NORWAY Law and Practice Contributed by: Kristian Lindhartsen, Lilly Kathrin Relling and Tobias Kilde, Kvale Advokatfirma DA
be owned by the debtor – keeping in mind that the bunkers are normally owned by the charterers (not the owners) under a time charterparty. 5.7 Sister-Ship Arrest The arrest of sister-ships is regulated in Section 93 (1) of the Norwegian Maritime Code, which states that only the ship in which the claim arose may be arrest - ed. The exception is where the vessels are owned by the same legal entity, and that legal entity is the debtor for the relevant claim. However, it is not possible to arrest ships with associated ownership – ie, where two ship-owning companies have the same holding company or are otherwise part of the same corporate structure. 5.8 Other Ways of Obtaining Attachment Orders Applying for a ship arrest is clearly the most com - monly used procedure to obtain security for a claim against a vessel under Norwegian law. That being said, if the claimant has a binding decision against the debtor, they may proceed directly with an applica - tion for attachment of the debtor’s vessel. In addition, the general right of detention/retention may also give a claimant security by way of physical possession of the vessel – eg, the yard’s right to detain the vessel in its docks until its claims have been paid in full. 5.9 Releasing an Arrested Vessel Under Section 3-4 of the Norwegian Enforcement Act and Sections 33-4, 33-5 and 32-12 of the NDA, only a cash deposit or an unconditional bank guarantee issued by a Norwegian financial institution is accepted as security. Under the Norwegian Enforcement of Claims Act, LOIs issued by P&I (protection and indemnity) clubs are not security recognised by law. Nevertheless, a letter of undertaking may be sufficient security for the claimant to agree to release the vessel on a mutual basis. This is quite common in Norway. 5.10 Procedure for the Judicial Sale of Arrested Ships Judicial sale proceedings are conditional upon the claimant having an enforceable claim in accordance with the rules of the Enforcement Act. All arrests and
forced sales are carried out by public district courts in co-operation with the local enforcement office. Chapters 11 and 12 of the Norwegian Enforcement Act establish the rules regulating a forced sale. In short, the claimant must have a final and binding court deci - sion on the claim itself (the main proceedings) before proceeding with a judicial sale. The claimant must also obtain an attachment of the vessel. It is important to note that the claimant’s claim has priority from the time of the arrest, even if the final judgment and the execution lien are established later (except where sale proceedings have not been commenced within one year of the arrest), so the arrest may be an important tool for the claimant to establish priority. In accordance with Sections 11-20 and 11-21 of the Enforcement Act, all claims with higher priority than the claimant’s claim will be covered in full before the claimant receives any funds. This means that the court cannot accept a bid unless it is sufficient to cover all claims with a higher priority than that of the claimant. The sale proceeds will be distributed in the following order: • court fees and the court-appointed administrator’s remuneration; • costs in connection with the accession that the buyer will not cover itself, such as document and registration fees (unless the buyer has agreed to cover such fees); • maritime liens – in the order and priority contained in Sections 51 and 52 of the Norwegian Maritime Code, mortgages, similar registered encumbrances based in contract and enforcement liens (including interest); and • unsecured debts. 5.11 Insolvency Laws Applied by Maritime Courts Under Norwegian law, insolvency is regulated by the Debt Negotiation and Bankruptcy Act (the DNB-Act) and the Recovery Act. The Mortgage Act and the Norwegian Maritime Code are also important when considering the priority of claims. Parts of the DNB-Act build on the same principles as the US “Chapter 11” procedure, but it does not go as
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