In 1910 Congress passed the Federal Maritime Lien Act to encourage growth in the merchant marine industry and attempt to create a unified theory among maritime liens. However, maritime liens remain complex and unique entities, based on a mix of both federal statutes and case law. Whereas traditional leans are attached to a property, in a maritime lien—with the exception of preferred ship mortgages—the vessel is considered a legal entity itself and one that may owe obligations under maritime law.
Maritime liens are not created consensually and do not require that they are recorded or even filed.
The Purpose of a Maritime Lien:
The purpose of the maritime lien is to allow lenders and suppliers to extend credit to vessels without being concerned that the ship will simply leave port and flee with the goods.
Generally speaking, maritime liens tend to arise out of a certain type of maritime accident or transactions such as:
- Salvage liens
- Liens for wages, maintenance, and cure for seaman
- Tort liens, which cover damage to cargo or from collisions
Should these conditions arise a lien becomes attached to the vessel.
Due to the fact that vessels are considered legal entities, they may also be “arrested”. When a vessel is arrested it is called an “action in rem”. This action can only be brought against a property that is subject to a maritime lien. The enforcement of such is brought about through the seizure of the property.
To negate a maritime lien several conditions must be satisfied including:
- Payment of any underlying claim
- The expiration of any applicable statute of limitation
- Sale of the vessel in a foreclosure action in United States district court (however, outside of a foreclosure action the lien is not dismissed by the sale of the vessel)
Additionally, vessels under construction or ones that have been permanently decommissioned are not eligible for a lien. A vessel must be “in navigation” for a lien to be asserted against it.