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Published 14 August 2014
The Court of Appeal has recently handed down judgment in what may prove to be the final chapter in the long-running litigation following the tragic loss of the ro-ro ferry Princess of the Stars.
On 21 June 2008, the passenger cargo vessel Princess of the Stars was lost in the Philippines after she sailed into the path of Typhoon Frank. The tragedy resulted in the loss of 800 lives, together with that of the vessel and cargo.
Cargo owners brought claims against the owner of the vessel and in some cases directly against the shipowner’s liability insurer, Oriental Assurance Corporation. The policy was subject to the law and jurisdiction of the Philippines, pursuant to which Oriental denied all liability for the incident in the local courts, relying upon the assured's breach of a two-part warranty in the policy to the effect that the vessel shall not sail or put out of port:
Oriental was in turn reinsured in the London market under a facultative reinsurance contract that reproduced the above warranty, and which was also expressed to "follow all terms, conditions and settlements of the original policy". By contrast with the original policy, however, the reinsurance was expressly subject to English law and jurisdiction.
In November 2010, the reinsurers commenced proceedings in London seeking a declaration that they were not liable to indemnify their reinsured, Oriental, having regard to breach of the typhoon warranty in the reinsurance contract. Reinsurers, in other words, contended that they could have no liability under the reinsurance, whatever may be the outcome of the underlying Filipino proceedings, and notwithstanding the follow clause. Oriental sought a stay of the English action, arguing that reinsurers were bound to follow the factual conclusions of the underlying claims and hence must await the outcome of the local proceedings.
The Commercial Court judge rejected Oriental's application for a stay, a decision with which the Court of Appeal agreed, albeit in both cases with some reservation. The court confirmed that a stay of proceedings properly started in England would only be granted in "rare and compelling circumstances" and such was not the case here. The Commercial Court judge was particularly influenced by the fact that the litigation in the Philippines would likely proceed at what was described as a "glacial" pace, perhaps taking as much as 10 years, and so it was reasonable for reinsurers to have sought an earlier closure of the matter in the English court. The Court of Appeal approved this reasoning, drawing a contrast with the position in Reichhold v. Goldman Sachs , where the competing Norwegian proceedings were expected to take only a year.
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