Already, a number of owners and operators have been declared bankrupt, and most observers agree that more are likely to follow in both the short and longer term. When a shipowner is declared bankrupt, it may no longer be possible to arrestor attach its vessels as assets. But shipping is an international industry, and the approach adopted to bankruptcy may vary from country to country. A universal approach is adopted in many countries, whereby it is not possible to arrest and/or attach the assets of a company once it has been declared bankrupt, irrespective of where the declaration is issued. A similar result is achieved by the 1997 Uncitral Model Law on Insolvency, which is designed to help states to address instances of cross-border insolvencies and which recognises foreign bankruptcy proceedings. Signatories to this Model Law include, among others, the UK and Poland. There are countries, however, which adopt a territorial approach to bankruptcy. One such is the Netherlands, which is not a signatory to the Model Law and which limits the prohibition of attachment of assets only to the country where the bankruptcy is declared. Confirmation of this territorial approach was provided by a recent decision of the Supreme Court in the Netherlands in a dispute between an affiliate of Russian oil giant Yukos, which had been declared bankrupt in Russia, and Russian state oil company Rosneft. The court ruled that, in the absence of an international agreement between Russia and the Netherlands, Dutch assets were not included in the receivership procedure, thereby confirming that foreign bankruptcies do not preclude or limit the possibility to attach assets in the Netherlands. In the Netherlands, the only exception to this rule exists in relation to insolvencies declared in another European Union member state on the basis of EU insolvency regulations. Furthermore, by attaching assets in the Netherlands, a creditor can create a factual priority over specific assets which would not be awarded in the bankruptcy proceedings. Given that the assets of globally operating shipping companies are often spread worldwide, this is an attractive option for creditors who have no realistic expectation of recovery under bankruptcy proceedings. The Netherlands is widely recognised as a haven for those looking to arrest ships and/or to arrange for their swift judicial auction. Leave for arrest is commonly granted without delay on production of a simple written application containing a summary of the claim only. No formal power of attorney and no proof of the claim is required. The arrestor is not liable for any port dues or related expenses. In addition, counter-security is seldom required. There are also very few legal hurdles to pass to obtain leave for arrest and, in addition, there is no obligation for the claimant to pursue its claim in the courts of the Netherlands following a ship arrest. The approach adopted by the Dutch courts to the recognition of foreign insolvencies and to the arrest and judicial sale of ships makes the Netherlands a very attractive jurisdiction for creditors in the maritime industry. Indeed, a number of mortgagees are known to have taken active steps in the past to direct vessels to ports in the Amsterdam-Rotterdam-Antwerprange for the specific purpose of bringing themselves within the jurisdiction of the Dutch courts. Given the current parlous, albeit slowly improving, state of world financial markets, this trend is only likely to become more pronounced in the immediate future.
"Published in Lloyd’s List on November 11, 2009."