JAPAN Law and Practice Contributed by: Jumpei Osada, Masaaki Sasaki, Takuto Kobayashi and Hiroshi Ideyama, TMI Associates
4.11 Insolvency Laws Applied by Maritime Courts
debt in the normal litigation procedures in the court. In the Japanese jurisdiction, once a vessel is arrested by the court in the legal proceedings, a private sale is not allowed. During the procedures, the vessel is main - tained by the ship-management agent, who is appointed by the court. It normally takes six to 12 months from the commencement of the judi - cial sale until its completion (ie, the completion of distribution to each creditor). Priority Ranking of the Claims The basic priority ranking of claims is as follows: • claims for costs of the procedure for the judicial sale; • claims secured by maritime liens; • claims secured by mortgages; and • unsecured (ordinary) claims. Priority Ranking of the Claims Covered by a Maritime Lien Within the category of maritime liens, the ranking of covered claims is as follows: • claims for death or personal injury; • claims for salvage and general average; • claims for pilotage, towage or voyage-related taxes such as port charges; • claims for necessity for continuation of a voy - age; • mariners’ claims arising from their employ - ment contracts; and • claims subject to a limitation held in accord - ance with the Limitation of Liability Act/claims for the damage caused by oil pollution result - ing from the spill or discharge of oil from a tanker.
Under Japanese law, there are similar insolvency schemes to those under Chapter 7 and Chap - ter 11 of the United States Bankruptcy Code; namely, the schemes under the Bankruptcy Act, Civil Rehabilitation Act and Corporate Reorgani - sation Act of Japan. If the owner of the vessel goes bankrupt and an insolvency procedure commences, the bank - ruptcy court/trustee may order or obtain an arrest order to recover its control over the vessel; however, this is not unconditional and depends on the terms of the relevant charterparty and other legal circumstances. 4.12 Damages in the Event of Wrongful Arrest of a Vessel In relation to an arrest by maritime lien, the threshold for the argument of wrongful arrest may be lower than that for arrest by provisional attachment order. The main requirement for such an argument is negligence or wilful misconduct of the arresting party in the course of the filing and arresting the vessel. The reason for this is that, since the arrest of the vessel by maritime lien is easier than for another normal attachment order procedure, the arresting party is required to be more cautious and should carry out suf - ficient analysis, both factual and legal, to avoid damage being incurred by innocent or irrelevant parties such as the owner who is not liable in personam.
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