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International Trade and Conflicts of Law – Court of Appeal Guidance

The laws of different countries often directly conflict and, in an important decision for the insurance industry which was reached in the context of a shipping accident, the Court of Appeal has given guidance on how such difficulties should be addressed.

The case concerned a vessel which became a total loss after grounding on the shore of a Greek island. Cargo owners had notified claims against the ship’s owner and her time charterer, both of them Turkish companies. Pursuant to the terms of the charter contract, the charterer had launched arbitration proceedings against the owner in London.

The owner was a member of a maritime insurance club which required that an arbitration award under English law was a condition precedent of any liability on its part. However, in tandem with the arbitration, the charterer had launched proceedings in Turkey which sought to attach the club’s assets in Turkey up to a value of $13.5 million.

The conflict between English and Turkish law arose because, under the latter, victims have a right to sue an alleged wrongdoer’s insurers directly, without first suing the insured. No such right exists under English law which provides, by the Third Parties (Rights Against Insurers) Act 1930, that insurers stand behind their clients.

The charterer argued that, in taking action in Turkey, it was merely taking advantage of a right granted to it by Turkish law. However, on the club’s application, the High Court in London granted an anti-suit injunction which prevented the charterer from suing it directly in Turkey.

In dismissing the charterer’s challenge to that decision, the Court found that there was no good reason why the injunction should not be granted. There was no need for the club to show that the Turkish proceedings were vexatious or oppressive and there was no suggestion of delay or inequitable conduct on its part.