Supreme Court overturns US$34m oil tanker ruling

The Supreme Court has overturned a High Court judgment that would have allowed two foreign banks to recover more than US$34 million from the sale of a crude oil tanker seized off the coast of Walvis Bay, finding that the company which granted the mortgage over the vessel was never its lawful owner.

The ruling, delivered last week, brings to an end a years-long legal battle over the MT Marvin Star, a foreign-registered oil tanker whose judicial sale in Namibia sparked a dispute between two lenders and another foreign company claiming the vessel had been fraudulently taken from it.

In 2019, two foreign financial institutions agreed to lend US$20 million (about N$360 million at the current exchange rate) to a shipping company, Panormos Crude Carriers Limited.

Like most lenders, they wanted security in case the loan was not repaid.

Panormos therefore offered one of its most valuable assets, the oil tanker Marvin Star, as collateral. In return, the lenders registered a mortgage over the vessel, giving them the right to claim the ship if Panormos defaulted on the loan. At the time, it was registered in the Marshall Islands in Panormos’ name.

When Panormos defaulted on the loan, the banks sought to recover the debt by enforcing the mortgage against the vessel.

By then, however, the tanker had already entered Namibian waters.

The vessel was first detained off the coast of Walvis Bay in August 2021 over an unrelated maritime claim involving unpaid lubricants. The banks subsequently arrested the tanker themselves to enforce their mortgage.

Rather than allowing the vessel to remain under arrest while litigation continued, High Court judge Esi Schimming-Chase on 15 July 2025 ordered that it be sold. The proceeds of the sale were paid into court, leaving the parties to fight over who was entitled to the money.

Ownership challenged

The banks' claim was opposed by Prime Paradise International Limited, a company incorporated in the British Virgin Islands.

Prime argued that Panormos had never lawfully owned the vessel and therefore had no legal authority to mortgage it.

According to Prime, the tanker had originally belonged to it after being transferred from another company as part of a restructuring involving the Iranian state-controlled shipping group IRISL.

Prime alleged that one of its directors, Athanasios Kairaktidis, abused his position by secretly transferring the vessel from Prime to Panormos – a company he controlled – without Prime's authority and without paying the agreed purchase price.

Prime maintained that because the transfer was fraudulent, ownership of the vessel never legally passed to Panormos.

Official records

The banks denied any involvement in the alleged fraud.

Before advancing the loan, they said they carried out extensive due diligence, including verifying the vessel's registration in the Marshall Islands, obtaining ownership certificates, conducting sanctions checks and securing legal opinions confirming Panormos as the registered owner.

All available information reportedly indicated that Panormos owned the vessel, and they maintained they had acted honestly and reasonably throughout the transaction.

Schimming-Chase found that the banks had conducted reasonable due diligence, acted in good faith and were not parties to any alleged fraud.

Although the court accepted that registration of ownership could be challenged, it held that Prime had failed to produce sufficient evidence proving that Panormos had fraudulently obtained ownership of the tanker.

The judge concluded that the mortgage had been validly registered and awarded the banks more than US$34 million, together with interest and costs, from the proceeds of the vessel's judicial sale.

Ruling overturned

The Supreme Court, however, reached a fundamentally different conclusion after reviewing the evidence.

While agreeing that the Namibian courts had jurisdiction because the vessel had been detained and sold in Namibia, the court held that the High Court had erred in finding that Prime failed to prove fraud.

Acting judge of appeal Dave Smuts, with deputy chief justice Petrus Damaseb and acting judge of appeal Theo Frank, concurring, found that the evidence established on a balance of probabilities that the purported sale of the vessel from Prime to Panormos amounted to a fraud.

The court found that Kairaktidis had purported to sell the vessel on behalf of Prime to another company effectively owned by himself, despite lacking authority to do so, and that the transfer was never lawfully completed.

As a result, ownership of the tanker never passed to Panormos despite its later registration as owner in Panama and subsequently in the Marshall Islands.

A central issue before the Supreme Court was whether registration alone proved ownership.

The banks argued that because Panormos was listed as the registered owner in the Marshall Islands, they were entitled to rely on that registration.

The Supreme Court accepted that registration created prima facie proof of ownership but stressed that such proof was not conclusive and could be rebutted by evidence demonstrating that the registration had been obtained through fraud.

After examining the documentary evidence and witness testimony, the court concluded that Prime had successfully rebutted that presumption.

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