Published in ILO
The ranking of privileged credits and priorities of maritime liens under Brazilian law is based on the harmonious application of Section 470 of the Commercial Code 1850 and the Brussels Convention 1924.
In particular, the Commercial Code expressly acknowledges a certain priority for debts undertaken by a captain for a ship’s maintenance and upkeep (Section 470, Item 8). On its turn, the Brussels Convention states that credits arising out of obligations undertaken by a captain outside a port of registry for real maintenance needs or to continue a voyage have a privileged nature and therefore a lien over the vessel (Section 2, Item 5).
The Brazilian courts recently discussed whether an unpaid credit for a bunker supplied to a vessel would fall under the above criteria and be considered a claim of a privileged nature, thereby permitting the vessel’s arrest.
The case involved a dispute between a foreign bunker supplier and a Brazilian shipowner for an unpaid bunker supplied to two vessels in a Brazilian port.
After an unsuccessful attempt to resolve the dispute out of court, the bunker supplier filed a judicial lawsuit before the Brazilian courts, seeking the payment of the supplied fuel. Given the privileged nature of the claim and in order to prevent the consumption of the unpaid bunker, the supplier also sought the preventive arrest of both vessels.
Considering that the bunker had been supplied and the debtor was established in Brazil, a Brazilian court accepted jurisdiction for the case. Moreover, considering the presence of the fumus boni iuris (ie, a prima facie case) and periculum in mora (ie, urgency) legal requirements, the court granted an injunction, ordering the vessels to be detained at the local Brazilian port in light of the privileged nature of the claim under Brazilian law.
The first-instance court reasoned as follows:
The Brazilian Commercial Code explains on item 8 of article 470 that secured credits are, among others, the debts incurred by the owners of the vessel for the ship’s repairs and costing purposes during the last voyage. Thus, the referred debt can be classified in the designated secured debts which according to the set out in article 479 of the same law, authorizes the seizure and detention of the vessel for secured obligations.
Therefore, the court:
- granted the claim;
- upheld the vessels’ arrest; and
- condemned the defendant to pay the bunker debt with additional indexation, interest and legal fees.
The defendant appealed this decision before the Rio Grande do Norte State Court.
The Rio Grande do Norte State Court rejected the defendant’s appeal and upheld the first-instance decision.
The court unanimously confirmed that the claim in question should be considered privileged and recognised that the supply of fuel is included in the ranking of maritime liens under Brazilian law.
Therefore, given the nature of the claim, the first-instance award was maintained and the vessels’ arrest was considered valid.
This decision confirms that unpaid debts for bunkers supplied to vessels are considered claims of a privileged nature under Brazilian law and permits creditors to obtain security for any debts by arresting vessels in a Brazilian port.
It is one of the first precedents to deal with the application of the Liens Convention 1926 and grants legal safety for bunker suppliers and other parties that hold credits of a privileged nature under Brazilian law.
For further information on this topic please contact Rodrigo Baptista Dalhe or Lucas Marques at Kincaid / Mendes Vianna Advogados by telephone (+55 21 2276 6200) or email ([email protected] or [email protected]). The Kincaid / Mendes Vianna Advogados website can be accessed at www.kincaid.com.br.
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