By Marc de Man
For recoveries in general, Canada is an ideal jurisdiction. It is not South Africa, but it does have a great juridical arsenal. It has four recourses that may be invoked, these being the arrest in rem, the sistership arrest, the Mareva Injunction and in Quebec, the saisie avant jugement. To arrest, you do not need to put up security, you do not need to seek the wisdom of a judge. If you fall within the parameters presented by the Federal Courts Rules, you obtain the arrest granted by the Court clerk. All you need is a telephone call from the client, any you are off and running with an Affidavit to Lead Warrant, a Statement of Claim and the Warrant of Arrest.
In other jurisdictions, and particularly Latin America and Spain, it is much more complicated. Now, do not get me wrong, Latin American countries and Spain are very sophisticated in their approach to maritime law. They have enacted elaborate legislation. Latin Americans are fabulous at drafting statutes. Many authors have written exceptional treatises on Maritime Law. Chile and Paraguay have adopted the Hamburg Rules, the Venezuelans have enacted legislation similar and more expansive than our Marine Liability Act, Argentina has very high limitation of liability ceilings. Venezuela is proposing supra national maritime legislation to apply to all Latin American countries, and Peru, through its Andean Court judge, Roberto Vigil, is proposing a Latin American tribunal to hear admiralty cases. However, Latin Americans get hung up on basic elements which are very impractical.
The first hang up is the requirement of the power of attorney. We all know that to secure a claim, one needs to act with great speed to arrest a vessel and obtain the appropriate security, you have to catch the vessel as soon as possible. If, for example, the vessel that has caused the damage to the cargo has just berthed in the Port of Buenos Aires, Argentina, you call the local lawyer, and before you tell him the first thing about your claim, he will request a Poder de Pleitos. To obtain this Poder, or Power of Attorney, you have to draft a document in accordance with the formal requirements of Argentinian law, have it notarized and then present it to the Argentinian Consulate. By the time all of this is carried out, and it is sent rush by FedEx to Buenos Aires, the vessel you may be attempting to arrest is on its way to Europe through the South Atlantic. When I spoke to the Argentinian Maritime Law Association two years ago raising this fundamental issue, the Argentinian Maritime lawyers explained to me that it was necessary to obtain the Poder de Pleitos to avoid fraud. And so, unless you have a good idea through vessel tracking and preparation work, and you obtain the Poder de Pleitos well in advance of the berthing of the vessel at the Latin American port, you will not be successful in obtaining a seizure or embargo preventivo of the vessel that has caused damage to the cargo interests you may represent.
The second element that is of major importance in the recovery of a claim in Latin America is to know the lawyer with whom you will need to carry out your recovery efforts. In my experience, Latin American lawyers are knowledgeable and ready to assist, but they have peculiar tendencies with which we are unfamiliar.
The most striking element is the hours they keep. It is difficult to reach them in the morning. At noon time, they usually have a good, hefty lunch and then disappear for the afternoon. There is an old saying in Latin America that after lunch, a lawyer dedicates his time to his mistress, and at night and on weekends he dedicates his time to his family. This may be an exaggeration, but I have experienced several frustrating situations wherein the lawyer is just not where he should be at the proper time. Once, in Buenos Aires, after a long voyage with the clients, the Argentinean lawyer, who was getting on in years, was never seen after lunch, only to arrive at his office after 5 o’clock in the afternoon. Another time, in Lima, Peru, the same situation arose.
The worst case was once in Madrid, Spain, where I was attempting to obtain payment for Greek shipowners for two arbitration awards in their favor which were pocketed by one of the partners of a very distinguished Spanish law firm. Upon my arrival at their offices, bright and early, I was given the run around until 8:00 o’clock in the evening. When I finally met the senior partner, we started to speak about the prevailing political situation in Spain, the role of King Juan Carlos, the Opus Dei, Basque terrorism. When I suggested that I was there on behalf of the Greek shipowner, the senior partner immediately suggested that our business discussions could wait until the next day and that we should instead enjoy a nice dinner at the Plaza Mayor. So, off we went, had great tapas and a late dinner. The next day, exactly the same situation occurred. I was only able to sit down with the senior partner at 8:00 o’clock in the evening. That evening, we spoke about Picasso, Salvador Dali, la corrida de toros (bull fighting), Manuel de Falla, Albeniz, Velazquez. At about 10:00 that night, I ventured to bring up the subject of the Greek shipowners. The senior partner told me that he did not think his firm was responsible as the theft was carried out by one of his partners, unbeknownst to him. I reminded him that he was strictly liable for the embezzlement carried out by his partner, and then he actually said to me “Dear Marc, let us go for dinner and I shall have a solution for you tomorrow”.
So, the third day, I once again met with the senior partner late that evening, where he finally proposed a reasonable settlement figure. I immediately ran to my Hotel, discussed the offer with the client, who asked to increase it to a slightly higher figure. I ran back to the Spanish lawyers’ office, and gave him the figure acceptable to the Greeks. He consented to the final offer, with the proviso that it would necessitate a modality of payment, that is to say, monthly payments for one year, due to the magnitude of the sum sought. I agreed to this, had another great dinner with the colleague and I could finally return to Montreal. The payment was effected in full by the Spanish lawyer within a week.
I have gone to some length with this narrative to illustrate to you that Latin American lawyers, and Spanish lawyers, have a different time zone in which they operate, and you must have some patience when dealing with them. Things are just not carried out at the same pace as in Canada.
Thus, the choice of lawyer in Latin America to handle your claim is very important. This lawyer must be well connected with his milieu and with the judiciary. Judges in Latin America are career judges and the rapport between the lawyer and the judge is very important. This is very different from the Canadian situation. In Canada, judges are for the most part very impartial. During my last voyage to Caracas, Venezuela, I had lunch with the lawyer I retained in a cargo recovery claim accompanied by two judges of the newly created Maritime Court in Venezuela. One of those judges was sure to attend to the case that I had sent to Venezuelan counsel, and there we were, the four of us having a great lunch. This would never happen in Canada.
Therefore, the lawyer you choose in the Latin American jurisdiction must not only be competent to understand the case you are referring to him, but he must also be well connected with the judiciary branch in his jurisdiction.
This leads me the issue of corruption in the judiciary. Although I think this aspect is exaggerated, there is an element of corruption that does not exist in our jurisdiction. This corruption is not overt as one may think, and less prevalent today than perhaps twenty years ago. Although there has always been some corruption in Latin America at the governmental or political level, I have not seen overt corruption of the judiciary. However, the corruption that does exist is one based on special relations between lawyers and members of the judiciary. Certain lawyers are just better tolerated by some judges than others. This may be due to friendships emanating from the same oligarchical class, past favors, links of nepotism and other factors.
On the subject of corruption, this may likewise exist with the Defendant. Thus, when a container of garments was stolen from the port area in Cartagena, Colombia, this port was in the process of privatizing its operations. The Colombian lawyer had to tear apart thick cobwebs of corruption and fraud in the privatization process until he was obtain to obtain a recovery in favor of Canadian Underwriters. The most dramatic case I faced was in Montevideo, Uruguay, where, for the first time in my life, a revolver was pointed at me during a meeting. The Canadian buyer of leather boots wished to meet his Uruguayan supplier after receiving very defective leather boots. A meeting was organized at the Victoria Plaza Hotel in Montevideo with the presence of the agent who provided the sample specifications from the Canadian buyer to the Uruguayan manufacturers. At the meeting, in the presence of all parties and their respective lawyers, the agent arrived with a bodyguard. The meeting started quite calmly, but in no time, the buyers and sellers were pointing their fingers at the agent. Suddenly, the bodyguard pulled out a revolver and everyone immediately jumped out of their seats and dove under the table. I remember being the last one to duck, because I was reading the terms of the letter of credit. In any event, after much yelling and screaming, the agent and his bodyguard left the meeting, which enabled the parties to discuss constructively the remedies to be applied to future shipments of boots.
There are two peculiarities which I would like to mention. First is currency exchange. In Venezuela, the official rate for one US dollar is 2,150 bolivares. In the black market, the rate for one US dollar is 6,500 bolivares. Three times higher. In a recent case of damage caused by stevedores in Puerto Cabello, the defendant was prepared to pay for the loss, but only in bolivares at the official rate. Thus the recovery was reduced by two-thirds of the amount. Getting a US dollar out of Venezuela is another can of worms. Your best bet is to obtain a recovery from a Venezuelan company that has a Miami branch office.
The last topic I shall deal with is the recovery of a variety of claims from Cuban entities, all of which are state-owned. This has been a great challenge for more than 15 years. Ever since the withdrawal of Soviet economic support of Cuba in the early 90’s, to this day, Cuban entities have had major difficulty in paying their debts. A fundamental principle that has developed from this experience is that no Cuban entity should be provided with credit. In the maritime area, a plethora of claims have arisen. They affect shipowners, bunker suppliers, container owners, cargo claimants, whether they be subrogated claims or direct claims.
First, it is almost impossible to obtain a recovery in Cuba. Presently we have a case where a cargo owner has obtained a judgment from the Tribunal de Comercio of La Habana, against two shipping companies and the Cuban Ministry of Transport and no Cuban lawyer is able to execute the judgment. It is tantamount to biting the hand that feeds you.
The only way to execute on a debt, apart from direct negotiation with the debtor is to arrest/seize Cuban assets outside the Cuban jurisdiction. This was done in the landmark decision of Med Coast v. The Government of Cuba in 1993. In that case Greek shipowners were owed a considerable sum from Empresa Cubana de Fletes, the chartering arm of the Cuban maritime fleet. Cuflet met the Greeks in Piraeus, and agreed to pay the outstanding charter hire by monthly instalments of $100,000.00 each. The debt was approximately US$2 Million. Unfortunately for the Greek shipowners, no bank guarantee was requested. When the first payment became due, nothing happened. Several months passed with no payment. By chance, the Ship BAHIA DE LA HABANA happened to berth in Port Cartier, Quebec. This vessel belonged to Empresa de Navegacion Mambisa, which entity owned at the time more than 145 ships, registered in the Lloyd’s Registry as belonging to the Government of Cuba. On behalf of the Greeks and their P & I Clubs and at the request of the London firm of Richards, Butler, we seized the vessel under the Quebec rules of procedure dealing with la saisie avant jugement. An incredible set of motions and challenges to the seizure were instituted, all unsuccessful. The charter parties between the Greeks and Cuflet provided for London arbitration, but when the motion to set aside the seizure was argued in front of Mr. Justice Gomery (later famous for his rulings on the sponsorship scandal), he stated that there was no room for arbitration as there was no dispute. The Cubans had recognized the debt, but they just were not disposed to pay it.
The legal challenges continued for 9 months until the case was settled. In the meantime, the BAHIA DE LA HABANA was immediately moved to the Port of Montreal. She remained in the Port with her crew for 9 months. Of course, the crew enjoyed their stay in Montreal, and when she finally sailed to return to Cuba, there was a line-up of ladies at the Port bidding their newly found Cuban boyfriends goodbye.
On account of this decision, the Quebec jurisdiction became an ideal jurisdiction to obtain the recovery of debts against Cuban maritime entities. One shipping line that was seized/arrested often was Coral Container Lines. But, with time, the Mambisa fleet of 145 vessels totally disappeared. All the Cuban vessels belonging originally to Mambisa/the Government of Cuba were either arrested in other jurisdictions, flagged out or scrapped. Coral Container Lines decided to close down its doors in 2003. This caused great concern to bunker suppliers, and particularly container owners. These container owners, companies such as Gold Containers, Capital Lease and others found that their containers were being confiscated by the Cubans, and the rental, both arrears and actual, from the container leases was not being paid. It took several years to settle these claims, through London and Cuban banks. The settlements were in the vicinity of 50% to 60% of the value of the claims.
Up to this year, another manner of obtaining recoveries from Cuba was to attach cargoes of cereals in New Orleans. According to the Helms Burton embargo, the US can sell medicine and food to Cuba. By food I mean cargoes of wheat, maize, soya. Until the beginning of 2007, Cuba could buy these cargoes if it effected cash payment to the American seller prior to the cargo leaving American waters. This meant that title passed to Cuba in the USA, allowing attachments in US ports. However, an amendment was permitted to the Helms Burton legislation which allows for payment from Cuba to the US seller through a third party bank foreign to Cuba and the US. On top of this, the Cuban buyer, Alimport, has inserted in its purchase contracts with Cargill or the US seller that title to the cargo can only pass when the cargo reaches Cuban waters.
This has effectively paralyzed the attachment procedures that could be exercised in New Orleans to execute on judgments or arbitration awards against Cuban entities obtained in other jurisdictions.
Presently, successful recoveries directed against Cuban entities have become very difficult indeed. If there is nothing to seize, seizure attachment or arrest of property to secure the claim, the eventual recovery becomes difficult.
To conclude, all jurisdictions with which we are not familiar have their peculiar idiosyncrasies. In Latin American countries, we have to adapt to formal requirements, to the lawyers of each country and the peculiarities of each jurisdiction. To speak and write Spanish is a great asset. For 20 years, I have been a founding director of the Iberoamerican Institute of Maritime Law, and last November, we gathered in Sevilla, Spain. This Institute incorporates the top lawyers in the Spanish and Portuguese speaking countries, and is an excellent source of doctrine, legislation and lawyers in Latin America, Spain, Brazil and Portugal.