Dubai-based tanker specialist Fractal Marine DMCC has lost a High Court bid to have UK sanctions against it suspended.
The tanker unit of Switzerland-based Fractal Shipping has sought to halt measures imposed in February.
Lawyers said the company would be forced into liquidation unless the sanctions were lifted.
Judge Adam Johnson ruled that Fractal could not challenge the UK government at this stage in its appeal, Bloomberg reported.
The company had offered not to transport Russian crude ahead of a government review, as it warned that shadow fleet operators could take over the business.
“The consequence is that Fractal Marine is unable to operate, unable to pay its staff. Vessel owners will have no choice but to replace Fractal Marine with one of its competitors,” Fractal barrister Maya Lester said.
Fractal has always insisted it has operated vessels within the G7 price cap mechanism.
But it has been suffering from the closure of its bank accounts and withdrawal of Western insurance coverage since the UK sanctions.
“The fact that the substantial effect of sanctions can be relaxed could be perceived as a sign of leniency or ineffectiveness by individuals and entities who could be the subject of sanctions in the future,” UK government lawyer Richard Hanstock said in a court filing.
Fractal said in a statement that the court had declined to weigh in and grant it interim relief on jurisdictional grounds.
Company will fight on
“This only means the court decided not to intervene and order a suspension of the designation while the [UK] Foreign, Commonwealth & Development Office is still reviewing the designation,” the owner added.
“There have been no findings of wrongdoing by Fractal, and the company will continue to challenge the designation,” Fractal pledged.
“We are disappointed but hopeful that the ongoing administrative review will be thorough, and the designation will be revoked,” the company concluded.
The Fractal group has also decided to start liquidation proceedings for Fractal Marine.
It said the group “remains steadfast in its commitment to upholding international standards and compliance protocols, including those set forth by the price cap coalition”.
Fractal added that it was founded on transparency, compliance, fostering robust relationships within the international trading community, and seizing geopolitical opportunities.
“The company remains committed to supporting and advancing policy objectives while strictly adhering to established trade mechanisms and regulations,” Fractal said.
“Consequently, as it undergoes liquidation, Fractal Marine is unwavering in its commitment to maintaining the utmost standards of integrity, compliance, and sustainability and is taking all necessary steps to comply with relevant jurisdictions.”
Ships shifted
Earlier in March, TradeWinds reported that Fractal shifted nearly half of its fleet to new commercial management within a week of the company being hit by UK sanctions.
Eleven of the 24 ships on its books have gone to new managers in the United Arab Emirates and Turkey since it was blacklisted, according to ownership database Equasis.
The UK’s foreign office gave no details of the reasons for its sanctions beyond saying that the company was “obtaining a benefit from or supporting” the Russian government by carrying on business in a sector of strategic importance.
The UK sanctions notice did not refer to any price cap breach.
Fractal Shipping was the only European tanker start-up focused on the Russian trade when it launched in 2022, backed by Middle Eastern money and headed by British-French national Mathieu Philippe.
Its fleet was built up rapidly from 2022 into 2023 with an average age of 17 years and was suited to cash in on the higher rates offered by Russian trades while other companies avoided the business, largely owing to regulatory, legal or reputational concerns.
Philippe told TradeWinds in January that the bumper earnings from the trades had largely run their course and he was looking to diversify into other markets with younger vessels.
But the move by the UK has thrown those plans awry and appeared to spark significant management changes.
