AS Akciju komercbanka 'Baltikums' (the applicant bank) and Rostman Ltd concluded two loan agreements. Both agreements contained arbitration clauses referring all disputes arising out of the agreements to the arbitration in Riga, Latvia. The vessel Yamburg, flying under the flag of Georgia and belonging to a third company, Larson Shipping Ltd, was pledged as a mortgage to the bank for both loan agreements under two separate mortgage agreements. The mortgage was registered in the Ship Registry of Georgia. The mortgage agreements contained an alternative arbitration/jurisdiction clause allowing claims arising from the mortgage to be arbitrated in Riga, or litigated in any state court in Riga, or any other court where the vessel may be located 'from time to time' if such courts were competent to consider the relevant dispute.

The bank applied to arrest the vessel to the Commercial Court of Kaliningrad Region where it was located. The Court found that this was a maritime claim under art 389.21 of the Merchant Shipping Code of the Russian Federation (the MSC RF), which is equivalent to art 1.1.u of the Arrest Convention 1999, and under art 1.1.q of the Arrest Convention 1952. However, it did not grant the arrest application. The Thirteenth Commercial Court of Appeal and the Commercial Court of the North-Western District confirmed the ruling of the Court of first instance.

The grounds for dismissing the arrest application were that the vessel had already been arrested by the court of general jurisdiction and the Commercial Court of Kaliningrad Region in another case concerning an unrelated dispute. The Courts stated that a vessel arrested as security for a maritime claim could not be arrested again except in the cases expressly named in art 392.1 of the MSC RF. Therefore, the arrest could not be granted.

The applicant submitted a supervisory appeal to the Presidium of the Supreme Commercial Court of Russia.

Held: The rulings of the Commercial Court of Kaliningrad Region, the Thirteenth Commercial Court of Appeal, and the Commercial Court of the North-Western District are revised. The application is ordered to be reconsidered by the Court of first instance.

Upholding the appeal, the Supreme Commercial Court stated that in terms of art 2 of the Arrest Convention 1952, a ship flying under the flag of a contracting State may be arrested in another contracting State. According to art 8.2 of the Arrest Convention 1952, ships flying under the flag of a non-contracting State may also be arrested in the jurisdiction of a contracting State. Therefore, the vessel could be arrested under the Arrest Convention 1952, even though it flew under the flag of Georgia, a non-contracting State.

Next, the Court emphasised that pursuant to art 6 of the Arrest Convention 1952, all procedural issues with regard to the ship arrest are determined by the law of the contracting State in whose jurisdiction the arrest was made or applied for. Article 3.1 of the Arrest Convention 1952 and art 388.1 of the MSC RF provide that arrest may be granted only for a maritime claim. Therefore, under Russian law, the existence of a maritime claim is a substantive ground for the ship's arrest. The bank’s claim related to the encumbrance on the ship which was registered in the Ship Registry of Georgia. It is a maritime claim. Thus, the Russian courts were competent to arrest the vessel.

If substantial grounds for the arrest are met, the court should assess the application from the perspective of procedural grounds for granting interim measures. In particular, the court should assess whether the interim measure applied for actually secures the future judicial dispute, preserves the status quo between the parties, and sufficiently prevents damage to the applicant (art 90.2 of the Commercial Procedure Code of the Russian Federation, para 9 of the Resolution of the Plenum of the Supreme Commercial Court of the Russian Federation No 55 dated 12/10/2006).

Further, the Court noted that international instruments (the Arrest Convention 1952) prohibit the ship's arrest more than once only under the same claims between the same parties. The relevant provisions do not impede the arrest of a ship more than once if this ship is arrested under different claims and/or if different claimants have brought such claims. This conclusion is based on the wording of art 3.3 of the Arrest Convention 1952, in terms of which a 'ship shall not be arrested, nor shall bail or other securities be given more than once in any one or more of the jurisdictions of any of the Contracting States in respect of the same maritime claim by the same claimant'.

Thus, although art 392 of the MSC RF does not refer to 'same maritime claims by the same claimants', it should be interpreted according to the international rules. In turn, the enforcement of a judgment secured by the arrest should be carried out under the law of the State where the vessel is arrested. Under Russian procedural rules, the subsequent arrest shall not impede the enforcement of the previous one.

The Supreme Commercial Court emphasised that any other approach to interpreting the relevant provisions would contradict the right to justice of the subsequent applicants.

Based on the above, the Supreme Commercial Court concluded that the courts below should have assessed the application on the basis of the procedural grounds stipulated in the Commercial Procedure Code of Russia, since the substantive grounds for the arrest stipulated in the MSC RF and the Arrest Convention 1952 were met. The interpretation of legal norms expressed in the Supreme Commercial Court of Russia's judgments rendered by it in its supervisory capacity is universally binding.