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CML Working Paper: Arrest of Associated Ships from a Common Law Perspective

August 26, 2024 | Research

ABSTRACT

The 1952 and 1999 Arrest Conventions provide for the arrest ships owned by the person who would be liable for the claim in personam. The widespread use of one-ship companies effectively circumvented these provisions. It allowed shipowners to limit or avoid their liability by distributing their fleet between one-ship companies. The only country that introduced separate associated ship provisions was South Africa. Other countries do not follow this example and generally deal with one-ship companies through beneficial ownership and piercing the corporate veil.

This paper examines the law and practice of arresting associated ships in South Africa, the US, the UK, Singapore, and Australia. Particular focus is paid to the impropriety criterion, which is part of piercing the corporate veil but is irrelevant to the South African approach. It is concluded that the primary function of impropriety is preventing overreaching, the subversion of the idea of separate legal personality of a shipowning company. It highlights that the courts are generally reluctant to pierce the corporate veil. The problem of overreaching in South Africa is demonstrated by ships owned by State-owned enterprises. The reasonable shipowner and objective approaches are proposed as a middle solution to the problem. Finally, the paper considers how associated ships relate to other institutions of admiralty and how their amendment may affect the possible benefits of permitting the arrest of associated ships.

Keywords: Arrest of ships, one-ship companies, piercing the corporate veil, sister ships, surrogate ships, associated ships, beneficial ownership, state-owned enterprises, state immunity

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