Vessel Arrest Vacated
On May 16, 2023, the United States Eleventh Circuit Court of Appeal, in the case Windspeed Enterprise Limited v. M/V Semi and Modern American Recycling & Repair Services, LLC. affirmed a ruling that rejected an in rem maritime lien claim against a vessel. The opinion illustrates that not all things provided to a vessel qualify as "necessaries" to create a maritime lien.
In January 2020, Windspeed Enterprise, Ltd. ("Windspeed") agreed to purchase two vessels from Semi Sub Service BV pursuant to a purchase and sale agreement. Windspeed started to prepare the vessels that were in Mexico for their eventual trip to a scrapyard in India. Windspeed provided a crew and other services to the vessels. However, Windspeed did not purchase the vessels on or before the closing date and the agreement expired by its own terms. In June 2021, Modern American Recovery and Recycling ("MARRS") purchased the vessels and towed them to Mobile, Alabama. In December 2021, Windspeed sued to arrest the vessels claiming it had a maritime lien for providing necessaries to the vessels. MARRS moved to vacate the arrest. The district court granted MARRS' motion to vacate. Windspeed appealed.
A maritime lien is a special property right in a ship given to a creditor by law as security for a debt and it attaches the moment the debt arises. Under the Commercial Instrument and Maritime Lien Act, "a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner . . . has a maritime line on the vessel . . . [and] may bring a civil action in rem to enforce the lien." The Eleventh Circuit examined the dispute and found the district court was correct in determining that it lacked admiralty jurisdiction. There was no maritime contract and Windspeed did not provide "reasonable grounds" for the arrest of the vessels. The Court noted that a contract for the sale of a vessel is not a maritime contract. Thus, providing necessaries to a vessel in anticipation of purchasing the vessel pursuant to a purchase agreement does not create a maritime lien or give rise to admiralty jurisdiction. The Court evaluated Windspeed's claim that it had a maritime lien because it supplied necessaries to the vessels. Although Plaintiff provided bunkers, fuel, crew, cleaning, insurance, etc. to the vessels it did so under the terms and conditions of the agreement to purchase in order to take delivery of the vessels. Windspeed's failure to close the deal did not turn its contractual performance into a maritime lien.
The 11th Circuit affirmed the district court ruling vacating the arrest of the vessels. Windspeed did not have a maritime lien and the district court lacked admiralty jurisdiction over the dispute.
D. Why Is This Important?
- A vessel purchaser should be aware that providing things to a vessel it intends to purchase might not give rise to a maritime line if the deal does not close.
- To avoid a potential claim for damages resulting from a wrongful seizure, do not seize a vessel to enforce a maritime lien that you do not possess.
- A contract to purchase a vessel is not a maritime contract.
W. Brett Mason is a Member at Stone Pigman Walther Wittmann L.L.C. and advises companies doing business in Louisiana in their desire to evaluate and manage maritime risk by counseling them on changes in law and protecting their interests should a dispute arise.