Assuranceforeningen Gard Gjensidig v The International Oil Pollution Compensation Fund
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 17 October 2014 |
| Neutral Citation | [2014] EWHC 3369 (Comm) |
| Docket Number | Case No: 2014318 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 October 2014 |
[2014] EWHC 3369 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Hamblen
Case No: 2014318
Christopher Hancock QC and Malcolm Jarvis (instructed by Ince & Co LLP) for the Claimant
Jonathan Hirst QC, Professor Dan Sarooshi and Oliver Jones (instructed by Reed Smith LLP) for the Defendant
Hearing dates: 6, 7 and 9 th October 2014
Introduction
The Defendant ("the Fund") applies pursuant to CPR Part 11 to challenge the jurisdiction of the Court over the claims brought against it by the Claimant ("Gard"). It contends that it is immune from jurisdiction pursuant to s. 6 of the International Oil Pollution Compensation Fund (Immunities and Privileges) Order 1979 ("the 1979 Order").
The Fund is an international legal organisation, created pursuant to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (the "Fund Convention"), and given the status of a corporation under English law by virtue of the provisions of the International Organisations Act 1968 and a statutory instrument made pursuant to the provisions of that Act, namely the 1979 Order.
Gard is a P & I club, a member of the International Group of P & I clubs ("the IG"), and the insurer of the owners ("Owners") of the vessel " Nissos Amorgos" ("the vessel").
Gard has brought claims in this country and in Venezuela against the Fund seeking declarations that the Fund is liable to indemnify it in respect of its liability to the Bolivarian Republic of Venezuela ("the Republic") under a judgment of the Criminal Court of First Instance in Maracaibo, Venezuela, dated 26 February 2010 ("the Maracaibo judgment"). The judgment held that the Owners and Gard were liable to the Republic in the sum of US$60,250,396 plus indexation and costs in respect of the Republic's claims for pollution damage arising out of the grounding in 1997 of the vessel in the Maracaibo Channel, Venezuela, as the result of which approximately 3,600 mt of crude oil escaped from the vessel.
On 7 May 2014 I granted Gard's application for a freezing injunction in support of its claims. By order dated 23 May 2014 I ordered that there be an expedited hearing of the Fund's jurisdictional challenge and gave directions for the determination of the relevant issues.
In the light of the fact that the jurisdictional challenge involves a claim to immunity it is common ground that the court has to decide the issues which arise on the balance of probabilities — see JH Rayner (Mincing Lane) v Department of Trade (CA) [1989] 1 Ch 72 at 194A-G (Kerr LJ) and at 252B-G (Ralph Gibson LJ); Fox, The Law of State Immunity (3rd ed., 2013), at pp. 228–230, 234–236; Mid-East Sales Ltd v United Engineering and Trading Co (PVT) Ltd [2014] EWHC 1457 (Comm) at [75], [88(iii)] (Burton J).
The General Background
Much of the general background is set out in my judgment in relation to the freezing order, parts of which I shall incorporate, with amendments, into this judgment.
The Conventions
The CLC
The International Convention on Civil Liability for Oil Pollution Damage of 1969 (the "CLC") provides for compensation for parties who suffer loss as a result of marine oil pollution incidents. The general scheme of the CLC is as follows:
(1) Shipowners are made strictly liable in respect of oil pollution damage, with very limited exceptions (Art III).
(2) The amount of that liability is however limited to an amount calculated by reference to the tonnage of the vessel (Art V(1)).
(3) Shipowners may lose the right to rely on the limit of liability if the incident was due to their actual fault or privity (Art V(2)).
(4) Shipowners may avail themselves of the benefit of limitation by establishing a fund with the competent court for the limitation amount, and this may be constituted by means of a bank guarantee if acceptable to the court (Art V(3)).
(5) Shipowners or insurers who make payment for pollution damage acquire subrogation rights against the limitation fund (Art V(5)).
(6) If they have established a fund, and are entitled to limit liability, the court shall order the release of any ship or other property of the owner which has been arrested (Art VI(1)).
(7) The courts with exclusive jurisdiction in relation to Convention claims are the courts for the place in which the damage occurred (Art IX(1)).
(8) Shipowners are required to have insurance in respect of this liability (Art VII).
(9) Claimants have a right of direct action against the insurer (here Gard) (Art VII(8)).
(10) However, the insurer is entitled to rely on the limit of liability even where there is actual fault or privity on the part of the shipowner (Art VII(8)).
(11) Where the amount of the limit of liability is insufficient to meet all claims, then each claimant is only entitled to recover its prorated share of its claim (Art V(4)).
The Fund Convention
The Fund Convention provides a second tier of compensation for parties who suffered loss by reason of oil pollution incidents, over and above the layer of compensation provided by the CLC. Its general scheme is as follows:
(1) The Fund is to provide compensation in respect of amounts which are irrecoverable under the CLC either because shipowners are not liable under the CLC, or because the amounts in question cannot be recovered from shipowners, or because the limit under the CLC is too little to provide adequate compensation (Art 4(1)).
(2) The Fund's liability is limited to an amount of SDR 60 million (Art 4(4)(a)).
(3) In addition to the compensation payable to third parties, the Fund Convention provides for the payment to shipowners of the top slice of the CLC liability (Art 5(1)).
(4) The Courts with exclusive jurisdiction in relation to Fund Convention claims are the courts for the place in which the damage occurred (Art 7).
(5) Where claims are made against the shipowner or its guarantor, then either party to the relevant proceedings may notify the Fund of those proceedings and if the Fund has had the opportunity to intervene, the Fund is bound by the facts and findings in that judgment even if the Fund has not in fact intervened (Art 7(5) and (6)).
(6) Where the amount of the limit of liability is insufficient to meet all claims, then each claimant is only entitled to recover its prorated share of its claim (Art 4(5)).
There is a time bar for the bringing of an action against the Fund of "six years from the date of the incident which caused the damage", after the expiry of which any rights to compensation for persons or indemnification for the shipowner "shall be extinguished" (Art 6(1)). There is a limited exception for claims for a "top slice" indemnity under Art 5(1) – in no case is such a claim to be extinguished "before the expiry of a period of six months as from the date on which the owner or his guarantor acquired knowledge of the bringing of an action against him under the Liability Convention". Art 5(1) is the only right of indemnity against the Fund conferred under the Fund Convention.
Article 9(1) provides the Fund, if it pays compensation in accordance with Article 4(1), with a right of subrogation in respect of the rights the person compensated has against the owner or his insurer.
The incident and the resulting claims
The grounding incident occurred in 1997 and resulted in numerous claims being made.
The Owners and Gard established a limitation fund of Bs 3,473,462.78 (then equivalent to about US$7.2 million) through Banco Venezolano de Credito S.A.C.A. This was approved by Judge Colmenares on 27 June 1997, and the vessel was released on 21 July 1997.
The Club and the Fund opened a joint claims agency and through the agency the Club (between June 1997 and December 2000) paid approximately US$6.5 million in respect of the claims made. Thereafter, the claims were paid by the Fund (to a total amount of approximately US$18.5 million).
The proceedings brought in Venezuela included criminal proceedings against the Master for the offence of pollution by leak or discharge. After a finding of guilt the file was then referred to the Criminal Circuit of Zulia State, Maracaibo, to hear the civil action arising from the criminal offence. That resulted in a judgment in favour of the Republic against the Owners and Gard in an amount equivalent to US$60.25 million (plus indexation and costs). The Fund was a third party intervener in the proceedings and was required to be notified of the judgment, but it was not a defendant.
The judgment against the Owners and Gard would appear to be in disregard of the provisions of the CLC and in particular the Owners' right to limit liability and the barring effect of the constitution of a limitation fund. The contention that the Owners were entitled to limit liability was dismissed on the grounds that the attempt to limit was based on the earlier decision by the Cabimas Court which was taken at a time before liability was established. However:
(1) There is no finding of actual fault or privity on the part of the Owners (nor was this even alleged).
(2) There is in fact no consideration of whether the Owners are entitled to limit liability under the terms of the CLC.
(3) There is no consideration of why the insurers should not be entitled to limit liability, irrespective of fault or privity, and indeed no finding that they cannot.
In the light of the judgment Gard has brought proceedings in Venezuela and in this country against the Fund. The claim in Venezuela seeks a declaration that the judgment means that the Fund is liable to the Republic for its claim and reimbursement of any payment made by Gard. The...
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