Havila Files Legal Actions to Free Cruise Ship from Russian Sanctions

Havila seeks courts to resolve sanction problem for cruise ship
Havila Capella has remained docked for two months in Bergen caught by the sanctions against Russia (Havila)

Published Jun 16, 2022 3:01 PM by The Maritime Executive

Norway’s Havila Kystruten has begun legal actions to free its cruise ship caught under the sanctions against Russia and also protecting its interests in two additional cruise ships under construction in Norway. The company, which has a contract with the Norwegian government to supply coastal voyages, said it has decided to force the situation as it has been unable to find a temporary solution to resume operations of the Havila Capella, which this week canceled yet another scheduled cruise.

Today, June 16, Havila Kystruten requested a temporary arrest and right of use for the Havila Capella from a district court in Norway seeking forced use of the vessel. The company has also filed a case in the British High Court seeking to force the change of ownership of its cruise ship.

The problems began for the company when the European Union added Russian lender GTLK on April 8 to the list of sanctioned companies due to the invasion of Ukraine. Under a long-term financing agreement reached in 2019, Havila is building four cruise ships to operate the Norwegian coastal voyages with traditional “sale lease back” terms. Havila has full control of the ships but would be leasing them from GTLK Asia. Havila has the option to purchase the ships after two years of operation and is required to buy them from GTLK after 10 years.

The Norwegian authorities ultimately agreed with the company that the ships are essentially Norwegian as they operate under Norwegian regulations and pay taxes to Norway granting the company a six-month dispensation to operate the Havila Capella while the company refinances the ships. The insurers, however, withdrew the liability coverage saying that in the event of a claim the proceeds would go to GTLK meaning the company was forced to lay up the Havila Capella as of April 12. 

“We have not met very much willingness from our financing partner to find an amicable solution,” said Bent Martini, CEO of Havila Kystruten. “Therefore, we now choose to take legal action to demand a change of ownership.”

This week, Havila Kystruten filed a case with The High Court of Justice, Business and Property Courts of England and Wales, Commercial Court (QBD) in London to force a change of ownership of the Havila Capella and protect its interest in the two cruise ships currently under construction in Turkey. The shipyard provided a bridge loan to Havila in May so that the company could take delivery and start operations of its second cruise ship, the Havila Castor.

“We have tried to find a solution with GTLK Asia, but the only solution they have put forward is to pay the amount due. It would be illegal for us to pay the amount due to a sanctioned company. We want to settle by paying the amount we owe GLTK Asia to a blocked account. The amount will be paid to GTLK Asia when the sanctions are lifted,” said Martini describing their proposed solution.

As the company explains the situation, if they can force the change of ownership, they will be able to then be able to receive insurance and resume sailing the Havila Capella. Otherwise, they fear they will remain caught in the sanctions with no apparent route to resolve the problem.

The UK courts issued a first ruling protecting the company’s interest in the two ships under construction by preventing any transaction on the ships without Havila’s approval. The company continues to seek a refinancing agreement for all four of its cruise ships while also expecting a clarification of English law regarding the ownership of the Havila Capella.

Havila is one of several companies that found itself caught in a similar situation. GTLK and its subsidiaries were active lenders in the maritime industry. Another new cruise line, Swan Hellenic also financed its new cruise ships with the subsidiaries of the Russian company. Swan Hellenic reports that it exercised its buy-out option for its cruise ships from GTLK, but it has also laid up its first ship, SH Minerva, until the fall while awaiting the early delivery of its second cruise ship which will continue the operation this summer.