Arrest of vessels in Brazil for bunker debt

Godofredo Mendes Vianna
Kincaid – Mendes Vianna, Brazil
godofredo@kincaid.com.br

Lucas Leite Marques
Kincaid – Mendes Vianna, Brazil
lucas@kincaid.com.br

Imagine that a foreign client contacts your firm to inform you that they have supplied bunkers to a certain vessel in a foreign port, duly delivered and registered through a Bunker Delivery Note signed and stamped by the vessel’s chief engineer, but remain unpaid.

Despite the invoice sent out to the owners and charterers of the said vessel, the debt remains unsettled. In fact, the owners responded by stating that they have not requested bunkers and that this matter should be dealt with vessel’s charterers.

The client’s General Terms and Conditions, applicable to the bunker agreement provided that a lien shall be constituted over the vessel; that the title for the bunkers shall only be fully transferred once payment is made; and that any disputes should be resolved via arbitration in London.

Considering all of the above, the client approaches your firm to inform that the vessel is on route to a port in your jurisdiction and would like to study the possibility of arresting the vessel in your country.

This is a common scenario for many maritime lawyers all over the world and, from a Brazilian law standpoint, there are some interesting aspects to be considered.

Firstly, it is important to mention that Brazil has not ratified the International Arrest Conventions. This prevents a creditor from seeking the arrest of a vessel in Brazil as security for a claim subject to the jurisdiction of another country.

According to the Brazilian Code of Civil Procedure, in order to seek the arrest of a vessel before the Brazilian courts the substantive claim must be filed in Brazil. The Brazilian Civil Procedure Code also sets out the circumstances under which Brazilian courts have jurisdiction over claims involving foreign parties:

Article 21 – The Brazilian judiciary authority has jurisdiction where

I - the defendant, whatever its nationality, is domiciled in Brazil;

II - the obligation is to be performed in Brazil;

III - the fact which gave rise to the claim results from a fact occurred or an act performed in Brazil.

Sole Paragraph: A company is considered domiciled in Brazil, when said company has an agency, branch or subsidiary located here.

Furthermore, Article 22, III, of the Civil Procedure Code (CPC) ensures the jurisdiction of the Brazilian courts when the parties, either explicitly or tacitly, have submitted to the national jurisdiction. This includes, for instance, a choice of forum clause in a contract designating Brazilian courts to resolve any dispute between the contracting parties.

The reciprocal is also true, as Article 25 of the CPC acknowledges that Brazilian courts lack jurisdiction to adjudicate disputes where an international contract contains a foreign choice of forum clause, provided this is raised by the defendant at their first opportunity to respond to the claim.

Back to the hypothetical bunker debt scenario, in most cases such a case would not meet the jurisdiction criteria required to allow an arrest claim before a Brazilian court. The fact that the shipowner may have a vessel sailing in Brazilian waters, calling a local port, or even a local maritime agent in Brazil is not sufficient to establish jurisdiction. And in case of absence of jurisdiction, Brazilian courts ordinary position would be to decline the arrest and dismiss the claim, thereby exposing claimants to wrongful arrest claims, court costs, opponent attorney’s sucumbential fees, and other risks.

However, there is still light at the end of the tunnel, specifically when the case is subject to arbitration. An exception to the general jurisdictional rule set out above is the adoption of precautionary and urgent measures prior to the inception of arbitration. Brazilian Arbitration Law expressly provides in Article 22-A that: ‘Prior to commencing the arbitration, the parties may seek provisional measures of protection and urgent relief from a judicial court.’ It continues in the Sole Paragraph:

‘The efficacy of the provisional measure granted by the judicial court shall cease if the interested party does not file the request for arbitration within 30 days from the date the respective decision takes effect.’

Consequently, a contractual arbitration clause such as the one established in the general terms and conditions of a bunker agreement can allow foreign creditors to seek the arrest of debtor’s vessel in Brazil, overcoming the jurisdiction obstacle.

Such an arrest in Brazil would consist of a preliminary urgent procedure in Brazil aimed at securing the substantive bunker claim, prior to the commencement of arbitration proceedings. Nevertheless, the claimant will have to demonstrate some legal rights to seek the arrest as a preventive measure in Brazil. Here it becomes essential to consider the ranking and priorities of maritime liens under Brazilian law.

Brazil is a party to the 1926 Brussels Convention on Maritime Liens and Mortgages. At the same time, the Brazilian Commercial Code also sets out an order of privileged maritime claims, which constitutes a lien over the vessel. Therefore, the claims which can constitute a lien and allow the arrest of a vessel in Brazil derive from a combined interpretation of the Brazilian Commercial Code and the 1926 Brussels Convention are as follows:

• federal taxes;
• legal costs and expenses;
• claims resulting from the employment of master, crew and other ship personnel;
• indemnities due for salvage;
• general average contributions;
• obligations undertaken by the captain outside the port of registry for actual maintenance needs or continuation of the voyage;
• indemnities due as a result of collisions, or any other maritime accident;
• ship mortgages;
• port dues, other than taxes;
• outstanding payments due to depositaries, storage and warehouse rentals, ship equipment;
• expenditures for the upkeep of the ship and her appurtenances, maintenance expenses at the port of sale;
• short delivery and cargo losses;
• debts arising out of the construction of the vessel;
• expenses incurred for repairs of the vessel and her appurtenances;
• outstanding price of the vessel.

In addition to the rules mentioned above, the arrest request will also need to comply with some procedural requirements established by the Brazilian Civil Procedure Code. Article 300 of the Procedure Code provides that ‘urgent injunctive relief shall be granted when there are elements that evidence the probability of the right and the danger of damage or the risk to the useful outcome of the process.’

Based on such rule, the judge will only evaluate two basic requirements: (1) the fumus boni iuris, that is, whether the case presented by the applicant appears to be lawfully grounded, providing reasonable evidence to support a prima facie claim; and (2) the periculum in mora, that is, the risk of suffering irreparable harm if the injunction is not granted and not being able to wait for a final decision on the merits.

These requirements are justified given the precautionary nature of arrest proceedings, in which the claimant typically seeks an injunction before the defendant is heard. In such cases, the judge usually examines the request ex parte, only hearing one side of the story, as there may be a legitimate concern that, if notified in advance, the defendant might remove the vessel from the jurisdiction before a decision is rendered.

In this context, the Brazilian judge is also authorised by the Procedure Code to impose counter-guarantees or other measures to balance the interests of the parties and prevent abusive use of interim relief. This structure reflects a principle of proportionality and procedural fairness, ensuring that emergency relief serves its intended purpose of upholding rights without pre-empting the outcome of the dispute.

After examining all these legal requirements, let’s now return to our bunker case from the beginning:

• Although an arrest injunction would probably be dismissed if Brazilian courts did not have jurisdiction for the substantive claim, in that scenario the bunker contract was subject to arbitration.
• As the bunker supply configures a debt arising out of an obligation undertaken by the master outside the port of registration of the vessel or an expenditure/necessaries for the upkeep of the ship and/or her voyage, such maritime claim would constitute a lien under Brazilian law.
• The claimant could show a prima facie claim (fumus boni iuris) by producing evidence of the bunker request and supply through the messages exchanged, the eventual contract, the Bunker Delivery Note showing receipt of the bunkers on board, the applicable general terms and conditions, the unpaid bunker invoice, and prior notices sent to the debtors.
• As for the periculum in mora, Brazilian courts tend to accept as sufficient the fact that the vessel is of foreign flag, owned by a foreign shipowner without any other assets/address in Brazil, and is just temporarily calling a Brazilian port before leaving Brazilian waters.
• In such circumstances, a Brazilian judge may grant a precautionary injunction to order the arrest of the vessel in Brazil.
• Following the arrest, the claimant will then have 30 days to initiate the arbitration contractually provided, otherwise the precautionary measure would be dismissed, exposing the arresting party to potential wrongful arrest claim, loss of suit expenses and other risks.
• In most cases, vessels’ owners may either try to challenge the arrest order before the Brazilian court or, alternatively, either offer security (through a bank guarantee, cash deposit or even a Club Letter of Undertaking (LOU) if accepted by the claimants) or offer a settlement, therefore avoiding the need for arbitration.

In conclusion, pre-arbitral judicial intervention can emerge as an essential procedural tool for maritime claims, bridging the gap between Brazil’s restrictive jurisdictional framework and the practical needs of international claimants.

By enabling limited, targeted relief, this mechanism strengthens the Brazilian legal system’s responsiveness to the realities of global shipping and cross-border commercial obligations, while respecting both the sovereignty of the national judiciary and the autonomy of parties when contractually choosing an arbitration clause.