On 9 September 2024, the Arbitrazh Court of Primorsky Krai considered the case on the claim of OOO MORIA (Russia) (Plaintiff) against Steker Limited (Ireland) (Defendant) to amend the bareboat charter agreement, to recognize the right of ownership of the vessel and to oblige the state registration of the vessel.
The case was considered with the participation of third parties OOO AVIA Capital and the captain of the seaport of Vladivostok V.A. Burda.
Facts:
In 2021, the Defendant acquired the vessel Sayan Knyaz from the Plaintiff. At the same time, the parties entered into a bareboat charter agreement, according to which the Plaintiff would buy the vessel within 12 months by exercising the option.
In the bareboat charter agreement, the parties chose English law and the Hong Kong International Arbitration Centre as the place of dispute resolution.
The vessel was registered with the RMRS (Russia) based on the permission of the Republic of Cyprus.
The Defendant is a 100% subsidiary of persons included in the EU sanctions lists. In 2022, the Defendant's assets were completely frozen and fell under European sanctions. The Defendant was unable to accept payments under the bareboat charter and dispose of the property.
In 2023, Cyprus did not agree to extend the vessel's registration with the RMRS. Then the RMRS refused to extend the vessel's registration due to the lack of consent from the Defendant and the Cypriot authorities.
The position of the parties:
The Plaintiff demanded to change the procedure for executing the bareboat charter agreement, to accept execution through the Defendant's beneficiary, OOO AVIA Capital.
The Plaintiff stated that the Russian court has exclusive jurisdiction to hear the dispute and that English law should not be applied.
He stated that the arbitration clause for the consideration of the dispute in Hong Kong is unenforceable due to sanctions restrictions. He stated that English law does not provide for the possibility of changing the contract and that English law is contrary to Russian public policy (clause 1 of Article 1193 of the Civil Code of the Russian Federation).
The Defendant did not participate in the case and did not refute the Plaintiff's position.
The court's decision and reasons:
The Court satisfied the claim.
The only way to protect the Plaintiff's rights to continue operating the vessel in accordance with the bareboat charter agreement is to exercise the option and the subsequent acquisition by the Plaintiff of the right of ownership of the vessel together with the transfer of the corresponding purchase price established in the Bareboat Charter Agreement to the account of OOO AVIA Capital.
OOO AVIA Capital is a Russian company that effectively controls the Defendant through its shareholding in its parent company, registered in the Republic of Cyprus. Transferring all funds due under the bareboat charter agreement to it in a Russian bank will allow the Plaintiff to register the vessel in Russia without obtaining the consent of the Defendant or the authorities of the Republic of Cyprus. At the same time, the fulfillment by the Plaintiff of obligations under the bareboat charter agreement in favor of OOO AVIA Capital does not violate the legal rights of the Defendant, since the Defendant and OOO AVIA Capital are part of the same group of companies, and since OOO AVIA Capital owns 100% of the shares in Avia Capital Leasing Limited, which, in turn, owns 100% of the shares in the Defendant, it is OOO AVIA Capital that is the center for making economic decisions of the group of companies in relation to the Defendant. Consequently, the profit received by OOO AVIA Capital from the fulfillment by the Plaintiff of its obligations under the bareboat charter agreement will in any case be distributed in the most favorable manner for the Defendant and the entire group of companies.
Source: case No. A51-7534/2024
The case was considered with the participation of third parties OOO AVIA Capital and the captain of the seaport of Vladivostok V.A. Burda.
Facts:
In 2021, the Defendant acquired the vessel Sayan Knyaz from the Plaintiff. At the same time, the parties entered into a bareboat charter agreement, according to which the Plaintiff would buy the vessel within 12 months by exercising the option.
In the bareboat charter agreement, the parties chose English law and the Hong Kong International Arbitration Centre as the place of dispute resolution.
The vessel was registered with the RMRS (Russia) based on the permission of the Republic of Cyprus.
The Defendant is a 100% subsidiary of persons included in the EU sanctions lists. In 2022, the Defendant's assets were completely frozen and fell under European sanctions. The Defendant was unable to accept payments under the bareboat charter and dispose of the property.
In 2023, Cyprus did not agree to extend the vessel's registration with the RMRS. Then the RMRS refused to extend the vessel's registration due to the lack of consent from the Defendant and the Cypriot authorities.
The position of the parties:
The Plaintiff demanded to change the procedure for executing the bareboat charter agreement, to accept execution through the Defendant's beneficiary, OOO AVIA Capital.
The Plaintiff stated that the Russian court has exclusive jurisdiction to hear the dispute and that English law should not be applied.
He stated that the arbitration clause for the consideration of the dispute in Hong Kong is unenforceable due to sanctions restrictions. He stated that English law does not provide for the possibility of changing the contract and that English law is contrary to Russian public policy (clause 1 of Article 1193 of the Civil Code of the Russian Federation).
The Defendant did not participate in the case and did not refute the Plaintiff's position.
The court's decision and reasons:
The Court satisfied the claim.
The only way to protect the Plaintiff's rights to continue operating the vessel in accordance with the bareboat charter agreement is to exercise the option and the subsequent acquisition by the Plaintiff of the right of ownership of the vessel together with the transfer of the corresponding purchase price established in the Bareboat Charter Agreement to the account of OOO AVIA Capital.
OOO AVIA Capital is a Russian company that effectively controls the Defendant through its shareholding in its parent company, registered in the Republic of Cyprus. Transferring all funds due under the bareboat charter agreement to it in a Russian bank will allow the Plaintiff to register the vessel in Russia without obtaining the consent of the Defendant or the authorities of the Republic of Cyprus. At the same time, the fulfillment by the Plaintiff of obligations under the bareboat charter agreement in favor of OOO AVIA Capital does not violate the legal rights of the Defendant, since the Defendant and OOO AVIA Capital are part of the same group of companies, and since OOO AVIA Capital owns 100% of the shares in Avia Capital Leasing Limited, which, in turn, owns 100% of the shares in the Defendant, it is OOO AVIA Capital that is the center for making economic decisions of the group of companies in relation to the Defendant. Consequently, the profit received by OOO AVIA Capital from the fulfillment by the Plaintiff of its obligations under the bareboat charter agreement will in any case be distributed in the most favorable manner for the Defendant and the entire group of companies.
Source: case No. A51-7534/2024