Underwriters fail to recover $22m for scuttled bulker

Hull underwriters have failed in an attempt to recover a $22m payout for the loss of a bulker, even though the claim was fraudulent.

Insurers led by Aspen Underwriting settled a claim for the ­total loss of the 27,209-dwt geared bulker Atlantik Confidence (built 1996) in the Gulf of Aden in 2013, although it was deliberately sunk by the master and chief engineer on the instructions of Turkish shipowner Ahmet Ali Agaoglu.

Most of the settlement was used to discharge mortgages and other debts of Agaoglu to the Netherlands-based, Turkish-owned Credit Europe Bank.

Aspen, a New York Stock ­Exchange-listed insurance group that operates Lloyd’s of London syndicate 4711, sought to recover the payout, with a jurisdictional dispute developing with Credit Europe Bank, the third defendant after Kairos Shipping, the one-ship company that owned the ­Atlantik Confidence, and shipmanager Zigana Gemi Isletmeleri.

In a nuanced judgment in the London High Court, Justice Teare ruled that the hull underwriters “do not have the better of the argument” that the bank is bound by an English law and London jurisdiction clause in the settlement agreement or in the policy.

But the hull underwriters won the argument that the misrepresentation behind the claim was a matter relating to tort (the claim for wrongful action), so the court had jurisdiction.

However, Justice Teare then ­crucially ruled that a claim for ­restitution was not a matter relating to tort — so the High Court has no jurisdiction. Thus, the hull ­underwriters’ bid to reclaim the proceeds of the Atlantik Confidence ­insurance claim failed.

Justice Teare conceded it was unsatisfactory on case-management grounds to reach a conclusion that a tort claim may be brought in England, but that the claim for restitution may not be.

This was a consequence of the Brussels regulation on jurisdiction of courts in the European Union. One of its principles is that jurisdiction in general lies in the domicile of the defendant. As Credit ­Europe is a Dutch bank, ­jurisdiction is the Netherlands.

“Of course, the entirety of the hull underwriters’ case against the bank could be brought in the Netherlands, but in circumstances where the hull underwriters’ case against the owners and managers is being brought in England, that also is not satisfactory,” the judge said. “The court cannot, however, base its jurisdictional decisions when applying the Brussels regulation on considerations of forum conveniens.”

In earlier proceedings, Justice Teare heard that the Atlantik Confidence had a market value of $6.5m at the time of the loss, so the payout would greatly ease the financial difficulties of Agaoglu, who was the sole shareholder and ­director of ­Atlantik Denizcilik ve Sanayi, a Turkish company that in 2013 controlled six owned and operated vessels and managed eight.

Much of the argument in the ­latest trial appeared to be about the legal meaning of the phrase “matters relating to insurance” in relation to enforcement of contractual rights, rather than the loss of the ship or wrongdoing by the owner.

The jurisdictional nature of the trial means this probably is not the last word on the matter.

There has already been a legal battle over the acceptability of a club guarantee in relation to cargo claims. The Standard Club won a London appeal court ruling that a limitation fund could be established through a club guarantee rather than by providing cash ­security.