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Law
Business
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Andrade Dias & Associados Portugal
Portugal
Mateus Andrade Dias
Andrade Dias & Associados
Newbuilding contracts guarantee his claims arising out from the building of the new ship.
The Civil Code also rules on retention liens (articles 754 to 761).
1 When does title in the ship pass from the shipbuilder to the Article 756 of the Civil Code states that no such retention lien
shipowner? Can the parties agree to change when title will pass? exists (or that it is unlawful, if exercised) when the claims (on which
The parties to the newbuilding contract may agree on when title in the builder is supporting his retention lien) were incurred or caused
the ship will pass from the shipbuilder to the shipowner, provided to be made in bad faith by the builder, or when the party against
they do so in writing as a newbuilding contract (or any amendments whom it is being exercised has offered, in or out of court, sufficient
thereto) governed by Portuguese law has to be produced in writing, security to guarantee the claims of the builder.
as per articles 12 and 16 of Decree-Law 201/98. If and when the builder is lawfully exercising his retention lien,
In the absence of such agreement between the parties, title in the shipowner may start court proceedings offering security. Pending
the ship shall pass from the shipbuilder to the shipowner when the such proceedings, the shipbuilder is notified by the court to declare
shipbuilder delivers the new ship and the shipowner accepts the new whether the security offered is satisfactory and sufficient. It rests
ship, except for the materials supplied by the shipowner for the new- with the judge to make the ultimate decision on the type, nature and
building, which are considered owned by the shipowner, pursuant to amount of the security to be provided.
article 16 of Decree-Law 201/98. If and when the builder is unlawfully exercising a retention lien,
A newbuilding contract is governed by the written clauses of the shipowner can elect to do any combination of the following:
the contract, by Decree-Law 201/98 and, in subsidiary terms, by the • commence proceedings to obtain a judgment against the builder
general rules applicable to construction or repair contracts (articles ordering payment of all losses and damages caused to the ship-
1207 to 1230 of the Civil Code) provided that said general rules do owner by the said unlawful retention lien of the ship, and also
not contradict the specific rules of Decree-Law 201/98. ordering delivery of the ship;
• if, under the newbuilding contract, title has already passed onto
the shipowner, enforce the newbuilding contract in a special
2 What formalities need to be complied with for the refund guarantee to enforcement proceeding aimed at obtaining delivery of the ship;
be valid? or
The newbuilding contract should have a written clause stipulating the • apply for a provisional order to be issued by the judge aimed at
duty of the shipbuilder to provide a refund guarantee to the shipowner obtaining the provisional delivery of the ship pending and subject
as a guarantee of repayment of pre-delivery instalments paid by the to a final resolution of the dispute.
shipowner. This does not prevent the parties from agreeing, after the sig-
nature of the newbuilding contract, on the said security requirement. The use of any of the above remedies will have to be assessed on the
The formalities required for the refund guarantee depend on the basis of the particular circumstances of the case. The builder will
type or nature of the refund guarantee agreed and on the conditions normally refuse delivery alleging a retention lien. Any of the said
stipulated in such refund guarantee and also on the person who is remedies should be then used in conjunction with the offering, (either
acting as the refund guarantor (a bank or an insurance company or in or out of court), of security to the builder.
the builder itself).
For example, a bank guarantee must be issued in a written docu- 4 Where the vessel is defective and damage results, would a claim lie
ment that includes the following information: in product liability against the shipbuilder at the suit of the shipowner;
• the identity of the guarantor, of the guaranteed and of the a purchaser from the original shipowner; or a third party that has
beneficiary; sustained damage?
• that it is a refund guarantee (cause of the guarantee);
• the amount guaranteed (a fixed amount or several instalments or With regard to building defects, the shipbuilder guarantees the ship
even subject to determination under certain conditions); for a period of one year, commencing from the date of acceptance
• the period of its duration and validity; of the ship. The shipbuilder is obliged to correct the defect or to
• the conditions of its enforceability and alterations; and replace the defective equipment, pursuant to article 24 of Decree-
• the applicable law and competent jurisdiction to consider issues Law 201/98. The shipowner must convey to the builder the defects
or disputes related to the said guarantee. detected within 30 days commencing from the date of their discov-
ery, as per article 26 of Decree-Law 201/98. The test results, the
approval and the acceptance by the shipowner without any reserva-
3 Are there any remedies available in local courts to compel delivery of tion does not exempt the shipbuilder from liability to correct defects,
the vessel when the yard refuses to do so? save where the shipowner knew of them. The apparent defects
Article 25 of Decree-Law 201/98 establishes that the shipbuilder are presumed to be known by the shipowner, according to article
has a retention lien by operation of law over the newbuilding to 27 of Decree-Law 201/98. If the defects are not corrected by the
www.gettingthedealthrough.com 205
Portugal Andrade Dias & Associados
shipbuilder, the shipowner can demand for a price reduction accord- Merchant ships or merchant yachts under construction may be
ing to equity or apply for the cancellation of the newbuilding con- registered at the Conventional Registry or at the International Ship-
tract if the defects make the ship inadequate for the purpose or aim ping Registry of Madeira.
to which she was destined, according to article 28 of Decree-Law
201/98. The correction, price reduction or cancellation remedies are
6 What are the requirements for company formation?
cumulative to any compensation for damages. The rights of correc-
tion of the defects or price reduction or cancellation or compensa- The common legal structures used are both of limited liability, one
tion for damages are, if not exercised, time-barred within two years being a limited liability company by quotas (Lda) and the other a
commencing from the date of delivery of the ship. The two-year time limited liability company by shares (SA). The Lda company has to
bar commences from the date of discovery of a latent defect by the have a minimum quota capital of e5,000 while the SA has to have
shipowner, pursuant to article 30 of Decree-Law 201/98. a minimum share capital of e50,000. A company can be incorpo-
A purchaser from the original shipowner will have to exercise rated by private written contract (signed with legalised signatures of
any possible rights pursuant to the contract for the sale and purchase the signatories) save where the capital is being met by an immove-
entered into with the original shipowner and pursuant to articles able asset (an estate) where, in this case, public deed is in principle
913 to 921 of the Civil Code that rule on the sale and purchase of required for the incorporation. The incorporation of the company
defective goods. This will not prevent the builder, shipowner and is subject to registration at the Commercial Registry and subject to
purchaser of the defective ship from agreeing on an assignment of online publication at the Ministry of Justice’s official website.
the newbuilding contract or of the relevant rights and duties arising
from the latter.
7 Is dual registration and flagging out possible and what is the
A third party that has sustained damage (eg, personal injury)
procedure?
arising from a defective ship will have to rely on the rules of tort to
seek compensation for damages. Normally said rights will be exer- Dual registration is admissible within the Portuguese legal frame-
cised against her owner. work, as per Decree-Law 287/83 and Decree-Law 96/89.
The Conventional Registry and the International Shipping Reg-
Ship registration and mortgages istry of Madeira admit flagging in of merchant ships under the fol-
lowing conditions:
5 What vessels are eligible for registration under the flag of your • the merchant ship needs to be bareboat-chartered by a Portu-
country? Is it possible to register vessels under construction under guese bareboat charterer duly licensed to undertake the com-
the flag of your country? mercial sea carriage business; and
Portugal uses a dual system of registration for merchant ships. It is • the bareboat charter party contract needs to stipulate a purchase
dual in two senses: option in favour of the charterer and it (the flagging in) will be
• a merchant ship can be registered on the Conventional Registry subject to a duration permission that shall not exceed five years,
or in the International Shipping Registry of Madeira; renewable.
• a merchant ship registered on the Conventional Registry has to
be registered at the Harbour Master’s Office and at the Com- A written permission application should be lodged by the charterer
mercial Registry; and be accompanied by: original or certified copy of the bareboat
• a merchant ship registered on the International Shipping Registry charter party contract with purchase option; written note describing
of Madeira has to be registered at its Technical Commission and the advantages to the Portuguese economy and to the applicant that
at the Commercial Registry of the Free Trade Zone of Madeira; arise from flagging in a foreign vessel; statement from the owner
• the Harbour Master’s Office and the Technical Commission are authorising the flagging in; statement from the underlying registry
technical registries aimed at publicising the technical features of allowing the flagging in; certificate of ownership, liens and encum-
ships, while the Commercial Registries are public registries aimed brances of the ship; statement from the mortgagee authorising the
at publicising, before third parties, the legal situation of assets, flagging in; and copy of the tonnage certificate and copy of her safety
namely her ownership, onus and encumbrances. Ships registered and classification society certificates. A registration number, call sign
under one of these systems of registration sail under the Portu- and tonnage certificate should be requested from the Portuguese
guese flag; and authorities after issuance of the permission.
• the main differences between Conventional Registry and Inter- A written registration application should then be lodged and
national Shipping Registry of Madeira rest on the fact that the accompanied by:
latter has less requirements on nationality of crewmembers and • proof of the Portuguese nationality of the bareboat charterer and
shipowners, and their crews do not have to comply with social and of its licence to operate as a sea carrier;
security compulsory dues. • proof that the bareboat charter party is recorded at the Com-
mercial Corporate Registry of the charterer;
Merchant ships, oil rigs and merchant yachts will all be eligible for • proof of permission for the dual registration; and
registration either at the Conventional Registry or at the Interna- • proof of the temporary registration number, call sign and ton-
tional Shipping Registry of Madeira. Pleasure yachts are only eligible nage certificate and certificate of ship’s survey.
for registration at the International Shipping Registry of Madeira and
at the Harbour Master’s Office, as they are not eligible for registra- The documents lodged with the permission application need not be
tion at the Commercial Registry within the Conventional Registry. attached with the registration application. A certificate of registration
Pursuant to article 77 of the Harbour Master’s Office Regulation, is issued upon completion of the registration process.
small boats existent on board, (even if they are life rafts), small Article 18 of Decree-Law 96/89 states that the Technical Com-
auxiliary fishing boats and small beach boats without engines or mission may allow flagging out of bareboat chartered ships. The
sails to be used within 300 metres of the low tide line are exempt procedure and requirements will mainly depend on the law of the
from registration. Theoretically and with the exclusion of the above- state flagged in.
mentioned boats, all merchant ships are eligible for registration at the
Harbour Master’s Office.
8 Who maintains the register of mortgages and what information does it Article 12 of Decree-Law 202/98 states that the owner, in addi-
contain? tion to the limitation of liability provisions contained in any inter-
If the ownership of the ship is registered in Portugal, the mortgage national conventions applicable in Portugal, and where the claims
will be registered at the Technical Commission and at the Commer- at stake are other than the ones stated in the said international con-
cial Registry of the Free Trade Zone of Madeira, if she is registered ventions, may limit his liability to the ship and to the value of the
at the International Shipping Registry of Madeira, or at the Com- freight at risk by abandoning the latter to the creditors and in order
mercial Registry, if registered at the Conventional Registry. to establish a limitation of liability fund.
Identification of the mortgagor, mortgagee, principal, interest
and expenses shall be recorded. 10 What is the procedure for establishing limitation?
If the ship is flagged in to Portugal, the mortgage will not be
registered at the Technical Commission or at the Harbour Master’s There is no specific regulation applicable to the 1924 Convention.
Office. The fund will be calculated based on the value of the ship, the freight
and the accessories of the ship.
Limitation of liability The Limitation Fund Regulation was established to allow appli-
cation of the 1957 Convention. The fund can be established in any
9 What limitation regime applies? What claims can be limited? Which way admitted by civil law to grant security. It will be established
parties can limit their liability? by means of lodging of a written application that must refer to: the
event that has caused the damages; the amount of the limitation fund,
Portugal is a contracting state to the International Convention for the calculated in accordance with article 3 of the 1957 Convention; the
Unification of Certain Rules relating to the Limitation of the Liability way in which the fund will be established and the amount to reserve
of Owners of Seagoing Vessels, 1924. The claims listed in article 1 of pursuant to article 3, paragraph 4 of the 1957 Convention. The
the 1924 Convention may be limited. The owner can limit liability application must be attached with a list of the known creditors and
arising from the said claims. information on their claims and domiciles and with the supporting
Portugal is also a contracting state to the International Conven- elements for calculation of the amount of the fund, namely a tonnage
tion relating to the Limitation of the Liability of Owners of Seagoing certificate and a tonnage admeasurement statement in respect of the
Ships, 1957 and of the 1979 Protocol Amending the Limitation of engine room space.
Shipowners’ Liability, 1957. The amounts to which the applicant can limit his liability under
Pursuant to article 1 of the 1957 Convention, the following article 3 of the 1957 Convention shall be an aggregate amount
claims may be limited: of 66.67 units of account for each ton of the ship’s tonnage if the
• loss of life of, or personal injury to, any person being carried in occurrence has only given rise to property claims. Where the occur-
the ship, and loss of, or damage to, any property on board the rence has only given rise to personal claims, an aggregate amount of
ship; 206.67 units of account for each ton of the ship’s tonnage. Where
• loss of life of, or personal injury to, any other person, whether the occurrence has given rise to both personal claims and property
on land or at sea, loss of or damage to any other property or claims, an aggregate amount of 206.67 units of account for each ton
infringement of any rights caused by the act, neglect or intent of the ship’s tonnage, of which a first portion amounting to 140 units
of any person on board the ship for whose act, neglect or intent of account for each ton of the ship’s tonnage, shall be exclusively
the owner is responsible or of any other person not on board the appropriated to the payment of personal claims and of which a sec-
ship for whose act, neglect or intent the owner is responsible for, ond portion amounting to 66.67 units of account for each ton of the
provide, however, that in this last case, the act, neglect or intent ship’s tonnage shall be appropriated to property claims. Provided,
is one which occurs in the navigation or the management of the however, that in cases where the first portion is insufficient to pay
ship or in the loading, carriage or discharge of her cargo or in the personal claims in full, the unpaid balance of such claims shall
the embarkation, carriage or disembarkation of her passengers; rank ratably with the property claims for payment against the second
and portion of the fund.
• excluded by reservation. The unit of account is the special drawing right as defined by
the International Monetary Fund. The amounts shall be converted
The owner, armador, armador manager, master, members of the crew into the national currency on the date that the shipowner has con-
and other servants of the owner, armador or armador manager acting stituted the limitation fund, made the payment or given a guarantee
in the course of their employment can limit liability arising from the that, under the law of that state, is equivalent to such payment. The
above claims, provided that the total limits of liability of the owner relevant currency for Portugal is the euro. Tonnage will be calculated
and all such other persons in respect to personal claims and property as follows:
claims arising on the same occasion shall not exceed the amounts • in the case of steamships or other mechanically propelled ships,
determined in accordance with article 3 of the 1957 Convention. The the net tonnage shall be taken with the addition of the amount
armador is the person or entity that executes, in its own interest, all deducted from the gross tonnage on account of engine room
the legal and material acts necessary for the ship to be in a position space for the purpose of ascertaining the net tonnage; and
to undertake her voyage – namely, equips, mans, clears and provides • in the case of all other ships, the net tonnage shall be taken.
the ship to undertake her voyage, under article 1, paragraphs (c)
and (d) of Decree Law 202/98. Pursuant to article 2 of Decree Law Security has to be given either in the form of cash, mortgage or letter
202/98 and subject to proof to the contrary, the following persons or of guarantee.
entities are presumed to be the armador of the ship: owner; benefici- Pursuant to article 13 of Decree-Law 202/98, the same proce-
ary of a dual registration; and bareboat charterer. The Protection dural rules applicable to the establishment of the limitation fund
& Indemnity Club or the Hull & Machinery Underwriters can also under the 1957 Convention shall apply to the limitation fund ruled
limit liability under the 1957 Convention, as has been decided in past by Decree-Law 202/98, fully adapted to the provisions of the latter.
judgments issued by the Portuguese courts. The value of the freight at risk must be stated in the application and
The 1957 Convention became internal law by force of Decree- security for the said value of the freight should be provided by the
Law 49028. A Limitation Fund Regulation was created by Decree applicant. A bailee is appointed and the judicial sale of the ship is
49029. ordered.
www.gettingthedealthrough.com 207
Portugal Andrade Dias & Associados
11 In what circumstances can the limit be broken? proceedings, the full amount of them was recognised. Its implications
As per article 2 of the 1924 Convention, the owner shall not be in future limitation of liability cases is yet to be seen. It is also yet to
allowed to limit his liability if the obligation arises out of acts or be seen what percentage relation will have to exist above 3.75 per
faults of the owner itself or in regards to obligations referred to in cent between the amount distributed and the amount of the claim.
article 1(8), where the owner has expressly authorised or ratified However, shipowners may consider from this judgment onwards that
such obligation; the obligation arises out of the engagement of the this will be an issue raised by any claimant in order to try to break
crew and other persons in the service of the vessel. If the owner or a the limitation of liability.
part-owner of the vessel is at the same time master thereof, then he
Port state control
cannot claim limitation of liability for his faults other than his faults
of navigation and the faults of persons in the service of the vessel. 12 Which body is the port state control agency? Under what authority
As per article 1 of the 1957 Convention, the applicant shall not does it operate?
be allowed to limit his liability if the occurrence giving rise to the
claim resulted from the actual personal fault of the applicant. IPTM is the port state control agency. It is governed by Decree-Law
A recent appeals judgement with No. 444/2008, issued by the 146/2007. IPTM is a public body empowered of administrative and
2nd Section of the Constitutional Court in proceedings No. 80/2008 financial autonomy pursuing tasks of the ministry of public works,
on 23 September 2008 and published on 28 October 2008, has transport and communication. IPTM operates under the supervi-
considered the limitation of liability under the 1957 Convention sion and custody of the minister of public works, transport and
unconstitutional under certain specific circumstances. It has been communication.
ruled that: Its aim is to regulate, check and exercise functions of coordina-
A compensation that covers merely 3.75 per cent of the claim tion and planning of the port and maritime sector and supervise
must be considered as a clear insignificant compensation, if and regulate activities developed in this sector. Its tasks are, inter
one bears in mind that the total amount of the recognised alia, to promote the application and check the compliance with the
damages to the claimants reaches e65,785.04. The dispro- laws, regulations, rules and technical requirements applicable within
portion between this last value and the compensation given its tasks, namely, of national and international rules related to the
is so apparent that the latter can only be considered miser- port and maritime sector, without prejudice of jurisdiction of other
able […] entities.
In fact, it happens that it is the amount of the fund,
in the maximum total of e8,267.41, that is, in the outset,
13 What sanctions may the port state control inspector impose?
insignificant, although we are facing a liable 100 tons net
tonnage ship (even if the claimants had received the total As per Decree-Law 195/98, the sanctions will not normally be
amount of the fund, they would be merely receiving coverage imposed by the inspector of the IPTM. The sanctions will normally
of 12.5 per cent of their claim). To allow that a ship, regard- be imposed by the harbour master following a mandatory technical
less of her tonnage, can blamefully collide with another ship, opinion of the IPTM.
and even sink her, resting only obliged to compensate the The following sanctions may be imposed: detention; stoppage of
caused property damages up to the amount of e8,267.41 operations (eg, cargo discharge); refusal of entry and stay in Portu-
clearly poses a risk to the core of the constitutional right guese ports; and fines of up to e25,000.
of compensation for damages, inherent to the constitutional
principle of democratic and the rule of law governed state
14 What is the appeal process against detention orders or fines?
as the possibility of its application results in a unacceptable
disproportion between the value of the property damages A detention sanction can be appealed by means of an application
and the compensation given. addressed to the Maritime Court. The appeal does not suspend the
The situation is much more serious where the claimants effects of the detention sanction. The same can be followed to oppose
can not, under the 1957 limitation of liability convention, fines.
obtain any other compensation for the suffered damages,
namely from the agents, servants or employees that acted Classification societies
negligently because the latter’s can use the same limitation
of liability against the claimants (article 6(2) and (3) of the 15 Which are the approved classification societies?
1957 limitation of liability convention) [...] The approved classification societies are: American Bureau of Ship-
It is decided then to rule unconstitutional the provision ping; Bureau Veritas; Det Norske Veritas; Germanischer Lloyd;
regarding the constitution of the limitation of liability fund Lloyd’s Register; RINA; and RINAVE.
with the amount stated in article 3, paragraph 1, sub para-
graph a) of the 1957 Convention [...] when the compensa-
tion arising from the distribution of the fund amount by the 16 In what circumstances can a classification society be held liable, if at
creditors covers merely 3.75 per cent of the amount of the all?
recognised to certain plaintiff’s claims, with a total amount Pursuant to article 11 of Decree-Law 321/2003, the Portuguese state
of e65,785.04. shall have the right to seek compensation from the approved clas-
It is then decided to grant the appeal in this point order- sification society when liability is imputed to the former arising out
ing the reform of the appealed judgment in accordance with of any incident, by a final and non-appealable judgment issued by a
the unconstitutionality judgment. court or an arbitral tribunal, together with an indemnity application
by the damaged parties and, where said liability arises, inter alia,
As can be inferred from the described judgment shipowners, may from loss or damage, death or personal injury and if it has been
well be prevented to limit their liability under the 1957 Convention proved in the said court that said damages were caused by intentional
within the Portuguese jurisdiction, or it is at least very likely that act or omission or by gross negligence of the approved society, their
they will see their limitation right very limited. The outcome of this directors, employees, agents or other persons that act on her behalf.
judgment was that the owners were prevented to limit their liability. The minister with supervision over maritime safety may limit the
Because the damages and their amount were considered proved in the maximum amount to be paid by the approved society. The process of
approval of a classification society is subject to the entering into of a 19 Is there a mandatory local form of salvage agreement or is Lloyd’s
written agreement between the Portuguese state and the relevant clas- standard form of salvage agreement acceptable? Who may carry out
sification society where a provision envisaging the mentioned liability salvage operations?
shall be inserted. There is no mandatory local form of salvage agreement. The salvage
A classification society can theoretically be held liable under the agreement merely needs to be entered into in writing, which includes
rules of tort if and where all requirements of this source of obli- its insertion in letters, telegrams, telexes, faxes and other equivalent
gations are verified, including: faulty (intentional or negligent) and procedures created by modern technologies, pursuant to article 2(2)
illicit act or omission; damage; causation between the act or omission of Decree-Law 203/98. As per article 1 of Decree-Law 203/98, sal-
and the damage; and a special relation between the classification vage is defined as all act or activity that aims to render help to ships,
society and her inspector that needs to be qualified as of comissão, crafts or other assets, including freight at risk, when in peril at sea. A
pursuant to article 500 of the Civil Code. We presume that the intri- salvor is defined as one who renders help to assets in peril at sea.
cate issue would be to ascertain what event has caused the damage.
Some professors of law are of the opinion that the rules of tort are Ship arrest
of public policy and hence cannot be subject to limitation of liability
clauses where the damage was caused by an intentional or with gross 20 Which international convention regarding the arrest of ships is in force
negligent conduct. in your jurisdiction?
www.gettingthedealthrough.com 209
Portugal Andrade Dias & Associados
23 Can a bunker supplier arrest a vessel in connection with a claim for procedure. The test for issuance of the sale order is accomplished
the price of bunkers supplied to that vessel pursuant to a contract when the arrested ship’ value is depreciating due to poor or lack of
with the charterer, rather than with the owner, of that vessel? maintenance or due to any other reason.
Pursuant to article 1(1)(k) of the 1957 Arrest Convention a claim The sale procedure will run as follows:
arising from supplies of products – such as bunkers – or materi- • the applicant must request in writing to the judge to grant per-
als done to a ship for her operation or maintenance wherever the mission for the anticipated sale of the vessel stating reasons in
said supplies are performed constitute a maritime claim under the support that (and providing evidence of) her value is depreciat-
1957 Arrest Convention. Subject to the provision of article 3(1) of ing. It should also propose a minimum sale value and attach
the 1957 Arrest Convention an applicant arrestor or creditor can evidence of her market value;
arrest the ship in respect of which the claim refers to or arises from. • the judge will hear the parties to the proceedings and will author-
Under article 3(4) of the 1957 Arrest Convention, in the case of ise or refuse the sale. The authorisation order will be issued if the
the existence of a charter party where the nautical management has parties agree on the sale or, failing said agreement, if the judge
been passed from the owner to the charterer and when merely the is convinced about the depreciation of the vessel pursuant to his
charterer is liable in persona, the creditor may arrest the ship insofar consideration of the evidence produced or attached in court that
as the claim refers to or arises from or any other ship owned by the show that her value is decreasing. The judge shall not authorise
charterer. in any case the anticipated sale if the action on the merits has not
A bunker supplier can therefore arrest a vessel in connection yet been started;
with a claim for the price of bunkers supplied to that vessel pursu- • the authorisation order will:
ant to a contract with the charterer, rather than with the owner, of • define the type of judicial sale (ships are usually sold by pri-
that vessel. vate treaty sale that needs to be approved by the judge);
• nominate the person in charge of the sale process;
• define the minimum sale value; and
24 Will the arresting party have to provide security and in what form and • define the duration of the sale process.
amount? the minimum sale value will be determined taking into considera-
tion the evidence attached by the applicant of the sale or taking
The judge can request the arrestor to provide security and to depend
into consideration a possible evaluation to her value ordered by
the granting of the arrest order on the provision of the said security.
the judge to be performed by a third-party expert;
Security can be produced inter alia in cash or bank guarantee. The
• the sale responsible normally drafts and publicizes a sale flyer
judge will ultimately assess the sufficiency and quality of the security
containing ship’s particulars that is promoted locally and
offered. This is not common practice in our courts and hence it is
internationally;
difficult to convey what amount will be required as security by the
• the presented bids are sent by the sale responsible to court and
judge.
passed to all parties to the proceedings. The parties may oppose
to their acceptance but ultimately the decision will rest with the
25 Who is responsible for the maintenance of the vessel while under judge; and
arrest? • the sale responsible will draft an out of court sale and purchase
agreement once the judge has accepted the relevant bid. The
The judge will appoint a bailee, who will be obliged to keep, guard,
judge issues a final order approving the sale once the price has
administer and maintain the vessel. Such responsibilities have, up
been deposited. The final approval order allows the delivery of
until now, been minimal.
the ship to the purchaser;
26 Must the arresting party pursue the claim on its merits in the courts The process may be concluded in a period of six months counted
of your country or is it possible to arrest simply to obtain security and from the date of the application.
then pursue proceedings on the merits elsewhere? The sale responsible will be entitled to a unique fee that shall
cover costs and remuneration and shall be determined by the judge
No. It is possible to arrest simply to obtain security and then pursue
in a percentage of up to 5 per cent of the sale proceeds.
proceedings on the merits elsewhere. However in some situations this
may not be the case taken into consideration article 7 of the Interna-
tional Convention for the Unification of Certain Rules Relating to 29 What is the order of priority of claims against the proceeds of sale?
the Arrest of Seagoing Ships, 1952, which is in force in Portugal.
A Portuguese judge may apply three alternative lists of priority of
claims:
Judicial sale of vessels
• the priority list contained in the law of the jurisdiction under
27 Who can apply for judicial sale of an arrested vessel? which flag the ship sails or, in case of dual registration, where
her ownership is registered;
The arresting party, the arrested party or the bailee can all apply for • the priority list contained in the International Convention for
judicial sale of an arrested vessel. the Unification of Certain Rules Relating to Maritime Liens and
Mortgages, 1926 when the ship sails under a contracting state
28 What is the procedure for initiating and conducting judicial sale of a flag that can be described as follows:
vessel? How long on average does it take for the judicial sale to be • legal costs due to the state, and expenses incurred in the com-
concluded following an application for sale? What are the court costs mon interest of the creditors in order to preserve the vessel
associated with the judicial sale? How are these costs calculated? or to procure its sale and the distribution of the proceeds of
sale; tonnage dues, light or harbour dues, and other public
The judicial sale of any vessel can not, as a general principle, be taxes and charges of the same character; pilotage dues; the
performed in the arrest procedure but only in the enforcement pro- cost of watching and preservation from the time of the entry
cedure where a creditor is enforcing a judgment. Considering, how- of the vessel into the last port; other taxes and social security
ever, that the process of obtaining a judgment may take considerable dues;
time, the present judge of the Lisbon admiralty court has long been • claims arising out of the contract of engagement of the mas-
authorising the anticipated sale of arrested vessels within the arrest ter, crew, and other persons hired on board;
• remuneration for assistance and salvage, and the contribu- Carriage of goods by sea and bills of lading
tion of the vessel in general average;
• indemnities for collision or other accident of navigation, as 33 Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some
also for damage caused to works forming part of harbours, variation in force and have they been ratified or implemented without
docks, and navigable ways, indemnities for personal injury ratification? Has your state ratified, accepted, approved or acceded
to passengers or crew, indemnities for loss of or damage to to the UN Convention on Contracts for the International Carriage of
cargo or baggage; Goods Wholly or Partly by Sea? When does carriage at sea begin and
• claims resulting from contracts entered into or acts done by end for the purpose of application of such rules?
the master, acting within the scope of his authority, away The International Convention for the Unification of Certain Rules
from the vessel’s home port, where such contracts or acts are Relating to Bills of Lading, Brussels, 1924, is in force. The Hague
necessary for the preservation of the vessel or the continu- Rules became internal law by means of Decree-Law 37748 of 1 Feb-
ation of her voyage, whether the master is or is not at the ruary 1950. The Hague Rules apply mandatorily where the bill of
same time owner of the vessel, and whether the claim is his lading was issued in the territory of a contracting state.
own or that of the ship-chandlers, repairers, lenders, or other Decree-Law 352/86 will apply, in subsidiary terms (in respect of
contractual creditors; and issues not dealt by the conventions) to the international conventions
• mortgages, hypothecations and other similar charges on the in force in Portugal, to the contracts for the carriage of goods by
vessel duly effected in accordance with the law of the con- sea. Decree-Law 352/86 rules, inter alia, on pre-loading and post-
tracting state to which the vessel belongs; or discharge responsibilities and liabilities, on package and unit limita-
• the priority list contained in article 578 of the Commercial Code tion calculation and amounts and on limitation periods. Decree-Law
that is described as follows: 352/86 inserted into internal law some of the Visby Protocol amend-
(i) court costs made in the common interest of the creditors; ments in regard to package and unit calculation. It has inserted the
(ii) taxes and social security dues; Hamburg Rules’ limitation period of two years to be applied merely
(iii) salvage rewards; outside the scope of application of the Hague Rules because regard-
(iv) claims secured by mortgages or pledges over ships; ing liabilities arising out in connection with the Hague Rules the
(v) pilots and towing expenses for entry into port; one-year limitation period is to be applied. The Hague Rules must be
(vi) tonnage, anchorage, public health, light and other harbour applied in conjunction with Decree-Law 37748 and especially with
dues; Decree-Law 352/86.
(vii) expenses made with the keeping of the vessel and storage Portugal has not ratified, accepted, approved or acceded to
of her appurtenances; the UN Convention on Contracts for the International Carriage of
(viii) master and crew wages; Goods Wholly or Partly by Sea (Rotterdam Rules).
(ix) repair costs of the vessel, her appurtenances and Pursuant to article 1(e) of the Hague Rules, carriage of goods
equipment; by sea encompasses the time elapsed, as from the time the goods
(x) reimbursement of the price of the cargo that the master are loaded on board the ship up to the moment they are discharged
was forced to sold; from the ship, that is to say, as from and up to the moment they have
(xi) insurance premiums; passed the ship’s rail ‘tackle to tackle’. Under article 6 of Decree-Law
(xii) the outstanding price of the last purchase of the vessel; 352/86 the carrier’s liability for the goods in respect of the period
(xiii) repair costs of the vessel, her appurtenances and equip- elapsed between receipt and loading of the goods is ruled by the
ment, in the three years previous to the voyage at issue and provisions of the bailment contract contained in the Civil Code. The
counted from the date of termination of the repairs; bailment contract regime is applied also as from the moment the
(xiv) costs related to shipbuilding contracts; goods have been discharged onwards. It is fair to conclude, then,
(xv) the insurances premiums over the ship, if entirely covered, that carriage by sea commences and ends as from and up to the
or over the covered part or her appurtenances not men- moment the goods have passed the ship’s rail at her loading and
tioned in paragraph (xi); and discharge ports.
(xvi) indemnities due to the shippers for shortage or damage of
goods.
34 Are there conventions or domestic laws in force in respect of road, rail
Claims mentioned in (i) to (xi), excluding the claims mentioned in or air transport that apply to stages of the transport other than by sea
(iii), are those incurred in the last voyage and because of it. under a combined transport or multimodal bill of lading?
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Portugal Andrade Dias & Associados
1999. Decree-Law 58/2008, published on 26 March 2008, contains where evidence is produced in court that cargo interests knew or
the internal regime applicable to internal rail carriage. ought reasonably to have known of the existence and extent of said
With regards to air carriage, Portugal is a contracting state to clause. Note however that only the carrier of the goods can issue bills
the International Convention for the Unification of Certain Rules of lading, as per subparagraph 5 of article 8 of Decree-Law 352/86.
Relating to International Air Carriage, Warsaw 12 October 1929 Pursuant to paragraph 1 of article 10 of Decree-Law 352/86, bills of
and of The Hague, Guatemala and Montreal Protocols. Portugal lading issued by one who does not have the condition of a sea carrier
is also a contracting state of the International Convention for the are null and void. Whoever, not being the sea carrier of the goods,
Unification of Certain Rules Relating to International Air Carriage, issues a bill of lading, is liable for damages caused to the shipper and
Montreal 28 May 1999. European Union Regulation No. 889/2002 to others interested in the goods, pursuant to paragraph 2 of article
of the Parliament and of the Council should be applied within the 10 of Decree-Law 352/86. This does not prevent an agent of the car-
European Union. rier to sign bills of lading on behalf of the carrier. Under article 28 of
Decree-Law 352/86, if the bill of lading is considered null and void
or if the sea carrier is not identifiable by the wording of the bill of
35 Who has title to sue on a bill of lading?
lading, the carrying ship will be liable in rem before cargo interests
The initial party (shipper or receiver) to the contract for the carriage under the same terms as the carrier.
of goods by sea or an assigned third party on the rights of the former;
the holder of a bill of lading where a bearer bill of lading was issued;
38 Are shipowners liable for cargo damage where they are not the
the named consignee where a not to order bill of lading was issued;
contractual carrier and what defences can they raise against such
or the named consignee or the endorsee where a bill of lading was
liability? In particular, can they rely on the terms of the bill of lading
issued at the order.
even though they are not contractual carriers?
security. The carrier shall have a retention lien over the sale proceeds Each member state presented statements about the terms in which it
but the court can order the deposit of the said proceeds. would apply the said EU Regulation. The statements can be found
A priority lien (that is to say, a right to be paid by distribution on the European Commission’s web site (http://ec.europa.eu). Each
of sale proceeds with priority over common claims) over the ship, member state has declared what type of service of papers it accepts.
freight, cargo and ship’s accessories is given by article 2 of the Inter- A plaintiff starting proceedings in Portugal against an EU-domiciled
national Convention for the Unification of Certain Rules relating defendant should comply with the relevant member state rules where
to maritime liens and mortgages, Brussels 10 April 1926 (of which the defendant is domiciled.
Portugal is a contracting state) and by articles 578, 580 and 582 of The Hague Convention Related to Service and Notices Abroad
the Commercial Code to a wide variety of claims. These priority liens of Judicial and Non-Judicial Acts in Civil and Commercial Matters,
operate by force of law. 1965 envisages an identical structure as of EU Regulation 1393/2007.
The relevant contracting state party’ requirements need to be ascer-
tained on a case-by-case basis.
41 What liability do carriers incur for delivery of cargo without production
Under the Civil Procedure Code service of court proceedings is
of the bill of lading and can they limit such liability?
done by a letter (attached with the relevant papers to serve, which
Assuming that the carrier has delivered cargo to someone that has are the points of claim and the attached documents) drafted by the
no lawful rights over the cargo, the carrier will be liable for breach court and sent by the latter via registered courier with acknowledge-
of the contract of the carriage of goods by failing to perform, in full, ment of receipt to the defendants’ address. Note that this procedure
the said contract. is used in arrest proceedings even if the defendant is domiciled in an
As per article 20 of Decree-Law 352/86, if more than one person, EU member state or in a state that is a contracting state party of the
with sufficient title, claims for delivery of the cargo, the goods will Hague Convention.
remain at the custody of the entity that has received them, up until
the court decides who has the right to receive them. In the case of
45 Is there a domestic arbitral institution with a panel of maritime
perishable goods, the carrier may sell the goods following permission
arbitrators specialising in maritime arbitration?
from the court and notice to the counterparty.
The carrier cannot limit his liability for wrongful delivery of the No.
cargo as the provisions contained in the Hague Rules and in Decree-
Law 352/86 in respect of limitation of liability are merely applicable
46 What rules govern recognition and enforcement of foreign judgments
to loss or damage to cargo.
and awards?
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Portugal Andrade Dias & Associados
Pursuant to article 1(1)(2) of Decree-Law No. 201/98, a ship is Building or ship repair contracts
defined as a floating craft aimed at water navigation. The following Pursuant to article 1227 of the Civil Code (provision contained in the
are constituent parts of the ship: her main and auxiliary engines; rules applicable to the construction or repair contracts – articles 1207
appliances; fittings; lifesaving equipment; accessories; and further to 1230 of the Civil Code – but applicable to a ship building or repair
equipment existing on board necessary for her operation other than contract by force of Decree-Law 201/98), if the performance of the
goods or merchandise carried on board as her cargo. It has been repair or of the construction work becomes impossible by cause not
therefore generally understood that the arrest order of a ship includes imputable to any of the parties, article 790 of Civil Code shall apply
all the above-mentioned constituent parts. It has been also generally – that is to say, the obligation shall be terminated. The owner shall
understood that bunkers are included in the described constituent be required, however, to indemnify the builder or the repairer of the
parts and hence are covered by an arrest order over a ship. Theoreti- works performed and to support the expenses incurred.
cally speaking this may not be the case where the bunkers on board
do not belong to her owner. Therefore, the theoretical possibility of
Voyage charter parties delivered the goods to the carrier he will be obliged to pay freight and
Subject to article 14 of Decree-law No. 191/87, if the voyage or voy- the expenses that the carrier has incurred with the goods.
ages cannot be initiated on the date or seasons agreed between the There is no specific provision for the contract for the sale and
parties by a cause not imputable to the owner or to the charterer, purchase of ship as it exists for the above-mentioned other contracts.
any of the parties may terminate the contract without incurring any The general principles contained in articles 437 and 790 of the Civil
liability whatsoever for any possible damages that may arise from Code may be applied.
said termination.
53 Are there any other noteworthy points relating to shipping in your
Time and bareboat charter parties
jurisdiction not covered by any of the above?
Pursuant to article 30 of Decree-law No. 191/87 freight shall not be
due during the periods in which the commercial use of the ship is Portugal is not a contracting party to the Athens Convention Relating
impossible by cause or any reasons not imputable to the charterer. to Carriage of Passengers and Their Luggage by Sea, 1974 or the SDR
Protocol 1976. Carriage of passengers is merely ruled by Decree-Law
Carriage of goods by sea 349/86. This may need to be taken into account, considering the
Subject to article 13 of Decree-law No. 352/86, if the voyage cannot enormous recent increase in cruise ship calls at Portuguese ports. This
be performed on the agreed date or season by a cause not imput- may soon be changed pursuant to the publication of EU Regulation
able to the carrier, any of the parties may terminate the contract of 392/2009 of the Parliament and of the Council on the liability of
carriage without incurring any liability whatsoever for any possible carriers of passengers by sea in the event of accident. Portugal is a
damages that may arise from said termination. Pursuant to article 15 contracting state to the International Convention for the Unification
of Decree-law No. 352/86, if the shipper fails to present the goods for of Certain Rules Relating to Maritime Liens and Mortgages, 1926.
loading to the carrier at the agreed place and time, the contract is con- Portugal is not a contracting party to the Hazardous Noxious Sub-
sidered to be terminated; the shipper, however, is obliged to perform stances Convention 1996 or of the Bunkers Convention 2001.
payment of freight. If the shipper terminates the contract after having
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