Banks and Lenders in the Maritime Business
July 13, 2017
Maritime Quirks
July 26, 2017
Show all

Liens

If there is an accident at sea or if there is lost cargo, the injury victim or the cargo owner can sue for damages. Often times, if the litigation is successful, the litigant will gain a maritime lien against the vessel. Because the lien is on the vessel itself, the lien travels with the vessel. Therefore, if the vessel is sold, the lien travels with the vessel and the litigant will have a lien on the vessel despite the vessel having a new owner.

A maritime lien can also be given in favor of those who work on the vessel. People who provide services, if not paid, can gain a lien on the vessel as well. On a cruise ship, for example, the wait staff can attain a lien if not paid. Engineers and others that perform work for the vessel can get a lien if not paid. A person who fuels the ship has an automatic lien against the vessel until paid.

The lien attaches not only to the ship but to the equipment, as well. A lien will apply to the cargo of a ship until the cargo is delivered. At that time, the lien is extinguished against the cargo. In this way, the lien against the cargo is a “floating” lien.

Silent Lien

A maritime lien is called a silent lien because the lien does not need to be recorded. Therefore, anyone who purchases a vessel needs to be concerned that there is a lien against it. Nonetheless, many maritime liens are recorded. Therefore, when conducting a sale of a ship, the purchaser needs to be concerned about maritime liens, especially when there is a sale of a large cargo ship or a cruise ship. There is no way to ascertain with certainty how the lien is structured.

Terminating a Lien

A maritime lien can be terminated or destroyed by several mechanisms.

  • If a vessel itself is destroyed or lost, then any liens against it are, as well, since a maritime lien is an interest against the vessel and only survives as long as the vessel itself survives
  • A judicial sale of a vessel by a maritime court is usually made free of liens, including maritime liens. A court has the right to declare it free and clear of liens;
  • During a bankruptcy proceeding, if a claim holder fails to come forward during a bankruptcy sale then the lien may be extinguished;
  • Applicable law regarding statutes of limitations or laches relating to the particular claim may bar further proceedings regarding the lien after the passage of a certain period of time;
  • Laches occurs when someone does not take any action for a significant period of time, wherein a court may rule that due to laches the person holding a claim no longer has that claim
  • A creditor claimant may affirmatively renounce reliance on a maritime lien.

Involved in maritime shipping? Operate a ship? Do you ship cargo? Partner with the Kolodny law firm, experienced maritime lawyers.

(image courtesy of Jens Rademacher)

Comments are closed.