Illegality and frustration

There is no modern authority on the effect of an external event, such as war, on a contract of insurance made between an English insurer and a policyholder who has subsequently become an enemy alien, although there is a body of early marine authority relating to various events such as the Napoleonic wars. It is likely that such a contract is rendered illegal and that no future performance is possible. In Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association (Bermuda) Ltd [2010] EWHC 2661 (Comm) the question was rather a narrower one, of whether Government regulations restricting dealing with particular bodies other than for limited purposes operated to render illegal, or to frustrate, a P&I Club insurance. The outcome turned on the proper construction of the regulations.

IRISL: the facts

IRISL entered 28 ships with Steamship Mutual, a P&I Club, with effect from 20 February 2009 until 20 February 2010. IRISL was thereby insured against liabilities which might be incurred by or arising from the use of the vessels, including liability for damage caused by bunker oil: such insurance is compulsory under the International Convention on Civil Liability for Bunker Oil Pollution Damages 2001 (the Bunkers Convention) in order for a ship to trade in the territorial waters of states which are parties to the Convention.