The law of sister ship arrest in Canada was recently clarified to confirm that sister ship arrests cannot be 'stacked', and that security can be obtained up to the value of the vessel arrested, even if more valuable than the offending vessel.

Under the Federal Courts Act s. 43(2) a party can arrest a ship that causes damage to its property, while s. 43(8) allows a party to arrest a ship owned by the beneficial owner of the offending ship, in other words a sister ship. Canada is not a signatory to the 1952 International Convention for the Unification of Certain Rules relating to the Arrest of Sea-Going Ships (the "Arrest Convention 1952"), so whether you could arrest both the offending vessel and its sister ship was, until now, an open question in Canada.

In Westshore Terminals Limited Partnership v. Leo Ocean, S.A., 2014 FCA 231, the Federal Court of Appeal considered this question. Previous case law and scholarly articles suggested that Canadian law did not place a limit on the number of sister ships which could be arrested in support of one claim. In interpreting the language of the Federal Courts Act, the Court found that although the language was ambiguous, it suggested that only one ship could be arrested. The Court found support in the Arrest Convention 1952, and stated that if Parliament had intended to break rank with those countries, like the UK, which followed the Arrest Convention 1952, it would have used different wording so as to make it clear that in Canada claimants were not restricted to one vessel to secure their claim. Instead, the Court found that by using language similar to the Arrest Convention 1952 when it enacted s. 43(8), Parliament must have intended to grant claimants in Canada a "true benefit" - a choice of arresting either the offending vessel or a sister ship, but not both.

Interestingly, the Court explicitly stated that the right to arrest a sister ship "in lieu of the offending ship" may be desirable where the offending vessel is unavailable for arrest in Canada or the value of that ship is insufficient to secure the claim. The security required for the release of the vessel is the value of the claim, capped at the value of the vessel arrested. The fact that the arrested sister ship is more valuable than the offending vessel is irrelevant, provided that the claim exceeds the value of the arrested vessel. The full value of the arrested sister ship is available as security for the claim.

This makes sense when it is considered that arrest is simply a procedural mechanism intended to obtain security. However, there is a distinct disadvantage to arresting a sister ship if the claimant is entitled to a true maritime lien (as opposed to a statutory right in rem). Maritime liens are usually granted a priority in any dispute, which ranks them above mortgages and claims which are statutory rights in rem. Previously, the Federal Court has held that a maritime lien is a right which can only be enforced against the offending vessel. If the claimant arrests a sister ship in lieu of the offending vessel, it cannot enforce its claim against that sister ship as a maritime lien, but only as a statutory right in rem. If there is a priority fight among claimants, that part of the claim for which sister ship security is available will no longer have superior ranking as a maritime lien.

Therefore, while more than one vessel cannot be arrested for a single claim of damage, if the claim is worth more than the offending vessel and there is a true sister ship, within reach of arrest, that is worth more than the offending vessel, it may well be in a claimant's best interests to forgo arresting the offending vessel and to arrest the more valuable sister ship instead.

However, a claimant holding a maritime lien against the offending vessel should weigh the advantages of this course against the potential disadvantage of falling behind any mortgages or maritime liens secured against the arrested sister ship should a priority battle arise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.