The Netherlands is a suitable jurisdiction to enforce claims against ships. The arrest of vessels is a broadly used manner to obtain payment or security for a long outstanding claim. It is not always that vessels are subsequently released. Especially where various parties arrest a vessel there is always a risk that the vessel will not leave port in the same ownership. With a certain frequency seagoing vessels are sold before the Dutch Courts through a judicial sale by public auction.
Most of the times, the auctions take place at the request of the bank, but in theory any creditor may decide to auction a vessel. It is rare that creditors with a claim that is ranked below a privileged claim of the bank takes these steps, especially if he fears that the proceeds will not be sufficient to recover a fair amount of the claim. In general the vessels sold have in common that they have too many debts. The public auction is meant to divide the nett proceeds of the ship under those entitled thereto. Who comes later, that is after the auction, comes too late.
One creditor must take the initiative to auction the vessel. At the request of a creditor that is in possession enforceable legal title against the ship owner the Court will fix a date for the public auction, at which a ‘Dutch Auction’ will take place. The Conditions of Sale will be made available upon request.
Inspection of the vessel
Vessels at auction are sold on an “as is where is” basis. Subject to the Conditions of Sale, the vessel may be inspected on application to the attorney of the enforcing creditor.
Dutch Auction
The judicial sale by public auction is conducted in the Dutch language. The auction takes place in one brief session, consisting of two parts. The session begins with a customary manner of bidding. Parties interested in the vessel may bid. The highest bid wins, that is to say, initially wins only a bidding premium as fixed in the conditions of sale (normally half a per cent of the highest bid). After the first part the real Dutch Auction will start. During the second part a sum will be fixed that will have to be paid on top of the earlier mentioned highest bid. In order to come to this sum, the bailiff will call out diminishing amounts to be paid in excess of the price as already fixed. The person who first accepts the vessel, by calling out “mine”, acquires the vessel. If nobody calls mine, the vessel goes to the person who was the highest bidder during the first part of the session. The bidding therefore goes up and then down again.
Purchase price
The purchase price consists of the total of:
- the highest bid made during the first bidding part, plus
- the sum at which ‘mine’ has been called during the second part, plus
- the bidding premium (if one is not the highest bidder in the first part), plus
- the Costs of the auction, as fixed by the Court before the auction.
The purchase price of the vessel is normally payable within eight days of the auction. Only upon payment will the purchaser receive the protocol of adjudication, which is a necessary document to take possession of the vessel and to register the vessel in a ship register of choice.
Formalities
The specific formalities of a public auction are described in the terms and conditions of the judicial sale. One of the formalities will almost always be the deposit of a certain amount of money before the auction actually takes place. Our attorneys know the formalities and are in a position to advise you on short notice. Over the last few decades potential buyers of seagoing vessels have instructed the lawyers of LVH Advocaten with regard to the auction of vessels and to do the bidding on their behalf. Having local knowledge at your disposal can make all the difference for a successful purchase.
Information
If you have any questions on this subject, please contact our office 0031 10 209 2777 or by e-mail info@lvh-advocaten.nl.
