Freezing injunctions and pollution claims

Sep 02 2014

The Commercial Court has granted insurance and P&I service provider Gard a freezing order over the assets of the 1971 International Oil Pollution Compensation (IOPC) Fund.*

International Group of P&I Clubs and the fund on 18th March, 2014, the fund’s director advised of his intention to recommend at the fund’s next meeting, to be held on 6th-9th May, 2014, that the money left in the fund (about ?4.6 mill) should be returned to the contributors.

Court application

This prompted Gard to apply to the English High Court for a freezing order. This application was heard before Mr Justice Hamblen on 1st May and judgement was handed down on 7th May, 2014.

The fund argued that the Court lacked jurisdiction because:

A) The fund had immunity from the grant of freezing order relief.

B) The fund had immunity from Gard’s claims (i) in England and (ii) in Venezuela.

The Headquarters Agreement between the fund and the UK and IOPC Fund (Immunities and Privileges) Order 1979 set out immunities on which the fund can rely in the UK.

The order contains a specific exception to immunity in respect of ‘a loan or other transaction for the provision of finance’.

The Judge held that Gard had a good arguable case that the practice of payment between the clubs and the fund fell under this head. Consequently, he ruled that the Court did have jurisdiction to decide the application.

He also found that Gard had met the legal test for a freezing order by establishing a good arguable case that they were entitled to an indemnity because of this practice and demonstrating a real risk that the fund would dissipate its assets by returning the funds to the contributors.

Accordingly, the Judge granted a freezing order in respect of the claims in the English proceedings. However, he did not accept that Gard had a good arguable case that the fund did not have immunity in Venezuela.

There is not enough left in the fund to settle this, or the other four outstanding compensation cases. The fund has applied to the High Court to set the claim in England aside and the case could progress to an appeal and ultimately the Supreme Court, which could prevent the winding up of the fund for some time.

If the 1971 monies are depleted, this raises the question of whether the fund could levy further contributions under a convention which is no longer in force. Nissos Amorgos was subsequently converted to an FPSO and renamed BW Joko Tole and is still in service.

*This article was taken from Holman Fenwick and Willan’s (HFW) bulletin and was written by associate Helen McCormick.

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