SPAIN Law and Practice Contributed by: José Antonio Domínguez, Mikel Garteiz-Goxeaskoa, Enrique Ortiz and Irantzu Sedano Beitia, Aiyon Abogados SLP
Ranking of Claims Pursuant to Article 386 of the SSA, the following costs and expenses take preference over the list of liens contained in the Lien Convention: • any wreck-removal expenses that must be settled to the Spanish Maritime Authorities; and • the cost and expenses arising out of the ship-arrest proceedings and her subsequent sale, including maintenance of the vessel and those crew wages accrued from the moment the arrest is in place, and any other sums as referred to in Article 4.1.a) of the Lien Convention. Second, any remaining funds shall be distributed up to their full and final settlement, according to their pref - erence ranking set forth in the Lien Convention. Any possible remaining balance (after all credits have been paid) will be returned to the owner. According to the Lien Convention, maritime liens take priority over registered mortgages. 5.11 Insolvency Laws Applied by Maritime Courts Spain’s insolvency laws regulate the reorganisation or liquidation of a company in financial distress, similar to Chapter 11 of the United States. Mercantile courts are competent to adjudge not only maritime matters but also insolvency matters. Once bankruptcy protection has been requested and bankruptcy proceedings initiated, a court can - not enforce against any asset owned by the debtor outside the bankruptcy proceedings. Accordingly, any individual enforcement will be stopped. 5.12 Damages in the Event of Wrongful Arrest of a Vessel A court will order the arresting party to pay for dam - ages or costs caused by the arrest and to run with all legal costs in the following three scenarios: • if the arrest is in dispute and it is finally lifted by the arresting court after the hearing, as set forth in Article 741.2 of the Spanish Procedural law;
through a public auction, which may be conducted either by a specialised body or directly by the court. Within the framework of the court proceedings, the parties involved (namely, the claimants/creditors and the debtor) retain the option to reach an agreement regarding the sale of the vessel. Such an agreement, however, must be approved by the court and accept - ed by any third party holding an interest in the vessel. The order granting the judicial sale of the vessel must be served to: • the authorities and vessel’s Registrar of the flag state; • the registered owner; • the holder of a nominative mortgage or charge duly recorded; and • any holders of mortgages/charges duly recorded, maritime lien or hypothèques that put the court/ authority on notice of them. Provided that the recipients of such notifications are known, the aforementioned service containing all par - ticulars of the auction (place, date, proceedings, cir - cumstances, etc) shall be made in writing at least 30 days before the date of the auction. Any holder of a maritime lien can appear in the auction proceedings to safeguard, defend or assert a third- party preference claim. Upon the sale of the vessel at public auction, all the mortgages, hypothèques , charges, maritime liens and claims will be cancelled. The sale of the vessel can be delegated to a special - ised body, usually a Port Authority or a broker. During the arrest, the vessel must be maintained by the arrested party. Spanish courts will not require the arresting party to pay the costs of maintenance of the vessel during the arrest. Furthermore, the port where the vessel is retained will look after the safety of the port and may take measures to guarantee such safety, at the ship-owner’s expense.
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