CA-2024-000950 - [2025] EWCA Civ 1019

It was common ground before the judge that the vessel had not been arrested or detained under any customs or quarantine regulation. (To avoid repetition, I shall refer to ‘detention’ to cover all of the terms used in the exclusion, i.e. arrest, restraint and detainment, as there is no need on the facts of the present case to distinguish between them). The insurers’ case was that exclusion 1(e) applied on the basis that there had been a detention which was ‘similar’ to a detention under customs or quarantine regulations and which did not arise from actual or impending hostilities.

In the absence of any authority dealing with exclusion 1(e), which has formed part of the American Institute War Risks Clauses since at least the 1940s, the judge’s approach was to consider the broadly similar wording of clause 4.1.5 of the English Institute Clauses 1983 and its predecessors. This exclusion referred to arrest ‘under quarantine regulations or by reason of infringement of any customs or trading regulations’, the words ‘or trading’ having been added in the 1983 revision. She referred to cases holding that the term ‘customs regulations’ in the English wording should be construed broadly to include regulations, in whatever form and wherever to be found, which regulate or deal with the imposition of customs duties and the import and export of goods, and includes regulations concerned with smuggling (The Anita [1970] 2 Lloyd’s Rep 365; The Kleovoulos of Rhodes [2003] EWCA Civ 12, [2003] 1 Lloyd’s Rep 138; The B Atlantic [2012] EWHC 802 (Comm), [2012] 1 Lloyd’s Rep 629). She considered that, in the absence in the English wording of any reference to arrests of a ‘similar’ nature, giving a broad construction to ‘customs regulations’ was the only way in which the clause could be construed to cover things to do with smuggling.

From this she reasoned that the American wording achieves the same result in a different way, with effect being given to the ‘similar’ wording by construing it to cover arrest for breach of any regulation which in substance equates to a customs regulation as construed under English law. In effect, therefore, she treated the ‘similar’ wording in the American clause as doing the same work as is done in the English clause by adopting a broad construction of ‘customs regulations’, with the consequence that it is unnecessary to adopt the same broad construction of that term in the American clause. Her conclusion was that:

‘119. … In my judgment an arrest, restraint or detainment is “similar” for the purposes of exclusion (e) if the underlying purpose and objective of the arrest is materially the same as the underlying purpose and objective of an arrest under customs and quarantine regulations.’

The judge considered that this construction was supported by what she regarded as a significant difference in the wording of the English and American clauses: while the English clause excludes cover for detention ‘under’ quarantine regulations or ‘by reason of infringement’ of any customs or trading regulations, the American clause is limited to detention ‘under’ such regulations, so that (she said) the scope of the American exclusion without the ‘and similar’ wording would be narrower. The judge considered that the ‘and similar’ wording in the American clause was intended to broaden the scope of the exclusion so that it applies in the same way as the English clause.

Applying this approach, the judge compared the object and the terms of the Indonesian Shipping Law with the object and the terms of the Indonesian Customs and Quarantine Laws. Having done so, she concluded that there was no sufficient similarity between the vessel’s arrest under the Shipping Law and an arrest under the Customs or Quarantine Laws to attract the operation of the exclusion.