Maxim A. Kocherzhenko

 According to the Civil Procedural Code of Ukraine a court or a judge can take measures for the security of a claim upon the motion of a person participating in the matter. Security of a claim is allowed at any litigation stage if non-acceptance of measures for the security can cause a difficulty or impossibility in the future execution of the court’s decision. The application for securing the claim shall be considered by the court during two days from the day of its receipt without notification of participants in the case (participants in arbitration proceedings).

  A claim can be secured:

1) by imposing of an arrest on the property or sums of money belonging to the defendant and being in his possession or in the possession of the other persons;

2) by the prohibition to perform certain actions;

3) assignment of the duty to commit a certain act;

4) by the prohibition to other persons to effect payments or pass the property to the defendant or to fulfill other obligations as to him;

5) by suspending the sale of the distressed property if there was a claim filed about the right of ownership on this property or about the exception of it from the inventory;

6) by suspending of the recovery which is to be effected on the grounds of an executive document, but was appealed by the debtor in a court;

7) by the delivery of a thing which is a matter of dispute on a safe keeping to other persons.

8) by stopping customs clearance of goods or items;

9) by arrest of a ship to ensure the maritime claim;

10) by other measures necessary to ensure effective protection or restoration of violated or disputed rights and interests.

As a rule claims which were filed to the Ukrainian courts against foreign shipowners are secured in the form of a ship arrest. And, as a consequence, shipowners face a necessity to lift it.

Earlier the Ukrainian procedural legislation have not provided a possibility of securing a claim by issuing a bank guarantee. In addition, the court or a judge allowed the replacement of one type securing of the claim by another at the request of one of the parties only taking into account the explanations of the other party, which meant that the plaintiff had the opportunity to exert pressure on the defendant (in order to compel the latter to pay the debt without consideration of the matter on merits) by avoiding the acceptance of a bank guarantee. Now, after coming into force of the new editions of the Civil Procedural and Commercial Procedural Codes of Ukraine in December 2017 the judge makes the decision on this issue on his own (without obtaining a consent from the plaintiff) what is an important innovation in the Ukrainian legislation which protects the rights of the shipowner in case of the ship arrest.

Upon the motion of a party the court may allow the replacement of the one claim security measure to another and this issue must be resolved by the court at the hearing not later than the day following the receipt of such a motion. In the event that the court takes measures to secure a claim for recovery of money the defendant (or another person) can secure the claim by depositing money to the court’s deposit account in the amount of the claim or providing a bank guarantee for such an amount and the court, in its turn, lifts the ship arrest. Besides, the provision to court of a document which confirms that the claim was already secured by the defendant voluntarily  is the ground for refusing to secure the claim by the court.

The Merchant Shipping Code of Ukraine (MSCU) also provides that the arrested ship can be released from the arrest in case of providing the security in the acceptable form and in the adequate amount. In case of the disagreement between the parties on a form and amount of the claim’s security the court determines the form and the amount of the security by itself.

However, now there is no extensive court practice on the claim security by accepting a bank guarantee without the plaintiff's consent and therefore it is difficult to say how this method of lifting the arrest will work in Ukraine on practice. This is due to the fact that the text of the guarantee is essential for its subsequent execution (and should satisfy the plaintiff in terms of its further enforcement) and also that the plaintiff often formally indicates a deliberately greater amount of the claim than the real one.

The option of depositing funds into the deposit account of the court in the amount of the  claim also has a number of practical deficiencies. Firstly, local courts generally do not have foreign currency bank accounts what in its turn leads to loss of a significant time by the shipowner for the currency conversion and payment of a large commission for this operation. Secondly, the subsequent return of funds transferred to the court’s deposit account (if the dispute is resolved in favor of the shipowner) has a number of procedural difficulties.

What regards to the provision of the Letter of Undertaking from a P & I Clubs, this way of the claim security is not provided by the Ukrainian Law and can not serve as a ground for releasing the ship from the arrest unless the claimant agrees for this.