Assuranceforeningen Gard Gjensidig v The International Oil Pollution Compensation Fund

An international organisation has only the immunity granted by the relevant statutory instrument. The grant and its exceptions must be construed according to the instrument’s terms, legislative purpose and scheme, without a presumption favouring or opposing immunity.

Where a party alleges a hybrid contract formed from communications and conduct, it bears the burden of proving contractual intention, offer, acceptance, certainty and an intention to create legal relations. A non-contractual practice of consecutive payments is not transformed into a contract merely because the parties expected it to continue.

A payment arrangement is not a loan or transaction for the provision of finance where its purpose and legal basis are the discharge of pollution liabilities and mutual subrogation, rather than funding the alleged borrower.

Gard, the insurer of the owners of the Nissos Amorgos, sought declarations that the Fund was liable to indemnify it for liability arising from pollution damage in Venezuela. Gard relied on an alleged agreement under which it would pay claims up to the applicable CLC limit and the Fund would thereafter pay claims up to the Fund Convention limit.

The Fund applied under CPR Part 11 to challenge jurisdiction, relying on immunity under section 6 of the International Oil Pollution Compensation Fund (Immunities and Privileges) Order 1979. The issues were whether a contract existed and, if so, whether it was a loan or other transaction for the provision of finance within the statutory exception.

1. Application granted. The Fund was immune from suit and legal process, and the court had no jurisdiction over Gard’s claim.
2. The relevant arrangement was a practice whereby P&I clubs generally paid claims up to the CLC limit and the Fund thereafter paid claims up to its limit. Its legal underpinning was mutual subrogation, together with an expectation that the parties would reconcile their respective payments. The practice was not itself contractual.
3. Applying the objective approach in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC 14, the Fund’s communications were statements of position. The references to having no objection to Gard paying approved claims, and to Gard acquiring subrogation rights, did not amount to an offer to pay all claims above the CLC limit.
4. The alleged agreement was insufficiently certain and complete. It did not identify the parties’ obligations concerning payment, approval of claims, joint costs, claim handling, reconciliation, disputes, interest or the circumstances in which the Fund could refuse payment. The parties’ subsequent conduct was equally consistent with a non-contractual expectation. Gard therefore failed to prove a contract or an intention to create legal relations.
5. The statutory immunity was governed solely by the Order. Following Standard Chartered Bank v International Tin Council [1987] 1 WLR 641, the Fund had immunity no more and no less than the Order granted. The court was not to apply doctrines of state immunity or acta jure imperii. Gard bore the burden of establishing the exception in section 6(1)(c).
6. Even assuming a contract existed, it was neither a loan nor a transaction for the provision of finance. Under Gadhok v Shamji [2003] EWHC 931 (Ch), a tripartite payment may be a loan only where an existing debtor-creditor relationship gives it that character or the parties agree that it is a loan. Neither condition existed. The arrangement concerned payment of liabilities, was based on subrogation, contained no financing terms, and was not made to satisfy the Fund’s borrowing needs.
7. Gard’s arguments based on commercial purpose and access to court under Article 6 of the ECHR could not alter the proper construction of the Order. Gard could pursue subrogated claims in Venezuela. The Fund succeeded on both issues.