Playa Shipping Corporation v Citgo Petroleum Corporation (M/T “Mambo”) – SMA 4418, 16 March 2021

DISPONENT OWNER – US SANCTIONS – TRADE SANCTIONS – ASBATANKVOY – DEMURRAGE – EXECUTIVE ORDERS – SECURITY AWARD – VENEZUELA

The arbitration arose from a claim by Playa Shipping Corporation (hereinafter “Playa,” “Owner,” or “Claimant”) as the owner of the M/T MAMBO (“Vessel”) for the shipment of diesel from the Gulf of Mexico to Venezuela under two separate charterparties dated December 13, 2018, and January 8, 2019. The claim was for restitution of outstanding invoices from the Owner to Charterer CITGO Petroleum Corporation (“CITGO”) for demurrage and port expenses. The arbitration was started by Triglia Navigation S.A. (“Triglia”), a Liberian company.  Triglia operated as the only broker for the Vessel by Playa, a Marshall Islands corporation, and the registered owner of the “Mambo”.

Triglia signed charter agreements on Playa’s and the vessel’s behalf, including the charter agreements at issue in the arbitration. According to an Assignment Agreement dated October 31, 2019, Triglia assigned to Playa all claims and interests under the Charterparties; accordingly, Playa was entitled to receive direct payment from CITGO for all monies due and owing under the charterparty. As a result, Playa was the Claimant in this arbitration and the Owner. Playa was seeking a $ 336,399.47 award.

CITGO did not contest the amount owed but maintained that sanctions imposed by the US Government on Venezuela prevented it from paying unless and until the Owner obtained a special license from the US Office of Foreign Assets Control (OFAC). Further, CITGO claimed the Owner’s demand for payment was moot, and the Owner should incur both CITGO’s legal fees and the total cost of arbitration.

The current arbitration was a Partial Final Award and focused on the Owner’s request for an Interim Award requiring CITGO to post security for Playa’s claims. The Panel had to evaluate (i) whether arbitrators could grant security and (ii) if the facts of the case supported that authority being exercised. After reviewing relevant SMA awards, the Panel concluded it could grant security, and it should grant security due to the risk of nonpayment by CITGO.

While it was not required to decide the applicability of US Sanctions to this claim, the Panel disagreed with CITGO’s assertion that sanctions against Venezuela prevented the Panel from requiring a security award. The Panel went so far as to state that current provisions of General License 7(c) lend themselves to permit CITGO to make payments in full to the Owners without any need for specific licensing.

The Panel ordered that on or before April 16, 2021, CITGO Petroleum Corporation would establish a bond or irrevocable standby letter of credit in the amount of $ 397,554.22 with a first-class surety or New York bank, to remain in effect pending the Panel’s final determination on the merits of Owner’s claims in this arbitration.