Gravelor Shipping Limited v GTLK Asia M5 Limited & Anor
[2023] EWHC 131 (Comm)
O v C
8 November 2024
[2024] EWHC 2838 (Comm)
High Court
A ship carrying cargo got stuck because of US sanctions. The court ordered the cargo to be sold, but there was a debate on where the money should go. Because the risk of getting into trouble with the US was deemed low, the court said to put the money in a UK court account, making it easy to decide who gets it later.
Key Facts
- •Arbitration claim under section 44 of the Arbitration Act 1996 concerning a cargo of naphtha blocked due to US sanctions.
- •Cargo has been on board the vessel for over 20 months due to Charterers being added to the US SDN List.
- •Owners sought an order for cargo sale and payment of proceeds into a blocked US account, which was initially opposed by Charterers.
- •Charterers subsequently only opposed payment into a US blocked account.
- •A third party, B, claims ownership of the cargo based on an alleged sale contract, which a Malaysian court deemed a sham.
- •Owners are a Liberian company, a wholly-owned subsidiary of a US company headquartered in New York.
- •Expert opinions on US sanctions law conflicted.
Legal Principles
The court's ability to order a party to act contrary to foreign law, including criminal law.
Akhmedova v Akhmedov [2020] EWHC 2235 (Fam), Bank Mellat v HM Treasury [2019] EWCA Civ 449, Joshua & Ors v Renault SA & Ors [2024] EWHC 1424 (KB), Tugushev v Orlov [2021] EWHC 1514 (Comm), Public Institution for Social Security v Al Wazzan [2023] EWHC 1065
In deciding whether to grant an interlocutory injunction (applied analogously here), the court considers the seriousness of the risk, adequacy of damages, and adequacy of cross-undertakings.
American Cyanamid v Ethicon Limited [1979] AC 396
When ordering a sale, the court considers all factors comprehensively.
The Governor and Company of the Bank of Scotland v Neath Port Talbot Borough Council [2006] EWHC 2276
The court must determine whether there is a 'real' (not 'fanciful') risk of prosecution under US sanctions.
Bank Mellat, Tugushev, Renault
Outcomes
The court ordered the sale of the cargo.
The continued presence of the cargo on the vessel is prejudicial to the Owners, and a sale preserves its value and allows the vessel to be used profitably. The court found that the risk of prosecution for non-compliance was low and the potential benefits outweighed the risk.
The court ordered that the proceeds of sale be paid into court.
Despite the risk of breaching US sanctions, the court determined that this risk was low, and the importance of ensuring the proceeds are available for the party entitled to them (as determined by the arbitration) outweighed this risk. Paying the proceeds into court simplified the process of enforcing the arbitration award.