P&I Club Letters of Undertaking, Bank Guarantees and Counter-Security in Egyptian Ship Arrest

Egyptian practice concerning security in ship arrest proceedings differs from that of certain other maritime jurisdictions. It is important to distinguish between security provided to obtain the release of an arrested vessel and counter-security that may be required from the arresting creditor.

Are P&I Club Letters of Undertaking accepted for vessel release? A P&I Club Letter of Undertaking (LOU) is not accepted by the Egyptian courts as substitute security for the judicial release of a vessel from precautionary arrest. In Egyptian court practice, the security used to obtain release is an acceptable bank guarantee, and shipowners, P&I Clubs and foreign counsel should not assume that a Club LOU — even where routinely accepted in another jurisdiction — will be sufficient to release an arrested vessel in Egypt.

The amount, wording, validity, and demand and expiry provisions of the bank guarantee should be carefully reviewed before the vessel is released.

Is counter-security required from the arresting creditor? Under Egyptian law, a precautionary arrest order may be issued with or without requiring the arresting creditor to provide security. In practical ship arrest proceedings, arrest orders are ordinarily issued without requiring counter-security from the arresting creditor, subject to the discretion of the competent court and the circumstances of each case.

Soliman Advocates handles ship arrest and release proceedings, including the review of bank guarantees and coordination with shipowners, P&I Clubs, banks, ship agents and relevant port authorities, drawing on the firm’s practical experience before the Egyptian Economic Courts. Where a vessel is under arrest in Egypt, early assessment of the arrest order and prompt arrangement of acceptable security can be critical to reducing the vessel’s detention time.