CARGO CONSIDERATIONS - owners’ lien on cargo

In another cargo-related development, the English High Court has confirmed when it will order the sale of liened cargo which is the subject of arbitration proceedings.

Owners’ lien on cargo ­typically does not afford an owner the right to sell the cargo in order to satisfy debts due from charterers. However, in a recent decision in The Moscow Stars (Dainford Navigation Inc v PDVSA Petroleo SA (The “Moscow Stars”) [2017] EWHC 2150 (Comm)) the English High Court confirmed that it has the power to order 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”.

In the case, owners had commenced arbitration 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. 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 sale of the cargo.

This decision may be of interest ­particularly to owners who may be faced with a situation where cargo belonging to a charterer remains on board a vessel for a long period of time without ­owners receiving hire, whilst still incurring operating costs.