The Abu Dhabi Court Claim
The Dubai Court Claim
Two similar cases concerning marine insurance claims for non-delivery of cargo recently came before the UAE courts: one in Dubai, the other in Abu Dhabi. The conflicting judgments, which were handed down in November 2001, provide an interesting insight into marine insurance litigation in the United Arab Emirates.
In both cases the consignments were covered on terms including the Institute Marine Cargo Clause C (ICC(C)). Both policies were extended to cover non-delivery, either by reference to the non-delivery (insured value) clause or simply by words extending cover to include non-delivery. As a matter of English law and practice (which governs the ICC clauses), cargo must be permanently lost for a non-delivery claim to succeed.
The voyages were from Black Sea and Mediterranean ports to the United Arab Emirates. Both voyages required the carrying vessel to transit the Suez Canal. The voyages commenced in January and June 1998. Neither vessel passed through the Suez Canal and, nearly four years later, the cargoes remain on board.
In the Abu Dhabi case, the owners could not pay the transit fee to the Suez Canal Authority. Instead, the vessel headed to Limassol, Cyprus, where it was arrested in August 1998. The vessel remains under arrest on the application of the Abu Dhabi assured.
The insurers argued that a claim of non-delivery did not lie because the cargo was known to remain on board the vessel and a cargo survey report was produced; the cargo was not permanently lost. They argued that the true nature of the assured's loss was delay in delivery - a risk excluded under the ICC(C) clauses. Alternatively, the loss was caused by the financial default of the owners or charterers in failing to pay the Suez transit fee, another excluded risk. The insurers also argued that the contract of carriage must have been terminated and, therefore, cover was automatically terminated under Clause 9. In reply, the assured argued that a non-delivery claim arose if the consignment did not arrive at the discharge port within a reasonable period.
The court appointed an expert to investigate the matter. However, he provided no evidence of relevant expertise and the insurers contested his appointment. The 'expert' filed a report without hearing the insurers' arguments, stating that (contrary to Lloyd's records) the vessel's name and nationality had been changed annually for fraudulent purposes, and the owners were pirates. This, he noted, was the cause of the loss and it was for the insurers, who had access to Lloyd's records, to decline to insure the cargo when they were notified of the proposed carrying vessel.
Fortunately, the court disregarded the report. The insurers had obtained a copy of the assured's arrest application in Limassol, on which the court relied to hold that the contracts of carriage and insurance had clearly terminated. Significantly, the court went on to rule that the fact that the cargo remained on board meant that there could be no claim under the insurance policy.
The vessel in the Dubai court case was owned by Navrom, the defunct Romanian state ship-owning company. Navrom's liquidator sold the vessel with the cargo still on board. The vessel did not pass through the Suez Canal and broke arrest three times, twice at Port Said and once in Greece. Eventually, the vessel was successfully arrested off Limassol, two changes of name later.
The insurers put forward the same defences as in the Abu Dhabi claim. With a copy of the Romanian court certificate of Navrom's liquidation and judgments from the Port Said courts evidencing owners' debts, the insurers were confident that even if a claim for non-delivery could lie in principle, it would surely be defeated by the defences of financial default and/or insolvency or delay, or under Clause 9 of the ICC(C) clauses.
The assured procured a report from a local individual who frequently acted as a court-appointed expert in marine cases. However, it appears that the assured did not advise its expert that the cargo was still on board the vessel and capable of delivery. Not surprisingly, the expert drafted a report in which he assumed the cargo was permanently lost and considered that a claim for non-delivery did arise. He also stated that the non-delivery clause was subject to the ICC(C) clauses not the exclusions to liability. Both points were robustly rebutted by the insurer's expert, a figure of international repute who acts as expert for insurers and insureds.
The court did not appoint an independent expert to investigate the case and accepted the opinion of the assured's consultant without comment. The court accepted that the non-delivery clause was independent of the ICC(C) clauses and the insurer could not claim the benefit of the Clause 4 exclusions.
The court held that there was a non-delivery. In contrast to the Abu Dhabi court, it found that a survey report showing that the cargo remained on board did not alter the position, since it also showed that the cargo of timber stowed on deck was now heavily damaged, having been exposed to the elements for a number of years.
Both these cases are now under appeal. Interestingly, similar cases arising out of the same voyage have also been litigated in Qatar and Kuwait again producing inconsistent judgements.
When a non-delivery claim arises, insurers must be quick to trace the cargo and obtain evidence admissible in the UAE courts. There is still no guarantee that UAE courts of first instance will reach the result expected by experienced insurance professionals.
We understand that some insurers are offering insurance on terms designed to cover claims similar to those in the two disputes. While such cover is likely to be welcomed by cargo owners, a greater underwriting risk may be placed on insurers to satisfy themselves to some degree as to the vessel, its owners and the risk of fraudulent claims. An ageing vessel may be the first indication of problems; the vessels in these cases were built in 1971 and 1980 - the latter believed to have already booked its final berth at an Indian scrapyard.
For further information on this topic please contact Caleb Raywood at Clyde & Co by telephone (+971 4 3311102) or by fax (+971 4 3319920) or by email ([email protected]).