Knowledge Counsel London
"The obligation is legal rather than equitable and the appropriate monetary remedy for breach is an award of common law damages."
Twenty four years on from the sinking of the oil tanker PRESTIGE and widespread pollution of the French and Spanish coast, the litigation in relation to those claims continues. The decision before the Supreme Court was whether Spain and France were bound to bring proceedings against the third party liability insurers (“the Club”) of the PRESTIGE only in arbitration. Both states had successfully brought a claim in the Spanish courts under a provision of the Spanish Penal Code that gave a direct right of action against insurers. The Club commenced arbitration proceedings against the two states and was awarded declaratory, monetary and injunctive remedies. The monetary remedies were overturned by the Court of Appeal. The Supreme Court allowed the appeal. The condition benefit principle provides that a third party who takes the benefit of a contract should be under the same obligations as the original party, which in this case meant that they were bound by the contractual obligation to arbitrate. The Court of Appeal’s conclusion that there was no power to award equitable compensation arose from an incorrect assumption that the obligation to arbitrate arose in equity. However, the obligation to arbitrate was contractual and therefore any breach attracted common law damages. The monetary compensation awarded by the arbitrators could be upheld as being common law damages.
MARITIME – INSURANCE
The Commercial Court has considered what sue and labour costs an assured can recover under a war risks policy where the vessel was a constructive total loss through detention. The ITHACA PROSPECT was detained in the port of Mykolaiv, Ukraine when Russia invaded Ukraine and was unable to leave the port in spite of several attempts. The vessel’s insurers agreed to pay the insured value of the vessel on the basis that it was a constructive total loss after being detained for more than 12 months. Three notices of abandonment were served on the insurers but were all rejected. The relevant policy also contained the standard sue and labour clause. The assured was successful in its claim for the costs of keeping the vessel ready for departure if the opportunity arose, including crew-related expenses, bunkers consumed and some legal expenses. However, they were not entitled to the cost of replacement war risks premium because the insurers had not accepted the abandonment of the vessel. Such premium was a liability of ownership but would only transfer if the insurer accepted the abandonment.
Ithaca Prospect LLC v Lloyd’s Insurance Company SA [2026] EWHC 2700 (Comm), 21 October 2026
ARBITRATION
The Court of Appeal has dismissed an appeal against a decision of the Commercial Court in relation to whether an investment dispute was governed by the India-UAE bilateral investment treaty (“BIT”) and therefore whether the tribunal had jurisdiction. Ras Al Khaimah Investment Authority (“RAKIA”), the investment arm of the Government of Ras Al Khaimah, commenced arbitration, alleging that India had breached the BIT in relation to RAKIA’s investment in the alumina and aluminium industry in Andhra Pradesh. The Court of Appeal upheld the lower court conclusion that the decisions taken by the government of Andhra Pradesh were executive actions applying directly to RAKIA’s investment that qualified as ‘Measures’ under article 10.2 of the BIT (which stated what the arbitration provisions covered). The tribunal did have jurisdiction.
Republic of India v Ras Al Khaimah Investment Authority, [2026] EWCA Civ 1358, 22 October 2026
AVIATION
This is the latest decision in the long running litigation between FW Aviation (“FWA”), an aircraft leasing company and Vietjet, an international airline. The court has made orders that Vietjet owes US$250m to FWA and FWA has taken various steps to enforce those orders. Vietjet has to date paid very little of the debt. In this recent decision, the Commercial Court granted a post judgment worldwide freezing order (“WFO”) against Vietjet. There had been an earlier, unsuccessful application for a freezing order that was refused for lack of evidence of risk of dissipation. On this occasion the court considered that there was solid evidence of past dissipation, with substantial value assets being transferred in exchange for an opaque offsetting arrangement. In addition, the court held that Vietjet’s behaviour indicated that it would take steps to frustrate collection of the judgment debt. There had been multiple material changes of circumstance since the first application for a freezing injunction and it was now just and convenient to grant the WFO.
CONSTRUCTION
In a dispute relating to a contract for the manufacture of some lifts, the Technology and Construction Court (“TCC”) has dismissed an application for summary judgment to enforce an adjudication award. The original dispute was for wrongful termination and damages where Serapid manufactured lifts that were ultimately not required. The adjudicator made an award in favour of Serapid but the sum awarded was not paid. Serapid commenced these enforcement proceedings but the TCC held that there was a reasonable prospect of Octavius establishing that there had been no contract. There were alternative cases and vagueness around when the contract came into existence. As a result the adjudicator would have no jurisdiction and the application for enforcement was unsuccessful.
Serapid Ltd v Octavius Infrastructure Ltd [2026] EWHC 2695 (TCC), 22 October 2026
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