Category: Uncategorized

Climate change litigation update. (1) The US.

At the end of April 2023 the Supreme Court rejected ExxonMobil and Suncor’s petition for certiorari seeking to force three Colorado communities — who sued the companies for their role in the climate crisis and the local impacts the communities suffer — into federal court. The result of the Supreme Court’s denial is that the cases brought by Boulder County, San Miguel County, and the City of Boulder will proceed in Colorado state court.

On 15 May 2023 The Supreme Court also rejected a similar petition for certiorari in  Delaware v BP America. The order also sends a similar case against fossil fuel companies filed by the City of Hoboken, NJ, back to New Jersey state court.

The oil company defendants had hoped that the cases would be remitted to the Federal Courts where it is likely that they would be dismissed due the decision of the Supreme Court in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011) (AEP),  and that of the Ninth Circuit in Native Village of Kivalina v. ExxonMobil Corp., 696 F.3d 849 (9th Cir. 2012), that such actions, at least when they relate to domestic GHG emissions caused by the defendant, are pre-empted by the Clean Air Act.

Meanwhile the trial in the Montana State courts in Held v Montana has been scheduled for 12-23 June. Youth plaintiffs are seeking declaratory relief alleging that by supporting a fossil fuel-driven energy system, which is contributing to the climate crisis, Montana is violating their constitutional rights to a clean and healthful environment; to seek safety, health, and happiness; and to individual dignity and equal protection of the law. The youth plaintiffs also argue that the state’s fossil fuel energy system is degrading and depleting Montana’s constitutionally protected public trust resources, including the atmosphere, rivers and lakes, and fish and wildlife. 

Workshop: The Protection of Vulnerable People at Sea (17-18 May, Swansea University)

The Institute of International Shipping and Trade Law is organizing a one-and-a-half-day in-person workshop on the important and topical theme of ‘The Protection of Vulnerable People at Sea’ (17-18 May, Swansea University).

Confirmed panellists are:

  • Dr Zoumpoulia Amaxilati (ISTL)
  • Professor Richard Barnes (University of Lincoln & University of Tromsø)
  • Professor Richard Collins (Queen’s University Belfast)
  • Professor Edwin Egede (Cardiff University)
  • Professor Steven Haines (University of Greenwich)
  • Neil Henderson (Gard AS)
  • Dr Richard L. Kilpatrick, Jr. (College of Charleston)
  • Andrea Longo (One Ocean Hub)
  • Professor Irini Papanicolopulu (SOAS University of London)
  • Dr Aphrodite Papachristodoulou (University of Galway)
  • Francesca Romana Partipilo (Sant’Anna School of Advanced Studies)
  • Matilde Rocca (University of Padova)
  • Dr Mercedes Rosello (Leeds Beckett University)
  • Dr Jessica Schechinger (University of Glasgow)
  • Chris Whomersley (Former Deputy Legal Adviser, Foreign, Commonwealth and Development Office)
  • Sir Michael Wood KC, Barrister (Twenty Essex Chambers, London)

The full programme of the workshop can be found here.

The workshop is open to all and there is no fee to attend. Participation can be registered via the following link: https://www.eventbrite.co.uk/e/the-protection-of-vulnerable-people-at-sea-tickets-558622122807.

Text agreed new UN High Seas Agreement

Draft agreement under the United Nations Convention on the Law of the Sea on the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction

The text of the Agreement, which takes the form of a new Implementing Agreement under the United Nations Convention on the Law of the Sea (UNCLOS) to protect and sustainably use the resources of these areas, was agreed on 4 March 2023. The Agreement establishes marine protected areas in the high seas which will help achieve the global goal of protecting 30% of the world’s oceans – set out in the UN’s Global Biodiversity Framework agreed in December 2022 in Montreal at the Convention on Biological Diversity  when countries pledged to protect 30% of ocean, land and coastal areas by 2030. These areas will put limits on how much fishing can take place, the routes of shipping lanes and exploration activities like deep sea mining – when minerals are taken from a sea bed 200m or more below the surface. the treaty will also require assessing the impact of economic activities on high seas biodiversity. Developing countries will be supported in their participationin and implementation of the new treaty by a strong capacity-building and marine technology transfer component, funded from a variety of public and private sources and by an equitable mechanism for sharing the potential benefits of marine genetic resources.

State parties are to apply the Agreement’s new environmental safeguards to activities “within their jurisdiction or control” and will need to ensure that high seas activities falling within their jurisdiction or control comply with the new requirements of (inter alia) environmental impact assessments, area-based management tools and marine protected areas under the Agreement. The Agreement does not define the concept of jurisdiction or control.

The Agreement will enter into force once 60 States have ratified. 

Late redelivery under time charter. Recovering more than allowed under The Achilleas.

In The Achilleas, [2008] UKHL 48, the House of Lords set out a bespoke rule as to what damages could be recovered by a shipowner in respect of the time charterer’s breach in redelivering the vessel late – market value at the time of breach less time charter hire rate for the period from when the vessel should have been redelivered, up to the time of actual redelivery. However, clauses may be inserted in time charters to allow for recovery of additional damages in the event of such a breach. London Arbitration 1/23 involves just such a clause.

The case involved a head time charter and a sub time charter on similar terms with redelivery to be on or before 1 July 2021 in both cases.  Charterers were to give various etas as to the vessel’s redelivery date and port, and clause 119 provided that if an order for a voyage ending after the maximum period were given the owner should have the option

“(i) to refuse the order and require a substitute order allowing timely redelivery of the vessel,ꞏ or

(ii) to perform the order without prejudice to their right to claim damages, including consequential damages, for breach of charter in case of late redelivery of the vessel.

In any event, for the number of days by which the maximum period stipulated in this charter party is exceeded, the Charterers shall pay the prevailing market rate if this is higher than the hire rate agreed in this charter party.”

At the time of fixing the time charterers were aware of the importance of the redelivery date to the owners who were planning to drydock the vessel shortly afterwards as the vessel as due for her special class survey on 6 July, although the parties would also have known that there was some flexibility on dates because the owners would have been able to obtain a short extension of the validity of the class certificates.. Owners intended to obtain a short fixture to get the vessel near to the drydocking port to come into effect after the end of the two time charters on 1 July 2021.

Delays occurred at the discharge port and the follow on fixture owners negotiated on 25 June 2021 was cancelled on 6 July.  Discharge eventually completed on 14 July 2021 and the vessel then sailed to the drydocking shipyard arriving there on 22 July 2021. The owners claimed that the charterers were in breach of charter on the following grounds:

(a) the vessel was redelivered late;

(b) the charterers failed to comply with their undertakings in clause 119;

(c) the charterers breached an implied term that any notices of expected redelivery (i) would be given honestly and in good faith, and (ii) would be based on objectively reasonable grounds following proper inquiries made by the charterers.

Time admitted a breach in redelivering late, that their last orders were illegitimate, and their estimates in the voyage orders had not been reasonable estimates. The charterers admitted that the owners were entitled to damages for late redelivery calculated on the basis of the difference between the market and the charter rate of hire for the 12.508 day overrun period between when the vessel should have been delivered (midnight on 1 July) and when she was actually delivered (12.12 GMT on 14 July).

Owners, however, also claimed hire and bunkers that would have been earned under the cancelled repositioning fixture, for the period for the actual ballast voyage from the time charter discharge port to a place 10 hours from the drydock, being a mid-point between the two redelivery ports under the repositioning fixture.

The tribunal accepted owners’ additional claim. The clause was not limited to breach by way of illegitimate last orders but covered all three breaches claimed by owners. The additional claim fell within the term ‘consequential damages’ in cl.119 which was not limited to damages within the second limb of Hadley v Baxendale (1854) 9 Exch 341 and would include losses on a follow-on fixture. However, this’ construction would not allow recovery of actual losses in excess of market rates. The standard approach to damages for breach of charter applied.

If this construction of cl. 119 were wrong, and ‘consequential losses’ was, as charterers argued, limited to the second limb of Hadley v Baxendale, owners’ claim would still be recoverable on that basis.  

Owners’ alternative claim based on the alleged breach of the obligation to give redelivery notices, which had to be given in good faith and also to be reasonable, was rejected as the tribunal accepted that even if the charterers had given accurate notices the vessel would not have been redelivered earlier.

We shall ‘overcome’ – through offering non contractual performance.

MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) raised the question of whether the effect of financial sanctions obliges a contractual party to accept payment in a currency other than that specified in the contract, which has now come before the Court of Appeal [2022] EWCA Civ 1406.

Mur Shipping BV (“the Owners” or “MUR”) concluded a Contract of Affreightment (“COA”) with RTI Ltd (“the Charterers” or “RTI”) in June 2016. Under the COA, the Charterers contracted to ship, and the Owners contracted to carry, approximately 280,000 metric tons per month of bauxite, in consignments of 30,000 – 40,000 metric tons, from Conakry in Guinea to Dneprobugsky in Ukraine. On 6 April 2018, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) applied sanctions (“the sanctions”) to RTI’s parent company, adding them to the Specially Designated Nationals and Blocked Persons List. This led to the Owners invoking a force majeure clause in the COA by sending a force majeure notice (“FM Notice”) on 10 April 2018 in which the Owners said that it would be a breach of sanctions for the Owners to continue with the performance of the COA and noted that the “sanctions will prevent dollar payments, which are required under the COA”. Charterers offered to make the payment in euros and to bear the cost of converting those euros into dollars which the tribunal described as a “completely realistic alternative” to the payment obligation in the COA, which was to pay in US dollars.

The force majeure clause provided for the suspension of the obligation of each party to perform the Charter Party while such Force Majeure Event is in operation.  The clause provided that

“36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:

a) It is outside the immediate control of the Party giving the Force Majeure Notice;

b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;

c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;

d) It cannot be overcome by reasonable endeavors from the Party affected.”

The matter went to arbitration and the Tribunal in its award held that Mur could not rely on the force majeure clause because the offer of payment in euros meant that the ‘event or state of affairs’ could have been ‘overcome by reasonable endeavours from the Party affected’. The Tribunal found that RTI was therefore entitled to damages for MUR’s refusal to nominate vessels to load the relevant cargoes.

On an appeal under s69 of the Arbitration Act 1996 Jacobs J held that the Tribunal had erred in their finding that “reasonable endeavours” required the Owners to accept the Charterers’ proposal to make payment in a non-contractual currency. A party does not have to perform the contract otherwise than in accordance with the contract in order to avoid a force majeure event. He held that the contract required payment in US dollars and that “a party is not required, by the exercise of reasonable endeavours, to accept non-contractual performance in order to circumvent the effect of a force majeure or similar clause”, referencing the decision in Bulman v Fenwick & Co [1894] 1 QB 179. The case involved a voyage charter where the charterer could discharge the cargo of coal at one of certain named places on the Thames. The charterer nominated the Regents Canal which subsequently became subject to a strike. The charterer resisted a demurrage claim on the grounds of a strike exception. Owners claimed charterers should have ordered discharge at one of the other possible places on the Thames. It was held that the charterer was entitled to send the vessel to the Regent’s Canal, with no limitation express or implied on its choice of discharge place and that the delay fell within the strike exception clause.

The Court of Appeal has now, in a majority decision [2022] EWCA Civ 1406, reversed the decision at first instance. The Court of Appeal focussed on the word ‘overcome’ in cl 36.3.(d). Males LJ, giving the principal judgment of the majority, held that the real question was whether acceptance of RTI’s proposal to pay freight in euros and to bear the cost of converting those euros into dollars would overcome the state of affairs caused by the imposition of sanctions on Rusal. Could that state of affairs only be overcome if RTI found a way to make timely payments of freight in US dollars, in strict accordance with the terms of the contract? The answer was ‘no’.

Clause 36 should be applied in a common sense way which achieves the purpose underlying the parties’ obligations –that MUR should receive the right quantity of US dollars in its bank account at the right time. RTI were able and willing to pay in euros and to bear any additional costs or exchange rate losses in converting the euros to US dollars. Accepting their proposal would have achieved precisely the same result as performance of the contractual obligation to pay in US dollars. The word “overcome” did not necessarily mean that the contract must be performed in strict accordance with its terms, given that the arbitrators’ conclusion in their award that the force majeure could have been “overcome by reasonable endeavours from the Party affected” was a finding of fact, or at any rate of mixed fact and law, with which the court should not interfere. The cases of Bulman v Fenwick and the Vancouver Strikes case referred to by Jacobs J were not relevant as neither case involved a force majeure provision such as cl.36 (d).

Arnold LJ dissenting found that if the parties to the contract of affreightment intended clause 36.3(d) to extend to a requirement to accept non-contractual performance, clear express words were required and there were none. He gave the example of a contract of carriage requiring discharge at port A which was strike bound. Clause 36 would not require acceptance of an offer by the other party to divert to port B which would involve no detriment to the party invoking the clause because the goods were required at a place equidistant to the two ports. The party invoking the clause is entitled to insist on contractual performance by the other.

The decision is very much tied to the wording of the particular force majeure clause in question and to the fact that the offer to pay the dollar equivalent in euros would have involved no detriment to owners. In the absence of such a clause a party would still be entitled to insist on contractual performance, as in Bulman v Fenwick.

The ILO adopts a Resolution on Financial Security in cases of the Abandonment of Seafarers 

In one of our previous posts ( https://iistl.blog/2022/04/13/financial-security-in-cases-of-abandonment-a-four-month-limit-for-unpaid-seafarers-wages%ef%bf%bc/ ), we considered some of the issues that emerge from the operation of Standard A2.5.2 of the Maritime Labour Convention (MLC), 2006, as amended, on financial security in cases of the abandonment of seafarers. In particular, we looked at paragraph 9 of this Standard which requires that the coverage provided by the financial security system when seafarers are abandoned by shipowners shall be limited to four months of any such outstanding wages and four months of any such outstanding entitlements. In this regard, we highlighted, inter alia, the inadequacy of the fourth month limit to accommodate the needs of seafarers when a case of abandonment is not resolved in time.  

Only a few months ago, during the second part of the fourth meeting of the Special Tripartite Committee, the possibility of extending the minimum coverage afforded by the current financial security system from four months to eight months was considered following a proposal from the seafarers’ group of representatives. While the proposal was not supported by the representatives of the shipowners’ group and the representatives of the Governments’ group, mainly because of the risks faced by the insurers, a joint resolution was adopted. The latter called for the establishment of a working group under the auspice of the Special Tripartite Committee to discuss the financial security system required under Standard A2.5.2 of the MLC, 2006, as amended, with a view to making recommendations on potential improvements that would make the system more effective and sustainable, as well as ensure a greater degree of protection and assistance for abandoned seafarers.  

Performance Warranties in Charterparties- “Good Weather” Qualification Again!  

Eastern Pacific Chartering inc v. Pola Maritime Ltd (The Divinegate) [2022] EWHC 2095 (Comm)

The Divinegate was trip chartered on an amended NYPE 1946 form with additional clauses for a carriage of pig iron from Riga via the Baltic Sea to the Mississippi River in the United States. Following discharge of the cargo, the owners sought unpaid hire, bunkers and expenses totalling US$ 99,982.79 and the charterers sought deductions from hire of US$ 93,074.55 for the failure to proceed with utmost despatch on the voyage and hull fouling. The charterers also made a counterclaim for US$ 72, 629.01 as damages in tort on grounds of the owners’ allegedly wrongful arrest of the vessel, The Polo Devora, of which charterers believed to be the beneficial owner. The wrongful arrest counterclaim failed and will not be discussed here.

The charterparty contained a performance warranty to the effect that “Speed and consumption basis no adverse currents and valid up and including Douglas Sea State 3/ Beaufort Force 4.”

The essence of the litigation was the assessment of the chartered vessel’s performance to determine whether there was, in fact, a failure to proceed with utmost despatch on the voyage. The owners contended that the performance of the vessel should be assessed in a conventional way, i.e. by reference to the vessel’s speed during “good weather”. The charterers, on the other hand, suggested that underperformance could be established by reference to the vessel’s measured RPM (revolution per minute) which reflects the engine speed maintained by the crew.   

The Judgment and Lessons for the Future          

Ms Clare Ambrose, sitting as a High Court Deputy Judge, made significant observations on the state of law in this area and reached interesting conclusions which are likely to inform the judges and arbitrators who are often called in to deal with performance related claims in the context of time (and trip) charters.

  1. It was stressed that traditional way of establishing breach and loss in performance claims is the “good weather” method and in instances where the parties have adopted such a formulation in their contracts (which was the case here) this will be the primary method of assessment used by the court.

2. The judge also appreciated that this is not the only available methodology for making calculations and there is no bar for alternative methods being used to measure vessel’s performance. However, any alternative method must be consistent with the express wording contained in the charterparty and must also be established as “reliable”. On the facts of this case, the RPM method was not found to be reliable in identifying loss of time as it made incorrect assumptions as to the resistance on the hull and made no allowance for weather conditions being a reason for a reduction in engine speed, as well as ignoring the fact that there were periods the vessel could not achieve the warranted speed due to other factors, e.g. currents.

Therefore, the judge left it open to parties to argue that alternative methods (especially in the light of emerging technologies) could be used to assess a chartered vessel’s performance but strongly hinted that so far no satisfactory method has been put forward to sway judges/arbitrators away from the traditional method and legal principles that have been developed for years. Referring to the “good weather” method, Ms Ambrose said (at [90]):

“The approach adopted in the authorities reflects commercial practice in assessing performance and the specific wording chosen by the parties, rather than the court imposing legal methodologies.”

3. An interesting debate in the case related to the impact of currents in the assessment of performance of the vessel. It was contended by the charterer that allowance should be made for the positive currents and positive currents should be, therefore, a factor in determining whether the vessel’s performance is at the warranted level. This argument found no support from the judge. It was held that in the absence of wording excluding the benefits of positive currents, such benefits should not be deducted in measuring the vessel’s speed for the purposes of the performance warranty. This provides a judicial clarity on the matter and is logical from a commercial perspective. A contrary solution would have meant that the owners would be penalised for its master finding a favourable current and ensuring that the vessel goes faster and burns less fuel (something that is economically beneficiary for both parties).

The judge applying the “good weather” method, reached the conclusion that the chartered vessel failed to meet the warranted speed so there was underperformance giving rise to a loss of time of 16 hours.

4. The judge also rejected the claim for hull fouling indicating that the use of good weather method for calculating loss from slow steaming would otherwise lead to double recovery.

The judgment is a reminder to the market that in the absence of clear and contrary wording it will be rather difficult to shift the traditional method of assessing a chartered vessel’s performance with reference to good weather method. However, especially in trip charters there remains a realistic possibility that it might not be possible to obtain good weather sample so as to be able to assess the performance of the vessel. In those instances, with the advances in technology, the courts and arbitrators might come under pressure to consider alternative assessment methods that could shed light on the performance of the chartered vessel.              

Insurable Interest in Cargo Insurance Context and First Late Payment of Claim Assertion in English Law


Quadra Commodities SA v. XL Insurance and others [2022] EWHC 431 (Comm)

The assured was a commodities trader who entered into various contracts with Agroinvest Group for the purchase of grain. On receipt of warehouse receipts confirming that the relevant quantities of grain were held in common bulk in stipulated warehouses or “Elevators”, the assured paid for the grain. However, it later transpired that Agrionvest Group and the warehouses were involved in a fraudulent scheme whereby the same parcel of grain or seeds may have been pledged and/or sold many times over to different traders. The fraud unravelled when buyers sought to execute physical deliveries against the warehouse receipts and it became clear that there was not enough grain to go around.


The assured sought to recover its losses under a marine cargo policy claiming that the insured goods were lost either because they had been misappropriated or because there was a loss by reason of the assured’s acceptance of fraudulent warehouse receipts. The relevant clauses in the policy stipulated as follows:

Misappropriation
This insurance contract covers all physical damage and/or losses, directly caused to the insured goods by misappropriation.

Fraudulent Documents

This policy covers physical loss of or damage to goods and/or merchandise insured hereunder through the acceptance by the Assured and/or their Agents and/or Shippers of fraudulent shipping documents, including but not limited to Bill(s) of Lading and/or Shipping Receipts and/or Messenger Receipt(s) and/or Warehouse Receipts and/or other shipping document(s).

Insurable Interest Issue

The insurers denied cover on the basis that the assured did not have insurable interest in any of the goods which were lost and/or there was no physical loss of the property, only pure financial loss, which was not insured. The basis of the insurers’ case on insurable interest was that this was not an insurance on property but instead an insurance of an adventure, including the success of storage operations. The judge (Butcher, J) was quick to dismiss this submission by referring to various terms in the contract pointing strongly to the direction that this was indeed an insurance on the property (grain) which the assured was purchasing from the buyers. The alternative argument of the insurers was interesting and raised issues whether the assured had insurable interest in the goods. It was essentially argued that even if the insurance was on the cargo purchased, the assured had no insurable interest in the present case as the cargo in question never existed. With this argument the insurers were primarily encouraging the court to adopt a strict approach to insurable interest following the spirit of the reasoning of Lord Eldon in Lucena v. Craufurd (1806) 2 & P.N.R. 269 which suggested that only those who stand in a “legal and equitable relationship to the property” have insurable interest in the context of property insurance.
The judge was able to dismiss insurers’ argument by holding that the assured was successful, on a balance of probabilities, in showing that goods corresponding in quantity and description to the cargoes were physically present at the time the Warehouse Receipts were issued. This meant that this was not an insurance policy on goods that never existed and accordingly the assured had insurable interest on the grounds that:

• The assured had made payment for goods under purchase contracts, and such payment for unascertained goods of the relevant description was valid ground for establishing an insurable interest irrespective of whether there were competing interests in the grain. The assured, therefore, stood in a “legal or equitable relation” to the property by virtue of the payment.

• The assured was able to show on the balance of probabilities that it had an immediate right to possession of the grain and this coupled with its economic interest in the grain can give rise to an insurable interest.

This outcome in the case is in line with authorities on the subject and is not too controversial. However, the curious point is whether the court would have reached the same conclusion on insurable interest, had it decided that on balance of probability the assured failed to show that goods corresponding in quantity and description to the cargoes were physically present. There is authority to the effect that an assured has no insurable interest in insuring property that it does not own although it might have a factual expectation of loss related to that property (Macaura v. Northern Assurance Co Ltd [1925] AC 619). However, a different stance has taken on the matter in other common law jurisdictions (in particular by the Supreme Court of Canada in Constitution Insurance Company of Canada v Ksmopoulos [1987] 1 SCR 2). Also, there is a marked shift in attitude of English courts towards a more flexible approach to insurable interest (especially in cases like National Oilwell Ltd v Davy Offshore (UI) Ltd [1993] 2 Lloyd’s Rep 582 and The Moonacre [1992] 2 Lloyd’s Rep 501). It should be at least arguable that a person who is led to believe by a fraudster to purchase goods (that never existed) and paid for them under a sale contract, should have an insurable interest if s/he enters into a contract of insurance to protect his/her interest against the risk of not getting what s/he paid for.

Late Payment Issue

The Insurance Act (IA) 2015 implies a term into insurance contracts to the effect that the insurer must pay any sums due in respect of a claim within a “reasonable time” (s. 13A of the IA 2015). However, by virtue of s. 13A(4) the insurer is not in breach of this implied term if it shows that there were reasonable grounds for disputing the claim merely by failing to pay while the dispute is continuing. The assured in the present case contended that the insurers’ conduct of the claim was “wholly unreasonable, and its investigations either unnecessary or unreasonably slow” and resulted the assured suffering losses by reference to the return on shareholders’ equity. Conversely, the insurers argued that a reasonable time was “a considerable time” and extended beyond the time by which proceedings were commenced. In any event, the insurers argued that by virtue of s. 13A(4) there was no breach of this implied term as they had reasonable grounds to dispute the claim.

Given that this was the first case on the matter, in considering whether there was any breach of the implied term, the judge apart from the guidance provided by s. 13A(2) of the Insurance Act, also turned to the Law Commissions’ Report and the Explanatory Notes to the legislation before ultimately deciding that there was no breach of the implied term. In reaching this conclusion, the judge made reference to a number of factors:


i) That although the case was relating to a dispute that arose in relation to a property insurance cover (which according to the Explanatory Notes such claims usually take less time to value than, for example, business interruption claims), the cover in question applied to transport and storage operations of different types and involving or potentially involving many different countries and locations, and claims under such a cover, could involve very various factual patterns and differing difficulties of investigation);
ii) The size of the claim was substantial;
iii) The fraud, uncertainty as to what happened, the destruction of documents, existence of legal proceedings in Ukraine and the fact that the assured elected to swap from French law to English law during the investigation were all significant complicating factors; and
iv) Relevant factors outside insurers’ control, included the destruction and unavailability of evidence and the legal proceedings in Ukraine.

On the point raised by the insurer, s. 13A(4) of the IA 2015, it was held that the insurer bears the burden of proof but here they had reasonable grounds for disputing the claim stressing that although the grounds for rejecting the claim were wrong, this did not mean that they were unreasonable. Although the judge considered elements of the insurers’ investigations were delayed, the investigations occurred in what was considered to be a reasonable time and they were part of the reasonable grounds for disputing the claim that existed throughout.

This is the first judgment on s. 13A of the IA 2015. When first introduced, there was some concern especially among insurers that this section might fuel US type of bad-faith litigation against insures. However, the parameters for such a claim are well-defined in s. 13(A) and guidance is provided to courts as to how they should judge whether a claim is paid/assessed within a reasonable time. The manner in which the trial judge made use of such guidance in this case is a clear indication that late payment claims will not go down the path that has been taken by some US courts and in England & Wales an assertion of late payment of an insurance claim will only be successful in some extreme cases. There is no doubt that insurers will take some comfort from the judgment given that it is clear now that an insurer’s decision to refuse payment for a claim will not automatically amount to breach of this implied term even if it is found that the grounds for disputing the claim are wrong.

COPYRIGHT IN THE POST BREXIT WORLD – WAVING GOODBYE TO THE AQUIS?

by Jane Foulser-McFarlane

The UK exited the EU on 31 January 2020, with the transition period ending on 31 December 2020. Given the teething problems of the early years of Brexit, one can only imagine how troubled the adolescence will prove to be and IP is no exception. Prior to Brexit, the UK adhered to the Civil Enforcement Directive 2004/48/EC which was implemented to address the disparities between EC Member States for the enforcement of IP rights. Subsequent attempts to harmonise criminal sanctions across the Member States by way of the proposed Criminal Enforcement Directive (IPRED2) failed, due in part, to the lack of EU aquis communautaire and the fact that the use of criminal sanctions and remedies for IP infringement remains very controversial. The UK was the only European State to have called the aquis into question and it is now about to embark on a creating a pyre of otiose law. However, the Trade and Cooperation Agreement, which came into effect in 2021 (TCA) appears to transpose at least the spirit of the Civil Enforcement Directive and some of the provisions appear to be more prescriptive. The September 2021 Blog considered the effect of Brexit on civil IP damages. This Blog considers the aquis in that context.

It is worth briefly considering the nature of the EU aquis, described as ‘seeming to live a dull and uninteresting life between periods of EU enlargement and it always seems to be one of those immensely important concepts that always finds its way into the headlines of newspapers, magazines, journals and news bulletins, when enlargement is on the agenda’. Joseph Weiller describes the aquis thus: ‘The holiest cow of all has been the preservation of the aquis communautaire and within the aquis, the Holy of Holiest is the Constitutional Framework of the Community.’ The aquis or Community Patrimony, is the body of common rights and obligations which bind all Member States together within the EU. It is a very concrete social structure which automatically confronts new Members of the EU and is something that they have to accept and adapt to. Brexit was the result of the UK having been confronted with the aquis, but never having accepted, or adapted to it. During David Cameron’s tenure as Prime Minister, he wrote an article for the Daily Telegraph, published on 15 March 2014, in which he postulated that ‘I completely understand and share people’s concern about the EU. Our businesses value the Single Market, but find the degree of European interference in our everyday life, excessive. People are worried that Britain is being sucked into a United States of Europe.’ 

In 2017, the academics Richard Arnold and Lionel Bentley et al considered the legal consequences of Brexit for IP law before the TCA was finalised. They rightly identified that the UK would have to comply with some of the EU aquis since every EU FTA with the rest of the world, comes with a detailed IP chapter, which obliges the other party to comply with some features of EU law even if it secures trade agreements only with third parties, such as Australia or New Zealand, beyond Europe, as third countries are often themselves, bound by bilateral agreements with the EU. Copyright law is harmonised in the EU by nine Directives, which were of direct effect in the UK, prior to Brexit and therefore implemented in the Copyright, Designs and Patents Act 1988 (CDPA 1988). These remained in force until modification, the most urgent, being the references to Member States and another EEA State. The Intellectual Property (Copyright and Related Rights) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/605), passed under the powers of the European Union (Withdrawal) Act 2018, coming into force on 1 January 2021, removed all references to the EU, EEA or Member States in UK copyright legislation and preserved the effect of UK law where possible. Arnold and Bently were right to recommend that if the UK starts to unravel the copyright EU aquis, it would in any case, be wise to revamp the CDPA 1988, now a long and over complicated instrument, a fact noted in my previous September Blog.

The TCA has set out the general principles governing copyright, such as agreement by the parties to affirm their commitment to comply with international treaties such as the TRIPS Agreement, National Treatment, the rights of authors and performers and terms of protection, but given the emergency amendments set out in the 2018 Regulations and the incorporation into the TCA of the provisions of the Enforcement Directive 2004/48/EC, there is scope for confusion relating to the applicable principles of IP protection. 

In relation to the enforcement of IP rights, little will change in practice, as the UK and the EU are parties to international IP treaties, such as the TRIPS Agreement. The value and legacy of the case law of the CJEU, which has a defining role in shaping the EU copyright framework, will need to be considered. The legal value of the CJEU case law issued before and after Brexit, will have to be addressed, as it likely that the court will refer to decisions as a  guiding principle at least, even if they are not directly applicable to future legal decisions. The case law decided pre-Brexit, may carry greater weight than post Brexit case law, given that it was applicable in the UK, prior to 31 December 2020. Further, as EU Directives have been implemented in the UK via national legislation, the content of those Directives have been analysed through UK case law, embedding it within the common law system.

Whilst he was the Brexit Minister, Lord David Frost delivered a statement to the House of Lords on 16 September 2021, on the future of retained law. He stated that he was going to conduct a review of so called ‘Retained EU Law’, legislation that remained on the UK statute books through the 2018 Withdrawal Act. This was intended to remove the special status of retained EU law, so that it was not a distinct category domestic law, but normalised within the national law, with clear legislative status, so that EU law does not attract undue precedence and the UK courts will be able to fully depart from it. A new, Standing Commission is to be set up, in order to receive ideas from any British citizen on how to repeal or improve regulation. The challenge here, is to redraft the CDPA 1988, so that European IP law is replaced with legislation that remains compatible with the TCA. However, the very fact that such legislation has to demonstrate such compatibility, shows that the UK is yet again confronted by the aquis, must adapt to it and continue to accept it. We will not be waving it goodbye anytime soon.