Whether direct right of action against insurers under Turkish law could be heard by the English courts

http://www.bailii.org/ew/cases/EWHC/Comm/2015/258.html

PD6B para 3.1(6)(c) provides that a claim form can be served out of the jurisdiction, with the  court’s permission, if “a claim is made in respect of a contract where the contract…is governed by  English law” (emphasis added).

Following the loss of a vessel, the Turkish charterers commenced arbitration proceedings in London  against  the Turkish owners. However, under Turkish law, they also claimed to have a right of  direct action against the owners’ liability insurers, a P&I Club. They commenced proceedings in Turkey. However, the Club sought an  anti-suit injunction  to restrain the charterers from continuing those proceedings. In order to do  so, they required the permission of the English court to serve out of the jurisdiction. The issue  was therefore whether the charterers’ claim was, in substance, a claim to enforce the contract  between the Club and the owners (so that PD6B applied), or whether it was a claim to enforce an  independent right of recovery.

Teare J concluded that the “essential content” of the right of direct action was the contract  between the Club and its member. Although there were some “exceptions” which pointed to a different  conclusion, these were not enough to change the essential nature of the right which had been  created. Nor did it matter that the charterers were not a party to the contract between the Club and the owners (see Greene Wood v Templeton Insurance (Weekly Update 06/09)).

The cover granted by the Club provided for English law and London arbitration. CPR r62.5(1)(c)  provides that the English courts may give permission to serve an arbitration claim form out of the  jurisdiction where “the claimant (i) seeks some other remedy or requires a question to be decided  by the court affecting an arbitration (whether started or not) ..; and (ii) the seat of the arbitration is or will be within the jurisdiction”. Teare J rejected  an argument that CPR r62.5 provided an exclusive code for service of an arbitration claim form and found that permission to serve out could be made under PD6B as well. In so doing, he  relied on an observation by the Supreme Court in AES v Ust-Kamenogorsk (see Weekly Update 22/13) to  that effect. He said that “I consider that a first instance judge should follow a unanimous  observation of the Supreme Court”.

In any event, he found that he also had jurisdiction under CPR r62.5 to give permission to serve  out of the jurisdiction. Although there was no privity of contract between the charterers and the  Club, he said that if they wish to enforce a contractual right which is itself subject to an  arbitration clause, the charterers will be bound by that arbitration clause too.

Finally, in finding that the English court should grant an anti-suit injunction in this case, Teare J held that English law gives priority to the Club’s  contractual rights, rather than the right of direct action.

The charterers have been given leave to appeal against this decision.