Earlier this month the Commercial Court handed down an interesting judgment which considered the question of when a cargo is the “subject of the [arbitral] proceedings”, so as to give rise to a power to order the sale of the cargo under Section 44(2)(d) Arbitration Act 1996 – Dainford Navigation Inc v PDVSA Petroleo SA (The “Moscow Stars”)  EWHC 2150.
Whilst rejecting an argument that the phrase “the subject of the proceedings” requires no more than that the proceedings in question should relate to or concern the goods in question, it was held that there is sufficient nexus between the cargo and the arbitral proceedings in circumstances where a contractual lien is exercised over a defendant’s goods as security for a claim which is being advanced in arbitration. Notably that does not depend on there being a claim in the arbitration for a declaration that the claimant is entitled to exercise such a lien, it being sufficient that the lien is being exercised in support of the arbitral claim.
In this particular case the defendant was also the owner of the cargo, and the Court made no finding as to what the position would be if the cargo was owned by a third party not a party to the arbitration.
The decision will be welcomed by owners who can otherwise face the difficulty of liened cargo remaining on board their vessels for many months, without payment of hire, whilst incurring operating costs.