Changes

Accordingly, Owners of “Panamax Alexander” appealed to the Court of Appeal on point (2), whilst Owners of “Osios David” appealed on point (1). In particular, Owners of “Osios David” submitted that the sanctions clause should have provided for Britannia to exercise “best endeavours”, instead of “reasonable endeavours”, to obtain permission to make payment under the LOU in circumstances where payment would otherwise be unlawful due to sanctions, and that the High Court judge placed too much weight in Britannia being an IG P&I Club.

The judgment of the Court of Appeal was handed down by Males LJ (with whom Snowden and Lewison LLJ agreed). The key grounds of appeal (concerning the reasonableness of the security offered and whether there was an obligation to accept reasonable security if offered) were each addressed in turn by Males LJ.

As a result, Owners of “Osios David” were liable in damages for the consequences of breaching the ASG 2 Collision Jurisdiction Agreement entered into with Owners of “Panamax Alexander”, by the continued arrest in South Africa of the vessel related to “Panamax Alexander”, instead of accepting the reasonably satisfactory security offered on the (amended) ASG 1 LOU wording security in its place.

This judgment reaffirms that the use of ASG 1 form LOU wording with an IG approved sanctions clause is, when objectively assessed, reasonably satisfactory security for the purposes of clause C of the ASG 2 form Collision Jurisdiction Agreement wording. This confirmation brings much relief to those in IG P&I Clubs (and their members), who seek to support their mutual members in collision matters as far as is reasonably practicable, to enable them to keep trading their vessels with confidence, but must equally ensure the Club remains in compliance with its sanctions and other mandatory regulatory obligation. If these were to be breached, the financial viability and, indeed, the continued existence of the Club might be imperilled, with all the unpredictable consequences that might then ensue.