Fines for unauthorised STS operation ruled unjust

The Permanent Court of Arbitration in The Hague has issued its final award in the tribunal of the arbitration of 2008-built, 10,800-dwt chemical/product tanker Duzgit Integrity in respect of the dispute between the Republic of Malta (Malta) and the Democratic Republic of São Tomé and Príncipe (São Tomé), situated in the Gulf of Guinea in West Africa.

The tribunal, which is constituted under Annex VII to the United Nations Convention on the Law of the Sea, was considering the arrest by São Tomé of a Malta-flagged vessel Duzgit Integrity on 15 March 2013 when it attempted to undertake a ship-to-ship (STS) cargo transfer in São Tomé’s archipelagic waters, and the subsequent measures taken by São Tomé in relation to the vessel, its master, cargo, owner and charterer. The second tanker in the STS operation is named in the award as Marida Melissa.

In a previous award, issued on 5 September 2016, the tribunal found it had jurisdiction over the dispute and that while the initial detention of the vessel fell within the lawful exercise by São Tomé of its law enforcement jurisdiction, the other penalties imposed by São Tomé could not be regarded as proportional to the original offence or the interest of ensuring respect for São Tomé’s sovereignty.

Accordingly, in its 5 September 2016 award, the tribunal held that the cumulative effect of the sanctions imposed by São Tomé was incompatible with Article 49 of the United Nations Convention on the Law of the Sea and that Malta was entitled to claim reparation in a further phase of the proceedings. Following the issuance of the tribunal’s 5 September 2016 Award, the proceedings were temporarily suspended while the parties pursued settlement negotiations, which were ultimately unsuccessful.

The actions taken by São Tomé included arresting and imprisoning the master, a fine of €5.0M (US$5.6M) against the master, owner and charterer of the vessel and the confiscation of the cargo. São Tomé’s port authority imposed a fine of €28,000 (US$31,000) and the local custom directorate instituted a fine of €1.0M (US$1.1M). At the time of the arrest (March 2013), the vessel was valued at approximately US$9M by VesselsValue.

The tribunal has ordered São Tomé to repatriate to Malta approximately US$13M.

One judge on the tribunal disagreed with the award on several legal points. Judge James L Kateka’s main disagreement was that each of the eight heads of claims by Malta against São Tomé should have been treated separately and not as a composite action, which was the preferred option of the majority of the judges in the tribunal.

Judge Kateka noted “Each penalty should be considered on its own merit. The circumstances of the particular case have to be taken into account including the prevalence of illegal STS transfers and bunkering which have become notorious in the West African region. This in turn fuels illegal, unreported and unregulated fishing which is high on the West African coast where São Tomé is situated.”