Kallang Shipping SA Panama v Axa Assurances Senegal & Anor

An arrest of a vessel abroad is permissible where its sole purpose is to obtain reasonable security for a claim which must be arbitrated or litigated in England. It becomes a breach of the arbitration agreement when used for an ulterior purpose, such as forcing the claimant to abandon the agreed forum or submit the substantive dispute to foreign jurisdiction. No separate implied term is necessary where the express arbitration clause already requires all disputes to be determined in the agreed forum. A third party who knowingly and intentionally procures that breach is liable for the accessory tort of inducing breach of contract.

The claimant shipowner alleged that cargo receivers arrested the Kallang in Dakar and used the arrest to force acceptance of Senegalese jurisdiction, contrary to London arbitration clauses incorporated into the bills of lading. The cargo insurer was said to have driven that conduct and to have procured the receivers’ breach.

The court had to determine which arbitration clause was incorporated, whether the Dakar arrest was merely conservatory, whether the arrest was used to defeat the arbitration agreement, the insurer’s knowledge and intention, conspiracy, and damages.

1. Incorporation. The bills of lading expressly incorporated the charterparty terms, including the law and arbitration clauses. Although two charterparties bore the same date, the voyage charter was the natural reference because freight was payable under it and its terms were germane to the bills of lading. Its London arbitration clause was therefore incorporated: [1978] 1 Lloyd’s Rep 545.
2. Security and arbitration. The Brussels Arrest Convention distinguishes the right to arrest a vessel for security from the forum for deciding the substantive claim. The English court will not restrain a foreign arrest whose sole purpose is to obtain reasonable security for an English arbitration. But conduct going beyond security and seeking to secure determination of the dispute abroad breaches the arbitration agreement: [1980] 2 Lloyd’s Rep 546; [1995] 1 Lloyd’s Rep 603.
3. No implied term of the kind pleaded was necessary. The express agreement to refer all disputes to London arbitration was itself breached when the arrest was used to force relinquishment of that bargain. The Dakar order was formally conservatory, but the insurer deliberately used the security process to obtain Senegalese jurisdiction.
4. Procurement. Under [2007] UKHL 21, the insurer was liable for procuring breach because it knew, at least by 15 March 2005, that a binding London arbitration clause was almost certain, deliberately failed to make obvious enquiries, and intended the breach as an end in itself.
5. The conspiracy claim failed because the evidence did not establish any agreement between the receivers and insurer. The insurer, rather than the receivers, had taken control of the claim.
6. The insurer’s conduct caused ten days’ recoverable loss. Damages of US$130,350 were awarded against it. The receivers were entitled to seek security, but the improper element was the attempt to defeat the arbitration clause.