No Shortcuts:
Closing the Procedural Bypass for Wrongful Arrest Damages

The Court of Appeal in The Alkyon has confirmed that the path to claiming damages for wrongful ship arrest remains exceptionally narrow. While acknowledging that the court has the discretionary power to require an arresting party to provide a cross-undertaking in damages, it firmly rejected a procedural “bypass” of the established principles in the absence of a comprehensive, industry-informed challenge. The decision shuts the door on ad-hoc attempts to reform the practice, while simultaneously providing a clear roadmap for how such a change could be properly brought in the future.

In English admiralty law, a claimant with a valid in rem claim has the powerful ability to arrest a ship “as of right,” provided all procedural requirements are met. This fundamental principle is reinforced by two others: first, a shipowner can only claim damages for losses caused by an arrest if the claimant’s case fails and the owner can prove the claimant acted with malice or gross negligence implying malice. The courts have acknowledged that this rule, established in The Evangelismos (1858) 12 Moo PC 352 (PC), is capable of bearing harshly on a shipowner left without a remedy for a substantial loss, as pointed out in The Kommunar [1997] 1 Lloyd’s Rep 2. Second, while the court has the discretion to release an arrested vessel, the settled practice is to do so only when the owner provides security for the claim or in cases of an abuse of process.

The Challenge in The Alkyon

The court’s discretion under CPR 61.8(4)(b) over the release of a vessel creates a point of legal tension: could a court use this power to impose a counter-condition on the claimant? This very question was tested in the case of The Alkyon [2018] EWCA Civ 2760.

In this case, a mortgagee-bank arrested a vessel, alleging a default on its loan. The owner, rather than providing alternative security, applied for the vessel’s release under the court’s discretion. They asked the court to make the continued arrest conditional on the bank providing a cross-undertaking in damages, similar to the protection offered to defendants in cases involving freezing injunctions.

The Legal Arguments

This application created a tension with the foundational principles of arrest. The court acknowledged that forcing the bank to provide an undertaking would indirectly undermine the established rules that arrest is a matter of right and that damages for wrongful arrest require a high threshold of proof.

The Owner’s Position: The owner argued that the high bar for wrongful arrest claims, established in The Evangelismos, was a historical relic. At that time, arresting a vessel was necessary to commence a claim, so the rule was needed to protect claimants from retaliatory damages just for bringing a case. Today, however, an in rem claim is commenced by issuing a claim form, making the original rationale obsolete. The court did not dismiss these historical arguments.

The Bank’s Position: The bank contended that such a significant change to the law was a matter for the legislature, the Rules Committee, or the Supreme Court, a view that Teare J at first instance accepted.

The Court of Appeal’s Decision: An Immediate Rejection and a Future Roadmap

The Court of Appeal disagreed with the bank’s procedural argument. It held that a first-instance court does have the power to impose a cross-undertaking as a condition of maintaining an arrest. This is because it is an exercise of discretion regarding the release of the vessel, which does not directly contradict the claimant’s initial right to arrest or the established test for wrongful arrest damages. The court found support for this judicial power in the Singapore Court of Appeal case of The Vasiliy Golovnin [2008] SGCA 39. In doing so, the court clarified that the precedent set in The Bazias 3 and Bazias 4 [1993] 1 Lloyd’s Rep 101 (CA) – that security is required for a vessel’s release – referred the “usual practice,” not an “invariable” one.

However, despite possessing this power, the Court of Appeal found that the judge had been right to refuse to exercise it in this case, in line with long-established practice. The court was not in favour of making such a significant “overnight change” when this was not an unusual or exceptional case like The Tjaskemolen (No. 2) [1997] 2 Lloyd’s Rep 476. Instead, it endorsed the position taken in The Vasiliy Golovnin: a court could consider such a change in the future, but only after receiving “full argument from counsel and the submissions of other interested stakeholders in the maritime community in the form of Brandeis briefs”. The judgment therefore provides a clear roadmap for any future, evidence-based challenge, while firmly rejecting any attempt to bypass the established principles without one.