Vestoil v. M/V "M Pioneer"

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DMC/SandT/05/59
Vestoil, Ltd. v. M/V "M Pioneer"
United States: Court of Appeals for the Eleventh Circuit: Circuit Judges: Birch, Carnes and Barkett: D.C. Docket No. 04-00770-CV-ORL-19-DAB: (Designated Not for Official Publication): 19 September 2005
Maritime lien: Rule C: vessel arrest: in rem jurisdiction: provision of bunkers: choice of law: Greek Law: whether greek law provides a maritime lien for necessaries: whether maritime lien can be created by contract
Summary
In this case, the Appeals Court affirmed an order of the US District Court for the Middle District of Florida, dismissing bunker-supplier Vestoil’s Rule C1 complaint against in rem defendant m/v "M Pioneer" for lack of personal jurisdiction and holding the arrest of the Vessel invalid. The Court found that Greek law applied and that under Greek law a maritime lien does not arise through provision of necessaries such as bunker fuel oil. Furthermore, the Court held that contractual language granting Vestoil a lien on the Vessel could not actually create or give rise to a maritime lien because a maritime lien can only be created by operation of law

DMC Rating Category: Confirmed

This case note has been prepared by Jan Petter Gisholt of Healy & Baillie, LLP in New York. Healy & Baillie are the international contributors to the website for the United States.

Discussion
In December 2002, Vestoil Ltd. ("Vestoil"), a Cyprus corporation with its principal place of business in Greece, entered into a contract to supply fuel oil to the m/v "M Pioneer" near the port of Singapore. At that time the vessel flew the Panamanian flag and was owned by Financial Shipping, a Maltese company based in Italy. The contract was negotiated by telephone and telefax between Vestoil in Greece and Financial Shipping in Italy.

The contract contained no choice of law provision but contained a clause which granted Vestoil a lien on the Vessel if the bunkers were not paid. Financial Shipping never paid for the bunkers and the Vessel was eventually sold to Fairlane Shipping, a Liberian corporation, in February 2004.

In May of 2004, while the Vessel was in Port Canaveral, Florida, Vestoil filed a Rule B complaint against Financial Shipping and a Rule C complaint to enforce a maritime lien against the vessel. The Rule B2 complaint was dismissed without prejudice for lack of service. The District Court granted the vessel’s motion to quash the arrest and dismissed Vestoil’s Rule C1 action to foreclose the maritime lien.

The District Court conducted a choice of law analysis and concluded that Greek law controlled. The District Court found that under Greek law, a maritime lien does not exist for the provision of necessaries in spite of a contractual clause which so provides. Without the existence of a maritime lien, the District Court dismissed the Rule C complaint for lack of in rem jurisdiction over the vessel.

In its appeal, Vestoil argued that the lien clause in the bunker contract created a maritime lien and relied on a series of cases which purportedly stood for the proposition that "international contracting parties are free to negotiate these kinds of provisions as they please."

Court of Appeals Judgment
In its review of the District Court’s decision, the Appeals Court disagreed with Vestoil and found that no authorities in Greek law that supported the conclusion that a maritime lien can be created by contractual agreement. Notably, the Court further observed that it is: "settled law in the United States that a maritime lien can arise only by operation of law, regardless of any agreement between the parties."

The Court ultimately concluded the District Court had properly interpreted the applicable Greek law in finding that Vestoil did not have a maritime lien despite the contractual language to the contrary. Accordingly, the District Court had properly concluded that it lacked in rem jurisdiction and properly dismissed Vestoil’s Rule C complaint. The Appeals Court declined to consider Vestoil’s in personam claims against Fairlane (the new owners of the Vessel) on appeal, because such claims were not raised in the District Court.

1 Supplemental Admiralty Rule C of the Federal Rules of Civil Procedure contains special provisions for enforcing a maritime lien and filing an action in rem against a vessel or other maritime property subject to liens. Under Rule C, the plaintiff files a complaint and affidavit(s) asserting the validity of the lien in the US district court where the property sits. The vessel may be seized on the basis of this complaint and affidavit. If the court finds that judgment should be entered on the complaint, the US Marshall may be ordered to sell the vessel to satisfy the plaintiff’s claim, absent satisfaction of the judgment by the owner.

2 Supplemental Admiralty Rule B provides for attachment and garnishment in an in personam action. Under Rule B, if the defendant is not found within the district, a plaintiff may request attachment of defendant’s tangible or intangible property up to the amount sued for. Property subject to attachment may include, among other things, the vessel, a bank account, cargo or bunker fuel. A Rule B attachment is used to secure the defendant’s appearance in the jurisdiction and to ensure satisfaction of the claim if the plaintiff prevails.

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