Court Orders Sale Of Non-Perishable Cargo Before Arbitrators Have Determined Rights To Sell

In Dainford Navigation Inc v PDVSA Petroleo SA; 'Moscow Stars' [2017] EWHC 2150 (Comm), Judge Males was asked to order the sale of a non-perishable cargo to compensate a ship owner for non-payment of the charter in support of an arbitration but before the arbitrators had determined whether the owner had a right to sell. He decided that he had a discretionary power to order the sale and in deciding to order a sale he spelt out the criteria he took into account when considering how to exercise his discretion.

Background

The Claimant, owner of the vessel "Moscow Stars", entered into a time charter with PDVSA, the Venezuelan state-owned oil and gas company. The vessel was loaded with cargo (crude oil), owned by the Defendant, on 14 October 2016 at Puerto La Cruz (Venezuela) and proceeded to Freeport (Bahamas).

When the charterer failed to pay the hire charges, the ship owner exercised a lien over the cargo and started an arbitration to recover the charges due. The owner then asked the arbitrators to order the sale of the cargo so as to be paid from the proceeds. The arbitrators decided that while section 38 of the Arbitration Act 1996 gave them power to make orders to preserve goods, it did not give them power to order the sale of the goods.

Court power

However, as the courts enjoy wider powers in support of arbitral proceedings, the arbitrators granted the owner permission to apply to the English High Court. Males J heard that application and first had to decide whether he had any jurisdiction as section 44 of the Arbitration Act 1996 gives the court powers exercisable in support of arbitration, including the power to order the sale of the cargo, if it was 'the subject of the arbitral proceedings'.

With reference to the Singaporean judgment in Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, Males J concluded that there was a sufficient nexus between the cargo and the arbitral proceedings, as the Claimant had exercised a lien over the cargo in support of the arbitral claim.

Discretion

Males J decided that the power to order a sale was discretionary so he would have to decide how to exercise that discretion. He found that there were three principal arguments against ordering a sale.

First, there was the fact that ordering a sale before the arbitrators had decided the merits would deprive the Defendant of its ownership of goods against its will before the Claimant's right had been established. Secondly, as section 44(1) of the...