The English High Court recently confirmed when it will order the sale of liened cargo which is the subject of arbitration proceedings.

An owner's lien on cargo does not typically afford it the right to sell the cargo in order to satisfy debts due from charterers. However, in the recent Moscow Stars(1) decision the English High Court confirmed that it has the power to order the sale of cargo pursuant to Section 44(2)(d) of the Arbitration Act 1996 when cargo is deemed to be "the subject of the [arbitration] proceedings".(2)

In Moscow Stars, the owners had commenced arbitration proceedings against time charterers for unpaid hire and had exercised a contractual lien over the cargo belonging to the time charterer as security for the claim. The owners subsequently applied to the High Court for sale of the cargo to satisfy the time charterers' debts. The court held that the exercise of a contractual lien over the cargo in support of the claim in arbitration constituted a sufficient nexus between the cargo and the arbitral proceedings, such that it could exercise its power to order the sale of the cargo.

This decision may be of interest to shipowners that are faced with a situation in which cargo belonging to a charterer remains on board a vessel for a long period without the owners receiving hire, while still incurring operating costs.

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For further information on this topic please contact Chris Grieveson or Julia Skisaker at Wikborg Rein by telephone (+44 20 7367 0300) or email (cjg@wrco.co.uk or jsk@wrco.co.uk). The Wikborg Rein website can be accessed at www.wr.no.

Endnotes

(1) Dainford Navigation Inc v PDVSA Petroleo SA (Moscow Stars) 2017 EWHC 2150 (Comm).

(2) Section 44(2)(d) of the Arbitration Act 1996.