The plaintiffs claimed reimbursement of sums paid to third parties by the plaintiffs in connection with services provided by those third parties to fishing vessels now owned by the defendants, AO Lenrybprom (AOL). The plaintiffs stated that the services were provided pursuant to contracts between the plaintiffs and PO Lenrybprom (POL). The payments by the plaintiffs were made from December 1991 to August 1992. The plaintiffs arrested AOL's vessel Kommunar at Falmouth, United Kingdom (UK), in November 1995.

The plaintiffs applied for appraisement and sale of the Kommunar. AOL applied to set aside the arrest on the ground that the Court had no jurisdiction because: (1) the claim does not fall within s 20(2) of the Supreme Court Act 1981 (UK) (the 1981 Act), not being a claim which arises in connection with any particular ship; or (2) because it does not fall within s 21(4) of the 1981 Act since AOL were not when the cause of action arose the owner or charterer of or in possession or control of any ship; or (3) since AOL were not the party liable in personam on the claim. AOL's argument on the s 20(2) point was separately rejected in Centro Latino Americano de Commercio Exterior SA v Owners of the Ship Kommunar (The Kommunar) [1997] 1 Lloyd's Rep 1.

On the s 21(4) point, the plaintiffs argued that POL owned, or were charterers of, or were in possession or control of the fishing vessels in connection with which the services were provided and further that POL would then have been the person who would have been liable in respect of the plaintiffs' claims. POL was a state enterprise under the control of the Russian Ministry of Fisheries through Sovrybflot, another state enterprise. However, in 1993, POL was privatised under Russian legislation and was converted into a company, AOL. The plaintiffs had been incorporated in Panama by Sovrybflot to provide a local management organization and agency services for fishing vessels in that area. Sovrybflot was also privatised, but it retained the plaintiffs as a wholly-owned subsidiary.

Whether AOL took over the debts of POL was disputed. Although AOL owned the Kommunar, AOL argued that they were not the same legal person as POL. AOL came into existence by privatisation in 1993. Even if AOL was the same legal person as POL, POL was not the owner or charterer of or in possession or control of the vessels in question. AOL also argued that another of their vessels had previously been arrested by a third party in South Africa and the plaintiffs had previously claimed against the proceeds of sale. Accordingly, the present proceedings were precluded by s 21(8) of the 1981 Act.

The issues were: (1) whether AOL and POL are the same legal person; (2) whether POL was the owner or charterer of or in possession or control of the fishing vessels; (3) the s 21(8) point.

Held: Plaintiffs' application dismissed. Defendants' application allowed.

The Court has no jurisdiction to entertain proceedings in rem against the Kommunar. The scope of the Court's statutory jurisdiction should be strictly complied with and not be adjusted to satisfy the interests of justice in a particular case. Section 21(4) requires that the legal person who beneficially owns the vessel proceeded against must be the same legal person as that who would have been liable on the claim in an action in personam and who, when the cause of action arose, was the owner or charterer of or in possession or control of the ship in connection with which the claim arose. Once there is discontinuity of legal personality no amount of statutory transfer of assets or liabilities by means of legal succession can satisfy s 21(4). Based on expert evidence on Russian law as the law of the place of incorporation, AOL and POL are not the same legal person.

The plaintiffs argued that if the effect of the local law of the place of incorporation is to bring about 'universal succession' as between the legal person originally the owner of the vessel the subject of the claim and originally liable in personam and the legal person who owns the vessel proceeded against, there has been sufficient continuity of legal personality for the purposes of s 21(4) for it to be said that the 'relevant person' is the beneficial owner of the vessel proceeded against. Thus, the plaintiffs argued that s 21(4) should be construed to cover the transformation of POL into AOL even if in the process a new corporation were created: National Bank of Greece and Athens SA v Metliss [1958] AC 509 (HL) (Metliss). The Court disagreed, reasoning that Metliss was a case where the effect of the universal succession prescribed by foreign legislation was recognised such that the successor company became the transferee of the assets and liabilities of the original corporation: Adams v National Bank of Greece [1961] AC 255 (HL). Metliss did not involve a jurisdictional issue.

Next, the Court rejected AOL's argument that there is no jurisdiction because POL was not at the time when the cause of action arose the owner, charterer of, or in possession or in control of any of the vessels in question. On the evidence, POL was the registered owner and controlled the vessels within the meaning of s 21(4)(b). In s 21(4)(b) 'owner' in means 'registered owner': The Evpo Agnic [1988] 1 WLR 1090 (CA) (CMI2225). Nevertheless, because AOL and POL are not the same legal person, this point does not arise.

Because the Court did not have jurisdiction, the s 21(8) point does not arise, but it should be considered because it was fully argued. Section 21(8) of the 1981 Act provides as follows:

Where, as regards any such claim as is mentioned in section 20(2)(e) to (r), a ship has been served with a writ or arrest in an action in rem brought to enforce that claim, no other ship may be served with a writ or arrested in that or any other action in rem brought to enforce that claim; but this subsection does not prevent the issue, in respect of any one such claim, of a writ naming more than one ship or of two or more writs each naming a different ship.

Another of AOL's vessels was arrested in May 1995 in South Africa, but by some creditor other than the plaintiffs. That vessel was then sold by the South African Court. Following the sale, the plaintiffs proceeded against the fund (ie proceeds of sale) for the same claim in the present case. AOL argued that the service of the writ in the present proceedings breached s 21(8). But the plaintiffs argued that there was no evidence that the plaintiffs had commenced proceedings in rem in South Africa, and that s 21(8) only applies to multiple proceedings confined to England, UK, and does not apply to international multiple proceedings. If it is assumed that the proceedings commenced in South Africa are indistinguishable in substance and effect from a writ in rem served on a fund in England, does s 21(8) preclude subsequent proceedings in rem against this vessel in the English Courts?

AOL argued that s 21(8) was newly enacted in 1981 to give effect to The Banco [1971] P 137 (CA) (CMI2156), which held that only one vessel could be arrested in respect of a given claim. AOL argued that the Arrest Convention 1952 can be used as an aid to construe the Administration of Justice Act 1956 (UK) (the 1956 Act) (The Banco 152, 157). Since The Banco resorted to art 3.3 of the Convention as an aid to construction of the 1956 Act in order to spell out in s 3(4) of the 1956 Act a restriction on the number of ships that could be arrested, it must be permissible to construe s 21(8) by reference to art 3.3 when s 21(8) was enacted to give effect to art 3.3.

The Court noted that the 1981 Act makes no reference to the Convention and no part of the Convention is set out in that Act. Furthermore, there is no provision for bringing that part of the Act into force in relation to the ratification of the Convention by other countries. Meanwhile, the 1956 Act did not reproduce or enact art 3 of the Convention. Section 3(4) of that Act, from which s 21(4) of the 1981 Act is derived, was strikingly different from art 3. For example, the owner of the arrested vessel had to have been also the owner or demise charterer of the vessel in respect of which the maritime claim arose. The connecting factor of mere charterer or being in possession or control of the vessel have no place in the Convention. Nor did the Convention make provision for beneficial ownership of the vessel arrested. Following ratification of the Convention by the UK in 1959, there was no subsequent attempt to give effect to the Convention prior to the 1981 Act. The 1981 Act did not by s 21(8) reproduce the whole of the substance of art 3.3 in at least two important respects. First, whereas art 3.3 prohibits the arrest of more than one ship, s 21(8) also prohibits the mere service of proceedings in rem where there are already pending proceedings in rem served against a sister ship, even though no arrest has at any time been effected. Second, there is no provision in s 21(8) equivalent to the 'unless' proviso at the end of art 3.3 enabling the Court to permit a second arrest in certain circumstances.

Many important trading nations, including South Africa, had not ratified the Convention by 1981. Although the UK has ratified the Convention, Parliament did not introduce all its provisions into English law. Parliament made significant modifications. It is therefore impermissible to construe the 1981 Act on the assumption that Parliament intended to introduce all provisions of the Convention into English law, although the 1956 Act 'must have been intended to achieve a broadly similar result' (The Banco 161) to the Convention. Nevertheless, unless the words of the Act are clearly capable of bearing the meaning of a provision in the Convention, the Convention cannot be treated as a reliable comparable in all cases of obscurity of meaning in the Act.

The phraseology of s 21(8) was inserted to deal with facts such as those in The Banco, where the prior arrest had been effected in an English port. Moreover, art 3.3 restricts multiple arrests to those occurring in the Contracting States and does not apply to prior arrests in non-Contracting States. It would be very odd if Parliament had prohibited multiple arrests where the prior arrest had been outside the Contracting States, yet s 21(8) can refer only to prior proceedings in rem or arrests in any jurisdiction if it is not confined to English proceedings. Further, there has been no attempt to introduce into s 21(8) the flexibility to be found in the last words of art 3.3: 'unless the claimant can satisfy the court … that there is other good cause for maintaining the arrest'. That is another indication that Parliament did not set out to follow the Convention, but was instead confining its attention to The Banco.

Thus, s 21(8) does not apply to foreign proceedings, but applies only to proceedings in rem or to a prior arrest in the UK. The South African proceedings are not a bar to these present proceedings. The Court expressed no view as to whether the South African proceedings could have fallen within s 21(8) had it applied to foreign proceedings.

Finally, the Court did not permit AOL to belatedly raise a new argument that, irrespective of s 21(8), it was contrary to English admiralty law and/or an abuse of process to pursue proceedings in rem in respect of a claim already the subject of other proceedings in rem at the suit of the same plaintiff wherever those proceedings might be brought, ie that The Banco reflected a wider principle.

Subsequently, the defendants claimed damages for wrongful arrest: Centro Latino Americano de Commercio Exterior SA v Owners of the Ship Kommunar (The Kommunar) (No 3) [1997] 1 Lloyd's Rep 22.