LATVIA Law and Practice Contributed by: Edward Kuznetsov, Marine Legal Bureau
5.11 Insolvency Laws Applied by Maritime Courts Latvia does not have an insolvency regime equivalent to Chapter 11 of the US Bankruptcy Code that would provide for debtor-in-possession restructuring with an automatic stay of enforcement comparable to US practice. Insolvency proceedings in Latvia are governed by the Insolvency Law of the Republic of Latvia, which applies to ship-owners in the same manner as to oth - er commercial entities. Latvian insolvency law does not, as a matter of principle, prevent maritime courts from ordering ship arrest or judicial sale of a vessel located within Latvia, even where the ship-owner is subject to foreign insolvency or restructuring proceed - ings, including Chapter 11 proceedings in the United States. Latvian courts primarily assess jurisdiction, the loca - tion of the asset and the nature of the maritime claim. Foreign insolvency proceedings may be taken into account as a matter of comity or under applicable international or EU instruments, but they do not auto - matically bar arrest or enforcement measures under Latvian law. In practice, ship arrest and judicial sale may proceed unless a recognised legal basis exists to stay enforcement. 5.12 Damages in the Event of Wrongful Arrest of a Vessel Latvian law recognises liability for wrongful arrest of a vessel. Damages or costs may be awarded against the arresting party where the arrest is found to have been unjustified, abusive or pursued in bad faith. Courts assess wrongful arrest claims on the basis of general civil liability principles, including fault, causa - tion and loss. Key factors include whether the claim - ant had a prima facie maritime claim, whether proce - dural requirements were complied with and whether the arresting party acted in good faith. In practice, Latvian courts can require the arresting party to provide counter-security at the time of arrest. Such security plays an important role in compensating the ship-owner for losses arising from wrongful arrest,
• prohibitions on disposal of specified assets; and • attachment of cargo (where the legal conditions are satisfied). These are often used either as alternatives to ship arrest or in parallel (eg, against charterers or local counterparties). 5.9 Releasing an Arrested Vessel A vessel is released upon the provision of accept - able security or upon the arrest being set aside by the court. Latvian courts commonly accept: • cash deposits; • bank guarantees (including from a foreign bank, subject to court comfort on enforceability); and • P&I club LOUs, particularly from first-class IG clubs, although acceptance remains discretionary and may depend on the judge, the claim type and the wording/amount of the LOU. 5.10 Procedure for the Judicial Sale of Arrested Ships Judicial sale proceeds through court-supervised enforcement/auction mechanisms under Latvian law. The sale is typically conducted as an official auction process, with the purchaser acquiring title free of prior encumbrances, and sale proceeds distributed accord - ing to statutory priorities. Private sale is not the standard route; where con - sidered, it would usually require court involvement/ approval and a structure consistent with enforcement rules. Costs of maintaining the vessel while under arrest (crew, port dues, essential services) are typically treated as custodia legis-type expenses and are paid out of proceeds with high priority, subject to the pro - cedural framework. Priority ranking generally places maritime liens ahead of registered mortgages, with mortgages then ranking ahead of ordinary unsecured maritime claims, subject to the Maritime Code’s detailed ordering. In practice, the exact ranking depends on the nature of the claims (lien versus non-lien) and timing.
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