This was an appeal brought by Mediterranean Shipping Co España Barcelona SA (MSC) against a judgment of the Court of first instance dismissing MSC's objections to the arrest of the MSC Ilaria. The respondent, Ms Paula, sought the arrest of the ship on the basis of a maritime claim under art 1.1.b of the Arrest Convention 1952, as a result of the death of her father in a fire on the ship Egoli, which occurred in a Chinese port. On 31 July 1999, the respondent sought to arrest the MSC Ilaria, owned by Ulmus International Corp. The respondent argued that, at the time of the accident, the ownership of both ships was the same, despite the different names of the owning companies, since, although Shoreline Shipping SA was the owner of the MSC Ilaria, and Dimitra Shipping SA was the owner of the Egoli, on which the accident occurred, between these two companies there was a series of significant identities, in the shareholders, the management positions, and the domicile of the companies.

The Court of first instance accepted this argument and, applying art 3.1 of the Arrest Convention 1952, proceeded to arrest the MSC Ilaria as a sister ship.

Held: appeal dismissed.

Article 3.1 of the Arrest Convention 1952 provides that any plaintiff may arrest either the ship to which the claim refers, and any other ship (a so-called sister ship) that belongs to the person who, at the time the maritime claim was created, was the owner of the ship to which that claim refers. In art 3.2, it is stated that ships will be deemed to have the same owner when all the shares of the property belong to the same person or persons. From the foregoing, it must be inferred that only the vessel causing the maritime claim or, as the case may be, another vessel that belongs to the same owner at the time the maritime claims arose, even if its current owner is not the original debtor, can be subject to ship arrest (although for this last assumption to be correct it must be a maritime lien in accordance with art 9 of the Arrest Convention 1952).

The judgment below applied the aforementioned provision to dismiss MSC's opposition, considering that, at the time of the accident, the two ships were sister ships. To reach this conclusion, the theory of lifting the corporate veil must be used, given that, at least formally, both vessels were held in different ownership. The application of this well-known doctrine of lifting the corporate veil is only justified, given its restrictive nature, to avoid those situations that appear to be invested with a fraudulent nature. In this sense, the Supreme Court judgment of 17 October 2000 indicates that this jurisprudential doctrine has limited application, since the normal course is obligatory respect for the legal form, although, exceptionally, when it is evident that the form hides a fiction, it is possible to penetrate into the personal substratum of such entities or companies, to avoid harm to third parties and their use as a vehicle of fraud. Here, the complete overlap in the identity of the shareholders, and in the positions of President and Vice-President, and the fact that both ships are managed by the same company from Greece, with the same management, justifies the application of the aforementioned doctrine, showing, under the guise of a legal fiction, a fraudulent situation that the legal system cannot protect. And this standard of evidence (a judgment of likelihood) is sufficient, at this precautionary stage, to find that the requirement referred to in art 3.1 of the Arrest Convention 1952 is satisfied.

Ulmus International Corp, the current owner of the arrested vessel, acquired it from Shoreline Snipping SA prior to the arrest, specifically on 4 September 2000, registering it on 16 October of the same year in Panama.

The maritime claim giving rise to this action enjoys a privileged character (see art 1.1. b of the Arrest Convention 1952, read with art 2.4 of the MLM Convention 1926). The nature of the maritime lien as real security allows its holder to enforce the same on the ship, even if its ownership has changed and does not coincide with that of the original debtor.

Since Panamanian law has not been proven, Spanish law must be applied. This was correctly applied in the first instance judgment.