Portugal Mateus Andrade Dias & Associados Newbuilding contracts

202 Getting the Deal Through – Shipping 2012

The parties to the newbuilding contract may agree on when title in

the ship will pass from the shipbuilder to the shipowner, provided

they do so in writing as a newbuilding contract (or any amendments

thereto) governed by Portuguese law has to be produced in writing,

as per articles 12 and 16 of Decree-Law 201/98.

In the absence of such agreement between the parties, title in

the ship shall pass from the shipbuilder to the shipowner when the

shipbuilder delivers the new ship and the shipowner accepts the new

ship, except for the materials supplied by the shipowner for the newbuilding,

which are considered owned by the shipowner, pursuant to

article 16 of Decree-Law 201/98.

A newbuilding contract is governed by the written clauses of

the contract, by Decree-Law 201/98 and, in subsidiary terms, by the

general rules applicable to construction or repair contracts (articles

1207 to 1230 of the Civil Code) provided that said general rules do

not contradict the specific rules of Decree-Law 201/98.

2 What formalities need to be complied with for the refund guarantee to

be valid?

The newbuilding contract should have a written clause stipulating

the duty of the shipbuilder to provide a refund guarantee to the shipowner

as a guarantee of repayment of pre-delivery instalments paid

by the shipowner. This does not prevent the parties from agreeing,

after the signature of the newbuilding contract, on the said security

requirement.

The formalities required for the refund guarantee depend on the

type or nature of the refund guarantee agreed and on the conditions

stipulated in such refund guarantee and also on the person who is

acting as the refund guarantor (a bank or an insurance company or

the builder itself).

For example, a bank guarantee must be issued in a written document

that must include the following information:

• the identity of the guarantor, of the guaranteed and of the

beneficiary;

• that it is a refund guarantee (cause of the guarantee);

• the amount guaranteed (a fixed amount or several instalments or

even subject to determination under certain conditions);

• the period of its duration and validity;

• the conditions of its enforceability and alterations; and

• the applicable law and competent jurisdiction to consider issues

or disputes related to the said guarantee.

3 Are there any remedies available in local courts to compel delivery of

the vessel when the yard refuses to do so?

Article 25 of Decree-Law 201/98 establishes that the shipbuilder has

a retention lien by operation of law over the newbuilding to guarantee

his claims arising out from the building of the new ship. The Civil

Code also contains rules on retention liens (articles 754 to 761).

Article 756 of the Civil Code states that no such retention lien

exists (or that it is unlawful, if exercised) when the claims (on which

the builder is supporting his retention lien) were incurred or caused

to be made in bad faith by the builder, or when the party against

whom it is being exercised has offered, in or out of court, sufficient

security to guarantee the claims of the builder.

If and when the builder is lawfully exercising his retention lien,

the shipowner may start court proceedings offering security. Pending

such proceedings, the shipbuilder is notified by the court to declare

whether the security offered is satisfactory and sufficient. It shall rest

with the judge to make the ultimate decision on the type, nature and

amount of the security to be provided.

If and when the builder is unlawfully exercising a retention lien,

the shipowner can elect to do any combination of the following:

• commence proceedings to obtain a judgment against the builder

ordering payment of all losses and damages caused to the shipowner

by the said unlawful retention lien of the ship, and also

ordering delivery of the ship;

• if, under the newbuilding contract, title has already passed onto

the shipowner, enforce the newbuilding contract in a special

enforcement proceeding aimed at obtaining delivery of the ship;

or

• apply for a provisional order to be issued by the judge aimed at

to a final resolution of the dispute.

The use of any of the above remedies will have to be assessed on the

basis of the particular circumstances of the case. The builder will

normally refuse delivery alleging a retention lien. Any of the said

remedies should be then used in conjunction with the offering, (either

in or out of court), of security to the builder.

4 Where the vessel is defective and damage results, would a claim lie

in product liability against the shipbuilder at the suit of the shipowner;

a purchaser from the original shipowner; or a third party that has

sustained damage?

With regard to building defects, the shipbuilder guarantees the ship

for a period of one year, commencing from the date of acceptance

of the ship. The shipbuilder is obliged to correct the defect or to

replace the defective equipment, pursuant to article 24 of Decree-

Law 201/98. The shipowner must convey to the builder the defects

detected within 30 days counted from the date of their discovery, as

per article 26 of Decree-Law 201/98. The test results, the approval

and the acceptance by the shipowner without any reservation does

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Andrade Dias & A ssociados Portugal

not exempt the shipbuilder from liability to correct defects, save

where the shipowner knew of them. The apparent defects are presumed

to be known by the shipowner, according to article 27 of

Decree-Law 201/98. If the defects are not corrected by the shipbuilder,

the shipowner can demand for a price reduction according

to equity or cancel the newbuilding contract if the defects make the

ship inadequate for the purpose or aim to which she was destined,

according to article 28 of Decree-Law 201/98. The correction, price

reduction or cancellation remedies are cumulative to any compensation

for damages. The rights of correction of the defects or price

reduction or cancellation or compensation for damages are, if not

exercised, time-barred within two years commencing from the date

of delivery of the ship. The two-year time bar commences from the

date of discovery of a latent defect by the shipowner, pursuant to

article 30 of Decree-Law 201/98.

A purchaser from the original shipowner will have to exercise

any possible rights pursuant to the contract for the sale and purchase

entered into with the original shipowner and pursuant to articles

913 to 922 of the Civil Code that rule on the sale and purchase of

defective goods. This will not prevent the builder, shipowner and

purchaser of the defective ship from agreeing on an assignment to

the purchaser of the newbuilding contract or of the relevant rights

and duties arising from the latter.

A third party that has sustained damage (eg, personal injury)

arising from a defective ship will have to rely on the rules of tort to

seek compensation for damages. Normally said rights will be exercised

against her owner.

Ship registration and mortgages

5 What vessels are eligible for registration under the flag of your

country? Is it possible to register vessels under construction under

the flag of your country?

Portugal uses a dual system of registration for merchant ships. It is

dual in two senses:

• a merchant ship can be registered on the Conventional Registry

or in the International Shipping Registry of Madeira;

• a merchant ship registered on the Conventional Registry has to

be registered at the Harbour Master’s Office and at the Commercial

Registry;

• a merchant ship registered on the International Shipping Registry

of Madeira has to be registered at its Technical Commission and

at the Commercial Registry of the Free Trade Zone of Madeira;

• the Harbour Master’s Office and the Technical Commission are

technical registries aimed at publicising the technical features of

ships, while the Commercial Registries are public registries aimed

at publicising, before third parties, the legal situation of assets,

namely her ownership, onus and encumbrances. Ships registered

under one of these systems of registration sail under the Portuguese

flag; and

• the main differences between Conventional Registry and International

Shipping Registry of Madeira rest on the fact that the

latter has less requirements on nationality of crewmembers and

shipowners, and their crews, do not have to comply with social

security compulsory dues.

Merchant ships, oil rigs and merchant yachts will all be eligible for

registration either at the Conventional Registry or at the International

Shipping Registry of Madeira. Pleasure yachts are only eligible

for registration at the International Shipping Registry of Madeira and

at the Harbour Master’s Office, as they are not eligible for registration

at the Commercial Registry within the Conventional Registry.

Pursuant to article 77 of the Harbour Master’s Office Regulation,

small boats existent on board, (even if they are life rafts), small auxiliary

fishing boats and small beach boats without engines or sails

to be used within 300 metres of the low tide line are exempt from

registration. Theoretically and with the exclusion of the above-mentioned

boats, all merchant ships are eligible for registration at the

Harbour Master’s Office.

Merchant ships or merchant yachts under construction may be

registered at the Conventional Registry or at the International Shipping

Registry of Madeira.

6 What are the requirements for company formation?

The most common legal structures used are both of limited liability,

one being a limited liability company by quotas (Lda) and the other

a limited liability company by shares (SA). The Lda company is no

longer required to have a minimum quota capital. The quota holders

can determine what capital will the company have. The SA has to

have a minimum share capital of €50,000. A company can be incorporated

by private written contract (signed with legalised signatures

of the signatories) save where the capital is being met by an immoveable

asset (an estate) where, in this case, public deed is in principle

required for the incorporation. The incorporation of the company is

subject to, inter alia, registration at the Commercial Registry and subject

to online publication at the Ministry of Justice’s official website.

7 Is dual registration and flagging out possible and what is the

procedure?

Dual registration is admissible within the Portuguese legal framework,

as per Decree-Law 287/83 and Decree-Law 96/89.

The Conventional Registry and the International Shipping Registry

of Madeira admit flagging in of merchant ships under the following

conditions:

• the merchant ship needs to be bareboat-chartered by a Portuguese

bareboat charterer duly licensed to undertake the commercial

sea carriage business; and

• the bareboat charter party contract needs to stipulate a purchase

option in favour of the charterer and it (the flagging in) will be

subject to a duration permission that shall not exceed five years,

renewable.

A written permission application should be lodged by the charterer

and be accompanied by: original or certified copy of the bareboat

charter party contract with purchase option; written note describing

the advantages to the Portuguese economy and to the applicant that

arise from flagging in a foreign vessel; statement from the owner

authorising the flagging in; statement from the underlying registry

allowing the flagging in; certificate of ownership, liens and encumbrances

of the ship; statement from the mortgagee authorising the

flagging in; and copy of the tonnage certificate and copy of her safety

and classification society certificates. A registration number, call sign

and tonnage certificate should be requested from the Portuguese

authorities after issuance of the permission.

A written registration application should then be lodged and

accompanied by:

• proof of the Portuguese nationality of the bareboat charterer and

of its licence to operate as a sea carrier;

• proof that the bareboat charter party is recorded at the Commercial

Corporate Registry of the charterer;

• proof of permission for the dual registration; and

• proof of the temporary registration number, call sign and tonnage

certificate and certificate of ship’s survey.

The documents lodged with the permission application do not need

to be attached with the registration application. A certificate of registration

is issued upon completion of the registration process.

Article 18 of Decree-Law 96/89 states that the Technical Commission

may allow flagging out of bareboat chartered ships. The

procedure and requirements will mainly depend on the law of the

state flagged in.

Portugal Andrade Dias & A ssociados

204 Getting the Deal Through – Shipping 2012

8 Who maintains the register of mortgages and what information does it

If the ownership of the ship is registered in Portugal, the mortgage

will be registered at the Technical Commission and at the Commercial

Registry of the Free Trade Zone of Madeira, if she is registered

at the International Shipping Registry of Madeira, or at the Commercial

Registry, if registered at the Conventional Registry.

Identification of the mortgagor, mortgagee, principal, interest

and expenses shall be recorded.

If the ship is flagged in to Portugal, the mortgage will not be

registered at the Technical Commission or at the Harbour Master’s

Office.

Limitation of liability

Portugal is a contracting state to the International Convention for the

Unification of Certain Rules relating to the Limitation of the Liability

of Owners of Seagoing Vessels, 1924. The claims listed in article 1 of

the 1924 Convention may be limited. The owner can limit liability

arising from the said claims.

Portugal is also a contracting state to the International Convention

relating to the Limitation of the Liability of Owners of Seagoing

Ships, 1957 and of the 1979 Protocol Amending the Limitation of

Shipowners’ Liability, 1957.

Pursuant to article 1 of the 1957 Convention, the following

claims may be limited:

• loss of life of, or personal injury to, any person being carried in

the ship, and loss of, or damage to, any property on board the

ship; and

• loss of life of, or personal injury to, any other person, whether

on land or at sea, loss of or damage to any other property or

infringement of any rights caused by the act, neglect or intent

of any person on board the ship for whose act, neglect or intent

the owner is responsible or of any other person not on board the

ship for whose act, neglect or intent the owner is responsible for,

provide, however, that in this last case, the act, neglect or intent

is one which occurs in the navigation or the management of the

ship or in the loading, carriage or discharge of her cargo or in the

embarkation, carriage or disembarkation of her passengers.

Paragraph (c) of article 1 has been excluded by reservation.

The owner, armador, armador manager, master, members of the

crew and other servants of the owner, armador or armador manager

acting in the course of their employment can limit liability arising

from the above claims, provided that the total limits of liability of

the owner and all such other persons in respect to personal claims

and property claims arising on the same occasion shall not exceed

the amounts determined in accordance with article 3 of the 1957

Convention. The armador is the person or entity that executes, in

its own interest, all the legal and material acts necessary for the ship

to be in a position to undertake her voyage – namely, equips, mans,

clears and provides the ship to undertake her voyage, under article 1,

paragraphs (c) and (d) of Decree Law 202/98. Pursuant to article 2 of

Decree Law 202/98 and subject to proof to the contrary, the following

persons or entities are presumed to be the armador of the ship:

owner; beneficiary of a dual registration; and bareboat charterer. The

Protection & Indemnity Club or the Hull & Machinery Underwriters

can also limit liability under the 1957 Convention, as has been

decided in past judgments issued by the Portuguese courts.

The 1957 Convention became internal law by force of Decree-

Law 49028. A Limitation Fund Regulation was created by Decree

49029.

Article 12 of Decree-Law 202/98 states that the owner, in addition

conventions applicable in Portugal, and where the claims

at stake are other than the ones stated in the said international conventions,

may limit his liability to the ship and to the value of the

freight at risk by abandoning the latter to the creditors and in order

to establish a limitation of liability fund.

There is no specific regulation applicable to the 1924 Convention.

The fund will be calculated based on the value of the ship, the freight

and the accessories of the ship.

The Limitation Fund Regulation was established to allow application

of the 1957 Convention. The fund can be established in any

way admitted by civil law to grant security. It will be established

by means of lodging of a written application that must refer to: the

event that has caused the damages; the amount of the limitation fund,

calculated in accordance with article 3 of the 1957 Convention; the

way in which the fund will be established and the amount to reserve

pursuant to article 3, paragraph 4 of the 1957 Convention. The

application must be attached with a list of the known creditors and

information on their claims and domiciles and with the supporting

elements for calculation of the amount of the fund, namely a tonnage

certificate and a tonnage admeasurement statement in respect of the

engine room space.

The amounts to which the applicant can limit his liability under

article 3 of the 1957 Convention shall be an aggregate amount

of 66.67 units of account for each ton of the ship’s tonnage if the

occurrence has only given rise to property claims. Where the occurrence

has only given rise to personal claims, an aggregate amount of

206.67 units of account for each ton of the ship’s tonnage. Where

the occurrence has given rise to both personal claims and property

claims, an aggregate amount of 206.67 units of account for each

ton of the ship’s tonnage, of which a first portion amounting to 140

units of account for each ton of the ship’s tonnage, shall be exclusively

appropriated to the payment of personal claims and of which

a second portion amounting to 66.67 units of account for each ton

of the ship’s tonnage shall be appropriated to property claims. Provided,

however, that in cases where the first portion is insufficient

to pay the personal claims in full, the unpaid balance of such claims

shall rank rateably with the property claims for payment against the

second portion of the fund.

The unit of account is the special drawing right as defined by the

International Monetary Fund. The amounts shall be converted into

the national currency on the date that the shipowner has constituted

the limitation fund, made the payment or given a guarantee that,

under the law of that state, is equivalent to such payment. The relevant

currency for Portugal is the Euro. Tonnage will be calculated

as follows:

• in the case of steamships or other mechanically propelled ships,

the net tonnage shall be taken with the addition of the amount

deducted from the gross tonnage on account of engine room

space for the purpose of ascertaining the net tonnage; and

• in the case of all other ships, the net tonnage shall be taken.

Security has to be given either in the form of cash, mortgage or letter

of guarantee.

Pursuant to article 13 of Decree-Law 202/98, the same procedural

rules applicable to the establishment of the limitation fund

under the 1957 Convention shall apply to the limitation fund ruled

by Decree-Law 202/98, fully adapted to the provisions of the latter.

The value of the freight at risk must be stated in the application and

security for the said value of the freight should be provided by the

applicant. A bailee is appointed and the judicial sale of the ship is

ordered.

Andrade Dias & A ssociados Portugal

As per article 2 of the 1924 Convention, the owner shall not be

allowed to limit his liability if the obligation arises out of acts or

faults of the owner itself or in regards to obligations referred to in

article 1(8), where the owner has expressly authorised or ratified

such obligation; the obligation arises out of the engagement of the

crew and other persons in the service of the vessel. If the owner or a

part-owner of the vessel is at the same time master thereof, then he

cannot claim limitation of liability for his faults other than his faults

of navigation and the faults of persons in the service of the vessel.

As per article 1 of the 1957 Convention, the applicant shall not

be allowed to limit his liability if the occurrence giving rise to the

claim resulted from the actual personal fault of the applicant.

An appeals judgement issued with No. 444/2008 by the 2nd Section

of the Constitutional Court in proceedings No. 80/2008 on 23

September 2008 and published on 28 October 2008, has considered

the limitation of liability under the 1957 Convention unconstitutional

under certain specific circumstances. It has been ruled that:

A compensation that covers merely 3.75 per cent of the claim must

be considered as a clear insignificant compensation, if one bears in

mind that the total amount of the recognised damages to the claimants

reaches €65,785.04. The disproportion between this last value

and the compensation given is so apparent that the latter can only

be considered miserable […]

In fact, it happens that it is the amount of the fund, in the

maximum total of €8,267.41, that is, in the outset, insignificant,

although we are facing a liable 100 tons net tonnage ship (even if the

claimants had received the total amount of the fund, they would be

merely receiving coverage of 12.5 per cent of their claim). To allow

that a ship, regardless of her tonnage, can blamefully collide with

another ship, and even sink her, resting only obliged to compensate

the caused property damages up to the amount of €8,267.41 clearly

poses a risk to the core of the constitutional right of compensation

for damages, inherent to the constitutional principle of democratic

and the rule of law governed state as the possibility of its application

results in a unacceptable disproportion between the value of the

property damages and the compensation given.

The situation is much more serious where the claimants can not,

under the 1957 limitation of liability convention, obtain any other

compensation for the suffered damages, namely from the agents,

servants or employees that acted negligently because the latter’s can

use the same limitation of liability against the claimants (article 6(2)

and (3) of the 1957 limitation of liability convention) [...]

It is decided then to rule unconstitutional the provision regarding

the constitution of the limitation of liability fund with the amount

stated in article 3, paragraph 1, sub paragraph a) of the 1957 Convention

[...] when the compensation arising from the distribution of

the fund amount by the creditors covers merely 3.75 per cent of the

amount of the recognised to certain plaintiff’s claims, with a total

amount of €65,785.04.

It is then decided to grant the appeal in this point ordering the

reform of the appealed judgment in accordance with the unconstitutionality

judgment.

As can be inferred from the described judgment, shipowners may

well be prevented to limit their liability under the 1957 Convention

within the Portuguese jurisdiction, or it is at least very likely that they

will see their limitation right very limited. The outcome of this judgment

was that the owners were prevented to limit their liability and

because the damages and their amount were considered proved in

the proceedings, the full amount of them was recognised. The entire

implication in future limitation of liability cases is yet to be seen. It is

also yet to be seen what percentage relation will have to exist above

3.75 per cent between the amount distributed and the amount of

the claim. However, shipowners may consider from this judgment

onwards that this will be an issue raised by any claimant in order to

try to break the limitation of liability.

Port state control

12 Which body is the port state control agency? Under what authority

does it operate?

IPTM is the port state control agency. It is governed by Decree-

Law 146/2007 and by Ordinance 544/2007. IPTM is a public body

empowered of administrative and financial autonomy pursuing tasks

of the secretary of state of public works, transport and communication.

IPTM operates under the supervision and custody of the secretary

of state of public works, transport and communication.

Its aim is to regulate, check and exercise functions of coordination

and planning of the port and maritime sector and supervise

and regulate activities developed in this sector. Its tasks are, inter

alia, to promote the application and check the compliance with the

laws, regulations, rules and technical requirements applicable within

its tasks, namely, of national and international rules related to the

port and maritime sector, without prejudice of jurisdiction of other

entities.

13 What sanctions may the port state control inspector impose?

As per Decree-Law 195/98, the sanctions will not normally be

imposed by the inspector of the IPTM. The sanctions will normally

be imposed by the harbour master following a mandatory technical

opinion of the IPTM.

The following sanctions may be imposed: detention; stoppage of

operations (eg, cargo discharge); refusal of entry and stay in Portuguese

ports; and fines of up to €25,000.

A detention sanction can be appealed by means of an application

addressed to the Maritime Court. The appeal does not suspend the

effects of the detention sanction. The same can be followed to oppose

fines.

Classification societies

The approved classification societies are: American Bureau of Shipping;

Bureau Veritas; Det Norske Veritas; Germanischer Lloyd;

Lloyd’s Register; RINA; and RINAVE.

Pursuant to article 11 of Decree-Law 321/2003, the Portuguese state

shall have the right to seek compensation from the approved classification

society when liability is imputed to the former arising out

of any incident, by a final and non-appealable judgment issued by a

court or an arbitral tribunal, together with an indemnity application

by the damaged parties and, where said liability arises, inter alia,

from loss or damage, death or personal injury and if it has been

proved in the said court or tribunal that said damages were caused

by intentional act or omission or by gross negligence of the approved

society, their directors, employees, agents or other persons that act

on her behalf. The minister with supervision over maritime safety

may limit the maximum amount to be paid by the approved society.

The process of approval of a classification society is subject to the

entering into of a written agreement between the Portuguese state

and the relevant classification society where a provision envisaging

the mentioned liability shall be inserted.

Portugal Andrade Dias & A ssociados

206 Getting the Deal Through – Shipping 2012

A classification society can theoretically be held liable under the

general rules of tort if and where all requirements of this source of

obligations are verified, including: faulty (intentional or negligent)

and illicit act or omission; damage; causation between the act or

omission and the damage; and a special relation between the classification

society and her inspector that needs to be qualified as of

comissão, pursuant to article 500 of the Civil Code. We presume that

the intricate issue would be to ascertain what event has caused the

damage. Some professors of law are of the opinion that the rules of

tort are of public policy and hence cannot be subject to limitation of

liability clauses where the damage was caused by an intentional or

with gross negligent conduct.

A classification society can also theoretically be held liable under

the specific rules of tort for counsels, recommendations or information

where the said classification society has assumed liability for

damages or when there was a contractual or a statutory duty to

provide counsels, recommendations or information and the latter

have been given with negligence or intent or when the act or omission

of the classification society or its inspector constitutes a criminal

offence.

Collision, salvage, wreck removal and pollution

Yes. Pursuant to article 5 of Decree-Law 64/2005, the following

entities may order wreck removal: harbour master; port administration;

relevant administrative state entity with jurisdiction over an

environmental protected area; and administrative state entity with

jurisdiction over the River Douro.

With regard to collision, the international conventions in force are:

• the International Convention for the Unification of Certain Rules

Concerning Civil Jurisdiction in Matters of Collision, Brussels,

1952;

• the International Convention for the Unification of Certain Rules

and

Relating to Penal Jurisdiction in Matters of Collision or Other

Incidents of Navigation, 1952.

With regard to salvage, the international convention in force is the

Convention Relating to the Unification of Certain Rules of Law

Relating to Assistance and Salvage at Sea, 1910. Portugal is not a

contracting state of the 1989 International Convention on Salvage

but has introduced most of the convention’s provisions into internal

law by means of Decree-law No. 203/98 published on 10 July

1998.

in force include:

• the Protocol of 1992 to Amend the International Convention on

Civil Liability for Oil Pollution Damage, 1969 (CLC Protocol

1992);

• the Protocol of 1992 to Amend the International Convention on

for Oil Pollution Damage, 1971 (Fund Protocol 1992);

• the Protocol of 2003 to Amend the International Convention on

the Establishment of an International Fund for Compensation

for Oil Pollution Damage, 1992 (Fund Protocol 2003); and

• the Protocol of 1978 Relating to the International Convention

for the Prevention of Pollution From Ships, 1973 (MARPOL

73/78), its optional annexes III, IV, V and the 1997 Protocol on

annex VI.

19 Is there a mandatory local form of salvage agreement or is Lloyd’s

standard form of salvage agreement acceptable? Who may carry out

salvage operations?

There is no mandatory local form of salvage agreement. The salvage

agreement merely needs to be entered into in writing, which includes

its insertion in letters, telegrams, telexes, faxes and other equivalent

procedures created by modern technologies, pursuant to article 2(2)

of Decree-Law 203/98. As per article 1 of Decree-Law 203/98, salvage

is defined as all act or activity that aims to render help to ships,

crafts or other assets, including freight at risk, when in peril at sea. A

salvor is defined as one who renders help to assets in peril at sea.

Ship arrest

The International Convention for the Unification of Certain Rules

Relating to the Arrest of Seagoing Ships, 1952 is in force.

21 In respect of what claims can a vessel be arrested? In what

circumstances may associated ships be arrested?

A vessel can be arrested under the 1952 Convention based on one

of the maritime claims identified in article 1 (1)(a) to (q) of the 1952

Convention. Pursuant to article 8(2) of the 1952 Convention, a ship

sailing under the flag of a non-contracting state can be arrested for

one of the maritime claims listed in the former. The governing law of

the claim has no implications on the possibility of having an arrest

order granted, if the arrestor can produce in court sufficient evidence

of the existence of a maritime claim. Until a judgment of late 2009, as

a general principle of law, it was not possible to arrest an associated

ship. The Lisbon Admiralty Court has, however, on said judgment

accepted the arrest of two vessels under the doctrines of associated

ship arrest and of ‘piercing of the corporate veil’. The arrest orders

issued in the first instance were withdrawn pursuant to an out-ofcourt

settlement agreement and hence were not tested at appeal. They

did, however, paved the way to allow further arrests in use of said

doctrines.

Outside the scope of application of the 1952 Convention, that

is to say, to obtain security for an unlisted claim – such as, insurance

premiums or P&I calls – an applicant arrestor can make use of the

Civil Procedure Code. Aside from a jurisdiction issue that needs to

be carefully assessed in the outset, the applicant arrestor must satisfy

an additional test in what regards to evidence. The applicant arrestor

shall have to produce evidence of the existence of a well-grounded

fear of losing security for its claim whether because the debtor is

insolvent or whether because he is dissipating his assets in order to

damage creditors. This test is not required if the application is presented

based on the 1957 Convention and tends to be somewhat

difficult to comply with under the Civil Procedure Code.

An arrest order issued by a Portuguese judge is merely aimed at

allowing the creditor to obtain security for its claim. An arrest order

is fully dependent on a main proceeding on the merits, started to

obtain a judgment or an award, or fully dependent of an enforcement

proceeding if the said judgment or award exists already.

Pursuant to article 390(1) of the Civil Procedure Code and article

621 of the Civil Code, if an arrest order is considered unfounded or

expires by reasons imputed to the arrestor, he will be liable for damages

caused with fault to the arrestee, provided the arrestor has not

acted with the normal prudence required. The arrest order expires,

inter alia, when the main proceeding on which it is fully dependent is

not commenced within a certain given time or if it is stalled by negligence

of the applicant for more than 30 days. The ultimate failure of

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Andrade Dias & A ssociados Portugal

the claim (ie, final and non-appealable judgment refusing the claim)

is not, per se, sufficient to base a wrongful arrest claim.

23 Can a bunker supplier arrest a vessel in connection with a claim for

the price of bunkers supplied to that vessel pursuant to a contract

with the charterer, rather than with the owner, of that vessel?

Pursuant to article 1(1)(k) of the 1957 Arrest Convention a claim

arising from supplies of products – such as bunkers – or materials

done to a ship for her operation or maintenance wherever the

said supplies are performed constitute a maritime claim under the

1957 Arrest Convention. Subject to the provision of article 3(1) of

the 1957 Arrest Convention an applicant arrestor or creditor can

arrest the ship in respect of which the claim refers to or arises from.

Under article 3(4) of the 1957 Arrest Convention, in the case of

the existence of a charter party where the nautical management has

been passed from the owner to the charterer and when merely the

charterer is liable in persona, the creditor may arrest the ship insofar

as the claim refers to or arises from or any other ship owned by the

charterer. This rule has been interpreted by the courts to include voyage

or time charterers and hence to allow arrest orders against the

supplied ship where only charterers are liable in persona.

A bunker supplier can therefore arrest a vessel in connection

with a claim for the price of bunkers supplied to that vessel pursuant

to a contract with the charterer, rather than with the owner, of

that vessel.

The judge can request the arrestor to provide security and to depend

the granting of the arrest order on the provision of the said security.

Security can be produced inter alia in cash or bank guarantee. The

judge will ultimately assess the sufficiency and quality of the security

offered. This is not common practice in our courts and hence it is

difficult to convey what amount will be required as security by the

judge.

The judge will appoint a bailee, who will be obliged to keep, guard,

administer and maintain the vessel. Such responsibilities have, up

until now, been minimal.

No. It is possible to arrest simply to obtain security and then pursue

proceedings on the merits elsewhere. However in some situations this

may not be the case taken into consideration article 7 of the International

Convention for the Unification of Certain Rules Relating to

the Arrest of Seagoing Ships, 1952, which is in force in Portugal.

Judicial sale of vessels

27 Who can apply for judicial sale of an arrested vessel?

The arresting party, the arrested party or the bailee can all apply for

judicial sale of an arrested vessel.

28 What is the procedure for initiating and conducting judicial sale of a

vessel? How long on average does it take for the judicial sale to be

concluded following an application for sale? What are the court costs

associated with the judicial sale? How are these costs calculated?

The judicial sale of any vessel can not, as a general principle, be

performed in the arrest procedure but only in the enforcement procedure

where a creditor is enforcing a judgment. Considering, however,

that the process of obtaining a judgment may take considerable

time, the former judge of the Lisbon Admiralty court has long been

authorising the anticipated sale of arrested vessels within the arrest

procedure. The test for issuance of the sale order is accomplished

when the arrested ship’ value is depreciating due to poor or lack of

maintenance or due to any other reason.

The sale procedure will run as follows:

• the applicant must request in writing to the judge to grant permission

for the anticipated sale of the vessel stating reasons in

support that (and providing evidence of) her value is depreciating.

It should also propose a minimum sale value and attach

evidence of her market value;

• the judge will hear the parties to the proceedings and will authorise

or refuse the sale. The authorisation order will be issued if the

parties agree on the sale or, failing said agreement, if the judge

is convinced about the depreciation of the vessel pursuant to his

consideration of the evidence produced or attached in court that

show that her value is decreasing. The judge shall not authorise

in any case the anticipated sale if the action on the merits has not

yet been started;

• the authorisation order will:

• define the type of judicial sale (ships are usually sold by private

treaty sale that needs to be approved by the judge);

• nominate the person in charge of the sale process;

• define the minimum sale value; and

• define the duration of the sale process.

The minimum sale value will be determined taking into consideration

the evidence attached by the applicant of the sale or taking into

consideration a possible evaluation to her value ordered by the judge

to be performed by a third-party expert;

• the sale responsible normally drafts and publicizes a sale flyer

containing ship’s particulars that is promoted locally and

internationally;

• the presented bids are sent by the sale responsible to court and

passed to all parties to the proceedings. The parties may oppose

to their acceptance but ultimately the decision will rest with the

judge; and

• the sale responsible will draft an out of court sale and purchase

agreement once the judge has accepted the relevant bid. The

judge issues a final order approving the sale once the price has

been deposited. The final approval order allows the delivery of

the ship to the purchaser;

The process may be concluded in a period of six months counted

from the date of the application.

The sale responsible will be entitled to a fee that shall cover

remuneration and shall be determined by the judge in a percentage

of up to 5 per cent of the sale proceeds. The sale responsible shall also

be entitled to a reduced amount to cover transport costs.

A Portuguese judge may apply three alternative lists of priority of

claims:

(i) the priority list contained in the law of the jurisdiction or state

where her ownership is registered;

Portugal Andrade Dias & A ssociados

208 Getting the Deal Through – Shipping 2012

(ii) the priority list contained in the International Convention for

the Unification of Certain Rules Relating to Maritime Liens and

Mortgages, 1926 when the ship sails under a contracting state

flag and that can be described as follows:

• legal costs due to the state, and expenses incurred in the common

interest of the creditors in order to preserve the vessel

or to procure its sale and the distribution of the proceeds of

sale; tonnage dues, light or harbour dues, and other public

taxes and charges of the same character; pilotage dues; the

cost of watching and preservation from the time of the entry

of the vessel into the last port; other taxes and social security

dues;

crew, and other persons hired on board;

• remuneration for assistance and salvage, and the contribution

of the vessel in general average;

• indemnities for collision or other accident of navigation, as

also for damage caused to works forming part of harbours,

docks, and navigable ways, indemnities for personal injury

to passengers or crew, indemnities for loss of or damage to

cargo or baggage;

• claims resulting from contracts entered into or acts done by

the master, acting within the scope of his authority, away

from the vessel’s home port, where such contracts or acts are

necessary for the preservation of the vessel or the continuation

of her voyage, whether the master is or is not at the

same time owner of the vessel, and whether the claim is his

own or that of the ship-chandlers, repairers, lenders, or other

contractual creditors; and

• mortgages, hypothecations and other similar charges on the

vessel duly effected in accordance with the law of the contracting

state to which the vessel belongs; or

(iii) the priority list contained in article 578 of the Commercial Code

that is described as follows:

(i) court costs made in the common interest of the

creditors;

(ii) taxes and social security dues;

(iii) salvage rewards;

(iv) claims secured by mortgages or pledges over ships;

(v) pilots and towing expenses for entry into port;

(vi) tonnage, anchorage, public health, light and other harbour

dues;

of her appurtenances;

(viii) master and crew wages;

(ix) repair costs of the vessel, her appurtenances and

equipment;

(x) reimbursement of the price of the cargo that the master

was forced to sold;

(xi) insurance premiums;

(xii) the outstanding price of the last purchase of the vessel;

(xiii) repair costs of the vessel, her appurtenances and equipment,

in the three years previous to the voyage at

issue and counted from the date of termination of the

repairs;

(xiv) costs related to shipbuilding contracts;

(xv) the insurances premiums over the ship, if entirely covered,

or over the covered part or her appurtenances not

mentioned in paragraph (xi); and

(xvi) indemnities due to the shippers for shortage or damage

of goods.

Claims mentioned in (i) to (xi), excluding the claims mentioned in

(iii), are those incurred in the last voyage and because of it.

30 What are the legal effects or consequences of judicial sale of a

vessel?

The judicial sale of a vessel extinguishes all prior liens and encumbrances

over a ship and thereby provides the purchaser clean title.

31 Will judicial sale of a vessel in a foreign jurisdiction be recognised?

Yes. The question to know will be to ascertain if said recognition

will be automatic or subject to a recognition of the order that has

accepted or approved the sale.

No. Portugal is a contracting state to the International Convention

for the Unification of Certain Rules Relating to Maritime Liens and

Mortgages, 1926.

Carriage of goods by sea and bills of lading

33 Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some

variation in force and have they been ratified or implemented without

ratification? Has your state ratified, accepted, approved or acceded

to the UN Convention on Contracts for the International Carriage of

Goods Wholly or Partly by Sea? When does carriage at sea begin and

end for the purpose of application of such rules?

The International Convention for the Unification of Certain Rules

Relating to Bills of Lading, Brussels, 1924, is in force. The Hague

Rules became internal law by means of Decree-Law 37748 of 1 February

1950. The Hague Rules apply mandatorily where the bill of

lading was issued in the territory of a contracting state.

Decree-Law 352/86 will apply, in subsidiary terms (in respect of

issues not dealt by the conventions) to the international conventions

in force in Portugal, to the contracts for the carriage of goods by

sea. Decree-Law 352/86 rules, inter alia, on pre-loading and postdischarge

responsibilities and liabilities, on package and unit limitation

calculation and amounts and on limitation periods. Decree-Law

352/86 inserted into internal law some of the Visby Protocol amendments

in regard to package and unit calculation. It has inserted the

Hamburg Rules’ limitation period of two years to be applied merely

outside the scope of application of the Hague Rules because regarding

liabilities arising out in connection with the Hague Rules the

one-year limitation period is to be applied. The Hague Rules must be

applied in conjunction with Decree-Law 37748 and especially with

Decree-Law 352/86.

Portugal has not ratified, accepted, approved or acceded to

the UN Convention on Contracts for the International Carriage of

Goods Wholly or Partly by Sea (Rotterdam Rules).

Pursuant to article 1(e) of the Hague Rules, carriage of goods

by sea encompasses the time elapsed, as from the time the goods

are loaded on board the ship up to the moment they are discharged

from the ship, that is to say, as from and up to the moment they have

passed the ship’s rail ‘tackle to tackle’. Under article 6 of Decree-Law

352/86 the carrier’s liability for the goods in respect of the period

elapsed between receipt and loading of the goods is ruled by the

provisions of the bailment contract contained in the Civil Code. The

bailment contract regime is applied also as from the moment the

goods have been discharged onwards. It is fair to conclude, then,

that carriage by sea commences and ends as from and up to the

moment the goods have passed the ship’s rail at her loading and

discharge ports.

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Andrade Dias & A ssociados Portugal

In respect of road carriage, Portugal is a contracting state to the

Convention on the Contract for the International Carriage of Goods

by Road signed at Geneva on 19 May 1956 (CMR Convention). Portugal

has also in force an internal regime that is applicable to internal

road carriages and that is contained in Decree-Law 239/2003,

published on 4 October 2003. The most relevant difference between

these two regimes rests in the limitation of liability limits applicable

to non-intentionally caused losses or damages to goods. Pursuant to

article 23 of the CMR Convention, the road carrier shall not be liable

for more than 8.33 units of account per kilogram of gross weight in

short, being the unit of account, the special drawing right, calculated

under paragraph 7 of article 23 of the CMR Convention and duly

converted into Euros. Differently, pursuant to article 20 of Decree-

Law 239/2003, the carrier shall not be liable for more than €10 per

kilogram of gross weight of the goods in short or damaged.

In respect of rail carriage, Portugal is a contracting party to the

Convention concerning International Carriage by Rail (COTIF) of 9

May 1980 in the version of the Protocol of Modification of 3 June

1999. Decree-Law 58/2008, published on 26 March 2008, contains

the internal regime applicable to internal rail carriage.

With regards to air carriage, Portugal is a contracting state to

the International Convention for the Unification of Certain Rules

Relating to International Air Carriage, Warsaw 12 October 1929

and of The Hague, Guatemala and Montreal Protocols. Portugal

is also a contracting state of the International Convention for the

Unification of Certain Rules Relating to International Air Carriage,

Montreal 28 May 1999. European Union Regulation No. 889/2002

of the Parliament and of the Council should be applied within the

European Union.

The initial party (shipper or receiver) to the contract for the carriage

of goods by sea or an assigned third party on the rights of the former;

the holder of a bill of lading where a bearer bill of lading was issued;

the named consignee where a not to order bill of lading was issued;

or the named consignee or the endorsee where a bill of lading was

issued at the order.

36 To what extent can the terms in a charter party be incorporated into

the bill of lading? Is a jurisdiction or arbitration clause in a charter