The Admiralty Law
By Francis Lansakara
- Abstract -
This article discusses three common topics connected to admiralty law, forum non
conveniens, piercing of corporate veil and conflict of laws. It analyses briefly their usage,
limitations, and issues arising from other common law jurisdictions.
Forum Non Conveniens Principle
In The Spiliada1 Case Lord Goff laid down the principal of forum non conveniens
which consists of first stage and second stage tests. The first stage test considers the
connecting factors and in the second all other appropriate factors including plaintiff will
obtain justice. Cases where, natural forum failed to satisfy the conditions of second stage
test, will be denied of jurisdiction. The burden of proof normally lies with the defendant
or the party challenging the jurisdiction to show there is another more appropriate forum
if successful the burden will then shift to the plaintiff to show there are special
circumstances under the second stage test whereby the plaintiff unable to obtain justice.
The question as to plaintiff’s right to justice under English jurisdiction is approached in a
flexible manner by taking into account factors at stated under one and two of the test.
Caltex Singapore v BP Shipping2
Following a collision between a BP ship and Caltex Oil Terminal in Singapore Caltex
commenced its liability proceedings in England and BP also commenced its limitation
proceedings in Singapore which is the natural forum. At the time of the trial
1957 Limitation of Liability Convention then applied in Singapore3 and 1976 Limitation
of Liability Convention applied in England in which limitation under 1976 convention
was higher. BP relied on Spiliada 2nd stage test4 and requested that English action be
stayed. Clark J rejected BP’s claim, although Singapore is the natural forum plaintiff
cannot be denied of higher limitation which is available under the 1976 Convention he
also taken into account that limitation of liability is being part of UK’s public policy and
the plaintiff’s right to higher limits.
When Forum Shopping5 be Discouraged
Substantial justice may be obtained in foreign jurisdiction. Case: Herceg Novi and Ming
Galaxy6, The Court of Appeal7 discourage forum shopping base on higher limitation,
 1 AC 460 (HL)
 1 Lloyd’s Report 286
Singapore became a signatory 1976 Convention at a later date.
 1 AC 460(HL) 1ST Stage test the courts will look at the connecting factors, 2nd state test the courts
Will look beyond the connecting factors such as service better justice
The practice of choosing the most favorable jurisdiction; plaintiff engage in filing suit in jurisdiction with
a reputation in higher awards than other jurisdictions.
1998 1 Lloyd report 167
taking into consideration, having parallel proceedings in two forums available funds may
be limited to satisfy the claims, 1976 Limitation Liability Convention not universally
recognized and having preference for it had no greater jurisdiction than 1957 Limitation
Liability Convention. Here the judge has given consideration for legal cost and lessons
learnt from The Kapitan Shveston.8
EC Regulations and their Impact on the Principal of Forum Non
EC Regulations which came in to force on 1st March 2002 have caused several limitations
to the application of the principal of forum non conveniens. Descriptions given below
include briefly the domicile rule, when it can be exempted, other options available and
their practical application in the Case Po. It is to be noted that prior to EC Regulations
identical provisions were existed under the Brussels and Lugano Conventions and the
Case Po was judged on those provisions under those Conventions. EC Regulations
Article 71 is Brussels Convention Article 57 and EC Regulations Article 4 remains the
same in Brussels Convention.
The Content of EC Regulations and how they may be Categorized
EC Regulations EC44/2001of 22 December 2000 on Jurisdiction and the Recognition and
Enforcement of Judgments in Civil and Commercial Matters:
Article 2, Subject to provisions of this Convention, persons domiciled in a contracting
State shall, whatever their nationality, be sued in the courts of that state. Persons who are
not nationals of that State in which they are domiciled shall be governed by the rules of
jurisdiction applicable to nationals of that state.
The Mandatory Exceptions to Article 2:
Article 22, exclusive jurisdiction relating to immovable property;
Article 23, jurisdiction allocated to a Contracting State by agreement of the parties to a
contract. Such jurisdiction shall be exclusive and;
Article 24, available exceptions when the defendant enters appearance in a court of a
Contracting State not just for contesting jurisdiction.
The Optional Derogations:
Articles 5 & 6, Special jurisdiction of a Contracting State as provided by Article 5 when
there is a specific substantive link with the dispute and by Article 6 concerning suits with
multidefendent parties or counterclaims in the Contracting State of one of the parties or
where a claim has been brought;
Articles 8-14 Jurisdictions in relations to insurance contracts;
Articles 5-17 Jurisdiction over consumer contracts;
Articles 18 -21 Jurisdiction over contracts of employment and;
 2 Lloyd’s Report 454
 1 Lloyd’s Rep. 199 (Hong Kong 1st Instance & CA).
Article 7 provides for an alternate jurisdiction to domicile of the limitation defendant, to
the extent that he has not already commenced a limitation of liability action in the court
of his domicile, another Contracting State. If he has not, then the limitation of liability
action must be brought in the court which is seised with the liability claim.
Article 71 (1), this Regulation shall not affect any conventions9 to which the Member
States are parties and which in relation to particular matters govern the jurisdiction or the
recognition or enforcement of judgments and Article 4(1), if the defendant is not
domiciled in a Member State, the jurisdiction of the courts of each Member State shall,
subject to Articles 22 and 23, be determined by the law of that Member State.
The collision occurred in Brazil between an Italian ship and an American Naval ship. The
plaintiff US Navy commenced proceedings in England and later issued a writ in rem11
the Italian Owners (the defendants) brought two motions first they claim that the Brussels
Convention prevented English court’s action because the defendant is domicile in Italy
which is a party to the EC Regulations and the second motion it claimed that English
action should be stayed in favour of natural forum that is Brazil. The Court rejected the
first motion on the grounds that arrest of a ship base on Article 1 of the 1952 Collision
Convention as such it overrides the Regulations12. The judge also rejected the second
motion since the competing jurisdiction (Brazil) is not a party to Brussels Convention13
and denied stay by applying second stage test of The Spiliada, interpreted as:
end justice where prima facie evidence exist that this is a case of res ipsa loquitur14,
under the English law burden of proof will shift to the defendant but under the Brazilian
law such judicial advantage is not available to the plaintiff.
The principal of Forum Non Conveniens appeared to have survived EC Regulations
As evident from the Article 4, if the defendant is not domiciled in a contracting state the
jurisdiction of the court can be determined by the law of the member state there is
English law and the principal of Forum Non Conveniens applied. In all other
circumstance application of the principal shall be in consistent with EC Regulations.
The Deichland  1 QB 361; The Anna H  1 Lloyd’s Report 11
1991]2 Lloyd Report 206
Action against the Ship; s20(2) of 1981 UK Supreme Court Act.
EC44/2001 Regulation Article 71 or Brussels Convention Article 57
EC44/2001 Regulations Article 4 also in Brussels Conventions broadly the same provisions.
Claimant have no difficulty in discharging the burden to the defendant because facts of the case is very
clear. See also Case Merchant Prince  P 179; the Kite P154
Piercing of the Corporate Veil
Investigating into who is the real beneficial owner in an admiralty claim required under
S21(4) SCA 1981 for claims in rem type described by S20(2) e-r, also known as non
truly in rem claims which states: (i) The relevant person is either the beneficial owner of
that ship as respects all the shares in it or the charter of it under a charter by demise; or
(ii) any other ship15 which, at the time when the action is brought, the relevant person is
the beneficial owner as respect all the shares in it.
Salomon v A Salomon & Co Ltd,16 concept was no matter who are the share holders the
company is a separate entity, no one could pierce the corporate veil to pursue the share
holders for liability. This concept was altered in Adams v Cape Industries17 which was a
non admiralty case, the court of appeal laid down the guide lines as to when the court can
consider piercing the corporate veil: (i) limitations imposed on his conduct by law; (ii)
such right of relief against him as third parties already process, exclude the rights that
may be acquired in future. It is common in shipping industry an owner having two ships
having them registered under two different companies, under the English law this will not
consider as sham nor the two ships will qualify as sister ship or ‘other ship’. In The
Aventicum18 it was held it is not permissible to pierce the corporate veil unless, there is
evidence of a sham transfer of the legal ownership. For this purpose, the court can order
evidence to be produced. In The Evpo Agnic19 Lord Donaldson said ‘however, it is
legitimate for ship owners to arrange their affairs by running a series of one ship
companies as a group and cause them use their individual assets to their mutual
advantage. There is no reason why they should not do so without any risk of the
arrangement being held to be a ‘sham’.’
The corporate veil was pierced in The Saudi Prince.20 Following a cargo claim, transfer
of ownership in fear of an action in rem was carried out in paper by the owners of The
Saudi Prince however, upon investigation including piercing of corporate veil found
transfer was a sham the original owner is still the beneficial owner of all shares of the
company. In Snook v London and West Riding Investments LTD21 the meaning of
‘sham’ given by lord Diplock Lj concerning hire purchase ‘acts done or documents
executed by the parties to the sham which were intended by them to give third parties or
the courts the appearance of creating the between the parties legal rights and obligations
different from the actual legal rights and obligations which the parties intend to create.
Other ship means sister ship owned by the same person.
 1 AC 22 (HL)
 1 All ER 929
 1 Lloyd report 184.
 2 Lloyd’s Report 411.
 2 Lloyd’s Rep 255
Shook v London and West riding Investment Ltd 2QB 786, p 802
But one think, I thing, is clear in legal principal, morality and authorities, that for the acts
or documents to be a ‘sham,’ with whatever legal consequences follow from this, all the
parties thereto must have a common intention that the acts or documents are not to create
the legal rights and obligations which they give the appearance of creating. No
expressions intension of a ‘shammer’ affects the rights of a party whom he deceived.
Comparison between English law and other Regimes
Under the English law the approach is not flexible therefore a legal transfer of shares
without a ‘sham’ will relieve the owners of liability. South African and France have
shown more flexibility in arresting sister ships whereas Canadian law appeared to be
similar to English law. The South African provisions are more extensive in that they
permit a piercing of the corporate veil. In this respect a vessel owned by a different
company from the company which owns the ship concerned is susceptible to arrest
simply by virtue of the two owning companies being commonly controlled. Section
3(7)(b)(ii) of the Admiralty Jurisdiction Regulation Act, No 105 of 1983 provides that ''a
person shall be deemed to control a company if he has power, directly or indirectly, to
control the company''. It was this sub-section that the court considered in the ''Heavy
Metal''22. The Court held that the nominee shareholders have direct control over a
company whilst their principals have indirect control.
Canadian Supreme Court Act 1992, which is similar to the English Statute except no
reference to all shares in a ship with regard to beneficial ownership. The Looiersgracht23
This ship was arrested in respect of a maritime claim arose with her and five other ships.
The defendant claimed that the security posted should not include security for other ships
since they do not beneficially own all the shares in them. The Canadian Federal Court,
Hargrave j : our legislation requires that the sister ship be ‘beneficially owned by the
person who is the owner of the ship that is subject of action’.
The development of the law on piercing the corporate law appeared have taken place
place from the time of Salomon v A Salomon & Co Ltd , the concept of ‘no one
could pierce the corporate veil’ ‘to allow piercing of the corporate veil when there is
‘sham’’. However the end results to date is that series of one ship companies are not a
‘sham’ if they are established for legitimate reasons. Common law regime such as South
Africa has shown more flexibility in arresting ships controlled by different legitimate
companies controlled by the owner. The collision convention does not give an
authoritative definition on the other ship or sister therefore different interpretations have
seen between the English, South African and Canadian law regimes.
Belfry Marine Ltd v Palm Base Maritime SDN BHD 1999 (3) SA 1083 (SCA).
 2 Lloyd’s Report 411 & 415
Conflict of Laws
Law of the flag state was taken as the law governing the contact of mortgage by the
English Courts however, with the increasing number of shipping registered under the flag
of convenience, the law of the flag state did not always represents the law which governs
the contract nor the law closely connected to it. 1980 Rome Convention on Law
Applicable to Contractual Obligations has made headway in defining the law applicable
to contractual obligations on the other hand, conflict of laws still exist in recognizing
maritime liens governed by different national laws.
Determination of Validity of Mortgage and Priority
Case Angel Bell24 a Panamanian company with a ship registered in Panama. The
mortgage was not finally registered, the ship sank and the cargo owner brought a Mareva
injunction against the insurance proceeds restraining the defendant from dealing from his
assets within the jurisdiction or removing them out of the jurisdiction. The mortgagee (G)
intervened on the action on the basis that (a) originally assured under one set of insurance
policies; (b) designated loss payee and other such as assignee under the policies. One of
the issues for the court was, whether, the mortgagee was a secured creditor. Under the
Panamanian law the unregistered mortgages are not recognized as secured creditors.
However, under the English law both registered and equitable mortgages are recognized.
It was held by Lord Donaldson that ‘although it was possible to have an English contract
for a mortgage of foreign land which would result in the mortgage being governed by
inter partes by English law, prima facie mortgages either of foreign land or ships would
be governed by the law of their situs or flag, in this case – Panamanian law. There was no
contrary evidence to displace that presumption. Thus the failure of G to register the
mortgage under Panamanian law reduced its effectiveness, in that it conferred no in rem
rights against the ship but, only the rights in personam against the borrower.’
One of the agreements, however, governed by English law, ‘G’ could rely upon the loss
payable clause, ‘G’ were held to be assignee of the policy under the notice of assignment
and were the creditors of the borrowers.
Under the English law25 both registered and equitable mortgages are recognized and have
the right to action in rem, the judgments were base on which law shall govern the
mortgage and the factors taken into consideration when foreign registered ships and their
mortgages involved were, the registration of the ship and specific law governing the
contact of mortgage.
Recognition of Maritime Liens Created by Law of a Foreign Country
The decision of the Privy Council in the Halcyon Isle:
Halcyon Isle 26 the mortgagees were English banks registered in England, the ship owners
were Americans and the repairs to the ship were carried out in New York, by the repair
yard under the repair contract was governed by the USA law. The ship was later arrested
 2 Lloyd’s Report 491
SCA 1981 S20 (2) (c)
 AC 221, p 235
and sold in Singapore, the proceeds from the sale were not sufficient to satisfy all the
claimants. Under the USA law ship repairer has lien on the ship but under the English
law repairers are secured creditors not lienees. The question was whether the maritime
lien which was created in US under the American law was enforceable in England. Lord
Diplock concluded that the question as the right to proceed in rem against a ship, as well
as priorities in the distribution between competing claims of the proceeds of her sale in an
action in rem in the High Court of Singapore, falls to be determined by the lex fori27
There were dissenting opinions28 their view on the balance of authorities, maritime lien
created by USA law is recognized by English law therefore maritime law created by lex
loci contractus29 has precedence over the mortgagees’ mortgage. If it were otherwise
injustice would prevail, the ship repairers would be deprived of their maritime lien, valid
as it appeared to be throughout the world, and without which they would obviously never
have allowed the ship to sail away paying a dollar for the important repairs upon which
ship repairers had spent a great deal of time and money and from which the mortgagees
obtained substantial advantages.30
Other Jurisdictions and Recognition of Foreign Liens
The Ioannis Daskalelis31The Canadian Supreme Court decision, the ship repairers were
entitled to maritime lien under USA but not under the Canadian law. After considering
authorities form the private international law32 and The Strandhil33it was held that the
ship repairer’s lien took priority over the mortgagee’s claim.
The Andrico Unity34The South African Court recognized the English decision of the
Privy Council in the Halcyom Isle, judge dismissed the claim by the Argentinean bunker
supplier that a maritime lien is attached to ship under which govern the law of the
contract or Argentinean law.
Present Status of Maritime Liens
The conflicting decisions lead to indicate non uniformity of recognition of liens.
Rome Convention on the Law Applicable to Contractual Obligations 1980, which was
implemented in the UK by the Contracts (Applicable Law) Act 1990, applies to contracts
entered into after 1st April 1991. The Act states that priority to be given to law chosen by
the parties35 and in the absence of choice, to the law of the country with which the
contract is most closely connected.361993 International Convention on Maritime Liens
and Mortgages came into force in 2004 but, UK has not ratified the convention yet.
The law of the forum ; the law of the jurisdiction
The dissenting minority, Lord Salmon and Scarman
The law which governed the contract ;
 AC 221, pp 246-47
 1Lloyd’s Report 174
Cheshire’s Private International Law 8th Edition Page 676
 4 DLR 801
(1987) 3 SALR 794
1980 Rome Convention is clear as to which law will govern the contract of mortgage
there is the law chosen by the parties or the law which the contract is most closely
connected however, with respect to maritime liens created by law of a foreign country,
English Courts decisions differ from the decisions of other common law jurisdictions and
sometimes criticized by dissenting judges and academics. Further to that, 1993
International Convention on Maritime Liens and Mortgages although is in force, is not
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