Pola Logistics Ltd v GTLK Europe DAC

JurisdictionIreland
JudgeMr. Justice Mark Sanfey
Judgment Date25 August 2022
Neutral Citation[2022] IEHC 501
CourtHigh Court
Docket Number[Record No. 2022/4234 P]
Between
Pola Logistics Limited
Plaintiff
and
GTLK Europe Designated Activity Company

and

GTLK Malta Four Limited

and

Central Bank of Ireland
Defendants

[2022] IEHC 501

[Record No. 2022/4234 P]

THE HIGH COURT

Specific performance – Purchase options – Contractual entitlements – Plaintiff seeking specific performance of purchase options – Whether an inability to exercise the options was a serious threat to the plaintiff’s ability to perform its contract

Facts: The plaintiff, Pola Logistics Ltd, applied to the High Court seeking specific performance, as against the second defendant, GTLK Malta Four Ltd, of purchase options contained in a number of charters in relation to five seagoing vessels. The second defendant was a special purpose vehicle and wholly owned subsidiary of the first defendant, GTLK Europe DAC, which was an Irish registered company. The vessels were tug-boats and barges leased to the plaintiff by the second defendant. There were three other proceedings in which similar applications were made for specific performance in relation to the purchase of leased vessels by companies, at least some of which the court was told were members of the same group of companies. In initiating these proceedings and this application, the plaintiff sought to enforce what it contended were its contractual entitlements with respect to the vessels, and in particular its contractual entitlement to purchase the tug-boats and barges from the defendants so as to allow it to retain the use of the vessels for the purposes of its business. The effect of the designation of JSC GTLK on the first defendant for the purposes of Annex 1 of Council Regulation EU No. 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (the sanctions regulation) on 8th April, 2022 was that any such purchase must be concluded by 9th December, 2022. When these proceedings were initiated on 10th August, 2022, it was envisaged that the proceedings would have to be determined by that date. The effect of the US sanctions was that the plaintiff considered that it must effect the purchases before 1st September, 2022, lest it fall foul of the US sanctions. In those circumstances, the plaintiff considered that this application – seeking specific performance on foot of a motion to the court – was necessary, given the urgency of the situation.

Held by Sanfey J that the court should order specific performance of the options, particularly in the following circumstances: (i) there does not appear to be any reality to an award of damages against entities which are the subject of international sanctions, the effects of which are to freeze the assets of those entities and to prohibit funds or economic resources being made available to them; (ii) an inability to exercise the options, on the evidence available to the court, was a serious threat to the plaintiff’s ability to perform its contract, and thus the economic viability of the plaintiff; (iii) the plaintiff would in the normal course have a contractual entitlement to exercise the options on payment of the agreed purchase price; (iv) there was no evidence before the court other than that the plaintiff was legitimately exercising its contractual options; (v) the first and second defendants did not object to orders enforcing the options, and indicated that they would comply with them if made; (vi) there was no evidence or circumstances before the court which would suggest that the relief was sought for collusive purposes, or in contravention of Article 9 of the sanctions regulation, which provides that “it shall be prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent the measures referred to in Article 2”.

Sanfey J made orders in these proceedings and in the three related proceedings which gave effect to the respective plaintiffs’ purchase options in each case.

Application granted.

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 25 th day of August 2022 .

Introduction
1

. This judgment concerns an unusual application made in unusual circumstances. Essentially, the plaintiff seeks specific performance, as against the second named defendant, of purchase options contained in a number of charters in relation to five seagoing vessels. The second named defendant is a special purpose vehicle and wholly owned subsidiary of the first named defendant, which is an Irish registered company. The vessels are tug-boats and barges leased to the plaintiff by the second named defendant.

2

. The application is made by notice of motion in circumstances which I shall outline below. The urgency of the application, which was made on 16 th August, 2022, i.e. during the court's long vacation, is primarily due to the fact that the first named defendant was on 2 nd August, 2022 added to the list administered by the US Department of the Treasury's Office of Foreign Assets Control of “Specially Designated Nationals” for the purpose of Executive Order No. 14024 (‘EO 14024’). The effect of this listing as regards the plaintiff is that it must wind down its relationship with the first and second named defendants prior to 1 st September, 2022, or risk breaching sanctions imposed by EO 14024 in circumstances to which I refer below.

3

. There are three other proceedings in which similar applications are made for specific performance in relation to the purchase of leased vessels by companies, at least some of which the court is told are members of the same group of companies. It is suggested that the result of the present application may well determine the success or otherwise of the other three applications.

4

. It should be said at the outset that a letter of 15 th August, 2022 on behalf of a number of defendant companies in the various proceedings, including the first and second named defendants in the present application, exhibited to an affidavit of Paul Convery, a partner in the solicitors' firm representing the plaintiff, indicated that the various defendants in all four proceedings, who are effectively the lessors under the various charter agreements, “…have no objection to the jurisdiction or orders sought on a summary basis. The group companies are in the court's hands, in this regard”.

5

. Reliefs 10 to 16 of the notice of motion are sought against the third named defendant, the Central Bank of Ireland (‘CBI’), seeking various reliefs pursuant to Article 5(1) of Council Regulation EU No. 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (‘the sanctions regulation’). Article 5 of that regulation permits a competent authority of a Member State to authorise the release of certain frozen funds or economic resources if certain listed conditions are met.

6

. It is accepted by all parties that the CBI is the competent authority in this jurisdiction for the purposes of Article 5. However, the plaintiff now accepts the position of the CBI that the process envisaged by Article 5 requires an application to, and invocation of, the competent authority's jurisdiction under that article, rather than court orders seeking to compel the exercise of that jurisdiction. Accordingly, the plaintiff accepted at the hearing that the reliefs at paras. 10 to 16 of the notice of motion were inappropriate, so that it was not necessary for CBI to contest them.

The parties
7

. The plaintiff is an entity incorporated under the laws of Cyprus, and carries on business as a provider of transhipment services. An affidavit sworn on 12 th August, 2022 by Dimo Marinov, a director of the plaintiff, explains that the ultimate beneficial owners of the plaintiff are Russian citizens but that neither they nor any of the entities they own which are the subject of the related proceedings are the subject of any sanctions in any jurisdiction.

8

. The first named defendant, GTLK Europe DAC, is a designated activity company registered in Ireland and engaged in the leasing and trading of air and sea vehicles. Its ultimate beneficial owner is JSC GTLK, an entity incorporated in Russia, the sole shareholder of which is the Ministry of Transport of the Russian Federation. It appears that JSC GTLK and the first named defendant are designated entities and/or related entities for the purposes of both EU and US sanctions regimes.

9

. The second named defendant is a special purpose vehicle incorporated in Malta, and is a wholly owned subsidiary of the first named defendant, which employs special purpose vehicles including the second defendant for the purposes of purchasing and leasing assets.

The vessels
10

. The proceedings relate to seven vessels that were leased to the plaintiff by the second named defendant (‘the SPV’) between June 2018 and April 2020. Two of the vessels are floating cranes. Mr Marinov avers at para. 15 of his affidavit that the plaintiff is “considering how best to proceed in circumstances where it is not currently in a position to exercise its right to acquire the Floating Cranes”; however, no relief is presently sought in respect of the cranes.

11

. The remaining five vessels comprise three tug-boats and two barges. The vessels are used primarily for the transhipment of bauxite, in respect of which activity the plaintiff has a ten-year contract with Compagnie des Bauxites de Dian Dian (‘COBAD’), which is engaged in the development of the Dian Dian bauxite deposit in Guinea, West Africa. The bauxite is primarily delivered to Limerick to Aughinish Alumina Limited; both that company and COBAD are subsidiaries of Rusal, an aluminium company incorporated in Jersey. The bauxite is used for the production of alumina for, inter alia, the EU market.

12

. The plaintiff is under an obligation, inter alia, to provide for the...

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1 firm's commentaries
  • Court Of Appeal Confirms Point Ireland Helicopters Jurisprudence
    • Ireland
    • Mondaq Ireland
    • 23 December 2022
    ...advised the plaintiff in the case of Pola Logistics Limited v GTLK Europe DAC and GTLK Malta Four Limited and Central Bank of Ireland [2022] IEHC 501 (Pola Logistics) where Mr Justice Sanfey reiterated his findings from an earlier decision in McAteer v Fried [2021] IEHC 249, that the High C......

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