Laura Cabello Joins the Aiyon Algeciras Office

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Following the departure of Rocío López, to whom we wish her all the best in her new career and with whom we continue to work closely, the new lawyer of the team, Laura Cabello, now attends the AIYON office in Algeciras together with the partner in charge of the office, José Antonio Domínguez.

After a few months of adaptation in our Cadiz office, working in direct contact with the two local partners on all kinds of cases, Laura now faces the challenges of an important logistics hub such as the Port of Algeciras, which has a strategic geographical location, her daily activity being a true reflection of the relevance of the maritime and logistics sector in general in the province of Cadiz.

Laura, a member of the Malaga Bar Association, holds a Law Degree from the University of Cadiz (2017) and a Master’s Degree in Access to the Legal Profession from the Malaga Bar Association (2022). She also has a specialisation in International Maritime Law from the Universidad Pontificia de Comillas (Madrid) ICADE- in collaboration with the Spanish Maritime Institute – IME (2023), with specific training in navigation areas, maritime safety, inspection, certification of ships and prevention of maritime pollution.

During her time at university, Laura actively participated in conferences and congresses organised by the Department of International Public Law of the University of Cadiz, where she had the opportunity to deepen her knowledge of key issues of International Law; knowledge that she later expanded with an in-depth study of procedural law.

After successfully passing the entrance exam to the Spanish Bar in June 2022, she completed several internships in the banking sector, where she put into practice her expertise in the development and drafting of lawsuits, appeals and foreclosure of mortgage deeds. She also conducted pre-trial and trial hearings in banking and criminal proceedings.

Given the interest she has always shown in international practice, in July 2024 she joined AIYON Abogados, where she is working in the different areas of maritime law, inland transport law and international trade law, specialising in the management of claims on maritime and inland transport contracts, administrative sanctioning procedures for ships, recovery and maritime insurance.

Revised Limits of Liability Under the Montreal Convention 1999

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In 2024, the International Civil Aviation Organization (ICAO) has proceeded to review the liability limits in accordance with the provisions of Article 24 of the Convention for the Unification of Certain Rules for International Carriage by Air, done in Montreal on May 28, 1999 – Montreal Convention of 1999, which states that the liability limits prescribed in Articles 21, 22 and 23 relating to destruction, loss, damage or delay of passengers, cargo or baggage, established in Special Drawing Rights (SDR), will be reviewed every five years.

Since it was rules in 1999, the Montreal Convention has suffered variations with respect to the limits originally established both in 2009 and in 2019, this being the latest modification, which will take effect on December 28, 2024.

Consequently, and with the appropriate exceptions or requirements to be reviewed in the Montreal Convention for each of the items, articles 21 and 22 of the Montreal Convention are modified as set forth below:

  • Article 21, compensation in case of death or injury of passengers: 151,880 SDR
  • Article 22.1, in case of damage caused by delay in the transport of people: 6,303 SDR
  • Articles 22.2, in case of destruction, loss, damage or delay in the transport of baggage: 1,519 SDR
  • Article 22.3, in case of destruction, loss, damage or delay in the transport of cargo: 26 SDR

AIYON collaborates with the ‘Diario del Puerto’ in its report ‘Legal Allies’

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The special report entitled ‘Legal Allies’, recently published by the specialised newspaper of the logistics and transport sector, ‘Diario del Puerto’, has counted on the collaboration of our colleagues Verónica Meana and Zuberoa Elorriaga, among other professionals of the sector.

After analysing the various questions posed to us, which covered different aspects of our work and included our vision for the future in the face of new challenges, we discussed aspects such as the value of advice and prevention in conflict areas, the most common deficiencies and lack of knowledge in the sector, the role we play as lawyers and its importance in the transport sector, as well as the future challenges facing the world of transport, our lawyers provided their perspective, based on their broad and varied experience.

For her part, Zuberoa Elorriaga commented that the lack of the proper coordination and joint vision that should exist between the purchase and sale operation and the subsequent transport operation can give rise to claims and disputes, which could be avoided with good prior advice. We are talking about both the logistics operation and the insurance that accompanies it.

It considers that the transport phase must be highlighted as an essential complement that complements and perfects the sale and purchase from which it derives. Therefore, correct management of routes and delivery times to avoid delays or damage to the goods is essential, a task that always involves a cost if we want to guarantee a correct service at the hands of professionals.

Verónica Meana, in turn, explained that the EU’s growing demands to reduce emissions are forcing the transport sector to look for alternatives, such as the use of electric vehicles or cleaner fuels. All of this is causing concern among operators about the high costs of adapting their fleets, whether by sea, air or land, which will be required by the new regulation.

In addition, she points out that the delay in adopting digital solutions for optimising operations or complying with environmental regulations, and the lack of robustly implemented protocols among employees of transport companies to make them less susceptible to cyber-attacks, are factors that can be improved with good research and planning.

Access to the publication…

AIYON Abogados, a Decade at the Service of Maritime and Transport Law

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‘El Canal Marítimo y Logístico’ took advantage of the celebration of the annual meeting of AIYON Abogados S.L.P. to meet in Bilbao with the five partners of the firm. Close to celebrating 10 years in the market, each of them pointed out the strengths of their multidisciplinary team of lawyers, as well as the different challenges they face on a daily basis from their offices located in Madrid, Cadiz, Bilbao and Algeciras.

We invite you to rea the article in its entirety from the link at the end of this article, highlighting below some of the statements made by the partners.

As expert lawyers in chartering and leasing of vessels, both for general cargo and project cargo, AIYON has also been specializing in off.shore construction projects. In this regard, AIYON’s partner in Bilbao, Mikel Garteiz-goxeaskoa, states, ‘This experience has given us the opportunity to assist from our Bilbao office local companies such as SAITEC Offshore Technologies, S.L., in projects as innovative as the launching and installation of its DemoSATH floating offshore wind platform in the BIMEP test area (Armintza), in the open sea two miles off the coast, and in waters 90 meters deep, as AIYON aspires to be a benchmark for companies operating in this sector due to its in-depth knowledge of Maritime Law in all its areas’.

With regard to the specific offshore wind sector, Mikel Garteiz-goxeaskoa highlights the firm’s strengths: ‘In addition to our knowledge and experience, we also have a large international network of collaborating lawyers, also specialized in these matters, mainly from the United Kingdom and Northern Europe. This allows us to rely at all times on up-to-date professionals in their respective jurisdictions to resolve any issued that may arise in the negotiation of the contracts concerned.’

When asked about their latest performances in Madrid, the firm’s partner, Verónica Meana, points our that: ‘We have recently seen in the office a notable increase in the number of cases that are resolved in institutional arbitration in these matters, either under CIAM or ICC rules, compared to the percentage of cases that go to court, which is still higher. This increase, although independent, runs parallel to the firm’s involvement in the Maritime Law working group within the Spanish Maritime Law Association in collaborating with CIAM, in an effort to promote maritime arbitration in Spain as an efficient and quality alternative means of dispute resolution.’

AIYON’s involvement in the teaching and preparation of the new generations is part of its hallmark, a fact that Verónica wants to highlight: ‘On the other hand, form Madrid, as from the rest of our offices, we continue to contribute to the teaching of maritime law. In my case, participating as a lecturer in the Master’s degree of both the IME (Spanish Maritime Institute) and the ISDE (Higher Institute of Law and Economics) in the subjects of maritime law and land transport.’

‘In Aiyon we know what it means to be at the side of both maritime and land carriers on a daily basis’, says Enrique Ortiz, partner of the Cadiz office. ‘And we know what it is like to be there for them both in normal circumstances and in urgent situations that require quick action (such as refusals of delivery by receivers, accidents, blocking of the means of transport by the authorities, etc.). What’s more, in exceptional circumstances, such as during the Covid confinement period or during the road transport stoppages and strikes that took place throughout the country between March and April 2022, our customers have always been able to counts on us.’

In fact, the situation in times of strikes and stoppages in the transport sector was not easy for the companies dedicated to land transport, and many of them, due to the convulsions of the time, even suffered damage to their vehicles caused by a group of people who, in favour of the strike during those dates, ‘took it’, in an absolutely vehement manner, against the vehicles in question. In relation to these events, which occurred to a significant number of road haulage companies and vehicles, Enrique can confirm that AIYON has recently managed to obtain, for one of its clients, a favourable ruling in the first instance, subject to appeal, against the Insurance Compensation Consortium, ensuring that concepts such as ‘riot’ and ‘extraordinary risk’ are not emptied of content, thereby rendering ineffective the coverage of claims that correspond to the Insurance Compensation Consortium. Let us not forget that the Consortium collects part of the premiums that insured hauliers pay to their insurance companies.

Asked about the great activity of the Port of Algeciras, our partner in the location, José Domínguez, tells us: ‘The port of Algeciras occupies a pre-eminent position within the Spanish port system. From our office in Algeciras, we provide ‘dockside’ assistance to shipping companies that provide passenger and goods transport services, both containers and roll-on/roll-off cargo in the Strait of Gibraltar, constantly advising not only in the day-to-day handling of all types of cargo and passengers claims, but also in the planning and management phases of the shipping companies to face challenges such as those of the so-called Operation Crossing the Strait (OPE). To this end, we regularly advise on charterparties, slot charters, shipbuilding and ship repair contracts, ancillary contracts and agreements such as stevedoring, confinement, etc. This is a part of the business that I particularly enjoy, as my background as a merchant seafarer is of great help to our clients, as I speak the same language as they do.’

Another of the most important traffics of Algeciras is the supply of fuel to ships, the so-called bunkering. Domínguez indicates in this respect that: ‘Algeciras is one of the most important bunkering ports in the Mediterranean. The maritime traffic through the Strait of Gibraltar, together with the magnificent anchorage of the port, make our port especially attractive for this type of operations. The figures that are handled are very relevant, close to 350,000 tons of oil products to ships, at a rate of approximately 200 ships supplied per month by a fleet of more than 15 barges of different sizes.’

For her part, Zuberoa Elorriaga, AIYON partner in Bilbao, points out that, in their almost 10 years as active partners, the common effort and trajectory has brought them together, allowing them to learn from each other: ‘Together with the rest of the firm’s staff, we form a close-knit team that encourages cooperation between offices and lawyers. It is not an easy sector as we face different challenges every day, with often complex cases and different actors involved, so the best way to work is to support each other and share experiences, which will always result in a better service for our clients.’

Finally, Zuberoa makes special mention of the continuous learning that the firm’s team is committed to pursuing, proof of which is the Postgraduate Course in Aeronautics and Space Law at the Faculty of Law (ICADE) of the Universidad Pontificia de Comillas, which she completed in 2021, opening up new areas of activity for the firm.

Listening to its partners, it is clear that in Aiyon Abogados they face this first decade of work and common effort as the beginning of a long and productive professional career looking to the future with optimism.

Read the article…

Complaints to Spanish State Aviation Safety Agency (AESA), an Option for Air Transport Users

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Further to our post Order TMA/201/2022, of 14 March: New procedure for the settlement of disputes in favour of air transport users we must now refer to Order TMA/469/2023 of 17 April accrediting the Spanish Aviation Safety Agency (AESA) as an alternative dispute resolution entity in the field of air transport.

In our previous post we already anticipated that AESA had to obtain such accreditation to provide the alternative dispute resolution (ADR) service to air transport users: ‘The procedure shall apply to incidents occurring after the first day of the month following publication in the ‘Boletín Oficial del Estado’. Order TMA/469/2023 having been published in the BOE of 10 May 2023, it will apply from 2 June 2023.

To activate this procedure, the first step is always to make a prior complaint to the airline and try to reach an amicable agreement with them. This first contact is expressly referred to in Article 6 of Order TMA/201/2022 of 14 March, as a step prior to initiating the alternative dispute resolution procedure before AESA. From the day of the incident, the user has 5 years to complain, and the airline should resolve the complaint within 1 month. If no reply is received or if the reply is not satisfactory, the affected person has 1 year from the date of the previous complaint to the airline to start the complaint procedure before AESA.

To do so, users must fill in a form provided by the Agency, adding the required documents. It is not until all the documents are available that the 90 calendar day deadline for AESA to resolve the complaint begins. However, this is also the beginning of the 21-day period within which to reject the complaint, without prejudice to the possible review to be requested at a later date by the interested party.

If the complaint is accepted, the airline or airport operator complained of shall be heard, as appropriate, and the complaint and documentation submitted by the affected party shall be forwarded to it. This is how a process of allegations and evidence is initiated between the parties, in which the Agency intervenes, and which will at all times inform the parties of their rights via its website.

The AESA Director will decide by means of a reasoned decision and will determine the measures to be applied in the case in question. As we have already reported, this decision will be binding on the carrier concerned, unlike before 2 June 2023. In principle, therefore, the carrier is obliged to comply with the decision and to send the Agency proof of compliance as soon as the decision is made. They must also inform the Agency whether they have contested the decision, which will be dealt with in the appropriate procedural area.

Legal claims by the passenger or the affected party, either as a challenge or as an original claim, are in practice channelled through oral proceedings due to their limited amount. However, should this scenario arise, other possible options to pursue financial claims, such as payment order proceedings, will have to be considered.

This regulation is a good proposal which, in addition to protecting passengers in complying with this regulation, aims to relieve the commercial courts of small claims, which could be resolved at an administrative level, with the help of AESA.

The long-term success of this procedure will depend on the real commitment of the parties to respect the Agency’s decisions, as in many cases airlines do not comply with the decision voluntarily and there is no subsequent follow-up of the case by AESA, so that consumers may decide to go directly ‘to court’, which means that the ultimate aim of this dispute resolution procedure would not have the intended effect.

Irantzu Sedano represents the Bar Association of Bizkaia in the 5th International Human Rights Public Speaking Competition for Young Lawyers, organised by the FBE in Gdansk (Poland)

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From 5 to 7 September 2024, our colleague Irantzu Sedano participated in the ‘5th International Human Rights Public Speaking Competition for Young Lawyers’, organised by the European Federation of Bar Associations in Gdansk, Poland.

Showing its commitment not only to the legal field but also to the defence of fundamental values at the international level, the FBE brought together young lawyers from all over the world to discuss human rights and their relevance and impact at the international level.

In her speech, Irantzu highlighted the impact of maritime transport on climate change and its direct relationship with fundamental rights. She emphasised how global warming, exacerbated by emissions from freight transport, affects, in many cases disproportionately, the most vulnerable communities, thereby compromising essential rights such as access to life, health and housing, and then she linked this issue to new European environmental legislation, in particular the ‘EU Emission Trading System’ and the ‘Fit for 55’ legislative package. Legislation that seeks a phased decarbonisation of the maritime sector, and which is being criticised and praised in equal measure.

Irantzu underlined that these regulations, although ambitious and necessary, also face important challenges in their implementation, especially in terms of port infrastructure and competitiveness of European companies.

This is not the first event of international scope in which Irantzu has made her mark. In 2023 she also had the opportunity to participate in the ‘Contracts Competition’, a leading meeting for young lawyers specialising in commercial law and contracts, held in Lisbon, which demonstrates our strong commitment to the The Bar Association of Bizkaia, where part of our team, including Irantzu Sedano, actively participates in the ‘Maritime Law Commission’ and the ‘International Relations Commission’.

Without a doubt, participating in these events allows us not only to exchange knowledge with other professionals from around the world, but also to gain new perspectives on the global challenges facing the legal sector, thus enriching our professional vision and experience in different global discussion forums.

All of which is a reflection of the firm commitment of Aiyon Abogados with the continuous training of its lawyers and the expansion of its international relations, both essential pillars for the good development of our work, especially in a sector that is so globalized and in constant change as the logistics and transport sector.

The Relationship between “Extraordinary Circumstances” and Travel Cancellation/Delay in Air Law

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It is not an opinion, but a fact, that air transport is the safest means of travel, allowing the movement of cargo and passengers in a short space of time, and this on the basis of the significant distances that are travelled.

That said, the experience of frequent air travellers is subject to the very constraints of this mode of travel, which means that they are exposed to delays, most of them short but sometimes significant, as well as to unforeseen cancellations of their journey.

Except for certain, proven and weighty reasons that can be alleged (for example, notably adverse and public weather conditions at an airport), when airlines are complained about by passengers due to a delay or cancellation, it is not unusual for them to use as an excuse a brief argument of rejection alleging having suffered “extraordinary circumstances”, even when the affected parties do not know what these alleged circumstances are, of which they have had no notice or, simply, were received at the time as mere rumours in the boarding lounge, without coming from any reliable source whatsoever.

As a general rule, the applicable rules for compensating European passengers are those set out in the European Regulation 261/2004 establishing common rules on compensation and assistance to air passengers in the event of denied boarding and of cancellation or long delay of flights and Regulation (EC) No 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air.

Regulations that affect Spain, as well as the rulings that are issued in the study and resolution of each case of claims for delay/cancellation that have as their source the national courts, as well as those issued by the Court of Justice of the European Union (CJEU).

In principle, “extraordinary circumstances” are defined as unforeseeable, unavoidable situations due to external factors on the flight, which exempt airlines from paying compensation as force majeure. For its part, the European Regulation 261/2004 considers extraordinary circumstances to be situations that could not have been avoided even if the airline had taken all reasonable measures to avoid them.

This concept is undoubtedly subject to interpretation by the law and jurisprudence that develop it, and must be nuanced, which is why the application or not of this inconclusive concept has been studied case by case, assessing whether it was applicable to the rejection put forward by the airline in question. The onus is on the carrier to prove that these extraordinary circumstances were unavoidable, even if reasonable measures were taken, and that, once they arose, the actions taken were adequate to avoid, as far as possible, the cancellation or delay (both preventive and reactive actions).

Clearly, the reasonable measures to be taken by an air carrier must be technically and economically feasible, based on the fact that routes and flights have been planned to reduce the risks of delay and cancellation.

In short, we must bear in mind that when a passenger is offered a rejection of his right to compensation on the grounds of “extraordinary circumstances” alleged by the airline, the implications behind this allegation are greater than just sending the passenger a catch phrase, without the passenger being able to object to anything in defence of his right.

Therefore, three requirements are necessary: (i) the disruptive event must be qualified as an “extraordinary circumstance”; (ii) there must be a direct causal link between the event and the cancellation/delay; (iii) the event became unavoidable, even if reasonable measures had been taken, and the carrier must take action to avoid the cancellation/delay.

This issue, like many others inherent to the world of transport, highlights the main need in the case of events occurring that disrupt the agreed transport, and that is that a fair balance must always be sought between avoiding airlines being forced to make an evidentiary effort in the course of their daily business when a cancellation/delay event occurs, together with the duty to adequately protect passengers’ rights.

Resolution of 22 May 2023 of the Directorate General for Land Transport – Systems and Requirements to Be Met by Electronic Administrative Control Documents in Road Transport

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In this article we would like to highlight the content of the Resolution of 22 May 2023, issued by the Directorate General for Land Transport, which establishes the requirements and systems that must be met by administrative control documents in electronic format for road transport in Spain, derived from Article 222.2 of the Regulation of the Land Transport Law. Article which, in accordance with Royal Decree 1211/1990, of 28 September, and its subsequent modifications, establishes the essential characteristics that the supports and computer applications used for the completion and management of this transport documentation must have.

Previously, in order to ensure that control documentation in electronic format meets the characteristics of availability, integrity, inalterability and inviolability of its content, as well as to determine the way in which copies of this control documentation must be obtained by the personnel of the Inspection Services and the agents of the transport surveillance forces when they are issued using electronic means, the Directorate General issued the Resolution of 13 February 2020, which established the characteristics that the administrative control documents in electronic format required in road transport must meet, which has now been repealed.

Thus, having established a new method of communication of the data collected in the various control documents, it was considered necessary to extend the new methods of communication to facilitate the activity of the hauliers themselves, reducing the administrative burden for drivers and companies.

The main requirements highlighted in the Resolution of 22 May 2023 include:

a) Characteristics of Computer Supports and Applications:

  • Accessibility for all eligible parties.
  • Ensuring secure storage and effective transmission of documents.
  • Specific requirements for electronic signatures: ensuring their binding to the signatory, identification, exclusive control and detection of modifications.

b) Systems and Requirements for Control by Inspection Services:

  • Implementation of two modalities: via numerical code with subsequent electronic delivery, or via QR code leading to a PDF repository.
  • Technical standards such as PDF/A format and size limitations (up to 4 MB).
  • Prior obligation to communicate the domain of storage and exclusive use of HTTPS connections by companies.

In any case, we must emphasise that the main objective of this regulation is to optimise the administrative management of road transport, ensuring the integrity, inalterability, inviolability of its content and availability of the required documentation.

The explicit repeal of the previous Resolution of 13 February 2020 only underlines the continuous updating and adaptation of sectoral regulations to technological developments and the operational needs of land transport. This sector is continuously evolving in order to facilitate trade between countries when it requires an agile and efficient means of transport, such as land transport.

The Nature of the Time Limit for the Exercise of Claims for Loss or Damage to Goods under the Hague-Visby Rules – Limitation or Expiry?

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The recent judgement no. 185/2024 of the 4th Section of the Murcia Provincial Court dated 8 February 2024, reviewing the case law referring to the nature of the one (1) year period for the exercise of claims for loss or damage during carriage by sea under a bill of lading established by the International Convention for the Unification of Certain Rules Relating to Bills of Lading signed on 25 August 1924, as amended by the Protocols of 23 February 1968 and 21 December 1979, the Hague-Visby Rules, has taken a position in favour of the figure of expiry of time.

The aforementioned ruling therefore joins other rulings in favour of expiry of time, such as, for example, No. 269/2023 of 26 January 2023 of the 1st Section of the Provincial Court of Pontevedra, to which it refers to summarise the controversy. The latter, in turn, cites Supreme Court judgments No 328/1983 of 7 June 1983, No 43/1984 of 31 January 1984, No 339/1984 of 30 May 1984, No 56/1985 of 29 January 1985 and No 583/1985 of 11 October 1985, which declare that the time limit provided for in Article 3.6 of the Hague-Visby Rules is one of limitation.

Referring to other judgments which, on the contrary, have declared that this period is a limitation period and not an expiry period, the aforementioned judgment no. 185/2024 of the Murcia Provincial Court, which is the subject of this article, also agrees with the judgment of the Pontevedra Provincial Court of 26 January 2023 in that, although article 278. 4 and Article 286 of the Maritime Navigation Act, when regulating the contractual carrier’s recourse actions against the actual carrier and the actions arising from the charterparty, use the expression “limitation” not “expiry”, this should not lead to error since the Hague-Visby Rules are of preferential application to national regulations and their interpretation must be made in accordance with them. Hence, coinciding with the criterion of the judgement of the 28th Section of the Madrid Provincial Court nº 357/2021 of 14 October, the analysed judgement of the Murcia Provincial Court states that the scope of application of articles 278 and 286 of the Maritime Navigation Act must be redirected to the contract of carriage of goods by sea, excluding that which takes place under the bill of lading regime, which is subject to a limitation period.

Mechanisms to Protect Against the Risk of Non-Payment by Shipyards and Shiprepairers

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I. Introduction

In any commercial or industrial activity involving the exchange of goods or services, there is a risk for the supplier that he will not be paid for his goods or services. To avoid these risks, market operators can take appropriate contractual measures or assert the rights that the legal system, the law, grants them.

The risks of non-payment are not particularly higher in the shipbuilding or ship repair sector than in any other sector under consideration. However, due to the type of asset on which the entire maritime shipbuilding or ship repair business is based, the ship, sometimes under foreign flag and ownership, protection against such risks of non-payment deserves special attention.

Many shipowners are organised under single-ship corporate structures, which means that with the vessel gone, the shipping company is undercapitalised and collection of claims against it becomes impossible.  The mobility of ships, which can easily change jurisdiction, can also add complexity to the recovery of claims in cases where there are no other known assets of the shipping company in the jurisdiction where the shipbuilder or ship repairer operates.

In order to protect their interests, both shipbuilders and ship repairers can implement contractual mechanisms that best protect their claims. There are also legal mechanisms that the legislation provides to these operators with the same protective purpose. In this article we will try to explain some of these mechanisms.

II. Contractual Mechanisms:

When we talk about contractual mechanisms, we refer to preventive measures that can be agreed in shipbuilding or ship repair contracts. There is no legal limitation to adopt this type of contractual covenants, so the will of the parties and the creativity of their legal advisors are the limit. The most common mechanisms that shipbuilders or ship repairers usually adopt are:

(a) Advance payments:

The provision of funds by the shipowner prior to the execution of the work is a common preventive solution to ensure that the shipbuilder or repairer has the necessary resources during the shipbuilding or repair process.

Most commonly, milestone payments are agreed. Through this mechanism, the shipowner makes advance payments based on the achievement of milestones during the construction or repair process, ensuring that the operator receives funds as the work progresses.

This system usually involves the issuing of refund guarantees by the builder/repairer in favour of the shipowner in case the work for which the latter has made the advance payment is not executed as agreed.  The mechanism therefore has a banking/financial cost for the shipbuilder/repairer.

(b) Requiring Sureties or Enforceable Guarantees:

Payment guarantees are another effective form of protection for shipbuilders and ship repairers.  Through this mechanism, the shipowner provides the shipbuilder/repairer with a separate payment guarantee, so that in the event of non-payment by the shipowner, the guarantor, under the guarantee contract, is obliged to make payment on first demand. The most common guarantees are:

  • Bank Guarantee: In this case the guarantor is a bank that will issue a guarantee on first demand in the event of non-payment and up to the agreed monetary limit.

If certain requirements are met, this type of bank document is directly enforceable before the Spanish courts.  The cost of this banking instrument is generally borne by the shipowner.

  • Personal Executive Payment Guarantee: With due formalities, this instrument functions in a similar way to a bank guarantee. In this case the guarantor is a natural or legal person whose solvency is known to the constructor/repairer. By means of this guarantee this person guarantees with his present and future assets the non-fulfilment of the payment obligation by the shipowner.

(c) Retention of Ownership of the Ship.

Finally, we would like to comment on this mechanism of retention of ownership of the ship until the shipowner pays the price. Due to its nature and operation, this contractual solution is reserved for shipbuilders, as it will be difficult or impossible for ship repairers to implement.

It involves retaining ownership of the vessel built until full payment by the shipowner. So that in the event of non-payment the shipbuilder can sell the ship to the highest bidder in order to collect the amount owed. If the market value of the ship is less than the price owed by the shipowner, the contractual arrangement should provide that the shipbuilder will continue to have a claim against the shipowner for the remainder.

In order to guarantee its effectiveness and proper operation, it is advisable to register the construction project in the name of the builder. In this way, if the shipowner’s non-payments are widespread, the registration of the ownership of the project in favour of the builder will prevent third party creditors of the shipowner from enforcing their claims against the vessel.

III. Legal Measures.

Spanish legislation provides shipbuilders and ship repairers with additional mechanisms that they can articulate without having to expressly agree on them. These mechanisms are mainly the following:

(a) Retention of possession of the vessel.

Article 7 of the International Convention on Ship Mortgages and Privileged Maritime Claims 1993 together with section 139 of the Shipping Act 2014 enables the builder and repairer of a ship to retain possession of the ship until they are paid what is due to them in respect of its construction or repair.

Certain requirements must be met:

  • In order to be retained, the ship must be in the possession of the shipbuilder or repairer. That is, the detention must operate prior to delivery and as long as the ship is on the premises or in the possessory custody of the shipbuilder’s or repairer’s personnel.
  • Retention is to be exercised for claims arising from the shipbuilding or ship repair contract, not for other claims.
  • The vessel that has generated these unpaid claims should be retained, not against another vessel.

It is important that all these requirements are scrupulously respected, otherwise there is a risk of improperly exercising the retention, which could lead to civil and even criminal liability.

Certain rules of the Civil Code apply to this lien which result in a lien on the ship. Some authors therefore argue that the shipbuilder or repairer of the ship can ask for the ship to be sold at public auction once the shipowner’s obligation to pay has expired. Thus the measure is sufficiently effective to persuade a shipowner to pay.

The Maritime Navigation Act 2014 only states that, if the compulsory sale occurs while the ship is retained by the shipbuilder or repairer, ‘the latter shall deliver possession of the ship to the buyer, but may obtain payment of his claim with the proceeds of the sale after satisfying those of the holders of maritime privileges… and before mortgage claims and other registered or noted encumbrances’. Thus, the shipbuilder or ship repairer will have preference of collection over ship mortgages and ordinary creditors, but not over privileged maritime claims (accruals in favour of the crew, compensation for death or personal injury caused by the ship, prizes for maritime salvage, port and pilotage fees and material damage caused by the ship due to non-contractual fault).

Since possession of the ship is a prerequisite for the lien, once the ship is delivered the lien and its collection preferences are extinguished.

(b) The Preventive Vessel Attachment:

The freezing of ships is a legal tool that enables the shipbuilder or repairer to secure the immobilisation of a ship wherever it is located in order to guarantee the collection of his claim.

This precautionary, preventive and urgent judicial measure can also be qualified as a burdensome measure due to the economic damage it can cause to the operator of the vessel, such as delays in its navigation, unforeseen costs due to its stay in a port, etc. It can also be a costly measure for the person requesting the seizure if it is wrongly or improperly proposed.

This measure is regulated by the International Convention on Arrest of Ships (Geneva 1999), the LNM and the Spanish Civil Procedure Act.

The immobilisation of the ship may be replaced by the provision of security by the shipowner/shipowner to the seizing court, since the ultimate objective of the attachment is to ensure the effectiveness of a subsequent judgment on the merits of the claim (‘maritime claim’) and thus to guarantee the creditor/shipper the possibility of enforcement.

In the event that the lien is unjustifiably or improperly applied for, the shipowner/shipowner of the vessel is entitled to claim any damages resulting from the lien.

The requirements are as follows:

  • Allegation of a ‘maritime claim’: The list of so-called ‘maritime claims’ is contained in Article 1(1) of the 1999 Geneva Convention, which includes, in paragraph (m), shipbuilders‘ or ship repairers’ claims;
  • attachment of the ‘offending ship’: attachment of the ship causing the claim is permitted provided that the person who was the owner/bareboat lessor of the ship at the time when the claim arose is still the owner/bareboat lessor at the time the attachment is requested. Under certain conditions it also provides for the possibility to seize other vessels owned by the person liable to pay (‘sister ships’).
  • the obligation for the attaching creditor to deposit a security: its purpose is to guarantee that in the event that the attachment is improperly requested, the damage caused to the shipowner/shipowner can be economically alleviated. At present, the minimum amount for this security is 15% of the alleged claim.
  • Where the application for attachment is made as an interim measure prior to the filing of the claim on the merits, it will lapse if the builder/repairer fails to commence proceedings on the merits before the competent court within the time limit set by the attaching court.

In short, this is a very effective precautionary measure that allows the builder or repairer to obtain sufficient security for his claims.

IV. Conclusions

It is a fact that shipbuilders and ship repairers face risks of non-payment by shipowners in their day-to-day business.

To protect against this risk there are a variety of solutions, both contractual and legal, which it is always and in any case advisable to bear in mind in order to minimise the risks to which builders and repairers are subject, all the more so when we are talking about foreign vessels and shipowners without a presence in our territory with complex corporate structures.

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