The London Steam-Ship Owners' Mutual Insurance Association Ltd v Trico Maritime (Pvt) Ltd & Ors

An insurer may restrain foreign proceedings brought by a non-party where the claimant’s asserted right is founded on the insurance contract rather than an independent local-law right. The claimant is then bound by the contract’s arbitration clause on a benefit-and-burden basis, or because arbitration is a legal incident of the contractual right asserted. An anti-suit injunction will generally follow unless there is a good reason to refuse it. A valid pay-to-be-paid clause ordinarily prevents a direct third-party claim against a P&I insurer unless the assured has first discharged the relevant liability.

The claimant, a P&I insurer, insured a vessel which sank off Sri Lanka. Cargo interests commenced proceedings in Sri Lanka alleging that the insurer was liable as insurer for their cargo losses. The insurer sought an anti-suit injunction and declarations concerning the insurance contract.

The policy was governed by English law and required disputes to be referred to London arbitration. It also contained a pay-to-be-paid clause. The defendants did not participate in the English proceedings. The issues were whether their Sri Lankan claims depended on the insurance contract, whether they were bound by its arbitration agreement, whether there was any good reason not to grant an injunction, and what effect the pay-to-be-paid clause had.

1. Anti-suit principles. The court applied the three-stage approach established in Shipowners Mutual P&I v Containerships Denizcilik (The Yusuf Cepnioglu) and QBE Europe SA NV v Generali Espana de Seguros. First, the court classifies the right asserted in the foreign proceedings under English conflict-of-law principles. Secondly, if the right is contractual and derived from the insurance contract, the foreign claimant is bound by the associated arbitration obligation, although not a party to the contract. Thirdly, the insurer may seek an anti-suit injunction, which will generally be granted unless there is a good reason not to do so.
2. The Sri Lankan claims against the insurer were advanced solely on the basis that it was liable “as the insurer”. They therefore depended on the insurance contract and were not independent local-law claims. The cargo claimants were bound by the London arbitration clause, both on the benefit-and-burden basis and because the obligation to arbitrate was a legal incident of the contractual rights asserted.
3. No good reason existed to refuse relief. The insurer had challenged the Sri Lankan jurisdiction without materially submitting to it, its withdrawal applications did not create material inconsistency, and there had been no material delay or progress on the merits. The insurer was entitled to an anti-suit injunction.
4. Pay-to-be-paid clause. Rule 3.1.1 made actual payment by the assured of the full liability a condition precedent to recovery from the Club. Consistently with Firma C-Trade S.A. v Newcastle Protection and Indemnity Association (The “Fanti” and The “Padre Island”) and London Steam-Ship Owners’ Mutual Insurance Association Ltd v Spain, the clause provided a complete defence where the assured had not discharged the liability. A third party could not obtain a better position against the insurer than the assured. The court granted the requested declaration.