In July 2022, the vessel Ahmet Telli caught fire. In order to rescue the vessel, the master entered into a salvage agreement with the Federal State Budgetary Institution Morspassluzhba (the salvors). The salvage agreement contained an arbitration clause. According to the salvors, they successfully provided firefighting services, extinguishing the fire and ensuring the safe anchorage of the vessel thereafter.

As a result of their salvage operations, the salvors submitted a claim against the shipowners for a salvage reward. The parties agreed that the reward should be 20% of the salved value of the vessel. The salvors calculated the value of the property saved at USD 4,250,000, which represented the vessel's value as indicated in the insurance policy. Thus, the claims of the salvors amounted to approximately USD 850,000. The shipowners considered the vessel a constructive total loss after salvage. In their opinion, the value of the vessel before salvage was about USD 2,700,000. Its salved value was USD 416,419, and a reasonable salvage reward was approximately USD 83,283.

The salvors applied to arrest the vessel to obtain security for their claims of USD 850,000. The arrest was granted. The shipowners applied to set the arrest aside by providing alternative security of USD 83,283 deposited into the Court's account. The salvors insisted that sufficient alternative security would be money deposited in the court's account in the amount of the salvors' claims (USD 850,000). The shipowners argued that the amount of the alternative security could not be higher than the value of the vessel after salvage (USD 416,419).

Held: The shipowners' application is dismissed.

Article 5 of the Arrest Convention 1952 and art 391 of the Merchant Shipping Code of the Russian Federation (the MSC RF) provide that a vessel should be released from arrest upon sufficient bail or other security being furnished. The Court may determine the nature and amount of the relevant security. The amount of sufficient security cannot be higher than the value of the property arrested.

The Court emphasised that art 2 of the Arrest Convention 1952 and art 388 of the MSC RF provide that ship arrest is a special security measure for maritime claims. It is unnecessary to prove anything else besides the existence of a maritime claim. Thus, the salvors are not obliged to prove the reasonableness of the arrest and the actual salved value of the property.

Under art 342 of the MSC RF, which contains the rules set out in art 13 of the Salvage Convention 1989, one of the factors which is taken into account when determining the amount of the salvage reward is the salved value of the property. The parties agreed that the salvage reward should be 20% of the salved value. Thus, to determine the fair and reasonable amount of the salvage reward and, therefore, the sufficient amount of the alternative security, it was necessary to establish the actual salved value of the vessel.

Interim measures, including ship arrest, are preliminary remedies. It is not necessary to provide evidence to the extent needed for proceedings on the merits. This position is indicated in s 10 of the Resolution of the Plenum of the Supreme Commercial Court of the Russian Federation No 55 dated 12 October 2006. Salvors seeking the arrest of a ship are not obliged to prove that the quantum of their claim is fair and reasonable. The assessment of the sum claimed and the salved value of the vessel are not the subject of the proceedings on granting ship arrest but the subsequent proceedings on the merits which the competent arbitral tribunal should determine. As a result, the Court could not establish the salved value of the vessel other than as claimed by the salvors and, therefore, could not determine that the amount of the alternative security should be less than the amount claimed.

Based on the above, the Court held that the shipowners should have provided the security in the full amount of the salvors' claim in order to release the vessel.

[Ruling confirmed on appeal: see the Ruling of the Fifteen Commercial Court of Appeal in Case No A32-34735/2022 dated 30 November 2022].