A remarkable case both from the factual background as well as from the legal perspective commented on by the Russian Maritime Association RUMLA.ORG (Ruling of the Arbitrazh Court of the Primorsky Region as of 25.11.2020, A51-18495/2020).
In November 2020, the mv Vasily Shukshin carrying 180 tons of enriched uranium was ruturning to Russia from South Korea due to the detection of COVID-19 among the crew. When approaching the territorial waters of the Russian Federation it lost its speed and drifted, giving a distress signal due to lack of fuel.
After the successful emergency salvage of the vessel, the salvage company Morspasluzhba applied to the Arbitrazh Court with a demand to arrest the vessel and the cargo in securing the claim for the recovery of a salvage fee in the amount of 500.000 euros. The salvor referred to the lack of information about radioactive cargo owner and the refusal of the ship owner to provide any security for the requirements of the salvor as well as the existence of a maritime claim secured by a maritime lien.
The defendants sent their objections to the Arbitrazh Court the next day after the filing of the request for arrest of the vessel, although the procedure for considering a request for securing a claim does not provide do the defendant to present any objections to it, especially as the judge is obliged to consider the the arrest application not later than the next working day. The defendant considered the salvage costs too high. In his opinion the remuneration should have been based on the Merchant Shipping Code of the Russian Federation and be about 9.000 USD.
Arbitrazh Court of Primorsky Region
The Arbitrazh Court of Primorsky Region refused to satisfy the request of the salvage company to arrest the vessel and the cargo.
- The court stated that the agreement contained an arbitration clause with a seat in London and referred to the applicable law of England.
- The preliminary calculation of the salvor’s remuniration was not sent to the adress of the ship owner and the vessel operator.
- A guarantee letter has been provided to the salvor indicating that the defendants did not intend to escape their obligations, as well as that the captain of the vessel did not sign the act of ending the salvage operation.
- Most importantly, the court noted that the arrest of the vessel is impossible due to the dangerous characteristics of the cargo on board and the possible damage to the environment. The long-term storage of 180 tons enriched uranium could potentially lead to an environmental disaster.
The Court of Appeal confirmed the decision of the Arbitrazh Court of Primorsky Region. It especially emphasized the possibility of proactive behavior of the party at the stage of the request consideration for preliminary interim measures.
Russian courts rarely apply interim measures, especially in the form of a ship arrest, which makes this case extremely remarkable. It is also due to the rare case of radioactive cargo on board that makes this decision almost unprecedented in the field of vessel arrests. The nature of the cargo onboard had the key role in this matter. Should the parties initiate arbitration proceedings, taking into account the dangerous nature of the cargo, the defendant could try to defend himself referring to the conclusion of a salvage contract under unfair conditions and excessively high fees due to the influence of the imminent environmental danger.
However, given that the salvage contract was agreed on LOF2020 which referrs to arbitration in London, one does not need a crystal ball to predict that the outcome will be much closer to the EUR 500,000 called up by the salvor then to the USD 9,000 offered by the shipowner.
See the full analysis (and more studies of Russian maritime case law) under http://rumla.org/wp-content/uploads/2021/02/Maritime-Law-Journal-14-Oct.2020-Jan.2021.pdf