritime law, which makes it imperative that vessel owners know the lay of the ocean.
Unique to maritime practice is the concept that a vessel stands alone as its own entity. In other words, a vessel can be sued, incur debts and be arrested. When the holder of a maritime lien isn’t paid, it will look to the vessel to satisfy the lien. The lien holder files a lawsuit in federal court and obtains a warrant of arrest. A U.S Marshal then executes the warrant by taking the vessel into custody or seizing it and turning the vessel over to the custody of a substitute custodian. The vessel’s arrest is publicized in a newspaper, an auction is scheduled and the vessel is sold.
Typically, proceeds from the sale are deposited with the court until the amount of the lien is established. The money is then used to pay the lien and, generally, the costs associated with the arrest and sale of the vessel.
From an owner’s perspective, this can all happen very quickly. Even if the amount and origin of a maritime lien is challenged, it will not likely prevent the arrest of the vessel. In some cases, an arrest may be a way to gain negotiating leverage or it may be an innocent move to obtain security for a debt. A vessel owner will do well to negotiate a vessel’s debt with a clear understanding that the potential for an arrest exists. That’s not to say a vessel owner should be cowed by the threat of a vessel arrest, but being caught unaware is never good. In other words, look for the warning signs. An inquiry into the vessel’s current location or a sudden halt to settlement discussions may be signs of an impending arrest.