Hong Kong, which continues to follow the English legal system, is well-known as a favourable ship arrest jurisdiction in Asia. The combination of an impartial judiciary, the rule of law and procedural efficiency – not to mention the absence of any requirement for counter-security – make Hong Kong an attractive forum for international claimants seeking security for their claims.
Arrest and Release
The vast majority of ships arrested in Hong Kong are released within a matter of hours against security provided by way of a P&I Club letter of undertaking. The arresting party is however not obliged to accept a Club LOU, and can insist that security be provided by way of the more complex ‘bail bond’, in effect an undertaking in a standard form given to the court by two sureties (such as banks or insurers) who are generally required to have a presence within Hong Kong. This issue tends to arise where the arresting party is intent on forcing Hong Kong jurisdiction for a claim which may have no connection with Hong Kong other than the fact that the ship is within Hong Kong waters.
Steps are, however, underway to simplify the release procedure, so that only one surety (e.g. a P&I Club) is required to file the bail bond. The Hong Kong Admiralty Court Users’ Committee and Admiralty Judge have proposed the necessary amendments and it is hoped that these will be incorporated into the court rules later in the year.
Court Sale of Ships
In response to a report prepared by Bill Amos and David Beaves of Ince & Co, the Hong Kong Admiralty Court has made a number of revisions to the procedures relating to the court sale of ships. The invitation to tender process has been streamlined, and no longer will investigations be made of the capacity and legal authority of intending buyers – with resultant savings in costs and time. It is also relatively common for buyers to purchase the ship through a different single purpose nominee company (i.e. other than the company which submitted the tender offer) for tax or risk management purposes. The buyer’s ability to use a nominee has now been regularised by way of a tripartite addendum to the tender documentation, which again will simplify and streamline the court sale procedure in Hong Kong.
bill.amos@incelaw.com
