Zaiwalla’s client, a shipowner based in Dubai, had paid the deposit for the purchase of a ship to be held by the Belgian escrow agent. It was then designated under US sanctions before the purchase completed. The seller of the ship (also Belgian) terminated the sale relying on a ‘Designated Entities’ clause in the agreement.
The seller then refused to cooperate with our client to return the deposit, because its New York and London lawyers had advised that it was obliged to take ‘actions akin to blocking’ the deposit, as it claimed it was ultimately owned by a US person, meaning it had to uphold the US Executive Order imposing the sanctions.
The Zaiwalla in-house team initiated arbitration proceedings against the seller and obtained a summary determination in its client’s favour directing the release of the deposit to the buyer and declaring that the seller had no claim to entitlement of the funds. The team successfully relied on the wording of the ‘Designated Entity’ clause in the transaction contract, and the ‘Escrow Release’ terms of the escrow agreement. The Tribunal agreed with our interpretation of the law, especially concerning the ability of a tribunal to bind a third party by contract (in this case the escrow agent) despite that entity not being party to the arbitration agreement or proceedings.
Following the award the Zaiwalla team successfully negotiated the return of the deposit to its client from the escrow agent.
