The 'MOSCOW STARS' – Charterers Challenge Court's Power To Sell Cargo In Arbitration Dispute

In a recent case1, the High Court was asked to determine the scope of the court's jurisdiction to sell cargo, an issue which was pertinent to an arbitration dispute over unpaid hire and other outstanding sums. In the process, the Court had to examine the wording of section 44(2)(d) of the Arbitration Act 1996 which sets out the Court's power to make an order for sale, and reviewed both the jurisdictional requirement of "good reason" for a sale under CPR 25.1 and the discretionary considerations.

Background

On 14 October 2016, the crude oil tanker "MOSCOW STARS" (the Vessel) was loaded in Puerto La Cruz, Venezuela, under a time charter between the claimant, owner of the Vessel, and the respondent charterer. The Vessel was ordered to discharge the cargo in Freeport, Bahamas.

Owing to repeated historic failures by the charterer to make payment of hire fees, the owner served notice of its exercise of a lien over the cargo, in October 2016, and again in November 2016, after which, at the order of the charterer, the laden Vessel sailed to Bullen Bay, Curaçao,.

The owner, subsequently, commenced arbitration in London against the charterer in respect of overdue hire fees, and other outstanding sums, totalling approximately USD7.7 million. In December 2016 and January 2017, whilst the cargo was subject to the contractual lien, it also became subject to arrest by the owner and other companies in the same corporate group (Sovcomflot) as security, following leave from the Curaçao Court

The owner then applied for an order to sell the cargo pursuant to section 44 of the Arbitration Act 1996, having received prior permission from the arbitral tribunal. The application was considered in the High Court before Mr Justice Males. The principal money claim had previously been heard by the arbitral tribunal and it was undisputed that any award, if granted, would likely take many months to enforce.

The issues

The three reasons submitted by the charterer for the dismissal of the application for an order to sell the cargo, were as follows:

the Court did not have jurisdiction to order the sale of the cargo under section 44(2)(d) of the Arbitration Act 1996 (the Act); even if that power existed, it must be exercised within the scope of CPR 25.1(c)(v), the requirements of which were not met in the present case; and in any event, the Court should not grant the order in the circumstances. Court jurisdiction

Section 44 of the Act sets out that the Court has, for the...