O v C

Under section 44 of the Arbitration Act 1996, the court may order the sale of property and determine how the proceeds should be preserved in support of an arbitration. Where compliance with a proposed order may breach foreign criminal law, the court should assess whether there is a real, rather than fanciful, risk of prosecution. If such a risk exists, it must balance that risk against the importance of the relief, taking account of comity and any order that may reduce the foreign-law concerns. The court may order payment into court where the risk of prosecution is not real, or where the importance of preserving a simple means of giving effect to the arbitral award outweighs a very low risk.

The Owners applied under section 44 of the Arbitration Act 1996 for permission to sell naphtha remaining aboard their vessel after the Charterers were placed on the United States sanctions list. The Charterers no longer opposed a sale but argued that the proceeds should be paid into the English court. The Owners contended that payment into court risked breaching United States sanctions and proposed payment into a blocked account with a United States financial institution.

The application also raised whether a possible third-party claim to the cargo made section 44 relief inappropriate. The central questions were whether a sale should be ordered and, if so, where the proceeds should be held pending the arbitration.

1. The court ordered that the cargo be sold and that the proceeds of sale be paid into court.

2. There was good reason for a sale. The cargo had remained aboard the vessel for over 20 months, its continued presence prejudiced the Owners, and the cargo and vessel faced deterioration and operational risks. A sale would preserve the cargo’s value and permit the vessel to be employed profitably.

3. A possible claim by B did not prevent relief under section 44. B had been informed of the application, had not asserted its claim before the court, was unlikely to oppose a sale intended to preserve value, and could assert any entitlement against the sale proceeds.

4. Where payment into court may breach foreign law, including foreign criminal law, the court has a discretion to make the order. It will not do so lightly where compliance may expose a party to criminal liability. The party relying on the foreign law must establish a real, rather than fanciful, risk of prosecution. If that risk is established, the court must balance it against the importance of the relief, while considering comity and whether the order can be fashioned to reduce the concern.

5. On the evidence, there was no real prospect of prosecution. The Owners had taken steps to comply with United States sanctions, payment into court would be compelled by an English court order, and the proceeds would be held to preserve them pending the arbitration rather than to frustrate sanctions. The possibility of an information request or other administrative action did not establish a real risk of prosecution.

6. Even if a real risk existed, the risk would be very low and would be outweighed by the importance of preserving a simple mechanism for giving effect to the arbitral tribunal’s decision. Payment into a blocked account could require further applications to OFAC and potentially further proceedings under a cross-undertaking in damages. The court therefore considered payment into court preferable in the circumstances.