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, who had performed cleaning work on the hull of the ship, argued that it had a maritime lien for maintenance of the auctioned ship that ranked ahead of the respondent's first preferred ship mortgage. The respondent disputed that claim. The Court below found in favour of the respondent. The appellant appealed, challenging the decision.

Held: Appeal dismissed.

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.

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).

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. According to Panamanian law, a ship may be arrested or a ban imposed on it for any kind of claim arising out of a maritime commercial transaction, provided that it is to the detriment of the shipowner or secured by a maritime lien over the ship. Although there is no explicit definition of maritime liens in the Panamanian Code, this means privileged claims over the ship or other maritime property in respect of services rendered to it or caused by it. Article 244 of Law 55 of 2008 stipulates the following maritime liens in case of judicial sale of a ship: court costs, which were made in the common interest of the maritime creditors; costs of compensation and wages for maritime salvage and rescue; maritime loans received on the hull of the ship and its components for the supply of equipment and the preparation, if the contract was drawn up and signed before the departure of the ship from the port in which these obligations have been concluded, as well as the insurance contributions for the last six months; salaries of the pilots and the guards and the costs of maintaining and guarding the ship, its components and supplies after the last voyage and entering the port; compensation due to the shippers and passengers for improper delivery of the cargo or their damage or injury, due to the master or crew on the last voyage; and the price of the last purchase of the ship and the due interest over the last two years.

According to the above provision, ship maintenance costs attract a maritime lien only if they were incurred after the ship arrived at the last port. In particular, ship maintenance costs include all that has been spent since the ship entered the last port, where the arrest followed, which are necessary for the restoration of the damages caused by the passage of time and by its operation, in order to keep the ship intact in the port until its auction. This maritime lien is intended to protect the interests of the shipowner, but also acts for the benefit of all creditors.

Thus, under the law of the Republic of Panama, this maritime lien does not attach to the costs of maintenance of the ship without exception, but only where the ship is immobilised, and for the purpose of maintaining it after its immobility and in view of its auction. Costs of operating the ship while mobile, as well as any costs of repairing the ship that aim to improve or change its condition, and increase and not to maintain its value, are not secured by a maritime lien. It follows from the above that the concept of ship maintenance costs which enjoy a privileged character as a maritime lien and precede the maritime mortgage is similar under both Greek law and Panamanian law.

It is therefore not appropriate to classify the appellant's claim ahead of the respondent's first preferred ship mortgage claim, since the legal conditions for the application of the above privileged provisions are not met. The appellant argues that the last port in this case is Piraeus, where the ship sailed independently, fulfilling economic activity, and from which a temporary order prohibited its movement, and not that of Eleusis, where the ship was moved to by a court order with a navigator and the escort of the port authority. This argument is unfounded and rejected, in view of the fact that the last port after arrival is where the final seizure order is imposed [ie Eleusis]. The maintenance works were executed long before the arrival of the ship in the last port where the seizure was imposed, and were not done for the preservation of its value before the auction, but for a reason and at a time not related to the seizure.