Admiralty procedure—bunkers supplied to ship—whether settlement of in personam action against time charterer extinguished bunker supplier’s maritime lien

The plaintiff, a Swiss bunker supplier, contracted with the time charterer of Yasa H Mulla to provide bunkers to the ship in Las Palmas, Spain. The time charterer did not pay for the bunkers and later opened bankruptcy proceedings in Switzerland. The plaintiff filed a claim in the bankruptcy proceedings and later settled with the time charterer, which paid some, but not all, of the sum agreed in the settlement agreement. The plaintiff then filed in rem proceedings against Yasa H Mulla in the US District Court for the Eastern District of Virginia and had the ship arrested, claiming that it had a maritime lien for the outstanding amount of the debt. The district court denied the ship’s motion to vacate the arrest, concluding that the settlement agreement did not extinguish the plaintiff’s right to a maritime lien. For the same reason, the court granted the plaintiff’s motion for summary judgment. The ship appealed to the US Court of Appeals for the Fourth Circuit.

Decision: Appeal dismissed.

Held: (1) The ship conceded that the plaintiff was initially entitled to a maritime lien under the Commercial Instruments and Maritime Liens Act (CIMLA) because the plaintiff supplied necessaries (bunkers) to the ship on the order of a person (the time charterer) presumed to have authority to bind the ship.2

(2) The settlement agreement in the Swiss bankruptcy proceedings was between the plaintiff and the time charterer. Although it did not specifically purport to preserve the plaintiff’s right to a maritime lien, it did not need to do so in order for the lien to continue to be effective. The ship was not party to the settlement agreement, so the plaintiff did not need to reserve its right to proceed against the ship.

(3) The plaintiff’s in rem claim was based on the statute (CIMLA), not its initial contract with the time charterer, nor the settlement agreement between the plaintiff and the time charterer. Maritime liens cannot be created by agreement of the parties but arise by operation of law. The plaintiff was entitled to pursue both an in personam claim against the