This dispute related to the ranking of maritime claims over a Panamanian-registered vessel that had been arrested and auctioned by judicial order in Greece. The appellant bank, who had a preferred mortgage over the vessel, complained that the respondent's claims for security and maintenance of the vessel had been recognised as enjoying maritime lien status and were therefore ranked ahead of the appellant's mortgage. The legal dispute originated in the Single Member Court of First Instance of Piraeus (judgment 4242/2009) and was then appealed to the Three-Member Court of Appeal of Piraeus (judgment 705/2010). In its 1737/2014 decision, the Supreme Court reversed the decision of the Three-Member Court of Appeal of Piraeus and referred the case for further trial by the same Court composed of other judges. The 55/2016 judgment of the Three-Member Court of Appeal of Piraeus was then issued. The appellant appealed to the Supreme Court a second time.

Held: Second appeal upheld. The 55/2016 decision of the Three-Member Court of Appeal of Piraeus is annulled. No second referral is made, but the Supreme Court, after hearing further submissions, will judge the substance of the case itself.

In the case of the auction of an arrested ship, the order of the creditors in the ranking list is determined mainly according to the provisions of the Κώδικας Ιδιωτικού Ναυτικού Δικαίου (ΚΙΝΔ) (the Code of Private Maritime Law (the Code). According to art 9 of the Code, the law of the flag of the ship regulates rights in rem over it. Furthermore, according to art 205 of the Code, the maritime liens defined by this provision are equivalent to a special pledge, have the character of a proprietary right, and precede the ship mortgage, but in order to precede the mortgage in the auction of a ship flying the flag of a foreign State, they must, as expressly required by art 9, enjoy the same privilege under the law of the flag (at the time of compiling the classification table). However, the order of classification of these liens will be judged according to the law of the place of execution (the lex fori), since this ranking is not an element of the claim, but concerns the relationships between the claims and is regulated by procedural law (AP 466/1996, AP 70/92). Furthermore, if a ship flying a foreign flag is seized and auctioned in Greece, if the claims are preferential and according to the law of that country, they are classified as privileged, according to article 205 of the Code, they rank before the mortgage, regardless of their order of classification under the law of that country (AP 710/1992).

According to art 205 of the Code, only the following claims attract a maritime lien and in the following order:

(a) legal costs incurred in the common interest of the creditors;

(b) claims arising out of contracts of employment between master and crew, as well as seafarers' pension fund (NAT) entitlements;

(c) expenses and remuneration on account of assistance at sea and salvage of the seized ship; and

(d) compensation owed to ships, passengers and cargo by reason of collision of ships.

Costs of maintenance of the ship can be included under (a), if they were made after the arrival of the ship in the last port, ie the one that followed its last navigation due to its arrest (AP 52/1995). Storage costs, as well as maintenance costs, may be eligible if incurred for the above purpose, from the arrival of the ship in the last port, ie the one to which the ship sailed and from which it was prevented from sailing, due to its seizure, without it being necessary that these expenses were made after the ship's confiscation (AP 295/2002, AP 52/1995, AP 284/1989).

In particular, storage costs, when recognised as a maritime lien, means the costs of 'supervision and necessary care' for the purpose of securing the ship with its components and appurtenances in the material condition when the vessel was seized. The storage costs include not only the costs but also the remuneration of the necessary services and care, paid for the storage of the ship to a guard designated by the shipowner. However, not all storage costs enjoy this privilege, but only those incurred on a ship immobilised in the run-up to the auction. That is to say, any expenditure which is not compatible with the justifiable reason for the introduction of the maritime lien, which refers to a ship which is in a fixed position for the purpose of the judicial sale, is excluded. Guarding the ship in the last port not only protects the interests of the shipowner, but also immediately benefits all creditors, because without this maritime lien, the debtor risks not finding guards willing to offer their services, and thus the ship will remain without protection during the auction process, to the detriment of creditors. In the event that the seized vessel has for a long time been decommissioned in the same port in which it was auctioned, this port can not be considered as the 'last port after arrival', so that any maintenance costs incurred during this period are covered by the above privilege. This is because this is not a port where the ship was stopped and prevented from sailing as a result of the seizure, but this immobilisation was irrelevant to the seizure, since the ship had sailed there with the sole purpose of immobilising and decommissioning it for a long time.

The Republic of Panama has not acceded to the MLM Convention 1926 or the MLM Convention 1967. However, several provisions of these Conventions have been included in its national law. Storage costs and maintenance costs are considered, under Panamanian law, as being that which is spent to keep the ship in good condition to fulfil its destination as an economic unit, suitable for autonomous movement and maritime exploitation, but also to avoid the reduction of its value. In particular, storage costs means the costs of supervision and necessary care for the purpose of securing the ship with its components and appurtenances in the material condition in which it was at the time of its seizure. Ship maintenance costs are, in particular, all that has been spent on repairing the damage caused over time and by its operation, in order to keep the ship unharmed in port until the auction. This maritime lien is intended to protect the interests of the shipowner, but also works for the benefit of all creditors, because without this privilege the debtor is in danger of not being able to find guards willing to offer their services, so that the ship remains unprotected. According to Panamanian law, not all the costs of guarding and maintenance of the ship enjoy this privilege, but only those incurred on a ship immobilised for the purpose of maintaining it after its immobility and in view of its auction. Under Panamanian law, custodia legis means the status of a ship under natural custody because it has been barred from sailing. In this case, the requirements for guarding and maintenance of the ship are not equipped with maritime lien status independently as included in art 244(11) of Law 55 of 2008. The specific costs do not enjoy a maritime lien and are classified according to the requirements of the mortgage lenders. A different case is where the seized ship was for a long time decommissioned in the same port where it was auctioned. According to Panamanian law, this port is not considered as the 'last voyage and entry into port', in the sense of art 244(11) of Law 55/2008, because in the case of decommissioning a ship its immobilisation and obstruction of its departure is not related to the imposed seizure and the expedited auction. Consequently, the costs of its maintenance and upkeep, which are incurred during that period, are not covered by the prerogative of art 244(11) of Law 55 of 2008, because they take place in time and for a reason not related to the seizure. For the same reason, the specific costs are not considered court costs, included in the art 244 (1) of the same Law, and they do not even enjoy a privilege under that heading (AP 533/2017).

The Court of Appeal's ruling gives vague and insufficient reasons regarding the essential issue of the nature of the disputed claims as privileged, based on Panamanian law in force at the time of classification. In particular, the Court of Appeal accepted that the respondent's claims amounted to maritime assistance services, without any assumption as to whether they are due for the last voyage, which is a condition of their enjoying maritime lien status under Panamanian law, and further accepted them as privileged, preceding the maritime mortgage, assuming that they were made after the arrival of the ship in the last port, a condition attached to the privileged nature of claims for maintenance of the ship. To the extent that it accepted those requirements for storage and maintenance costs, the Court did not specify whether the services offered in January 2004, ie about 20 months before the seizure, as well as the immobilisation of the ship and the obstruction of its departure were related to the subsequent arrest of the vessel and the auction. As for the services offered in February 2006, ie after the seizure of the ship, the Court did not specify if: a) these had been ordered by the harbor master or by the Court conducting the auction; or b) had been prepaid by the applicant for the precautionary seizure or the judicial prohibition of the departure of the ship to the Port Authority. Therefore, it is not possible to discern the correct application of the provisions of substantive law of art 244 of Law 55/2008 of the Republic of Panama.