A product tanker managed by Sea Pioneer Shipping of Greece is under threat of arrest unless troubled commodity trader GP Global and oil player NOC Swissco can come up with almost $12m in security.
Natixis, the bank that financed the cargo onboard and holds the bill of lading, claimed the cargo was misdelivered to parties not entitled to it.
That has led the company to threaten to arrest the 50,400-dwt tanker Tenacity (built 2014).
Now the obligation to put up security to prevent the tanker's arrest is being passed down the charter chain. But both the time charterer and the sub-charterer have claimed that they do not have the cash.
The ship's registered owner, Tenacity Marine, had time-chartered the vessel to NOC Swissco. The ship was then fixed on a voyage charter to bunker supplier GP Global, previously known as Gulf Petrochem.
GP Global has said it is restructuring and in July denied it is in financial difficulties.
But the Dubai-based trader and bunker supplier has had one of its tankers arrested in India and another chartered-in vessel is said to be on the run and avoiding arrest in the Indian Ocean, as TradeWinds has reported.
The case was heard on Monday under Justice David Foxton in a London High Court hearing held via Skype, in which TradeWinds was in attendance.
Tenacity Marine is seeking an interim mandatory injunction against NOC Swissco requiring the trader to put up the security, which is an obligation under a letter of indemnity (LOI).
The company, a one-ship owner that Equasis lists at the same address as Sea Pioneer, also wants NOC Swissco to meet its obligation to take responsibility for defence costs on the claim.
NOC Swissco, meanwhile, is seeking a similar order against GP Global, with whom it was in a back-to-back charter position.
After loading a cargo of gasoil in Kuwait, bills of lading issued were issued to French bank Natixis.
The vessel was then ordered to the UAE and instructed to discharge the cargo to two receivers against a LOI, without producing the bills of lading.
GP Global provided an LOI to NOC Swissco, which in turn provided an LOI to the shipowner.
But Natixis, the holder of the bills of lading, claims that the cargo was misdelivered to parties not entitled to it and has threatened to arrest the vessel, claiming $11.5m.
The judge said both Tenacity Marine and NOC Swissco put forward "formidable" arguments for their claims.
And he said that both parties had clear and identical contracts of indemnity in place that obligated parties to put up security.
"The arrest appears to arise very directly out of the order given to instruct the delivery of the cargo without production of bills of lading," the judge said.
Lack of cash
But neither NOC Swissco nor GP Global are in a position to put up the security, according to the hearing.
The traders would need to put up cash collateral to a bank in order to do so because they do not have the backing of a protection and indemnity club or a charterer's liability insurer, according to information disclosed in the hearing.
The judge said that handing down a injunction on NOC Swissco and GP Global, forcing them to put up the security would require them "to do that which it is impossible for them to do".
NOC has provided evidence that shows its balance sheet has net current equity of just over $600,000, of which around $350,000 is cash, the judge said.
Meanwhile, GP Global is in the process of restructuring, making it incapable of providing the cash, Foxton said.
Outcome
Instead of issuing a mandatory injunction, Foxton ordered the two charterers to provide further information about their respective financial positions.
Foxton said NOC Swissco and GP Global should explain what can be done with the assets they have available and should say what efforts have been made to provide as much security as possible.
The court will then consider whether to grant the relief that has been sought or whether it might be appropriate to order less security to be provided, Foxton said.
A next hearing will take place within the next two weeks, which Foxton said should provide GP Global more time to respond more fully than it has already.
"The Commercial Court will want to be very confident that the protestations about inability to comply or the extent of inability to comply appear very clearly from the evidence," Foxton said.
Tenacity Marine was represented at the hearing by barrister Oliver Caplin from Twenty Essex, instructed by Ince & Co. NOC Swissco was represented by Holman Fenwick Willan.
GP Global was not represented during the hearing and has provided only a brief communication as to its position, the judge said.
“As a matter of respect for the legal process we will not comment on specific matters before a court, but will state categorically that the company’s CRO [chief restructuring officer] and team are in regular and professional communications with all our valued stakeholders to deliver a transparent, fair and satisfactory restructuring,” the company said in an email to TradeWinds.
“We continue to make progress every day on that plan.”
