This was an appeal from the decision of the Commercial Court in Split, Ovr-492/07 of 13 July 2010, which held that a Croatian creditor did not have a maritime lien over the proceeds of the forced sale of the ship P.

Held: The appeal is rejected as unfounded, and the decision of the Commercial Court in Split is confirmed.

The appellant argues that the first instance Court erred in applying art 912.2 of the Maritime Code, because after settling the costs of the procedure, the Court failed to determine the settlement of claims secured by maritime liens (art 241 of the Maritime Code). The appellant argues that the appellant's claim, which is based on individual pension insurance contributions, realised capitalised savings, compound interest, contributions for basic health insurance and special contributions in case of injuries at work for a total of HRK 195,578.81, is secured by a maritime lien and should thus be settled before the claims of other creditors.

Responding to the appeal, the bailiff essentially points out that the legal deadline has expired within which the appellant's claim could be protected by a maritime lien.

The first instance Court correctly determined that the amount to be distributed from the purchase proceeds is HRK 144,000 (art 910.1.1 of the Maritime Code). In accordance with art 912.2 of the Maritime Code, the costs incurred during the sale of the ship are settled before the distribution of the purchase price and even before claims secured by maritime liens. With the challenged decision, the first instance Court correctly determined the amount of the incurred costs of selling the ship, and determined their settlement before the distribution of the purchase proceeds.

The appellant considers that the first instance Court incorrectly applied art 912 of the Maritime Code. Article 912.1 of the Maritime Code [which follows the provisions of the MLM Convention 1993] prescribes the rule of the order of settlement of creditors. Creditors whose claims are secured by a maritime lien are settled first in the distribution, then creditors with retention rights, then creditors whose claims are secured by a ship mortgage, and finally other creditors.

The maritime lien represents a substantive legal burden on the ship which gives the authorised lienholder the right to settle the claim by judicial sale of the ship, and provides that the lienholder has an advantage in collection over all other rights, including those secured by a ship mortgage. A maritime lien is a specific legal lien on a ship, a limited real right that authorises its holder to settle a certain claim from the value of the ship, no matter whose ship it is, and the owner is obliged to suffer it. It is a form of real liability of the shipowner for certain claims.

The first instance Court correctly concluded that the appellant belongs to the category of other creditors listed in art 912.1.4 of the Maritime Code, which means that that claim is not secured by a maritime lien. Article 241.1.1 of the Maritime Code stipulates that the maritime lien over the ship secures, among other things, claims for salaries and other amounts due to the master of the ship, officers, and other crew members in connection with their employment on the ship, including repatriation costs and social security contributions paid on their behalf. Thus, a claim on that basis is privileged, but its proxies (the holder of the lien) are the master of the ship, the officers of the ship, and other members of the ship's crew, not other creditors.

In support of this, it should be noted that maritime liens are of limited duration, and they expire after one year (art 246 of the Maritime Code). This is an absolute cessation of liens, which means that this lien no longer belongs to any party. The moment from which the one-year term of maritime liens for privileged claims from the first category (salaries and social benefits in favour of members of the ship's crew) begins to be calculated is prescribed in art 247 of the Maritime Code. This period begins to run from the disembarkation of the lienholder from the ship.

Therefore, a claim that is protected on that basis by a maritime lien can be enforced only by a member of the ship's crew as its authorised lienholder, within the duration of the claim thus secured. The way to settle the claim of a privileged creditor is the forced sale of the ship in enforcement proceedings. After the expiration of the 'duration' of the maritime lien, the claim loses its specific property protection, and the claims are settled in the order of priorities in accordance with the Maritime Code.