The United Arab Emirates is the central shipping point in the Middle East, operating several ports in the country, which contribute substantially to the GDP of the UAE.
The law regulating the shipping industry and maritime trade is the Federal Law No. 26 of 1981 (Maritime Code).
The Maritime Code regulates the procedure of registration of vessels, contracts of carriage, liens, limitation of liability, accidents or collisions of vessels, and arrest and sale of the vessels, amongst other things.
Vessels Having UAE Nationality
The Maritime Code defines vessels under Article 11/1 as follows.
A vessel is any structure normally operating, or set for the purpose of operating, in the field of maritime navigation, regardless of its power, tonnage, or the purpose of navigation thereof.
Every vessel is required to have a name, nationality, a flag to fly and a port of registry under Article 13. The registration and flag of the vessel determine its nationality and the country which exercises regulatory control of the vessel.
According to Article 15, every vessel which holds the nationality of the UAE is required to fly the flag of the UAE. For a vessel to acquire the nationality of the UAE, it must be registered in any of the UAE’s ports and owned by a natural or juridical person having UAE nationality. In the event of an LLC, at least 51% of the capital has to be owned by persons holding UAE nationality and directors of the same nationality under Article 14.
A vessel cannot sail while flying the flag of UAE unless it is registered under the Maritime Code.
Legal Capacity of the Ship
A ship does not have the legal capacity to be sued and therefore, any claim arising out of or in connection with a ship has to be filed against the ship’s registered owners and not against the ship itself.
Can a Vessel be Mortgaged?
Yes, a vessel whose total tonnage exceeds ten tons may be mortgaged. This is provided under Article 97 of the Maritime Code. The mortgage of the vessel is undertaken by entering into a mortgage contract under Article 99, which should set out the name of the vessel, capacity, nationality, port of registration and the date of the certificate of registration.
Once the mortgage has been secured, it has to be registered at the bureau of the port of registration of the vessel under Article 102.
The Maritime Code does not specify the mandatory terms of the mortgage and it appears that the legislator left it to the parties to determine the terms and conditions of the mortgage. That said, Article 1440 of Federal Law No. 5 of 1985 clarifies that the terms of the mortgage expire upon the expiration of the debt.
The Arrest of the Vessel
A vessel can only be arrested in satisfaction of a “maritime debt”. A maritime debt has been defined under Article 115 of the Maritime Code. Article 115/2 states that:
The expression “maritime debt” shall mean a claim in respect of a right arising out of any of the following causes:
1. Damage caused by the vessel because of a collision or otherwise
2. Loss of life or personal injuries occasioned by the vessel and arising out of the use thereof.
3. Assistance and salvage.
4. Contracts relating to the use or exploitation of the vessel under a charter party or otherwise
5. Contracts relating to the carriage of goods under a charter party, bill of lading, or other documents,
6. Loss of or damage to goods or chattels being carried on board the vessel
7. General average.
8. Towage or pilotage of the vessel.
9. Supplies of products or equipment necessary for the utilization or maintenance of the vessel, in whichever place the supply is made.
10. Construction, repair or fitting out of the vessel, and costs of it being in dock.
11. Sums expended by the master, shippers, charterers or agents on account of the vessel or account of the owner thereof.
12. Wages of the master, officers and crew, and other persons working on board the vessel under a contract of maritime employment.
13. A dispute as to the ownership of the vessel
14. A dispute in connection with the co-ownership of the vessel, or with the possession or use thereof, or with the right to the profits arising out of the use thereof.
15. A maritime mortgage
How to File for a Ship Arrest?
In order to file a ship arrest application, the party must provide a power of attorney signed by it in favor of a local advocate, and the power of attorney must be signed before a notary public in the UAE. The application for ship arrest is to be filed with the civil court having jurisdiction. The ship arrest will only be ordered for the satisfaction of a maritime debt. An arrested vessel is forbidden to sail under Article 118.
Setting Aside an Order for Arrest
According to Article 118/2, an order of arrest can be set aside by the civil court if a guarantee or any other security is presented before the court which is sufficient to satisfy the debt. However, where the maritime debts relate to the dispute as to ownership, co-ownership, possession, use or right to profits arising out of the use of the vessel, the order of arrest may not be set aside under Article 118/2.
Conclusion
The laws governing the shipping industry in the UAE are complex and wide, although it is clear that the goal is to promote domestic and foreign trade in the country, economic security and develop UAE as the biggest maritime location in the world.
Written by Dr. Hassan Elhais
Legal Consultant