Universal Africa Lines BV v Knidos Shipping Corporation [2025] EWHC 770 (Comm) (18 February 2025)

Executive Summary

Universal Africa Lines BV (claimant) initiated arbitration against Knidos Shipping Corporation (defendant) over alleged unseaworthiness causing cargo damage.
Cargo of cocoa beans from Ghana to the Netherlands suffered heat and smoke damage due to a sodium light left on in the hold.
Defendant’s vessel sank in the Persian Gulf in September 2024, resulting in a total loss and triggering an insurance claim.
Claimant seeks a freezing order to secure potential insurance proceeds amid concerns defendant may dissipate assets.
Arbitration and related Rotterdam court proceedings remain ongoing, with settlement negotiations anticipated.

No direct sanctions imposed on parties; however, OFAC-related compliance is relevant due to:
Vessel’s passage and loss in the Persian Gulf, a region subject to US sanctions scrutiny.
Potential involvement of insurance proceeds and ownership structures that may implicate US sanctions enforcement.
Freezing order application aligns with risk mitigation against asset dissipation potentially complicated by sanctions compliance.

Loss of vessel removes primary tangible asset (~$7-8 million), increasing risk of non-payment.
Uncertainty over handling of hull and machinery insurance proceeds, with risk of funds being transferred through subsidiaries beyond claimant’s reach.
Lack of clarity on maritime mortgages or liens on the vessel complicates security interests.
Potential delay or dispute over “proper settlement and compromise” of cargo claims under Interclub Agreement 1984.

Incident occurred in the Persian Gulf, a geopolitically sensitive maritime corridor with US strategic interests.
US sanctions regime (OFAC) may influence insurance claims and financial flows related to the vessel and defendant.
Enforcement of freezing orders and arbitration awards may be affected by cross-jurisdictional legal complexities involving Panama registration and Turkish insurers.

Cargo damage claim valued at approximately $4.9 million plus legal costs.
Vessel insured by Turkish maritime insurer; total loss claim pending.
Potential exposure for defendant increased by loss of vessel and insurance proceeds.
Arbitration claim may expand post-settlement, increasing financial liability for defendant.

Pursue freezing order to secure insurance proceeds and prevent asset dissipation.
Conduct thorough due diligence on ownership structure and potential subsidiaries to identify asset flows.
Monitor OFAC sanctions compliance risks related to Persian Gulf operations and insurance payments.
Engage with Turkish insurer and Panamanian registry to clarify mortgage status and insurance claim handling.
Prepare for arbitration amendment post-settlement to include monetary claims under Interclub Agreement 1984.
Coordinate with legal counsel to navigate cross-jurisdictional enforcement challenges.

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**Source Notes:**

Sanctions Intelligence Digest, England and Wales High Court (Commercial Court) Decision [2025] EWHC 770 (Comm)

https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/770.html