High Court upholds arbitration agreement in maritime insurance dispute

The case involves a barge that capsized in international waters

High Court upholds arbitration agreement in maritime insurance dispute

The High Court has upheld an arbitration agreement in a maritime insurance dispute involving a barge that capsized in international waters.

The dispute in Maritime Mutual Insurance Association (NZ) Limited v Silica Sandport Inc [2023] NZHC 793 arose following the capsize and loss of the NRC Resolute barge in the waters of Trinidad. The Maritime Mutual Insurance Association (NZ) Limited is a New Zealand-registered company operating as a protection and indemnity club. It provides a wide range of marine insurance products to its members. Silica Sandport Inc. was incorporated in Guyana and owned a tug and barge flagged in St. Vincent and the Grenadines. Sri Commodities Import and Export Inc., which was likewise incorporated in Guyana, managed the barge.

The barge had been insured with the Association. The insurance policy was subject to the Association's Rules and the New Zealand Marine Insurance Act 1908. Shortly before the capsize incident, a renewal indication was issued to Silica and Siri, which indicated that the policy was subject to the Association's Rules and the New Zealand Marine Insurance Act 1908. The Association's Rules also provided that it was "governed by and construed in accordance with New Zealand Law."

Following the capsizing incident, Silica and Sri commenced proceedings in Guyana. On the other hand, the Association sought an interim anti-suit injunction from the NZ High Court restraining the respondents from continuing the Guyana proceedings on the ground that it was commenced in breach of an arbitration agreement.

The High Court explained that the court would usually adopt a two-stage approach in determining whether to grant interim injunctions. First, the court must decide if there is a serious question to be tried. If that threshold is met, the court must then consider whether the balance of convenience favours granting or refusing relief. 

The court noted that the anti-suit injunction is a long-recognised species of equitable injunction that restrains a defendant from pursuing proceedings overseas that are vexatious or oppressive. An anti-enforcement injunction is also available to restrain a defendant from enforcing a judgment already obtained overseas. The high court has the power to grant anti-suit injunctions, although it is uncommon in New Zealand.

The court further said that a three-step analysis is involved when determining whether to grant an anti-suit injunction:

  1. The local court must have jurisdiction over the defendant.
  2. The local court must be satisfied that the commencement or continuation of the foreign proceedings or the defendant's conduct in those proceedings is vexatious, oppressive or unconscionable.
  3. The court must consider whether the interests of justice require the injunction to be granted.

Furthermore, the high court said that New Zealand courts also acknowledge the importance of arbitral proceedings and the autonomy of the parties who wish to choose arbitration for dispute resolution.

The court found that the statement of claim in the Guyana proceeding provides that the orders sought arose "out of or in connection with the [Association’s] Rules." The court said there is a high degree of probability that the Association’s Rules form part of the insurance contracts with the Association.

The court further said that including a statutory cause of action in the amended statement of claim in the Guyana proceeding does not take the proceeding outside the scope of the arbitration agreement in the Association’s Rules. The court noted that although the Association acknowledged that it was only disputes under the contract of insurance that could be subject to the arbitration agreement contained in the Rules and that statutory causes of action were likely required to be determined by the relevant jurisdictions provided for in those statutes, the Association submitted that it could be inferred that the statutory claim was within the scope of the arbitration agreement and could be addressed in the arbitration.

The court concluded that there was a high degree of probability that an arbitration agreement governed the dispute and that the respondents' proceeding in Guyana breached the agreement not to commence other proceedings. Considering that the insurance contracts provide for arbitration in either Auckland or London, the court considered that the New Zealand court has a sufficient interest in upholding and enforcing the arbitration agreement.

The court ultimately ruled to uphold and enforce the arbitration agreement in the insurance contracts. It ordered the respondents to restrain from continuing the Guyana proceedings.

 

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