About the Author
Peter Hirst, Partner
Peter has arbitrated and litigated in more than 50 international jurisdictions, from the Far East, Middle East, Central Asia, North Africa, US and South America where he has wide variety of experience in all arbitral institutions and areas of commercial law. Peter is a fellow of the Indian Counsel of Arbitration and registered foreign lawyer of the Brazilian Bar (OAB).
Peter sits as an arbitrator and mediator and as well as being an accredited CEDR mediator is a Fellow of the Chartered Institute of Arbitrators.
35 ReSolution | Nov 2017
-by Sarah Redding
The English High Court recently considered its jurisdictional power in support of arbitral proceedings under section 44 of the Arbitration Act 1996 to order the sale of cargo as goods ‘the subject of the proceedings’.
Background
In early 2016, PDVSA Petróleo S.A (‘PDVSA’) entered into a time charter agreement with Dainford Navigation Inc. (‘Dainford’). The charter was for the transport of crude oil by PDVSA on board Dainford’s vessel the “Moscow Stars”, and was one of 14 charters between PDVSA and other companies within a state-owned Russian shipping group.
Dainford alleged repeated failures by PDVSA to pay time charter hire since January 2016, culminating in an outstanding balance of approximately US $4.5 million by October 2016. As a result of PDVSA’s continual non-payment of charter hire, between October and November 2016 Dainford gave notice twice of its exercise of a lien over the cargo on board the Moscow Stars. In December 2016 and January 2017, PDVSA made payments towards the hire, but these were insufficient to clear the substantial arrears. With charter hire overdue and cargo still on the vessel, PDVSA continued to accrue the charter rate of US $29,000 per day as further debt owing to Dainford. No further payments by PDVSA were made.
Dainford commenced arbitration in London pursuant to the parties’ agreement in an attempt to recover the US$7.7 million it claimed was owing. Incurring the usual costs of running the vessel while it remained moored subject the lien, Dainford sought and obtained permission from the arbitral tribunal under section 44 of the Arbitration Act 1996 to apply to the High Court for an order for sale of the cargo. Dainford sought payment from the proceeds given the cargo had been on board the Moscow Stars for over nine months and there were no reasonable prospects of resolution. Eleven other companies in the same state-owned Russian group also had similar claims against PDVSA under different charters.
In referring Dainford’s application to the High Court, the arbitral tribunal determined that their power to “preserve goods” under section 38 of the United Kingdom’s Arbitration Act 1996 did not extend so far as to order the sale of goods. PDVSA opposed the application.
At the time the High Court considered the application, the arbitral tribunal had not determined the award.
Mangatu then sought leave to appeal to the Court of Appeal against that judgment, on grounds including that the judgment failed to identify any error of law in the damages award, and wrongfully concluded that the arbitrator had pre-determined damages. Mangatu also sought permission to adduce further evidence relating to the arbitrator’s actions following the previous damages appeal decision, in support of its application for leave to appeal.
Case in Brief
Dainford Navigation Inc v PDVSA
Petróleo SA ‘Moscow Stars’
[2017] EWHC 2150 (Comm)