Sister Ship Arrest in India: When Can You Arrest a Vessel Other Than the Defaulting Ship

In maritime law, a ship arrest is normally sought against the vessel that was directly involved in the transaction giving rise to the claim. But what happens when that vessel has already left Indian waters, has been sold, or is otherwise unavailable? Indian admiralty law provides a solution in the form of sister ship arrest — the ability to arrest a different vessel owned by the same beneficial owner.

The Legal Basis in India

Section 5 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017 provides for the arrest of a ship other than the ship in connection with which a maritime claim arose, where the person who would be liable on the claim in an action in rem is, at the time the action is commenced, the beneficial owner of the ship to be arrested.

This provision follows the approach of the International Convention on the Arrest of Ships 1999, to which India is a party. The key concept is beneficial ownership — not registered ownership, but actual ownership and control of the vessel.

What Is Beneficial Ownership

Beneficial ownership is a factual question. In modern shipping, vessels are frequently registered in the name of single-purpose companies incorporated in flag-of-convenience jurisdictions. The actual operator and controller may be a different company in a different country. Tracing the beneficial ownership of a vessel requires examining the corporate structure behind the registered owner.

For sister ship arrest purposes, the question is whether the person liable on the maritime claim beneficially owns the vessel sought to be arrested. Where both the original vessel and the vessel to be arrested are owned by single-purpose companies that are in turn owned by a common parent company, the question of whether the parent company's beneficial ownership of both vessels is sufficient to found a sister ship arrest is one that courts have examined in various jurisdictions.

Practical Situations Where Sister Ship Arrest Is Used

The most common situation is where the vessel that was party to the relevant transaction has left Indian jurisdiction before the arrest application can be made. If the same beneficial owner has another vessel that regularly calls at Indian ports, a sister ship arrest of that vessel provides an alternative way to obtain security for the claim.

Sister ship arrest is also used where the original vessel has been sold. A sale of the vessel extinguishes most maritime liens against it in the hands of a bona fide purchaser for value without notice. But if the seller retains beneficial ownership of other vessels, those vessels can be arrested for the original claim.

The Procedure

The procedure for sister ship arrest is the same as for a direct arrest. The applicant files an admiralty suit in the relevant High Court and applies for a warrant of arrest against the sister ship. The application must set out the maritime claim, establish that the named defendant is liable on that claim, and demonstrate that the vessel to be arrested is beneficially owned by that defendant.

The court will examine the evidence of beneficial ownership carefully. A bare assertion that two vessels have the same beneficial owner is unlikely to be sufficient without supporting corporate documentation showing the ownership structure. Vessel ownership information can be obtained from shipping registers, commercial ship data providers, and corporate registry searches.

Release

As with a direct arrest, the arrested vessel will be released on provision of adequate security for the claim. The shipowner will invariably want to secure the vessel's release quickly to get it back into commercial operation. Once security is provided, the arrested vessel is released and the underlying dispute proceeds to resolution through arbitration or litigation.