USA Law and Practice Contributed by: Seward & Kissel LLP, Seward & Kissel LLP
claim or its value upon due appraisement, with interest upon that amount at 6% per annum. Motions to reduce or enhance the amount of security may subsequently be made for good cause shown under Rule E(6). The release of a vessel is likewise conditional on the payment of all costs and charges of the court and of the US Marshal or other substitute custodian. 4.10 Procedure for the Judicial Sale of Arrested Ships Any party to the action, the US Marshal or a sub - stitute custodian may apply for a sale of the ves - sel. In practice, it is usually the mortgagee bank or single largest creditor that moves to have the vessel sold. In the event of an application for interlocutory sale, judicial input is limited to confirming that notice of the action and arrest of the vessel, as well as notice of the motion for sale, is in compli - ance with statutory authority and any applicable local rules of court. Although a broker may be involved or other procedures may be agreed pursuant to a court order, judicial sales in the absence of agreement would otherwise be con - ducted by the US Marshal. The Marshal will charge poundage in the amount of 3% of the first USD1,000 of proceeds and 1.5% of proceeds above that amount, and a bro - kerage commission may be paid if a broker is engaged for the sale. The proceeds of the sale of the vessel are paid into the registry of the court and distributed according to the rank and prior - ity of liens, subsequent to the confirmation of sale of the vessel, at which point the vessel is delivered to the buyer free and clear of liens. The relative priority of similarly ranked liens often fol - lows a reverse-chronology priority regime where the most recent lien of equal rank possesses the superior claim (ie, “last in time, first in right”).
Courts in the United States have discretion to order an interlocutory private sale of a vessel upon a party’s request and in compliance with applicable law. In general, challenges to vessel sales may pro - ceed prior to confirmation upon grounds of fraud, collusion or gross inadequacy of price. 4.11 Insolvency Laws Applied by Maritime Courts In the United States, insolvency proceedings are governed by the US Bankruptcy Code and heard by federal bankruptcy courts, including reorganisation proceedings under Chapter 11 of the Bankruptcy Code. Generally, the automatic stay applicable in all Chapter 11 cases under the Bankruptcy Code would act to prohibit or stop any arrest and judicial sale of a vessel owned by owners that are subject to Chapter 11 proceed - ings. However, courts in at least one US jurisdic - tion have held that the automatic stay does not prevent actions with respect to certain types of maritime liens, and would allow a federal court sitting in admiralty to retain in rem jurisdiction over an arrested vessel and to conduct a judicial sale, provided that the action was commenced prior to the filing of the Chapter 11 proceeding. 4.12 Damages in the Event of Wrongful Arrest of a Vessel Damages may be awarded against an arrest - ing party under circumstances where that party has been found to have made a wrongful arrest. However, such a claim requires showing that the arresting party has no bona fide claim, together with establishing bad faith, malice or gross neg - ligence.
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