CL-2024-000668 - [2025] EWHC 2788 (Comm)

On 29 July 2021, the Defendant commenced FOSFA arbitration proceedings against the Claimant, claiming on three bases: (i) that the Claimant had failed to arrange adequate insurance for the goods, in breach of the CIF contract; (ii) that the goods had suffered damage whilst waiting at anchorage in Ukraine, for which the Claimant was responsible; and (iii) that as the insurance was null and void the Defendant had no proper recourse.

The Claimant initially sought to stay the FOSFA proceedings on the basis that the question of whether the insurance policy was valid was the subject of ongoing proceedings in Belgium. The FOSFA First Tier Tribunal (‘FTT’) declined to stay the FOSFA proceedings.

In its Award No. 4804 dated 15 October 2023 (‘the FTT Award’), the FTT found that the Claimant was not in breach of contract by reason of the fact that the goods were delivered to the Defendant in a damaged condition. At paragraphs 9.30 – 9.34 the FTT considered the Defendant’s claim that the Claimant had failed to provide a marine insurance policy or certificate covering 102% of the CIF value, covering all risks, FOSFA trade clause A, war clause (HSSC).

In this connexion the FTT Award said this:

‘[9.30] … It is also common ground that the Insurance Certificate was declared null and void by insurers and that Buyers could not, therefore, make recovery under the policy.

[9.31] We do not wish to disrespect the jurisdiction of the Belgian courts to address this issue. However, time has no telling on when the Belgian court will come to find a conclusion and we consider it wholly unsatisfactory that a FOSFA arbitration should be put on hold pending the outcome of the Belgian proceedings, as this is against the nature of an arbitration in this forum. It is contrary to our general duty under s. 33 of the Arbitration Act 1996 to adopt procedures avoiding unnecessary delay or expense. It is also contrary to the introductory words of the FOSFA Code of Practice for Arbitrators, namely that “The object of arbitration is to deliver a fair resolution of disputes by an impartial tribunal, without undue delay or expense.”

[9.32] Under our own jurisdiction, on the evidence placed before us, on balance and, as said, without detracting from the jurisdiction of the Belgian courts, we see no plausible basis where it could be found that Sellers complied with their obligation under the CIF contract to provide insurance cover.

[9.33] At the time of the negotiation of the Contract, Sellers were appraised (sic) of the full facts of the history of the Vessel. On the evidence before us, it would also appear that Sellers sub-seller AMS Ameropa had provided insurance pursuant to Sellers’ purchase contract up until the time when the voyage contemplated by that contract was terminated, and it was Sellers’ obligation to provide ongoing cover. However, Sellers failed to disclose such facts to the underwriters as would have been appropriate in the circumstances and in the face of the absence of such disclosure, it appears to us that underwriters were entitled to avoid the policy. That will ultimately be a decision for the Belgian courts but, under our jurisdiction to adjudicate any dispute arising out of the Contract, it is our conclusion that as the disclosure was not made, it followed that the underwriters avoided cover and that the policy was invalid; Sellers were, therefore, in breach of their CIF obligations to provide such cover pursuant to clause 6 of FOSFA Contract No 54.

[9.34] On balance of the evidence, there is no plausible basis that it could be said that Sellers had completed their obligations under the CIF obligations to provide insurance AND SO WE FIND. Sellers are liable to Buyers for Sellers’ breach in this respect.’

The FTT also considered that the Defendant had not satisfactorily proved the quantum of its claim and invited further submissions and evidence from the Defendant in that regard.

The Claimant lodged an appeal against the FTT Award. The Appeal Board issued the Appeal Award (No. 1209) on 13 November 2024.

In the Appeal Award, the Appeal Board stated (paragraph 8.23) that there were three issues which needed to be addressed:

As to the first, the Appeal Award stated, at paragraphs 8.31-8.32:

‘[8.31] It would seem to the Board that if the First Tier Tribunal meant by “common ground” that all parties had become aware of the cargo insurer’s disclosure, then the statement would be correct. It would seem likely in such circumstances that all parties to the Contract were aware.

[8.32] Whether cargo insurers have “declared” the insurance null and void or have “claimed” that the insurance is null and void, does not alter the fact that Buyers/sub buyers have not been able to pursue their claim.’

As to the second, the Appeal Award stated, at paragraphs 8.42-8.45, as follows:

‘[8.42] The above evidence and the undisputed time line of the Sellers’ request for insurance on the voyage from Pivdennyi to Aliaga does not help Sellers’ case and suggests that if Sellers had not disclosed all material facts to the insurers then Sellers were at risk under their obligations concerning misrepresentation.

[8.43] We agree with the First Tier Tribunal that at the time, the policy was not effective and hitherto remains ineffective and therefore could not be considered a valid policy.

[8.44] Whilst the Board accepts that having a valid policy does not necessarily result in coverage for all potential perils, in this case the underlying issue concerns the actual ability to claim against the policy, irrespective of whether the alleged peril was either covered or not.

[8.45] Here there is sufficient doubt following the broker’s repeated statements regarding voidability that it was not possible. The resulting dispute currently under consideration through the Belgian court adds credence to Buyers’ argument that whatever insurance was put in place was not capable of successfully accomplishing the desired outcome. In this case the desired outcome was certainly not being informed by insurance brokers that the insurance cover was null and void.

[8.46] WE THEREFORE FIND AND HOLD, that as Sellers had put in place a policy that was not effective it was by definition also not valid. WE THEREFORE FIND THAT Sellers were in breach for not providing an insurance policy immediately capable of considering any potential claim irrespective of the peril.’

As to the third question, the Appeal Award contained the following:

‘[8.53] Buyers or sub-buyers under the terms of the Contract had every right to expect that in the event of a cargo claim, there would at least be the option of pursuing the claim with insurers. That has not been possible and consequently WE FIND that Sellers are in breach for not ensuring that process. The cause of the ineffective insurance whatever the reason, rests with Sellers.

[8.54] WE THEREFORE FIND AND UPHOLD the First Tier Tribunal’s findings, that the insurance required under Clause 6 of FOSFA Contract No. 25, and procured by Sellers, has been avoided by cargo insurers, that such insurance was therefore not effective, and that Sellers are in breach of their insurance obligations under the Contract.’