The Pacific Ray was arrested upon the application of Yuzhmorrybflot JSC (the applicant). The applicant was the creditor of VIP-Stroy Holding LLC, which had been declared insolvent (the insolvent company). The applicant submitted its claim to challenge the demise charter agreement between the insolvent company and Avangard-5 Shipping Co SA (the previous owner), registered in Panama. The applicant succeeded and received judgment in its favour on 29 March 2021. On 21 July 2021, the vessel was arrested.

It was established that the vessel was sold to Gold Ocean Logistic LLC (the current owner) by a bill of sale dated 13 June 2021 ie after the judgment in favour of the applicant, but before the ship arrest. The vessel was under preliminary registration in the Republic of Dominica. The permanent registration of the vessel had not yet been changed.

On 26 July 2021, the current owner submitted an application to set aside the arrest. The demise charterer, Northwest Ship Management Ltd, a Canadian company, and the previous owner joined the proceedings. On 9 September 2021, the application to set aside the arrest was dismissed. This ruling was upheld by the Court of Appeal on 21 December 2021.

The vessel was arrested because the previous owner was a foreign company which did not have any property in Russia. Thus, it was concluded that the absence of arrest would make claim enforcement impossible. The sale purchase agreements between the previous owner and the current owner and the demise charter between the current owner and the demise charterer were found to have been concluded in bad faith and, therefore, were disregarded.

The current and previous owners submitted cassation appeals. The current owner argued that the claim for which the vessel was arrested was not brought against it but against the previous owner. Thus, the arrest of the vessel did not assist in enforcing the judgment. At the same time, the arrest made it impossible to use the vessel and caused losses to the current owner. The arrest was also disproportionate to the claim against the previous owner. The previous owner argued that the claim for which the vessel was arrested was not a maritime claim and, therefore, the ship could not be arrested due to art 2.2 of the Arrest Convention 1999.

Held: The cassation appeals are allowed.

Under arts 90(1) and 90(2) of the Commercial Procedure Code of Russia (the CPC RF), the Commercial Court may impose interim measures at any stage of the proceedings upon the claimant's application. According to art 91 of the CPC RF, the interim measures are aimed at restricting particular actions regarding the property. These restrictions should be proportionate to the claim.

According to ss 9 and 10 of the Resolution of the Supreme Commercial Court of Russia No 55 dated 12 October 2006 (Resolution No 55), the interim measures may be aimed at ensuring the status quo between parties to the proceedings. The interim measures should be reasonable and justified, correspond to the probability of causing significant damage to the applicant, ensure the balance of interests between the parties, and avoid the violation of public and third party interests (art 90(2) of the CPC RF). Moreover, the Commercial Court should assess whether the interim measure is proportionate to the claim and how it assists in ensuring the aims of the interim measures indicated in art 90(2) of the CPC RF.

The specific features of the interim measures in different areas of law may be regulated by separate legislative provisions and international treaties. As it follows from s 16 of the Informational letter of the Presidium of the Supreme Commercial Court of Russia No 81 dated 13 August 2004 (CMI2348), the Merchant Shipping Code of Russia (the MSC RF) stipulates the rules regarding the arrest of seagoing vessels from ch 8 of the CPC RF.

According to art 388(1) of the MSC RF, arrest of a vessel is any detention or restriction of the vessel's movement when it is located within the Russian jurisdiction. The arrest is imposed by the courts, commercial courts or arbitral tribunals competent to arrest ships. The vessel may be arrested only for a maritime claim (art 388(2) of the MSC RF). The same rule is contained in art 2 of the Arrest Convention 1952.

Under art 8.2 of the Arrest Convention 1952: A ship flying the flag of a non-Contracting State may be arrested in the jurisdiction of any Contracting State in respect of any of the maritime claims enumerated in article 1 or of any other claim for which the law of the Contracting State permits arrest.'

At the same time, all the rules and procedural aspects of the arrest are regulated by the law of the Contracting State (art 6 of the Arrest Convention 1952). Therefore, the rules on the arrest of seagoing ships should be established on the basis of systematic interpretation of the Arrest Convention 1952, the MSC RF, and the CPC RF.

Art 389 of the MSC RF provides the list of maritime claims. According to this art, maritime claims include any claims relating to the use of the vessel, any disputes on the ownership of the vessel or its possession, and any disputes arising out of the sale of the vessel.

Under art 390 of the MSC RF, the vessel may be arrested if:

• the claim against the shipowner is secured by a maritime lien;
• the claim is based on a ship mortgage or other registered encumbrances of the same nature;
• the maritime claim relates to the ownership of the vessel or its possession;
• the person who owned the vessel involved in the incident when the maritime claim arose is the person who is liable for the claim, and is the owner of the vessel to be arrested at the time when the arresting procedure commenced, or is the demise charterer of the vessel involved in the incident when the maritime claim arose is the person who is liable for the claim, and the demise charterer or the owner of the vessel to be arrested at the time when the arrest procedure commenced.

The Court did not find on the evidence that the claim against the previous owner should be secured by restrictions on the property rights of the current owner through the arrest of the vessel. The interim measures imposed upon the vessel include restrictions on registering it. This kind of interim measure actually aims at returning the vessel to the previous owner in order to execute the claim against it. On the basis of this, the Court found that the interim measure imposed does not ensure the status quo between the previous owner, the insolvent company, and the current owner, and restricts the right to use the vessel of the latter. It may result in a violation of the rights and legal interests of the current owner.

The Court separately emphasised that imposition of interim measures does not consider the main claim or solve the dispute on the merits. Taking into account the circumstances around the arrest of the ship, the Courts of first and appellate instances were not competent to consider the contract between the previous owner and the current owner, and the current owner and the demise charterer, and they could not conclude that these contracts were made in bad faith.