South Africa: Court orders SARS to release seized vessel against guarantee – A significant customs and maritime ruling

By Jeremy Prain, Partner, Bowmans

International maritime commerce is no stranger to the notion of arrested ships being released against provision of alternative security; typically, guarantees or letters of undertaking from banks and protection and indemnity (P&I) clubs.

By contrast, the South African Revenue Service (SARS) has tended to push back against tenders of security from owners and charterers in circumstances where SARS has detained or seized vessels for alleged contraventions of the Customs and Excise Act (Customs Act). This approach leaves little room to negotiate a speedy resolution and resumption of trading activities.

Against that background, the Western Cape Division of the High Court handed down a significant judgment on 24 April 2026 in Ocean Ark Shipping Ltd & Another v The Commissioner for the South African Revenue Service. The Court ordered SARS to release the mt Essien, a Singapore-flagged products tanker, from detention and seizure, subject to the provision of a guarantee by the charterers, Astron Energy.

Bowmans acted for the owners, Ocean Ark Shipping Ltd.

The facts

Since about September 2023, the vessel has been employed in the South African bunkering market to perform coastwise carriage of fuel products on behalf of Astron Energy.

On 27 March 2025, the Commissioner for SARS detained the vessel and the fuel on board in terms of section 88(1)(a) of the Customs Act and then proceeded to seize the vessel on the basis that it was liable to forfeiture.

The detention and seizure was premised on the assertion by SARS that the vessel had been imported into South Africa and that the Commissioner sought to recover import VAT of approximately ZAR 94 million, together with interest and penalties of approximately ZAR 30 million, totalling approximately ZAR 124 million. The estimated value of the vessel itself, for purposes of forfeiture, was approximately ZAR 400 million, bringing the total potential exposure to ZAR 524 million.

The section 93 applications and the Commissioner’s refusal

Both Astron Energy and Ocean Ark sought the return of the vessel in terms of section 93 of the Customs Act. This section empowers the Commissioner, on good cause shown by the owner, to direct that goods detained, seized or forfeited be delivered to the owner, subject to payment of duties, charges and such conditions as the Commissioner may determine.

In this regard, Astron Energy tendered a guarantee from Lombard Insurance Company covering the estimated value of the vessel, together with the full amount of alleged VAT, penalties and interest. In other words, SARS was presented with a tender of security for the full value of potential exposure.

This notwithstanding, the Commissioner declined to engage with Astron Energy on the basis that it was not the owner of the vessel and also, ultimately, refused to release the vessel to her owners, Ocean Ark.

The urgent application

The refusal to accept the tender precipitated an urgent application for an interim interdict to suspend the Commissioner’s detention and seizure of the vessel temporarily, pending the outcome of a separate review application to determine the underlying merits of the matter; coupled with a directive from the Court for the release of the vessel against the provision of the Lombard guarantee in the form tendered by Astron Energy.

The Court’s analysis

Prima facie right

The merits of SARS’ position on the law in relation to the importation of the vessel is a matter to be determined by the review court in due course. For the purposes of the interim interdict, however, Holderness J found that the applicants had established a prima facie right warranting protection and noted that the proper interpretation of the Customs Act on this point raised genuinely complex legal questions. The Court also identified the lawfulness of the Commissioner’s refusal to release the vessel under section 93, and the proportionality of forfeiting a ZAR 400 million asset in respect of a ZAR 124 million VAT liability, as further arguable bases for review.

Irreparable harm

The Court was satisfied that the applicants had demonstrated irreparable harm. Ocean Ark, as registered owner, faced the potential permanent loss of an asset valued at approximately ZAR 400 million. Astron Energy suffered direct monthly losses of approximately ZAR 31 million, comprising continued charter hire for a vessel it could not use, the necessity of hiring substitute vessels on the volatile spot market, and costs associated with maintaining safety standards for the detained fuel.

The Court also noted the broader public dimension: Astron Energy’s refinery supplies roughly 75% of the jet fuel required by Cape Town International Airport, and the detention of the vessel disrupted refinery operations, creating a tangible risk of fuel shortages.

Balance of convenience and the guarantee

The balance of convenience inquiry resolved largely into a question about the adequacy of the guarantee. The Commissioner’s principal concern was one of enforcement: the vessel sailed under a foreign flag, and once it cleared South African waters, the Commissioner’s practical ability to enforce a judgment would be significantly diminished. Holderness J acknowledged this as a real risk but concluded that the revised guarantee was designed to address it.

The Commissioner advanced three objections to the guarantee. First, that it was conditional rather than a true on-demand instrument. The Court found that the conditionality (payment triggered by a final court order or settlement) did not render the guarantee inadequate, as SARS could not in any event access the proceeds of the vessel before the dispute was resolved. Second, that the guarantee named the wrong party (Astron Energy rather than the alleged importer).

Applying the autonomy principle applicable to demand guarantees, as confirmed by the Supreme Court of Appeal in First Rand Bank Ltd v Brera Investments CC, the Court held that Lombard Insurance’s obligation was determined by the terms of the guarantee itself, not by the underlying dispute between SARS and the parties. Third, that the quantum was insufficient. The Commissioner did not seriously press this point, and rightly so, as the guarantee exceeded the Commissioner’s own stated exposure.

The order

After assessing all of the elements that must be demonstrated to establish an interim interdict, the Judge was satisfied with the case made out by the applicants and ordered that the Commissioner’s detention, seizure, deemed importation and section 93 decisions be suspended temporarily pending the outcome of the review application. The Commissioner was directed to release the vessel to the applicants, subject to the payment by Astron Energy of any reasonable charges incurred in connection with the detention and seizure, and the provision of the Lombard Insurance guarantee. SARS was ordered to pay the applicants’ costs, reflecting the novelty of the issues, the volume of work and the financial magnitude of the dispute.

Comment

The judgment is significant for several reasons.

First, it demonstrates that the courts will, in appropriate circumstances, intervene to release a vessel from customs detention and seizure, provided that adequate alternative security is tendered to protect the fiscus. The principle that the physical detention of a vessel can be substituted by liquid security (in this case, a guarantee) is one that will resonate with the maritime industry. The Court’s careful analysis of the terms of the guarantee, and its willingness to look through the form of the instrument to its substance, provides useful guidance for practitioners advising on the structuring of security in similar cases.

Second, the Court’s approach is consonant with the rights afforded to ship owners, charterers and other affected parties under South African admiralty law when their vessels are arrested or otherwise detained under the Admiralty Jurisdiction Regulation Act. It is a foundational principle of admiralty law that a party whose vessel has been arrested is entitled to obtain its release by providing adequate security for the claim in respect of which the arrest was effected. The rationale is that the arrest of a vessel is an extreme remedy, carrying severe financial and operational consequences for the owner and all parties in the chartering chain, and that the interests of the arresting party are adequately protected if liquid security replaces the physical detention of the asset.

The Ocean Ark judgment applies an analogous logic in the customs context. SARS’s interests were fully protected by a guarantee that exceeded its stated exposure, and the continued physical detention of the vessel, at a cost of approximately ZAR 31 million per month to Astron Energy alone, was disproportionate in circumstances where equivalent security was available. The practical alignment between the admiralty and customs regimes in this regard is a welcome development.

Finally, the judgment underscores the severe consequences of the detention and seizure of a commercial vessel for multiple parties across a complex maritime chartering chain. The financial fallout extended beyond the registered owner to the head charterer, the sub-charterer and, potentially, the public at large through the disruption of fuel supplies to Cape Town International Airport. The Court’s recognition of Astron Energy’s standing as time charterer, notwithstanding its lack of ownership, is an important finding for charterers and other parties with direct contractual interests in a vessel’s availability.