UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
• issue a notification regarding the sale; • notify the vessel registry and any other locations designated by the court; and • appoint an expert to assess the vessel’s value and set the initial price for the sale. The court will also specify the basic price for the ves - sel, the terms and conditions governing the sale and the time of the auction. The sale is conducted through an online auction man - aged by a company called Emirates Auction, which serves as the auctioneer. The auction is held in mul - tiple rounds. The highest bid in each round becomes the initial price for the next round, with the vessel sold to the highest bidder in the final round subject to court confirmation. If no bids are received or the initial bid is below the reserve price, the auctioneer can seek a reduction in the initial price from the court. Private Sale Private sales of arrested vessels are not allowed in this jurisdiction. The judicial sale must proceed through a public auction. Maintenance of the Vessel The arresting party is responsible for maintaining the vessel from the time of arrest until she is sold by the court. If the port authorities or the vessel agent incur costs for the maintenance, these costs can be claimed as priority debts from the sale proceeds. Priority Ranking of Claims According to Article 29 of the ML, the priority ranking of claims from the sale proceeds is as follows: • legal expenses related to the preservation or sale of the vessel; • rights arising from maritime employment contracts; • compensation for assistance, salvage and contri - bution to general average; • compensation for marine accidents, excluding loss or damage to cargo and personal effects; • debts arising from contracts executed by the ship’s agent or Master outside the ship’s port of registra - tion; • debts from loading, unloading, pilotage and towing operations;
• mortgages; • liabilities for damages necessitating compensation on behalf of the ship’s charterers; and • total insurance premiums for up to one year. Mortgage Priority and Its Relation to Maritime Claims General priority of mortgages Mortgages are listed as a lower priority compared to other maritime claims, such as legal expenses, crew wages and compensation for salvage. These higher- priority claims are satisfied first from the sale proceeds of an arrested vessel. Priority of mortgages under the ML According to Article 44 of the ML, a mortgage ranks directly after privileged debts attached to the vessel, which are specified in clauses (1)–(6) of Article 29 of the ML. However, mortgages may rank below certain other privileged debts referred to in clauses (7) and (8) of Article 29, if certain conditions are met. Ranking of multiple mortgages Debts secured by mortgages rank in order of the dates of registration. If several mortgages are registered on the same day on the vessel (or a share of the vessel), their priority is determined by the order of registration, with the oldest registered mortgage having higher pri - ority. Return of debt The registration of a mortgage also ensures that the returns of the debt for the last two years, in addition to the current year’s returns in which the bid is awarded, are secured. These returns are given the same priority as the principal debt of the mortgage. Effect of judicial sale After the judicial sale of the vessel, mortgages are extinguished. The sale proceeds are distributed based on the court’s priority ranking of claims, which may include the assistance of an appointed expert to allo - cate the funds accordingly. Mortgages are not carried forward with the vessel once she is sold, and their claims are satisfied based on the order of registration.
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