IMSML Website Article 29/2025: Unicious Energy Pte Ltd v The Owners And/Or Demise Charterers of The Ship or Vessel ‘Alpine Mathilde’ [2024] MLJU 532 - Application for Wrongful Arrest of a Ship Carrying Sanctioned Cargo
This is a continuation of the saga that was documented in IMSML Website Article 20/2024: Desert Oasis Petrochemical Trading LLC v Pemilik Dan/Atau Pencarter Demis Kapal Atau Vesel Alpine Mathilde Dari Pelabuhan Hong Kong [2023] MLJU 2494, Sham Transactions to Evade US Sanctions, Associated Ship Arrest in South Africa and Wrongful Arrest of the Ship. The Defendant made an application for damages for wrongful arrest of the ship but it was postponed to a later hearing date. It was in this case of Unicious Energy Pte Ltd that the Court proceeded to hear this application for wrongful arrest.
What were the facts leading up to this application for wrongful arrest?
Mr Justice Ong Chee Kwan held that when the Plaintiff procured a warrant of arrest, the Affidavit produced failed to give a clear and truthful or accurate account of the true nature of the claim against the Defendant, see Paragraph [43]. Three material facts were left out by the Arresting Plaintiff, see Paragraph [43]:
[a] The Defendant was a ‘US Person’ and therefore the ship and cargo was subject to the sanctions laws of the US;
[b] The Cargo was blocked property and the Defendant was prohibited from delivering it to the Plaintiff. Of course approval from OFAC could be obtained, but this was unlikely. As a result, there could be no claim for an action in personam against the Defendant for breach of the voyage charter party.
[c] On the contrary, it is the Plaintiff is the one who had breached the voyage charter party by being a sanctioned party, causing the cargo to be a Blocked property under the Sanctions Clauses or US Sanctions Law.
[d] Courts in two jurisdictions, ie the South African High Court and the High Court of Malaya, have dismissed the Plaintiff’s claims;
[e] The contract entered into between the Plaintiff and Desert Oasis was a sham transaction and an attempt to avoid US Sanctions Laws.
[f] The Plaintiff’s submission that both [d] and [e] above are irrelevant to the present action is misleading.
Hence, Mr Justice Ong Chee Kwan held there were justifiable reasons why the clocked cargo could not be discharged and delivered by the Defendant to the Plaintiff, see Paragraph [44]. The Plaintiff’s conduct in commencing the action was an abuse of the process of the Court, made worse by a failure to make full and frank disclosure when applying for a warrant of arrest in order to achieve a collateral or ulterior object otherwise than pursuing a genuine claim, see Paragraph [45].
Was a claim for wrongful arrest, a tort, that fell outside the scope of a contractual claim founded on Charterparty terms that also contained an arbitration clause?
Counsel for the Plaintiff cited The Eastern Pacific; Eastern Pacific Chartering v Polo Maritime [2021] 1 WLR 5475, the shipowner had a claim for hire against the charterer. The shipowner arrested another vessel belonging to the charterer in Gibraltar and then brought a claim for hire in the English court. The charterer counter claimed for damages for wrongful arrest. The English Court held that it had jurisdiction to hear the case as the Charterparty had an English jurisdiction clause, covering a claim in tort for wrongful arrest of the ship. Learned Counsel argued that this was similar to The Damianos; Astro Vencendor Cia Naviera SA of Panama v Mabanaft GmbH [1971] 2 QB 588 where the claim for wrongful arrest fell within the scope of arbitrator’s jurisdiction.
Mr Justice Ong Chee Kwan rejected this submission by stressing, ‘with respect, the facts of the Eastern Pacific are completely different from the present case’, see Paragraph [10]. Lordship listed several reasons for this:
[1] There is no application in this case for the proceedings to be stayed pending arbitration, see Paragraph [11];
[2] In the Eastern Pacific, there was no application before the Court in Gibraltar to set aside the arrest of a vessel. Instead, the Plaintiff released the vessel upon being shown a copy of the time charter party between the Defendant and one Pola Rise. This suggested that the beneficial owner of the Vessel was not the Defendant, see Paragraph [12];
[3] There was no hearing before the Court in Gibraltar for wrongful arrest. Instead, the case proceeded in the English Court and the defendant filed a counter claim in tort for wrongful arrest. This claim for wrongful arrest is not the same as the arrest claim in the Court of Gibraltar, see Paragraph [12]. Further, the English Court was also considering Articles 21 and 22 of the Brussels Convention. This Convention has no application to the case before Mr Justice Ong Chee Kwan, see Paragraph [13].
[4] In The Damianos, the owners claim damages for wrongful arrest in the arbitration, and the Court had to determine if that claim had come within the scope of the arbitration clause, see Paragraph [14].
What was the basis for damages for wrongful arrest?
Mr Justice Ong Chee Kwan held that a Defendant is only entitled to damages if the Court finds that the arrest was brought with so little colour or with so little foundation that it implies malice or gross negligence, see Paragraph [17]. Note that his Lordship revived this test from classic cases such as:
[1] The Evangelismos [1858] 12 MOO PC 352 (Privy Council), see Paragraph [18];
[2] The Dong Nai [1996] 4 MLJ 454, see Paragraph [19];
[3] The Kommuar (No.3) [1997] 1 Lloyd’s 22, see Paragraph [20];
His Lordship also highlighted the warning given inThe Vasiliy Golovin [2008] 4 SLR(R) 994 that Maritime arrests can, when improperly executed, sometimes be as destructive as Anton Pillar orders and even potentially ruinous as Mareva Injunctions, the two nuclear weapons of civil litigation, see Paragraph [21].
Was the Arresting Plaintiff fully aware that the cargo had become blocked property under US Sanctions Law?
YES, when the Plaintiff was designated as a Specially Designated Nationals and Blocked Persons List (SDN) by the PFAC of the US Treasury Department, see Paragraph [22].
What did the Plaintiff do upon knowing its SDN status?
The Plaintiff terminated the sale of the Cargo to Idemitsu, its Japanese buyer, see Paragraph [23].
What was the effect of the Plaintiff becoming a SDN?
By becoming a blocked person, the cargo also became blocked property. The Plaintiff was then in breach of the charterparty, see Paragraph [24].
Had the Plaintiff disputed that it had breached the Sanction Clause in the Voyage Charter Party?
No, not even up until the issuance of the Notice of Arbitration, see Paragraph [25].
Was the Plaintiff unaware that by the reason of the Cargo becoming Blocked Property, the Defendant, being a US Person, would become subject to US Sanctions Law?
The Plaintiff must been aware of this and therefore the Defendant could not deliver the blocked cargo to the Plaintiff, see Paragraph [26].
Was the Plaintiff’s action to arrange a scheme with Desert Oasis a sham?
YES. The sham sale contract was arranged so that Desert Oasis would demand the sanctioned cargo to be delivered to it as buyer effective 10 May 2023, see Paragraph [27].
Had the Plaintiff ever challenged the Defendant’s status as a US Person?
Only when the Plaintiff failed to convince both the South African High Court and the High Court of Malaya on the legitimacy of the sale contract. The Plaintiff then invoked notice of arbitration despite knowing under US Sanctions Law that the Dfendant was prohibited from discharging the Blocked Property to the Plaintiff, see Paragraph [28].
Did the Plaintiff ever know that the Defendant was no longer in a position to deliver the blocked when it commenced its action to arrest the ship?
YES, when it instructed lawyers on 2 October 2023 to commence Admiralty in rem action to seek damages from from the arbitration it invoked, see Paragraph [29]. Mr Justice Ong Chee Kwan held that the Plaintiff proceeded to apply for and issued a warrant of arrest for the Vessel even though its claims were a blatant attempt to to get a third bite at the ferry after two courts in two jurisdiction held that the transaction with Desert Oasis was a sham sales transaction, see Paragraph [30]. The Plaintiff schemed an arrangement with Desert Oasis to make a new claim as buyer to the cargo. If it had a substantive dispute to be determined by an arbitral tribunal to decide, it would have taken action immediately when the Defendant refused to discharge the sanction cargo on 15 February 2023, see Paragraph [31]. Further, the Plaintiff’s contention that the Defendant was not a US person appears to be an afterthought, see Paragraph [32]. A simple search of the Equasis database would shown that the Defendant was a US person, subject to the sanctions law of the US, see Paragraph [33]. The Plaintiff therefore knew that the Defendant was prohibited from dealings with the Plaintiff because of the status of the Blocked Property, see Paragraph [34]. Mr Justice Ong Chee Kwan concluded that the Plaintiff was well aware that it did not have a good faith claim that it would succeeded in arbitration, but nevertheless proceeded anyway to arrest the Vessel, see Paragraph [35]. The actions of the Plaintiff were nothing more than an attempt to circumvent US Sanctions, see Paragraph [36]. His Lordship explained that the recourse to arbitration is being used to clothe the Plaintiff with some grounds by which to effect the arrest of the vessel with no real belief that it actually has a cognizable claim, see Paragraph [38].
Was there non-disclosure or misleading or inaccurate statements in relation to the material facts by the Plaintiff when it sought to arrest the ship?
YES. An arrest based on arbitration legislation is subject to the discretion of the Court. Not as a matter of right unlike arrest of the ship under for Court processes. Therefore, the Plaintiff is under a duty of full and frank disclosure for an arrest under arbitration, so that it enables a proper exercise of discretion at a hearing before the High Court Registrar, see Paragraph [40]. In The AA V [1999] 3 SLR(R) 664 at [47] the Court held that a failure to discharge the duty of full and frank disclosure can be an independent ground for setting aside an arrest, see Paragraph [41]. Mr Justice Ong Chee Kwan then added that where the material non-disclosure or in accurate statement is deliberate, calculated to mislead or if it was caused by gross negligence or recklessness, this can also constitute a ground for awarding damages for wrongful arrest, see Paragraph [42]. His Lordship found that the Plaintiff only presented selective facts in the Affidavit leading to the Warrant of Arrest, which failed to give a clear and truthful or accurate account of the true nature of the claim against the Defendant, see Paragraph [43]. A warrant of arrest would not have been issued by the Learned Deputy Registrar if the Plaintiff had disclosed that the owner of the Vessel is not liable to the Plaintiff in personam, and there were lawful reasons why the blocked cargo could not be discharged to the Plaintiff, see Paragraph [44].
What was the Plaintiff liable to the Defendant for Wrongful Arrest of the Vessel?
All damages for wasted and unnecessary expenses occasioned by the wrongful arrest. This will be assessed by the High Court Deputy Registrar, see Paragraph [49].
Thank you for reading IMSML Website Article 29/2025
Stay tuned for the next IMSML Website Article 30/2025: Zion Shipping Limited v The Owners And/Or Demise Charterers of And/Or Other Persons Interested In The Ships Or Vessels ‘MV HAN THAR’ and MV ‘U THAR’ [2024] MLJU 534 - Jurisdiction for the Arrest of a ship for alleged unpaid time charter hire and claims based on a Settlement Agreement.
Signing-off for today,
Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT
Professor of Maritime and Transport Law
Faculty of Law
Universiti Teknologi MARA Shah Alam
Selangor, Malaysia
Tuesday, 22 July 2025
Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my