Release of the Cargo from the Arrested Vessel: Voyages to Crimea and Dispute with the Owners

We are thrilled to share an exciting success story from our recent shipping work, where we handled a truly unique case to secure the release of over 3,000 mt of barley for our client, a Greek trading company. This case gained a lot of publicity and was covered by Lloyds.?

The situation was as follows. The goods were loaded aboard the M/V USKO MFU in the port of Giurgiulesti, Moldova. The vessel should have delivered the goods to Greece but was detained by Ukrainian armed forces while sailing down the Dunabe, convoyed to Ukrainian port of Reni and arrested at the request of the Prosecutor's Office of Crimea and Sevastopol. The reason for this was the alleged prior voyages of the vessel to Crimea.?

In the result of this, our client found itself caught in a challenging situation that threatened both their contractual obligations and the quality of the goods. Although unaware of any previous voyages to Crimea, our client was effectively held hostage by the situation.?

There were the following challenges:?

1. Criminal proceedings. The vessel was arrested in the course of the criminal proceedings, and her master and crew were suspected of committing crimes (illegal trade with Russia). Practice shows that in such cases, it is extremely hard to free the vessel from an arrest, and cargo is often arrested as well.??
2. Clearances. In such situations, transhipment of the cargo requires clearance from multiple authorities, including the port harbour master, law enforcement authorities and border guards. Obtaining them can be difficult and lenghty due to bureaucracy.?
3. Lack of shipowner’s consent. Regrettably, unlike in most other countries, Ukrainian law does not contain provisions allowing to discharge of the cargo without a shipowner’s consent. Although theoretically, courts may allow it, they usually refuse to do so, citing the lack of express provisions in the law. In this light, the shipowner is tempted to blackmail the charterer by taking his goods hostage?

Here's how we helped them overcome them:?

1. Firstly, we immediately applied to the Prosecutor’s Office to ensure that the goods were not arrested and obtain their authorisation to tranship them subject to obtaining all other necessary clearances. We also obtained a similar authorisation from the intelligence agency involved in the investigation.?
2. Secondly, we obtained clearances from the port harbour master, customs service and border guards, ensuring that the goods may safely leave the territory of Ukraine. Simultaneously, we helped the client to find a transhipment services provider and arrange transhipment promptly.?
3. Finally, we overcame the shipowner’s resistance by arresting the goods in the client’s favour and persuading the shipowner that a non-cooperative approach would result in significant losses for him. We also negotiated the deferred payment with the sellers of the goods to avoid an arbitration.?

Following this, the client released the goods, paid for them to the seller and delivered them to the string buyer in time. All parties in this sale string maintained good relations and continue to work together. Meanwhile, the vessel remains arrested in the Reni port, Ukraine.?

Several conclusions can be drawn from this story. First, careful due diligence of the vessel is a must. Ukrainian officials are extremely cautious about the prior trading history of vessels entering the country's waters, and they hunt for those conducting voyages to Russia.??

Second, if the vessel has already been arrested in the course of criminal proceedings, it is crucial to obtain evidence that the cargo is not under arrest and is not evidence in such proceedings as soon as possible.?

Third, due to the shortcomings of Ukrainian maritime legislation and the formalistic approach of Ukrainian courts, shipowners are put in a strong position, as it is almost impossible to discharge the cargo without their consent. Therefore, including provisions allowing forced discharge in such situations in the charterparty is essential for charterers. In any case, they should be prepared for a tough confrontation.?

For those in the shipping and commodities trade industries, the takeaways are clear: investigate the vessel’s history, anticipate challenges and rely on experienced legal counsel to navigate complex cross-border issues.?