Esja seeks court order for US$8.8m as Fishrot vessel sale funds remain frozen

A long-running dispute over the proceeds from the sale of a fishing vessel seized during the Fishrot investigation has returned to court, with Icelandic company Esja asking the High Court to order the release of more than US$8.8 million it says is lawfully owed to it.

The matter centres on a loan advanced by Esja to Heinaste Namibia to finance the acquisition of a fishing vessel in late 2017.

Esja maintains that, despite the vessel being sold for US$18 million under a court-sanctioned arrangement and the debt being admitted, the Namibian government has refused to release funds from a jointly controlled account to settle the outstanding loan.

Court papers show that between December 2017 and January 2018, Esja paid the full purchase price for the vessel directly to Heinaste Cyprus in four instalments totalling approximately US$7.23 million.

The payments were made on behalf of Heinaste Namibia, which had purchased the vessel from its Cypriot affiliate.

According to Esja, the payment structure was approved by the Bank of Namibia under exchange-control regulations following an application submitted by Standard Bank of Namibia, as an authorised dealer. Approval was granted in August 2017 for an intercompany loan, subject to conditions including restrictions on capital repayments and a prescribed shareholder loan-to-equity ratio.

Two payments

After Esja fulfilled its obligations under the loan agreement, Heinaste Namibia registered a first-priority mortgage over the vessel in favour of Esja in January 2018, securing repayment of the principal and interest.

According to court documents, Heinaste Namibia made only two repayments on the loan, paying US$700 000 in July 2018 and a further US$600 000 in September 2018.

No additional payments were made thereafter, leaving a substantial balance outstanding, the lawsuit notes.

In February 2020, amid the widening Fishrot investigations, the police seized and detained the vessel at the Port of Walvis Bay under section 28 of the Prevention of Organised Crime Act (POCA).

Heinaste Namibia challenged the seizure's legality, but the vessel remained under attachment as criminal and forfeiture proceedings unfolded.

By September 2020, the cost of keeping the vessel idle and its ongoing depreciation prompted negotiations involving Heinaste Namibia, Esja, the government and entities linked to Tunacor.

The parties agreed to sell the vessel to Tunacor Fisheries Limited for US$18 million, with the transaction governed by a detailed memorandum of agreement.

Under the agreement, the sale proceeds were paid into a joint US-dollar account at First National Bank of Namibia, controlled jointly by Heinaste Namibia and the government, court documents state.

The funds were deemed seized property under POCA and were to be held pending either the finalisation of criminal proceedings or a court ruling determining the parties’ rights.

Importantly, the agreement expressly recognised Esja’s mortgage claim.

Both Esja and Heinaste Namibia acknowledged that an outstanding loan balance remained due, with Esja asserting a claim of more than US$6.9 million, plus interest.

Heinaste Namibia admitted that the amount was owed.

The agreement required the government and Esja to attempt to resolve the issue within 60 days, failing which either party could approach the courts to determine the amount, if any, to be paid to Esja from the joint account.

Despite the vessel being sold and all approvals being obtained to give effect to the transaction, Esja says no agreement was reached, and no funds have been released.

Exchange control violations

As of July 2024, Esja calculates the outstanding debt at US$8.8 million, excluding further interest accruing at a rate of 6.2064%, compounded quarterly.

Court papers indicate that the joint account currently holds approximately US$18.2 million, excluding accrued interest.

Esja further alleges that its efforts to recover the debt have been frustrated by the state.

In April 2021, the Bank of Namibia blocked Heinaste Namibia’s accounts, citing suspected exchange-control violations linked to entities under investigation.

Although Heinaste Namibia responded through its legal representatives, Esja claims the central bank never replied and has taken no further regulatory action.

Esja accuses the government, the prosecutor-general and the attorney-general of acting unlawfully and in bad faith, alleging that the exchange-control measures were used to prevent payment of a lawful, admitted debt.

It further claims the state misrepresented, at the time of concluding the sale and joint account agreements, that Esja would be able to recover its funds once the vessel was sold.

Esja seeks the High Court's confirmation of the outstanding indebtedness, an order for payment of the debt and interest, and a direction to release funds from the joint account.

It is also seeking relief against the Bank of Namibia should it withhold foreign exchange approval.

While the state maintains that the proceeds of the vessel sale constitute potentially confiscable property, Esja argues that its mortgage rights and admitted loan claim cannot be ignored indefinitely.