Ceto Shipping Corporation v Savory Shipping Inc
[2024] EWHC 663 (Comm)
The London Steam-Ship Owners' Mutual Insurance Association Ltd v Trico Maritime (Pvt) Ltd & Ors
23 April 2024
[2024] EWHC 884 (Comm)
High Court
An insurance company in England successfully stopped cargo claimants in Sri Lanka from suing them there. The court said the Sri Lankan case should be in London arbitration, as the insurance contract says. The court also clarified a clause in the contract that stops third parties suing the insurer directly.
Key Facts
- •The London Steam-Ship Owners' Mutual Insurance Association Ltd (the Club) sought an anti-suit injunction and declaratory relief against five Sri Lankan defendants (Cargo Claimants) who initiated proceedings in Sri Lanka for cargo loss following the sinking of the X-Press Pearl.
- •The Cargo Claimants did not appear in the English proceedings.
- •The Cargo Claimants' Sri Lankan claims were against the Club 'as the insurer,' relying on the insurance contract between the Club and the vessel's owners.
- •The insurance contract was governed by English law and contained an arbitration clause.
- •The Club's insurance contract included a 'pay to be paid' clause.
Legal Principles
A foreign claimant can be bound by the terms of an insurance contract, including arbitration clauses, even if not a party to it, if the claim relies on a right derived from that contract.
Shipowners Mutual P&I v Containerships Denizcilik (The Yusuf Cepnioglu) [2016] EWCA Civ 386 and QBE Europe SA NV v Generali Espana de Seguros [2022] EWHC 2062 (Comm)
'Pay to be paid' clauses in P&I insurance contracts prevent direct claims by third parties against insurers unless the assured has first discharged their liabilities.
Firma C-Trade S.A. v Newcastle Protection and Indemnity Association (The “Fanti” and The “Padre Island”) [1991] 2 AC 1 and London Steam-Ship Owners’ Mutual Insurance Associated Ltd v Spain [2013] EWHC 3188 (Comm)
Outcomes
The court granted the Club an anti-suit injunction, restraining the Cargo Claimants from pursuing their proceedings in Sri Lanka.
The Cargo Claimants' claims were dependent on the English law governed insurance contract, which contained a London arbitration clause. Their failure to appear and defend the claim in England, coupled with the absence of a good reason to refuse the injunction, led to the decision.
The court granted declaratory relief, confirming the effect of the 'pay to be paid' clause in the insurance contract.
The court held that the 'pay to be paid' clause is a well-established principle of English law, preventing direct claims by third parties against P&I insurers, and the declaration would serve a useful purpose in clarifying this for all parties and potentially the Sri Lankan courts.
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