OCM Maritime Nile LLC v Courage Shipping Company
| Jurisdiction | England & Wales |
| Judge | Sir Andrew Smith |
| Judgment Date | 04 March 2022 |
| Neutral Citation | [2022] EWHC 452 (Comm) |
| Docket Number | Case No: CL-2021-000501 |
| Court | Queen's Bench Division (Commercial Court) |
Sir Andrew Smith
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Case No: CL-2021-000501
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Robert Bright QC, Charles Holroyd (instructed by Reed Smith LLP) for the Claimants
Graham Dunning QC, Chris Smith QC, Claudia Wilmot-Smith (instructed by Rosling King LLP) for the Defendants
Hearing dates: 19, 20, 24, 25 and 26 January 2022
Introduction
The Claimants are incorporated in the Marshall Islands, and are ultimately beneficially owned by investment funds managed by Oaktree Capital Management LP (“Oaktree CM”), a Delaware limited partnership with headquarters in California, United States of America. The First Claimant, OCM Maritime Nile LLC (“OCM Nile”), is the owner of the vessel “Courage”, and the Second Claimant, OCM Maritime Kama LLC (“OCM Kama”), owns the vessel “Amethyst”. They are represented in these proceedings by Mr Robert Bright QC and Mr Charles Holroyd, instructed by Reed Smith LLP (“Reed Smith”).
The Defendants are also incorporated in the Marshall Islands. Before June 2021, their shares were legally and beneficially owned by Mr Abdul Jalil Mallah (“Mr Mallah”), a Syrian national, apparently resident in Greece, who was also their sole director. They were represented by Mr Graham Dunning QC, Mr Chris Smith QC and Ms Claudia Wilmot-Smith, instructed by Rosling King LLP (“Rosling King”).
During the trial, with effect from 20 January 2022, the Third Defendant, Oryx Shipping Limited (“Oryx”), was dissolved. Rosling King and the Defendants' counsel learned this on 24 January 2022, and Mr Dunning informed me when the Court sat on 25 January 2022. At that time, those acting for the Defendants had not been able to take advice about the effect of dissolution under the law of the Marshall Islands. I therefore told the parties that I would decide in this judgment the issues between the Claimants and the first two Defendants, Courage Shipping Co (“CSC”) and Amethyst Venture Co (“AVC”), and deal with the position of Oryx when I deliver this judgment and in light of my conclusions in it. There was no objection to this.
By an agreement made between Oaktree Maritime Finance I LLC (“Oaktree Maritime”) and Oryx on 12 July 2019, Oaktree Maritime offered, and Oryx accepted, terms on which Oaktree Maritime would provide finance for the acquisition of bulk carriers to be owned by single purpose companies wholly owned by Oaktree Maritime and to be chartered to companies controlled by Oryx. Oaktree Maritime was to provide up to half of the purchase price of the vessels (or, if lower, 60% of the appraised value of the broker at delivery). It was provided that each charter should be “a ‘Hell or High Water’ bareboat charter incorporating the terms of [the letter], based on Barecon 2001 terms”, with a charter period of 25 months from delivery. The letter provided that the charter hire included a fixed element, designed to cover the capital provided by Oaktree Maritime, and a floating element, designed to cover interest at the rate of 7.5% above one-month LIBOR. The charters were also to provide the charterers with an option to purchase the vessels at any time during the charter period, and to be under an obligation to purchaser on the last day of the charter.
By a bareboat charterparty dated 5 November 2019, OCM Nile chartered the bulk carrier “Courage” to CSC, and by a bareboat charterparty dated 18 February 2021, OCM Kama chartered the bulk carrier “Amethyst” to AVC. By letters to OCM Nile dated 13 November 2019 and to OCM Kama dated 18 February 2021, Oryx entered into certain undertakings relating to the respective charterparties, having been appointed as the “Approved Manager” under them, and being nominated as the “commercial, technical and/or operational manager” of the vessels by CSC and AVC.
Under the charterparties, the vessels were demised to the charterers, so that possession and control was given to the charterers, who were responsible for, inter alia, maintenance of them, crewing and insuring them; and, as contemplated in the agreement of 12 July 2019, the charterers were given an option to buy the vessels during the charterparties and were obliged to do so at the end of the charter period.
On 10 June 2021, the United States authorities designated Mr Mallah a “Specially Designated Global Terrorist” (“SDGT”) under Executive Order 13224 of 23 September 2001 (“EO 13224”), and he was included on the “Specially Designated Nationals and Blocked Persons List” (“SDN List”). His property and property interests were “blocked”, and, being owned by Mr Mallah, the Defendants' assets were also blocked. According to a press release of the US Treasury, Mr Mallah was associated with Mr Sa'id al-Jamal, who was himself designated for having materially assisted or supported Iran's Islamic Revolutionary Guard Corps-Qods Force (“IRGC-QF”): the press release said that, at Mr Sa'id al-Jamal's direction, Mr Mallah had facilitated transactions with a Yemen-based exchange house used by Mr Sa'id al-Jamal to send US dollars to IRGC-QF officials in Yemen; and that Mr Mallah had facilitated the shipment of Iranian crude oil to Hezbollah. I am not in a position to decide whether or not any of these allegations or any of the concerns about Mr Mallah that led to his designation are true, and I express no view about them.
The Claimants say that, when and after Mr Mallah was so designated, various “Events of Default” under the charterparties occurred, whereby they were entitled to terminate the charterparties. They served Notices of Events of Default in respect of each charterparty dated 18 June 2021, 19 July 2021 and 26 August 2021, and they claim that they were entitled to take possession of the vessels. In fact, on about 1 September 2021 OCM Kama obtained possession of the “Amethyst”, which is (or until recently was) in Sharjah, United Arab Emirates (“UAE”), but OCM Nile has not obtained possession of the “Courage”, which is at Latakia, Syria.
The Claimants seek declarations that the charterparties have been lawfully terminated and that they are entitled to possession of the vessels. In the case of the “Amethyst”, OCM Kama seeks a declaration that it is under no liability to AVC or to Oryx in respect of having re-possessed her. Both Claimants also seek damages from all the Defendants.
The Defendants admit that Events of Default occurred under both charterparties (although they do not admit all the Events of Default alleged by the Claimants), but deny that the Claimants are entitled to possession of the vessels. First, they contend that, despite the admitted Events of Default, on the proper construction of the charterparties, the Claimants are not entitled to possession (the “Construction Defence”). Secondly, they submit that the Claimants' claim for possession relies on provisions that are penal, and so void and unenforceable (the “Penalty Defence”). Thirdly, they bring a counterclaim for relief from forfeiture by way of (i) restoration of the charters, or (ii) restitutionary relief in respect of payments made to the Claimants.
The Trial
The proceedings were issued on 23 August 2021. On 24 September 2021, Andrew Baker J ordered that the trial be expedited to take place in January 2022. The trial was held remotely on 19, 20, 21, 24 and 26 January 2022.
The Claimants called to give evidence Mr Henry Orren, a Senior Vice President at Oaktree CM, and Mr Martin Hugger, the Managing Director of Meerbaum Capital Solutions Inc (“Meerbaum”), which provides investment advice to Oaktree CM. They put in evidence a statement of Mr Christos Mangos, the Chief Executive Officer of Interunity Management Corporation SA (“Interunity”), which manages ships and provides advice and technical assistance on maritime matters, and which was appointed by the Claimants in July 2021 to assist them to trace the whereabouts of the “Courage” and the “Amethyst”. The Defendants had the opportunity to cross-examine Mr Mangos but chose not to do so.
The Claimants put in evidence under the Civil Evidence Act, 1995 (i) a statement of the Master of the “Amethyst”, Capt Tirso Subaan Jr, made on 29 August 2021, together with a supplemental statement of 30 August 2021; and (ii) a statement of Theophanis Manaikas, who conducted a surveillance exercise between October and December 2021 on behalf of the Claimants. The Claimants also relied, for limited purposes, on statements made in interlocutory proceedings by Mr Charles Weller, a partner in Reed Smith.
The Defendants adduced no evidence of fact.
Both parties called expert evidence of United States sanctions law. The Claimants' witness was Mr Adam M. Smith, who is a partner in the Washington DC office of Gibson, Dunn & Crutcher LLP, and who served for some four years as the Senior Advisor to US Department of the Treasury's Office of Foreign Asset Control (“OFAC”), which is charged with administering, implementing and enforcing the GTSR and EO 13224. The Defendants' expert witness was Mr Simon Harter, who is a member of the Bar of the States of New Jersey, New York and Connecticut, and who, after practising as a partner at Healy & Baillie LLP in New York City, founded his own firm in 2001. Both were impressive witnesses and gave helpful evidence, and they were almost entirely in agreement. Where they differed, I prefer the evidence of Mr Smith, whose experience with OFAC gave his evidence particular weight on some questions.
The Terms of the Charterparties
As was contemplated by the agreement of 12 July 2019, the charterparties of both the “Courage” and of the “Amethyst” are...
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