In a recent decision by Teare J, the Commercial Court upheld an anti-suit injunction brought by Shipowners’ Mutual Protection & Indemnity Association against Charterers, Containerships Denizcilik Nakliyat Ve Ticaret.

Background

The anti-suit injunction was sought by the Claimant P&I Club to restrain proceedings commenced in Turkey by Charterers to take advantage of recent developments under Turkish law whereby a victim has a direct right of action against an insurer. In what is being viewed as a pro-insurer decision, the Commercial Court upheld the anti-suit injunction and differentiated the case from that of The “HARI BHUM” No.2 (2005), which allowed a direct action to proceed in Finland against the TT Club, on the basis that Turkey was not an EU/Lugano Convention country.

The case itself centred around the total loss of a container vessel following grounding at Mykonos, in March 2014. The Charterer Carriers are exposed to significant cargo losses and, in looking for an indemnity from Owners and their P&I Insurers, have faced difficulties stemming from the P&I Club arguing the “Pay to be Paid” rule defence.

Commercial Court

The Claimant P&I Clubs’ anti-suit injunction was upheld, restraining the Charterers’ Turkish action, as the Judge held that, inter-alia, the rights under the P&I Club’s contract should prevail over issues of comity towards the Turkish legislature.

Teare J found that proceedings in Turkey were vexatious and oppressive, following the approach of Hobhouse LJ in The JAY BOLA” (1997), as such actions, he said, would “deprive the Club of its right to have claims brought against it enforced

by arbitration in London. Further, there is a real risk that those proceedings will also prevent the Club from being able to rely upon the “Pay to be Paid” clause in its contract with its member”. He added that English law gives priority to contractual rights,  as in The “JAY BOLA”, The “HARI BHUM” No.2 (2014) and The “PRESTIGE” No.2 (2014).

The  Court  also  decided  the  characterisation  question  of whether the claim was to be considered as one arising  out  of  contract  or  arising  independently  under  statute, by finding that “the direct action conferred by Turkish law against the Club is in substance a right to enforce the contract between the Club and its Member rather than an independent right of recovery”.

It also found that the Court had jurisdiction to grant permission to serve out of the jurisdiction as England  was viewed as the proper place to bring the claim (as the Court characterised the right as arising under the P&I contract and therefore subject to English law and London arbitration).

Comment

Charterers have been given leave to appeal all three points, characterisation, jurisdiction to grant permission to serve out, and the vexatious and impressive issue, which is expected to be held later this year or in early 2016. The P&I world will no doubt await the appeal decision with extreme interest at a time when direct action has become a major topic for the courts to contend with.