England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
ADMIRALTY CLAIM IN REM
Against the ship "BUMBESTI"

		22 June 1999

1. This is an application to set aside these proceedings and/or to release the vessel "BUMBESTI" from arrest. The Claim Form was issued on 8 June 1999 and the vessel was arrested in Liverpool on 9 June 1999. Initially the Applicant Notice sought an order to set aside the arrest. The ground stated was that the arrest was an abuse of the process of the court because the Claimants already had adequate security in respect of the claims made. However Mr Garland for the Defendants/Applicants made it clear in opening his application that the Defendants had a further ground, which was that the Admiralty Court had no jurisdiction in rem in respect of the claim made by the Claimants. During the hearing I gave leave to amend the Application Notice to include this point. Accordingly the application is now put on two bases, which are: (1) that the action in rem and/or the Claim Form should be set aside under CPR Part 3, Rule 3.4(2)(b), on the ground that the Court has no jurisdiction in rem in respect of the claim sought to be made by the Claimant in these proceedings. If this ground is successful, then the vessel must be released from arrest, subject to any caveats against release. Ground (2) is that the vessel should be released from arrest pursuant to the Admiralty Court's power to do so under paragraph 6.6(1)(b) of the Admiralty Court Practice Direction which supplements CPR Part 49, on the basis that the arrest is an abuse of the court process because the Claimants already have adequate security for the claim made.
2. The Facts

The Defendants are Compania de Navigatie Maritimie Petromin SA, which is a Romanian corporation. They were the owners of the vessel "DACIA". The vessel was bareboat chartered to the Claimants by a charterparty dated 27 February 1995. The charter was for three years and was due to expire on 27 March 1998. The charter provided (by clause 26) that it was governed by Romanian law. Clause 26 also stipulated that disputes would be "solved" by arbitration which was to be organized by the "Chamber of Commerce, Industry and Navigation of Constantza County in accordance with the Rules of Arbitrational Procedure" of that Chamber. Clause 55 of the charter provided that disputes between the parties were to be "solved in accordance with the laws of the Romanian State, such laws governing this Charter (see Clause 26)". It was therefore common ground at the hearing that the proper law of the charter was Romanian law and that the procedural law of the arbitrations which have taken place was Romanian law.

3. Disputes did arise under the charter. The Claimants, as charterers, alleged that the Defendants wrongfully terminated the charter early in January 1998. This resulted in two arbitration references. Two Awards were made by the Constantza Court of Arbitration. They were called Arbitration Award No 1 and No 12. Award No 1, dated 3 March 1998, ordered the Defendants, as owners of the vessel, to return her to the Claimants for the balance of the charter period, ie. 53 days. The Claimants were also awarded damages of US$186,532 and further sums in respect of stamp duty and legal fees. The vessel was not returned for the balance of the charter. In Arbitration Award No 12, dated 10 November 1998, the tribunal awarded the Claimants a further US$238,072 as damages for the wrongful early determination of the charter. It also awarded further sums in respect of stamp duty and costs. The total sum awarded to the Claimants was therefore US$424,604 plus stamp duty and lawyers' fees.
4. The Claimants appealed the arbitration awards. The appeal from Award No 1 was dismissed by the Constantza Court of Appeal on 30 March 1999 and by the Supreme Court of Justice on 14 April 1999. The appeal from Award No 12 was dismissed by the Constantza Court of Appeal in April 1999. However, leave has been granted to appeal to the Supreme Court and the hearing will take place on 2 December 1999. The Defendants have obtained an order from the Romanian Supreme Court for the general suspension of any enforcement of Award No 12 until 13 July 1999.
5. The Claimants have attempted to enforce the two Awards. On 4 February 1999 the Claimants applied to the Constantza Court for execution of all movables and immovables of the Defendants in order to meet the sums due on both Awards. In respect of Award No 1 the Claimants have put up two bank letters of guarantee following the arrest of the "BUMBESTI" in Greece and the Netherlands. Those bank guarantees are, in my judgment, sufficient to meet any liability that the Defendants have on that Award. The bank guarantee in Greece is the subject of proceedings there, but I am satisfied that, quite apart from the vessels in Constantza, the Claimants have adequate security for Award No 1.
6. On 4 February 1999 the Claimants applied to the Constantza Court for execution against the Defendants in respect of the two awards. Subsequently, two identical bulk carriers that are owned by the Defendants, the "TIRGU LAPUS" and the "TIRGU NEAMT", were seized in Constantza pursuant to Commands of the Court of Constantza made on 9 February 1999. The Commands required the Defendants to pay the sums due under the two Awards within 24 hours, or, if they failed to do so, then the vessels, which were identified in the Commands, would be "prosecuted and auctioned off". The exact legal characterisation of the process by which the vessels have been detained is in dispute between the parties. But the present position appears to be that both vessels remain detained by order of the Constantza Court, despite attempts by the Defendants to rescind the orders. Further, an order for the sale, by public auction, of the two vessels was made by the Court at some date in April 1999. The auction was set to take place on 30 April 1999. A buyer was found for the two vessels at a price of $660,000 for the pair, but the deposit was not lodged in time. So the sale was cancelled. Subsequently, on 8 June 1999, the order permitting enforcement against the "TIRGU LAPUS" was cancelled by the Constantza Court. However two stamped certificates (one for each vessel), both dated 15 June 1999 and issued by the Constantza Harbour Master's Office, state, in English, that the vessels are arrested. That state of affairs is accepted by both parties.
7. The Claim Form in this action was issued on 8 June 1999. It states that the Claimants bring their action "founded on" the Arbitration Award dated 10 November 1998 (ie. Award No 12). On the following day, the 9 June 1999, the "BUMBESTI" was arrested in Liverpool. The sworn evidence to lead the arrest states that the Award No 12 remains wholly unsatisfied and that the aid of the Court is sought "to enforce payment of or security for the same". The sworn evidence states that security of US $300,000 is sought.
8. The Issues

The principal issues are:

(1) whether the Admiralty Court has jurisdiction in rem to hear and determine a claim to enforce the arbitration award No 12 made by the Constantza Court. The only basis of the Court's in rem jurisdiction relied on by the Claimants is section 20(2) paragraph (h) of the Supreme Court Act 1981. By that paragraph the Admiralty Court has jurisdiction to hear and determine "any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship". (It is common ground that if the claim comes within that paragraph then, pursuant to section 21(4) of the 1981 Act the in rem jurisdiction of the Court could be invoked. No point was taken by the Defendants on section 21(4)(a) that this claim did not "arise in connection with a ship");

(2) assuming that the Admiralty Court has jurisdiction, then whether "BUMBESTI" should be released from arrest because the Claimants already have adequate security for their claim to enforce Award No 12 because of the detention of the two vessels in Constantza, so that the arrest of the "BUMBESTI" is an abuse of the process of the court.

9. Principal Issue One: The nature of the claim to enforce the Award No 12

The proper law governing the arbitration procedure and the Award No 12 was agreed to be Romanian law. However I received no evidence that Romanian law differs from English law on the nature of an arbitration award and the effect of an award being made. In English law it is clear that if a claim for damages is referred to arbitration and an arbitration award is made awarding the payment of damages, this creates a new right of action for the enforcement of the award that replaces the original cause of action. Strictly speaking the doctrine of "merger" does not apply in the way that it does to an action brought in Court and there could be debate on the precise juridical basis for the rule relating to awards: see Mustill & Boyd on Commercial Arbitration 2 Ed. page 410. But it has been accepted since at least Gascoyne v Edwards (1826) 1 Y&J 19 that a claimant cannot bring a further claim in personam on the original cause of action (if the original cause of action was for damages) once he has an award. (As noted below, it is possible to bring an action in rem: see The "Rena K" [1979] QB 377).

9. The "brief details of claim" endorsed on the Claim form in this case state:

"The Claimants bring their action founded on the Arbitration Award dated 10 November 1998, made by The Chamber of Commerce, Industry, Navigation and Agriculture, (CCINA), Constantza, Romania. The said award was in respect of the premature termination of the charterparty dated March 1995, of the MV "Dacia", at that time owned by the Defendant".

It is therefore clear that the claim is one to enforce the Award. What is the nature of a claim to enforce an award? It could be a claim for a debt, being the sum awarded. Alternatively it could be a claim for liquidated damages, for a breach, by the party due to pay, of an implied obligation to fulfil the award made. Both solutions have been suggested in the cases. However the preferred analysis by the Court of Appeal in the leading case of Bremer Oeltransport GmbH v Drewry [1933] 1 KB 753 was that a claim on an award is a claim for damages for the breach of an implied term in the submission to arbitration that any award made would be fulfilled: see particularly per Slesser LJ at 764 with whom Romer LJ agreed. That analysis was adopted by Lord Pearson in giving the advice of the Privy Council in FJ Bloemen Pty Ltd v Council of the City of Gold Coast [1973] AC 115 at 126. He emphasised that in the case of an arbitration award a new cause of action arises once the award is made, but that the award "cannot be viewed in isolation from the submission under which it was made". Therefore a claimant wishing to enforce an award in English proceedings has to prove not only the award, but also the submission to arbitration which gave the arbitrators power to make their award and which contained the implied term that the parties would fulfil any award made pursuant to the submission.

10. That gives rise to a further question: which "submission" to arbitration is being referred to here? As Mustill J made clear in Black Clawson International Ltd v Papierwerk Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446 at 455, there are two "submissions" which govern the arbitration of disputes under a substantive contract. First there is the contract to submit future disputes to arbitration; this will often be annexed to the substantive contract between the parties, in this case the bareboat charterparty. Secondly there is the contract that is created when a particular dispute arises and the parties refer that dispute to arbitration. The implied term to fulfil the award made must, in my view, be contained in the contract that is created between the parties when the individual dispute arises and it is referred to arbitration. However, in practice there is bound to be reference to the initial general submission to refer disputes to arbitration, as that is the basis upon which individual references will be made.
11. On this analysis, in order to succeed on their claim, the Claimants must plead and prove the individual submission to the Constantza Court of arbitration and the Award No 12 that they made on 12 April 1999 pursuant to that submission. But no more than that need be proved. There is no need to plead and prove the underlying dispute arising under the charterparty.
12. Is the claim to enforce the award within section 20(2)(h) of the SCA 1981

The next question must be: does this claim to enforce the award fall within the terms of section 20(2) paragraph (h) of the Supreme Court Act 1981? Mr Smith says that it does and he relies upon the decision of Sheen J in the Saint Anna [1983] 1 WLR 895, in which the Judge held that an action to enforce an award made in respect of a contract for the hire of a ship was within paragraph (h). Mr Garland has submitted that the Saint Anna was wrongly decided and that Sheen J should have followed the decision of the Court of Appeal in The Beldis [1936] P 51, which, he said, was binding. In view of these submissions, it is necessary to consider briefly the statutory history of paragraph (h) and some of the decisions that have dealt with it.

13. The statutory history of paragraph (h)

The history has been considered by the House of Lords in a number of recent cases: see The "Eschersheim" [1976] 1 WLR 339; Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1985] AC 255; and The "Antonis P Lemos" [1985] AC 711. From these cases the history of paragraph (h) is established as follows:

(1) Paragraph (h) in the 1981 Act reproduced, in the same words, paragraph (h) of section 1(1) of the Administration of Justice Act 1956. That section had been enacted to give force in England to the International Convention for the Unification of Certain Rules relating to the Arrest of Seagoing Ships made in Brussels on 10 May 1952 ("the Arrest Convention"). In the Arrest Convention a number of "maritime claims" in respect of which a ship could be arrested are set out at Article 1 under the terms of the Convention. The wording of the Convention is exactly reproduced in the Scottish section of the 1956 Act (section 47(2) (d) and (e)). But although two paragraphs have been rolled into one in section 1(1)(h) of the 1956 Act, their effect is not materially different.

(2) The wording of the Arrest Convention list of "maritime claims" was itself based upon the list of the types of claim set out in section 22(1)(a)(xiii) (1) of the Supreme Court of Judicature (Consolidation) Act 1925, for which the Admiralty jurisdiction of the High Court could be invoked. This re-enacted section 5(1)(a) of the Administration of Justice Act 1920. That was the first Act to confer Admiralty jurisdiction on the High Court to consider this type of claim. Neither the High Court of Admiralty, nor its successor (from 1875), the Probate Divorce and Admiralty Division of the High Court, had jurisdiction over claims of the type now covered by paragraph (h).

(3) However, prior to 1920 the County Court did have a limited Admiralty jurisdiction for that type of claim. The jurisdiction was conferred by the County Courts Admiralty Jurisdiction Act 1868, amended by the County Courts Admiralty Jurisdiction Amendment Act 1869. Section 2(1) of the latter Act provided that County Courts appointed to have Admiralty jurisdiction could try and determine "any claim arising out of any agreement made in relation to the use or hire of any ship …".

(4) Therefore the wording in the 1981 Act can trace its ancestry back to the 1869 Act. The differences in the words used are not significant, as Brandon J observed in The "Eschersheim": see [1975] 1 WLR 83 at 93G.

15. The Early cases on the Construction of paragraph (h)

The three House of Lords cases I have referred to have also considered the Courts' construction of the predecessors of paragraph (h) and that paragraph in the 1981 Act. The Courts construed the 1869 Act paragraph restrictively. They were reluctant to give the County Court a wider Admiralty jurisdiction than the High Court, particularly in relation to charterparty disputes, as that would interfere with the common law courts which had always asserted exclusive jurisdiction in such cases. Thus it was only in The "Alina" (1880) LR 5 Ex 227 that the Court of Appeal held that claims arsing out of charterparties were covered by section 2(1) of the 1869 Act. But in a significant case after The "Alina", The "Zeus" (1888) 13 PD 188, the Divisional Court held that a claim arising out of a contract to load a ship with coals was not within section 2 of the 1869 Act. Mr Garland relied on that case and the fact that it was approved in the House of Lords in both the Gatoil case (see 270E per Lord Keith of Kinkel) and The "Antonis P Lemos" case (see per Lord Brandon at 730 G-H). In those cases the House of Lords held that The "Zeus" was authority for a narrow construction of the words "relating to" in section 2 of the 1869 Act and its statutory successor paragraphs.

14. The "Beldis" [1936] P 51

The wording of section 2(1) of the 1869 Act was again considered by the Court of Appeal (The President, Sir Boyd Merriman; Scott LJ and Swift J) in The "Beldis" [1936] P 51. A claim had been referred to arbitration to recover overpaid charter hire in respect of a charter for a ship called the "Belfri". An award was made in favour of the Plaintiffs in the subsequent action, Anglo Soviet Shipping Co. They started a County Court action in rem against a sister ship of The Belfri, called The Beldis. The claim was to recover the sum awarded by the tribunal. The defendant owners did not appear and judgment was entered against them in default. The mortgagees then intervened. The parties put one agreed issue before the County Court judge. That was whether an Admiralty action in rem could be maintained against The "Beldis" when the original claim arose out of a charterparty for The "Belfri". He decided that it could be maintained. When the matter came before the Court of Appeal the President raised the issue of whether there was jurisdiction in rem to deal with this type of claim at all. It appears from the report of the argument (see page 58) that Mr Owen Bateson for the appellant mortgagees did not take up the jurisdiction point, although he did refer the Court to three cases on the issue, including The "Zeus".

15. In a reserved judgment the Court held that the claim on the award did not come within section 2(1) of the 1869 Act. Therefore the County Court could not exercise jurisdiction in rem. The President accepted that if the action had been for the claims that were the subject of the reference to the arbitrator, then they would have fallen within the section, following The "Alina": see page 61. But he held that this was entirely different from a claim on the award. He pointed out that a plaintiff claiming on an award has only to plead and prove "that certain matters in dispute have been submitted to an arbitrator and that he has made his award in the plaintiff's favour". The President emphasised that it was not necessary, indeed positively wrong, to plead the nature of the original dispute. He concluded that he was not prepared to hold that "a claim upon an award held under the arbitration clause in a charterparty is a claim arising out of any agreement made in relation to the use or hire of a ship". He held it was a "common law claim upon the award and nothing else". The President went on to hold that, if there had been jurisdiction, it was not possible to bring the action in rem against a sister ship that was unconnected with the cause of action. Both Scott LJ and Swift J agreed on the second point of decision.
16. Scott LJ noted that when the 1869 Act was passed, there was a statutory means for enforcing arbitration awards by obtaining from one of the three common law courts a rule absolute for payment of the sum awarded: see page 82. Therefore, he remarked, it was unlikely that an Admiralty jurisdiction would be created to enforce an arbitration award, unless the statutory wording clearly did so. He concluded that the wording of section 2(1) clearly did not confer this jurisdiction. He also pointed out that the history of the statutory extension of the Admiralty Court's jurisdiction in the 1840 and 1861 Acts was in "precise, plain and carefully guarded terms; and, in the case of those founded on contact, the cause of action was one directly based upon the maritime contract described in the section". In his view, because of this approach, it would be "entirely wrong to hold that an action on an award arising out of such a maritime contract was included by the words of" the 1840 and 1861 Acts which gave the Admiralty Court jurisdiction over certain types of contractual claim eg. in relation to towage and bills of lading. He concluded that the legislature must have adopted a similar approach to the County Court jurisdiction in Admiralty. He therefore concluded:

"… it would in my judgment be plainly wrong to say that under s2 sub-s.1 of the Act of 1869 a county court has Admiralty jurisdiction to entertain an action on an award upon a voluntary submission, merely because the arbitration was held pursuant to an arbitration clause in a charterparty for the reference of disputes arising out of that charterparty".

17. The decision in The Beldis stood undisturbed until 1983. In The Eschersheim Brandon J commented on it (at page 94F-G), saying that the basis of the decision was that the relevant claim did not arise out of the agreement (ie. the charterparty), although the agreement related to the use or hire of a ship. He commented that ground of decision in the The "Beldis" "does not seem to be consistent with Bremer Oeltransport GmbH v Drewry [1933] IKB 753, which was apparently not cited". As already noted, the Court of Appeal in that case had held that an action on an award was founded on the breach of an implied term in the agreement to submit the differences of which the award was the result. Therefore the court held that, for the purposes of the existing Order XI Rule 1(e), the claim on an award was one "to enforce a contract made within the jurisdiction". (This was so, even though the award itself was made in Hamburg.) I am not sure that Brandon J was correct to suggest that in The "Beldis" the Court of Appeal were emphasising that it was the first part of the sentence of the section (ie "claim arising out of any agreement") that was not fulfilled. The President refers to the whole sentence at page 63 and Scott LJ recognised that the action on the award arose "indirectly" out of the maritime contract: see page 83. However it should be noted that Brandon J did not say that The "Beldis" was decided per incuriam although he clearly had doubts about it.

18. The "Saint Anna" [1983] 1 WLR 895

The issue of whether an action on an award could be the subject of an Admiralty Action in rem arose in this case, in which the Plaintiffs sought judgment in default of defence. The action was on an award made in favour of charterers and against the owners of The "Saint Anna". That vessel had been arrested and sold by the Admiralty Marshal at the suit of numerous claimants. The Plaintiffs had issued a Writ in rem against the proceeds of sale of the vessel. Sheen J heard argument only from the Plaintiffs, but both The "Beldis" and Bremer Oeltransport were cited, as were the passages of Brandon J in The Eschersheim and relevant text books. Having referred to both cases, Sheen J concluded: (1) that Bremer Oeltransport was clear authority for the proposition that an action based upon an award is an action for the enforcement of the contract which contains the submission to arbitration, ie. the charterparty; (2) an action to enforce an award necessitates pleading and proving the arbitration submission and the award; (3) a claim to enforce a charterparty is within the Admiralty jurisdiction of the High Court; (4) because one ground of decision of The "Beldis" was inconsistent with Bremer Oeltransport "that leads me free to decide which authority I should follow. As the decision in [Bremer] was not brought to the attention of the Court of Appeal during argument in The "Beldis" and as I find myself convinced by the reason in the latter case, I have no hesitation in following it".

18. Mr Smith drew my attention to the fact that The "Saint Anna" has been followed in the Hong Kong and Singapore Courts. He also submitted that it has been referred to in text books without criticism, save for a cautionary note in Dicey & Morris on The Conflicts of Laws (12 Ed; pp 605 and 608). So far as Counsel can discern, there is no reported decision either following it or dissenting from it in England. However in the Gatoil case in the House of Lords, Lord Keith of Kinkel refers, without comment, to the decision of the Court of Appeal in The "Beldis" but The "Saint Anna" was not cited. Nor was it in The "Antonis P Lemos".
19. Conclusion on Principal Issue One: Is a claim on an arbitration award within paragraph (h) of section 20(1) of the Supreme Court Act 1981?

I have come to the conclusion that the answer I must give to this question is "no". I think that it is not within the paragraph as a matter of construction. I also consider that I am bound by the decision of the Court of Appeal in The "Beldis". My reasons are as follows:

(1) The "claim" in this case is the action on the award. That "claim" clearly "arises out of" the agreement to refer the disputes that had arisen under the bareboat charterparty. In The "Antonis P Lemos" the House of Lords held that the phrase "arises out of" in paragraph (h) should be given a broad construction, so as to mean "in connection with": see page 731 F. Upon the analysis of the Court of Appeal in Bremer Oeltransport a claim on an award "arises out of" or is "in connection with", the agreement to refer the particular dispute to arbitration, or the agreement to refer future disputes generally to arbitration.

(2) However, that agreement to refer disputes is not, itself, an "agreement in relation to the use or hire of a ship". This is because the arbitration agreement, whether it is the individual reference or the general agreement to refer, is a contract that is distinct from the principal contract, ie. the bareboat charterparty in this case. The distinction between the contracts is, as Mr Garland submitted, made clear in cases such as Heyman v Darwins Ltd [1942] AC 356; and Harbour Assurance (UK) v Kansa General International Insurance Co [1993] QB 701; and see section 7 of the Arbitration Act 1996.

(3) In The "Antonis P Lemos", at page 730 F-G, the House of Lords accepted that the authorities on paragraph (h) of the 1981 Act and its statutory predecessors made it clear that a narrow meaning must be given to the expression "in relation to" in that paragraph. The agreement to refer to arbitration individual disputes that have arisen out of a charterparty, or the agreement to refer future disputes in general that arise out of a charterparty, must be agreements that are indirectly "in relation to the use or hire of a ship". But, in my view, they are not agreements that are sufficiently directly "in relation to the use or hire of a ship". The arbitration agreement is, at least, one step removed from the "use or hire" of a ship. The breach of contract relied upon to found the present claim has nothing to do with the use or hire of the ship; it concerns the implied term to fulfil any award made pursuant to the agreement to refer disputes. In my view the breach of the contract relied on when suing on an award does not have the "reasonably direct connection with" the use or hire of the ship that Lord Keith held in the Gatoil case was necessary to found jurisdiction under this paragraph: see page 271A-B.

(3) Therefore, upon the proper construction of paragraph (h), an action on an award is not one on an agreement which is "in relation to the use or hire of a ship". This was the conclusion of the Court of Appeal in The "Beldis". The current paragraph is the statutory successor to the wording that was considered in that case. Unless there is some material distinction in the wording, then I believe that I must follow the construction given by the Court of Appeal to the wording in that case. There is no significant distinction, as Brandon J pointed out in The Eschersheim: see page 93G.

(4) With great respect to Sheen J, I cannot accept his view that the decision in The "Beldis" was "inconsistent with" the Bremer Oeltransport case. The latter case was not dealing with the proper construction of this head of Admiralty jurisdiction. And the analysis in both cases of the constituents of an action on an arbitration award is remarkably similar. Both make it clear that the submission to arbitration must be pleaded and proved as well as the award itself.

(5) Even assuming that an action on an award is one "in connection with" the underlying submission to refer, there remains the question, critical to the present issue, of whether that submission is sufficiently directly related to the use or hire of a ship to make the matter fall within paragraph (h). That point was not at issue in Bremer Oeltransport, but it was in The "Beldis", which decided the point against the Claimants. I am satisfied that the decision was not "per incuriam" and that I must follow it.

20. Therefore I have concluded that Mr Garland is correct in his submission that the Admiralty Court has no jurisdiction to consider this claim under paragraph (h) of section 20(1) of the Supreme Court Act 1981. Accordingly, the Action and the Claim form must be struck out and the service of the Claim form in rem must be set aside. It must also follow that the arrest of the vessel cannot be maintained in respect of this claim.
21. The Second Principal Issue: that the arrest is an abuse of the process of the Court as the Claimants already have adequate security

This point obviously only arises if I am wrong on the first issue. Both parties accept that the Court has the power to release the vessel from arrest under paragraph 6.6(1) of the Practice Direction forming the Admiralty Court Guide. Mr Smith for the Claimants accepted that there should be a release if the Court is satisfied that the claim to enforce Award No 12 is otherwise adequately secured. The only "security" considered was the detention of the two vessels at Constantza. There was some debate as to how "adequate" the security had to be. Mr Smith contended that the security had to be as good as the arrest of the "BUMBESTI" both in terms of amount and the "quality" of the protection. But he accepted that the nature of the protection of the security did not have to equate exactly with an arrest by the English Admiralty Court. Mr Garland ultimately accepted these tests. Therefore there are two issues that I have to deal with under this heading: (1) is the correct value of the vessels, as detained in Constantza sufficient to discharge the claim; and (2) is the protection over the vessels that is provided by the Constantza Court order adequate?

22. The Amount of the Claim on Award No 12

As already noted, the total claim under Award No 12 is for damages of US$238,072, plus stamp duty and lawyers' fees. The parties agreed that the latter two figures probably amount to about $9000, making a total of US $247,072. Under the Award there is no entitlement to interest on the principal sum. Even if I assume that interest can be awarded somehow, then the maximum figure for which the Claimants could legitimately seek security is, in my view, US $300,000.

23. Value of the vessels as detained in Constantza

The evidence on value was conflicting. The "TIRGU NEAMT" is 21 years old, is in class but is laid up. The "TIRGU LAPUS" is nearly 21 years old and has been out of class since October 1998. A Romanian company has put a "market value" on the "TIRGU NEAMT" of US$ 750,000. Mr Garland says that should be accepted and as the vessels are identical, it is the market value of the "TIRGU LAPUS" also. But if the vessels were sold in Constantza, whether pursuant to a Court auction or privately, it would be at a "forced sale" value. The valuation report does not say that the figure of $750,000 represents the sum that would be obtained in a "forced sale" of the vessels in their present condition and I am sure that sum would not be realised.

24. Mr Garland next relies on the figure that was offered by a Cypriot company that had agreed to buy the vessels through the Constantza court but then failed to pay the deposit. The total price for both vessels was agreed at US$660,000. As this sale did not go ahead I am sceptical about the utility of the sum agreed. I am also sceptical about the "offer" apparently made to the Defendants by NG Moundreas Shipping SA on 9 June 1999. The price "offered" for both vessels was US $470,000. There was no evidence of how this offer came to be made and, given that the vessels were detained in Constantza at the time, I must doubt whether it was a genuine offer.
25. Lastly there is evidence of the value of the vessels from the well known Ship Sale and Purchase brokers English White Shipping Ltd. That gives a valuation of US$ 600,000 for each of the vessels, assuming them to be "in seaworthy condition, capable of proceeding under their own power, in average condition for their age and in Class". I have concluded that these conditions are not satisfied in either case. The "TIRGU LAPUS" is out of class and the Romanian company's valuation report on "TIRGU NEAMT" states that "in order for the vessel to be operated on [sic], high investments are necessary". That must mean that "TIRGU NEAMT" is probably neither seaworthy, nor capable of proceeding under her own power nor in average condition for her age, even if she is still, technically, in Class.
26. English White also gives a scrap valuation of the vessels. The net value would depend on where the vessels were to be delivered, because the cost of towage to any destination far from Constantza would be high. The two scrap markets suggested by English White are the Indian Subcontinent and Turkey. If the vessels were sold for delivery to the former, the net sale proceeds would probably be only US $40,000; if for delivery to the latter the net proceeds would be about US $340,000. There is no evidence as to which destination would be more likely.
27. On the evidence I have concluded that it is very unlikely that the two vessels would achieve much more than a scrap value price if sold at Constantza. But there is evidence of an available scrap market in Turkey. It seems to me inherently more likely that the vessels would be sold for delivery there rather than further afield. Therefore, although the evidence is not entirely satisfactory, I have concluded that the sale value of the vessels at Constantza is between US$ 300,000 and $340,000, ie. enough to meet the Claimants' claim.
28. The nature of the protection of the security given by the Constantza Court order

Mr Smith submits that the vessels are not in the custody of the Constantza Court in the same way that vessels under arrest in an Admiralty Action in rem are in the custody of the Admiralty Marshall. Therefore the protection given by the Constantza Court order is not as good as that of an arrest in England. There was some evidence of the nature of the detention of the vessels by the Constantza Court. The original application for execution was not specifically an "admiralty" provision, but is a form of execution available against all assets. But the "Commandment" made on 9 February 1999 against each vessel was issued under Articles 914 and 915 of the Romanian Commercial Code and is an admiralty provision. That deals with the seizure and enforcement of existing judgments against vessels. The Commandment gives the claimant a priority over subsequent claimants in receiving payment out of the proceeds of sale of the vessel. It is accepted by the Romanian lawyers acting for the Defendants that the effect of the suspension (by the Supreme Court) of the execution of Award No 12 does not affect the seizure of the two vessels: see the fax of Musat & Associatii dated 17 June 1999: exhibited to PEM 2. Mr Smith also accepted that the effect of the seizure was that the Defendants could not attempt to sell the vessels, except with the approval of the Constantza Court.

29. There was controversy as to whether the Defendants could lawfully use the vessels for trading whilst remaining seized by the Romanian court. I asked Mr Garland if his clients would be prepared to give an undertaking not to use the vessels whilst remaining seized by the Constantza Court. The undertaking that the Defendants are prepared to give, assuming that the arrest in the English proceedings was set aside, is set out in a fax from Ince & Co to the Court dated 18 June 1999 (although only sent on 21 June), as follows:

"Not to disturb the enforcement proceedings against the two vessels detained in Constantza pending determination of the appeal to the Romanian Supreme Court, this undertaking specifically reserving [the Defendants'] right to apply to the court on 13 July for the suspension of the right of sale to continue throughout that period".

That undertaking would, I think, adequately preserve the rights of the Claimants on the two vessels given the existing orders of the Constantza Court over the vessels.

30. Conclusions on the Second Principal Issue

I have concluded that the security obtained by the Claimants for the Award No 12, in the form of the detention of the two vessels by the Constantza Court, is adequate security for the enforcement of that claim. Accordingly, provided that the Defendants confirm that they will give the undertaking set out in Ince's fax of 18 June, I propose to release the "BUMBESTI" from arrest in this action. I should, however, note two further points. First, I was informed by Mr Smith that the Claimants would be issuing further proceedings in rem against the "BUMBESTI" and so they had issued a caveat against the release of the vessel. The proposed proceedings were in the form of a claim, brought in rem, based on the original cause of action under the bareboat charter. The right to bring this form of action is said to be based on the decision of Brandon J in The "Rena K" [1979] QB 377. In that case Brandon J held that a cause of action in rem does not merge with a judgment made in personam, but remains available so long as the judgment in personam remains unsatisfied. He also accepted that this principle could apply to arbitration awards: see page 405B to 406F. I do not know whether the Claimants will maintain their caveat in the light of my conclusion on Principal Issue Two.

31. Secondly I note that the Claimants were prepared to undertake to release their security over the two vessels in Constantza if the arrest of the "BUMBESTI" were to be maintained. As I have held that it should not be, this undertaking is irrelevant.

[Signature]

32. June 1999