The court ruled that a sales contract with an entity designated as a Specially Designated National under U.S. sanctions was a sham, leading to the dismissal of the plaintiff's claims and an award of damages for wrongful arrest.

Introduction

[1] Sanctions are political trade restrictions that are imposed to maintain or restore international peace and security or to further a country's foreign policy objectives. The United States, through its Office of Foreign Assets Control ("OFAC") of the US Department of Treasury have imposed sanctions on countries, individuals, vessels and legal entities and on various commercial activities.

[2] The US sanctions can generally be divided into 2 categories. Primary sanctions are those that apply to "U.S Persons" which is defined as U.S citizens and permanent residents, entities incorporated under the laws of the United States and persons physically located in the United States. Primary sanctions also apply to transactions in US dollars, which transit through the U.S financial system. Secondary sanctions do not require a "U.S nexus" and apply to non- U.S Persons. The aim is to prevent the non-U. S Persons from engaging in transactions against the U.S national security and foreign policy interest by threatening access to U.S markets.

[3] Whether economic or political in nature, sanctions have a real impact and can affect the interest of those engaged in international shipping. This is one such case where one Unicious Energy Pte Ltd ("Unicious"), the voyage charterer of the vessel, "ALPINE MATHILDE", being the seller of the cargo shipped on board the vessel on route from Singapore to Japan, was designated by OFAC on its Specially Designated National and Blocked Persons ("SDN") List, making it subject to the U.S Sanctions.

[4] Unicious then entered into a sales contract purporting to transfer ownership and or title in the cargo to the Plaintiff.

[5] Based on the purported sales contract and asserting that it has possession of the original bills of lading (which were issued prior to the sales contract), the Plaintiff sought and demanded delivery of the cargo from the Defendant as the registered owner of the vessel.

[6] Notwithstanding notice of the fact that the Defendant is a U.S person and with Unicious being designated as a SDN and the cargo automatically becomes a "Blocked Property", the Plaintiff proceeded to arrest the vessel.

[7] This judgment deals with the application by the Defendant under encl 18 to set aside the Plaintiff's Writ in rem and the Warrant of Arrest and for an order that the Plaintiff do pay the Defendant damages for wrongful arrest.

[8] It is the Defendant's case that the purported sales contract is a sham and that in any event, the Plaintiff has not suffered any damages to justify invoking the admiralty jurisdiction of this Court.

Background Facts

[9] The Defendant, Heroic Serena Inc ("Heroic") is the registered owner of the vessel M/T ALPINE MATHILDE ("the Vessel").

[10] The Plaintiff, Desert Oasis purports to be the owner of the cargo of approximately 36 MT Naphtha currently onboard the Vessel ("the Cargo"). The Plaintiff alleged that it has "title" and/or is "persons entitled to possession of the