QCR Summer 2021: Enemalta Plc V The Standard Club Asia Ltd (THE “DI MATTEO”) [2021] EWHC 1215 (Comm)

Jurisdiction – P&I Club letter of undertaking – Exclusive English jurisdiction clause – Effect of limitation proceedings in Singapore on letter of undertaking

On 23 December 2019 Malta suffered a nationwide blackout found to be caused by damage to the underwater High Voltage Alternating Current (HVAC) connector cable operated by Enemalta, Malta’s national power distributor, in the Sicily Channel. The Claimant alleged that the damage was caused by the vessel DI MATTEO, whose owners were domiciled in Singapore. The vessel was entered with the defendant P&I Club, who provided a Letter of Undertaking (LOU) in the usual terms subject to English law and to the exclusive jurisdiction of the English High Court of Justice. The LOU was negotiated and provided before any attempt at arrest had been made. Notably, the alleged incident did not take place in the port or in the territorial waters of any nation but occurred in international waters

Owners commenced limitation proceedings in the High Court of Singapore seeking to establish a limitation fund under the LLMC 1976 with substantially lower limitation than the 1996 Protocol to LLMC 1976, and seeking also an order for the release of any existing security. In the meantime, Enemalta commenced proceedings against the owners in the Maltese courts in respect of their substantive claim. Malta, like the United Kingdom, is a signatory state to the 1996 Protocol. Both England and Malta renounced the LLMC 1976.

The maximum value stated in the LOU was calculated by reference to the limits of liability applicable under the 1996 Protocol. The limit of liability under the LOU is fixed at a sum of in excess of €21 million, whereas the maximum sum that will be secured by an order under the LLMC 1976 is €5.77 million.

JUDGEMENT

The claimant sought the following declarations from the English court concerning the status of the LOU,

  1. All disputes arising over the validity of the LOU are to be determined solely in the High Court of Justice, in proceedings between the parties in England, applying English law.
  2. The LOU is and remains a valid and binding contract between the claimant and the Club, and is not null and void.
  3. Should the Club by itself, its agents or privies (including any action brought by its shipowning member or members at its behest), wish to dispute the continuing validity of the LOU, it must do so solely by bringing proceedings in this Court, and any contrary proceedings brought by or at the behest of the Club would constitute a breach of the LOU.
  4. Should any contrary declaration to para 2 above be made by the Singapore Court, it will not affect the validity of the LOU under English law, which is and remains the applicable law of the LOU.

The Club challenged the Court's jurisdiction on the basis that the Singapore Court had sole and exclusive jurisdiction to make an order under art 13(2) of the LLMC 1976, concerning orders with regard to arrested vessels and other security, which is the sole basis on which the jurisdiction of the English Court can be challenged.

The defendant’s challenge to English jurisdiction failed. The judge concluded that, as a matter of English law, it was “better than seriously arguable” that the LOU was not a security within the jurisdiction of the Singapore Court. It was not a vessel or other property attached within the jurisdiction of any state party to the LLMC 1976, nor was the security given to obtain the release of a vessel or other property attached within the jurisdiction of any state party to the LLMC 1976. To the extent physical location was relevant, the LOU was located in Malta, which was not a state party to the LLMC 1976. More probably, however, English law would treat the LOU as being located in England, being the state which, by agreement between the parties, had been given exclusive jurisdiction in relation to it. England too was not a state party to the LLMC 1976.

On the question of construction of Article 13(2), the judge referred to the previous decision of Colman J in ICL Shipping Ltd v Chin Tai Steel Enterprise Co Ltd (The ICL VIKRAMAN) [2003] EWHC 2320 Comm, in which he held that the words ‘such State’ at the end of the first sentence of Article 13(2) did not mean the state where the limitation fund has been constituted, regardless of the jurisdiction in which the vessel has been arrested or within which the security had been put up. Furthermore, he held the LLMC 1976 could not be construed so as to create a power in the courts of one state party (in the present case Singapore) to interfere by order with the disposition of property or other security within the jurisdiction of a state that is not a party (in this case, either Malta or England).

COMMENTS

The Court found it unlikely, as a matter of English law, that the Singapore Court would have jurisdiction to discharge the LOU and it was, therefore, appropriate for the Claimant to apply for the protective declarations sought in the English proceedings. The decision highlights the English Courts’ stance of giving effect to exclusive jurisdiction agreements under a LOU as security for the underlying claim. The Court flagged up the LOU is an entirely autonomous contract between parties and will, therefore, be governed by the jurisdiction provisions in the LOU.

This decision might be of interest to Members who may be involved in jurisdictional arguments in the context of limitation proceedings.

Staff Author

UK P&I

Date06/07/2021