Navigating Vessel Ownership Disputes in the UAE Under the New Maritime Law

The UAE has introduced a transformative maritime legal framework with Federal Decree-Law No. 43 of 2023, effective as of March 29, 2024. This landmark legislation modernises maritime law, replacing Federal Law No. 26 of 1981. Among the critical areas addressed by the law are vessel ownership disputes, which have often been fraught with legal and procedural complexities. By aligning with international standards, the UAE aims to provide greater clarity and equity when resolving such disputes.

This article explores how this law addresses ownership disputes, offering examples and referencing the relevant legal provisions that were applied to resolve them.

Common Triggers of Vessel Ownership Disputes

Disputes over vessel ownership frequently arise due to the high financial stakes and the intricate nature of maritime transactions. Some of the most scenarios where they arise include:

1. Conflicting Ownership Claims
   Disputes often stem from unclear or conflicting ownership claims, which can be a result of ambiguous contractual terms, improper registration, or overlapping rights. In many cases, a lack of thorough documentation or disagreements over the interpretation of ownership clauses result in a dispute between parties. These can be exacerbated by the significant amounts of money involved. Therefore, it is essential to have precise and clear agreements from the outset.
2. Vessels Under Construction
   Ownership issues frequently arise during the construction phase of a vessel, especially when there are payment delays or when one party halts payments. Since ownership may be contested before the vessel is completed or operational, it is crucial for stakeholders to establish clear legal documentation early on, such as conditional ownership agreements, to prevent disputes later. This is particularly relevant when the vessel is partially constructed, as the ownership might not be fully clear until the construction is finished, or the payments are made in full.
3. Charter Agreements
   Long-term leases or charter agreements can create ambiguity regarding ownership when these contracts expire or are not clearly defined. Charter agreements may allow for the temporary transfer of operational control of the vessel, but the ownership remains in question when the terms of the lease end. The transition of rights at the expiration of these contracts should be clearly laid out to prevent misunderstandings or competing claims from arising. A common point of contention is whether the vessel is returned in the same condition as it was chartered, which can also lead to disagreements over damages and/or the vessel's value.
4. Operation Agreements
   Operation agreements can trigger ownership disputes, particularly in cases where multiple parties are involved in managing the day-to-day operations of a vessel. Disagreements about the distribution of responsibilities, financial contributions, or the vessel's use may lead to conflicts over who controls it. Clear operational agreements that define the rights and obligations of each party can help minimise risk. These agreements should ideally address not just operational details, but also contingencies for when issues arise, ensuring the roles and stakes are clearly defined and understood by all relevant parties.
5. Multiple owners of the ship
   When a vessel has multiple owners, especially if ownership shares are not clearly set out or agreed upon, can lead to conflicts regarding the management, operation, or sale of the ship. Some of the common issues include disagreements on the use or operation of the vessel, sale or transfer of ownership, financial contributions and profit sharing, and disputes regarding who has decision-making authority.

As the above demonstrate, disputes related to vessel ownership are often rooted in unclear contractual terms, lack of proper registration, and ambiguous operational or financial arrangements. Addressing these from the outset through detailed contracts and legal documentation is crucial to avoiding conflicts and ensuring smooth commercial operations for those in this sector.

Key Provisions Addressing Vessel Ownership Disputes

These situations highlight the need for a robust legal framework to protect the rights of all stakeholders. The new UAE maritime law offers precisely that through various provisions that should effectively reduce the risk of disputes arising. Some of they key ones include:

1. Registering Vessels Under Construction

One of the standout updates is found in Article 9,10,11 which allows vessels under construction to be registered. This provision ensures that shipbuilders, financiers, and potential owners can secure their rights even before the vessel is operational. Now that partial or conditional ownership can be recorded there is much greater legal clarify which will mitigate the chances of disputes.

2. Resolving Disputes in Joint Ownership

Under Article 27, the law provides clear guidelines for joint ownership scenarios. It specifies each party’s share and their rights and obligations, which is particularly useful in partnerships or co-ownership agreements. The new law provides mechanisms for courts to enforce equitable resolutions based on ownership shares.

3. Vessel Arrests in Ownership Disputes

Ownership disputes often escalate to precautionary vessel arrests. The new law, under Article 53, expands the scope of such arrests, allowing claimants to seize the disputed vessel and any sister ships owned by the same debtor or party. This aligns UAE law with the 1999 International Convention on Arrest of Ships, providing robust enforcement options for claimants.

Even with the new law and given the nature of this sector, disputes will still arise. Should this happen then you should file a case in the local courts, submitting all relevant documents, such as contracts, registration papers, and proof of payments, to substantiate your claim. If there is a risk of the vessel being sold or transferred, apply for a precautionary arrest to freeze its status during the legal proceedings. It is important to also consider mediation or arbitration as a means of settling the dispute. Many maritime contracts include clauses for resolving disputes outside of court, and arbitration can often be a faster and more cost-effective route.

Conclusion

Federal Decree-Law No. 43 of 2023 is a testament to the UAE’s commitment to further strengthening the legal system in relation to the maritime sector. By providing clear ownership guidelines, introducing flexible registration rules, and expanding enforcement mechanisms, the law equips stakeholders with the tools to navigate complex disputes effectively.

For vessel ownership disputes, this modern framework offers much-needed transparency and protection, ensuring that the UAE remains a global leader in maritime law.