Nord Stream AG v Lloyd's Insurance Company SA & Anor

Where a policy excludes damage directly or indirectly occasioned by, happening through, or in consequence of war, the causal link need not be proximate. War must, however, be identifiable as a contributing cause, rather than merely part of the historical background. The inquiry does not require the perpetrator to be a belligerent, the target to be military, or the damage to occur within a theatre of war.

A policy clause excluding damage by or under government order may operate as a separate exclusion. Its reference to damage “by” a government can include acts by its armed forces, unless they acted independently of the State. A policy provision restoring government-related cover for pollution measures does not restore cover for unrelated acts of sabotage.

Nord Stream AG claimed under policies covering its Baltic Sea gas pipelines after explosions in September 2022 ruptured two pipelines. The insurers relied on policy exclusions for damage connected with war and for damage by or under government order. A separate indentation on one pipeline was also disputed: the insurers said it was caused by an explosive charge as part of the same attack, while Nord Stream disputed that cause. After a six-week trial, the court addressed policy construction, the causal link to the war, the government-act exclusion and the cause of the indentation. It did not determine quantum.

1. Policy wording. The court held that the Institute Clauses for Builders’ Risks (“ICBR”) did not provide the policy’s primary insuring clause. As incorporated, the ICBR were limited to property under construction or repair. The Institute War Clauses Builders’ Risks were limited to floating assets; the pipelines were not brought within their scope by treating offshore installation as a launch or by substituting “property insured” for “vessel”. The policy could not be rewritten to remove those limits. Market practice was relevant background and supported the insurers’ construction.
2. Exclusions and pollution cover. Exclusion 2.i contained two separate heads: the war exclusion and the exclusion for confiscation, nationalisation, requisition, or damage to property by or under government order. The proviso “except as otherwise provided in Section I” qualified only the government-related head. General Condition 9 was limited to damage connected with pollution hazard and did not conflict with the exclusion; General Condition 4 therefore did not restore cover.
3. War causation. The wording required a broad causal connection, weaker than proximate or efficient cause. War had to be a noticeable or specifically accountable contributing cause, rather than merely an item of history; it did not need to outweigh other causes or be of “real significance” in a comparative sense. The court rejected requirements that the attack have a warlike aspect or special danger, or that it be carried out by a belligerent, against a military target, or within the theatre of war. On the evidence, the war was a significant cause if any of the identified possible perpetrators had carried out the attacks. It was therefore unnecessary to decide which perpetrator was more likely.
4. Government acts and the Dent. “By” a government was not confined to a formal order: it included acts by the armed forces and their members acting on behalf of the State, but not those acting on a frolic of their own. The court also found that General Condition 9 did not extend to the army as a governmental or regulatory agency. Applying the balance-of-probabilities approach in The Popi M [1985] 1 WLR 948 and Ide v ATB Sales Ltd [2008] P.I.Q.R. P13, the court found that the Dent was more likely than not caused by an explosive charge in the same attack. The court relied on the expert evidence and the Dent’s proximity to the ruptures, its location near a welded joint, and physical evidence consistent with an explosion. Quantum was not determined. The Damage was excluded from cover by Exclusion 2.i.