Lloyd's Maritime and Commercial Law Quarterly
DIRECT ACTIONS AND ARBITRATION: ALL AT SEA
Adrian Briggs*
The Yusuf Çepnioğlu
The Yusuf Çepnioğlu ran aground on the rocky coast of Mykonos, casting its cargo into the Ionian Sea and becoming a total loss. The Turkish charterers, facing claims from cargo interests and blaming the Turkish owners for their predicament,1 took advantage of a Turkish law which allowed them, as they said, to claim compensation in proceedings brought directly against the insurers of the vessel. Those insurers were a P&I Club, and the Turkish court had jurisdiction under its own law to entertain the claim against them. In Shipowners’ Mutual Protection and Indemnity Association (Luxembourg) v Containerships Denizcilik Nakliyat ve Ticaret AS (The Yusuf Çepnioğlu),2 the Court of Appeal confirmed3 an anti-suit injunction to restrain the charterers. The basis for this was that their bringing proceedings in Turkey infringed the legal rights of the insurers, and the only way to protect those rights was by injunction.4
If there had been no more to the story than that, the outcome would be inexplicable. The one additional fact, which the court took to make all the difference, was that the contract of insurance, which was governed by English law, provided for London arbitration. That allowed the court to conclude that the claim brought before the Turkish court was one which the arbitration clause in the insurance contract required the claimants to bring before a London tribunal. The plain point, that the claimants were not party to any contractual or consensual agreement to arbitrate, and so owed no relevant legal duty to the insurers to submit their claim to arbitration in London, was rejected. It should not have been.
The law of insurance gives rise to puzzles of a kind not usually found in simple bilateral relationships created by contract. Two points in particular challenge the application of basic theory. One is the way in which an insurer may be brought into a direct legal relationship with a non-party by taking over the rights of its insured against a person who has caused the loss. This may result in the insurer’s being bound and entitled in the same way its insured was.5 Whether the mechanism by which this happens is by assignment
1. The charterers’ claims against the owners were the subject of arbitration in London.
2. [2016] EWCA Civ 386; [2016] 1 Lloyd’s Rep 641.
3. Dismissing the appeal against the decision of Teare J: [2015] EWHC 258 (Comm); [2015] 1 Lloyd’s Rep 567.
4. If the premise is right, the conclusion follows, at least in the generality of cases, and unless the judicial proceedings are before the courts of another Member State. The point is not discussed here.
5. A particular factor that commonly arises in such cases, as it did here, is that a “pay to be paid” clause in the insurance contract means that the insurer’s liability to indemnify is subject to the insured’s having paid the person claiming against him. See Firma C-Trade SA v Newcastle Protection and Indemnity Association (The Fanti) (No 2) [1990] 2 Lloyd’s Rep 191; [1991] 2 AC 1.
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