Attorney Gil Nadel, Gilad Paz
In matters of import and export one may often encounter a marine carrier, his agent or an international forwarder, who will retain possession of goods and refuses to grant a release statement due to financial debt. For instance, if a sender did not pay the conveyance fee of that shipment, bringing the forwarder to refuse to release the shipment. Or, another scenario might be that the sender owes money for previous shipments, and the forwarder holds back a current shipment (whose conveyance fees have been paid) as "hostage".
As mentioned above, this is an action that one may encounter in practice, however this does not mean that this is legal. So what does the law say on this matter?
Recently, a decision was made in the District Court of Haifa on this matter, but before we review this decision, we shall first explain what lien is. Lien is the right to self-support- a manner of self-assistance that was meant to allow a creditor to implement his right against the debtor on his own without any need for litigation. This is, in fact, a sort of collateral at the disposal of the creditor. The creditor has the right to withhold the debtor's asset that is in the creditor's possession (and to refrain from handing it over to its owner), so as to pressure him into paying his debt. Furthermore this can be done without any need for a court order. And yet, there is a general opinion that in order to put this withheld asset into action (to sell it for the sake of paying a debt) this necessitates a court order. Withholding an asset without court approval- yes. Selling the asset- no.
The right of lien is given to the creditor in one of two ways: 1. By right of law. 2. By the power of contract.
Lien by right of law:
Clause 5 of the Law for Contractor Contracts determines that "a contractor has right of lien over an asset that was given to him by the client for the sake of carrying out his work or providing his services, for payments that are owed to him for the contractual work provided". An importer who has entered a business deal with a carrier by contract- constitutes a contractual deal and the merchandise that is delivered to the carrier/forwarder for shipment is in effect an asset that was handed over to the contractor for providing his services and in such this asset is given to lien. According to law, lien will be applicable only for receiving the conveyance fees for that merchandise and not for other shipments, and the carrier/forwarder cannot withhold the merchandise for the sake of receiving payment for previous debts.
The contract law (remedies for breach of contract)- "if a party that has suffered damages by contract has received an asset of the party that has breached said contract and this asset must be returned to its owner, the damaged party has right of lien over this asset for the sake of receiving payment for the sums owed to him by the party that has committed the breach." Even the contract law states that there must a connection between the deal in which the debt was created, and the deal in which the assets came into the possession of the creditor.
Clause 11(a) of the Chattels Law determines that: "lien is a legal right for withholding chattels as guarantee for payment until the debt has been settled."
We would like to stress once again: the right of lien is applicable according to the provisions of the Law for Contractor Contracts or the Contract Law for the sake of guaranteeing the payment of fees that are owed only for the specific "contractual deal", only for the "breach" of the payments for a specific shipment deal (notice the wording of the law!). If an importer does not pay conveyance fees for a cargo shipment from August 2003, and then orders another shipment in January 2004, the carrier/forwarder cannot withhold this new cargo on account of the debt on the old cargo.
Lien by the power of contract:
Secondly, the carriers or the international forwarders may refer to the aid of the contractual lien. This means that it is possible by law for the parties to create a means of lien within the contract that is signed between them. This means can determine that the carrier/forwarder has right of lien over the importer's/exporter's assets in his possession for any debt that the importer/exporter may owe the carrier/forwarder. This gives the carrier/forwarder a wide berth for maneuvering and releases him from the restriction of the lien provisions as determined by law. The contract is required to be clear, explicit and in writing. Lien by contract cannot cover all the possible scenarios, but it can allow the carrier/forwarder to withhold new cargo because of a debt on old cargo.
A case that was recently tried in court:
The case:
An international forwarder handled a shipment of cargos to Israel, and additionally, granted the importer, Avkor 10 (2009), credit (a loan) for NIS 135,000 for use in cargo importation.
The importer encountered financial difficulties and remained indebted to the international forwarder and owed money to many other creditors. The international forwarder claimed that he had right of lien on the cargo that he had imported for the importer to Israel for the sake of the money owed to him, and therefore, the forwarder claimed its status to be that of a secure creditor.
The international forwarder requested to establish the right of lien on a written contract that was signed between Av Kor Ltd, a sister-company of Avkor 10 (2009), and between a sister-company of the international forwarder, where a right of lien was determined. The international forwarder claimed that he and Avkor 10 had also agreed (verbally) to follow that same contract.
In addition, the forwarder claimed right of lien by the power of clause 5 of the Law for Contractor Contracts, since the shipment was delivered to the international forwarder so that he may provide his services, and the debt owed is tied directly to that shipment.
Court ruling:
Regarding the contractual lien:
The court determined that the international forwarder was unable to establish his claim for lien by right of contract. The court repeatedly stressed that lien by contract must be explicit and in this case there is no written contract between the international forwarder and the indebted company with a clause of lien.
The court determined that it is not possible to automatically correlate between the contract signed between the sister companies and the nature of the deal between the international forwarder and the indebted company.
Regarding the lien by law:
The court also deferred the claim made by the international forwarder for right of lien on the basis of clause 5 of the Law for Contractor Contracts. The court determined that the majority of the debt stems from a credit deal (a loan0 which does not necessarily have anything to do with the current shipment, and therefore there is no direct connection between the debt and the shipment for which they are claiming right of lien.
On a side note the court deffered the claim made by the Turkish supplier, which claimed that the ownership of the shipment that arrived in Israel remains in his hands and has not been transferred to the importing company.
Likewise, the court charged the international forwarder with legal fees of NIS 8,000.
[Liquidation (District Court of Haifa) 51618-11-11 Kotler (executor) vs. Avkor 10 (2009) Ltd. and others, in the District Court of Haifa, Judge Alex Ceasari, decision of September 13, 2012. Party representatives were not mentioned].
A previous case from December 2011:
In a verdict given in late 2011 in the Magistrates Court of Haifa the court accepted a marine carrier's claim to right of lien by contract (the marine bill of lading), not only for this specific shipment but also for previous debts. In this case, the right of lien in the bill of lading was comprehensively phrased as follows:
"The carrier shall have a lien on the goods and any documents relating thereto for all sums payable to the carrier under this contract and for general average contributions to whomsoever due. The carrier shall also have a lien against the merchant on the goods and any document relating thereto for all sums due from him to the carrier under any other contract…"
[Civil suit (Magistrates Court of Haifa) 2832-02-09 Damco Logistics Israel Ltd. vs. Nazareth Metal Trades Ltd., verdict as of December 21, 2011, Judge Nasrin Adui. Party representatives: on behalf of the prosecutor- Attorney S. Friedman. On behalf of the defendant- Attorney Shalufa and/or Y. Grave].
Notes:
The right of lien by law gives the creditors much power, and allows them to greatly pressure the debtors into paying off their debt, without taking any legal action.
When a company is under liquidation, the right of lien bears additional significance in that the creditor who possesses the right of lien is considered a secure creditor, and his status as such is preferable over creditors that are not secure, since he is entitled to receive the money owed to him from the return that is received from the sale of the asset in lien.
עדכוני מכס ורגולציה
