Eleven London market and Lloyd’s insurers are in the UK’s High Court defending their refusal to pay out on a historic Iran-related marine cargo claim due to fears that payment may expose them to a wave of political sanctions.
The commercial court trial – which continues today – between Mamancochet Mining Ltd (MML) vs Aegis Managing agency and others is over the insurers’ decision not to settle their share of a claim which they claim will violate international sanctions.
The hearing comes at a time when the US is once again increasing pressure on Iran after President Trump ordered new sanctions against the regime in August and it may become an influential decision on how London market insurers can operate with insuring business that has an Iranian connection.
The dispute, which is being heard by Mr Justice Teare, relates to two cargos of steel billets on route from Russia to a port in Iran. While held in Iran the consignment was stolen sometime between ٢٢ September and the ٢٢ October ٢٠١٢.
The all – risks marine cargo policy contained a market standard clause which allowed for the non – payment should it place the insurers “at risk” of being in breach of any adverse sanctions.
MML filed an insurance claim in the UK’s Commercial Court in May this year against ٣٠ insurers including several firms at Lloyd’s of London – such as Aegis – and units of Chubb, Munich Re, QBE and Travelers, among others.
١٩ out of the ٣٠ insurers have subsequently paid their share and are no longer involved in the dispute.
The remaining ١١ firms – all of which contest payment – argue they cannot pay the claim as doing so would be place them in breach of prohibited sanctions legislation from the UK, European Union and/or the US.
The court heard today that two of the defendants – Tokio Marine and Channel Managing Agency, a Lloyd’s insurer owned by Scor – contest the payment of the claim purely on the belief that they would be in breach of EU sanctions.
Nine of the firms believe they are owned or controlled by or through US-based entities, placing them in breach of US economic sanctions if they were to pay the claim.
Another, unnamed firm has been struck from the court due to its belief “that it is neither controlled now owned by US entities or persons.”
Richard Blakely, counsel for the insurers, told the court that “none of the US exposed defendants have settled”.
The defendants maintain that the “suspensory sanctions regime” and continuing flux in the political and sanctions climate from the US and EU towards Iran mean that the insurers would be placed continually “on and off risk.”
The counsel said paying the claim would leave them “vulnerable” to be in breach of US sanctions.
But Jawdat Khurshid QC, counsel for the plaintiffs, argued that payment would not in breach of sanctions due to exemptions laid out in the EU and US legislation.
The exceptions, for example, make allowances for historic business contracts with Iran conducted by US-based or run firms, he claims.
The claimants argue that there is nothing on the record that details the final intended use of the steel and as such it is not known whether the steel could have been used for construction within any sanctions – related industries such as Iran’s nuclear, weapons manufacture or paramilitary sectors.
This does not amount to a “reasonable risk” on the part of the insurers, Khurshid explained.
Iran has had economic sanctions or trade embargoes imposed in various forms since ١٩٧٩.
But in July ٢٠١٢, the Obama Administration took action to further isolate and penalise Iran for its refusal to live up to its international obligations regarding its nuclear program.
In January ٢٠١٦ the majority of Iran-related EU sanctions and US secondary sanctions were lifted after Iran agreed to curb its nuclear programme.
However, certain US primary sanctions remained – including any US-owned business or persons from being involved in Iran-related dealings or transactions and forces US banks to reject or block all Iran-related fund transfers.
More recently, tensions between the US and Iran have increased after President Trump withdrew the US from the Iran nuclear deal, re-imposing sanctions on the regime and delivering on an election campaign promise that a Trump White House would take a tough stance on Iran’s nuclear ambitions.
Mamancochet is represented by ٧ King’s Bench Walk and Reed Smith. The insurer defendants are represented by Brick Court Chambers and Crown Office Chambers.
Neither party has submitted estimates of damages or costs.
