ARASH SHIPPING ENTERPRISES CO LTD V GROUPAMA TRANSPORT

[2011] EWCA Civ 620, Court of Appeal, Lord Justice Stanley Burnton, Lord Justice Elias and Lord Justice Tomlinson, 25 May 2011

Insurance (marine) - Renewal of policy - Whether renewal provisions contravened Iranian sanctions - European Council Regulation 961/2010/EC

Arash represented a number of co-assureds, controllers of Iranian oil tankers, who were under a composite hull and machinery marine policy subscribed to by a number of underwriters including Groupama. The policy incepted on 10 May 2010 and was to last for a year, although it was agreed that the policy would extend for a further 12 months at anniversary date subject to the Review Clause. That clause stated that, after 10 months of the policy period, the underwriters would extend cover unaltered if the credit balance of the insurance was 50 per cent or better for all fleets combined. The policy also contained an "Iran Sanctions Clause", under which the underwriters could cancel the policy "in circumstances where the Assured has exposed or may, in the opinion of the Insurer, expose the Insurer to the risk of being or becoming subject to any sanction, prohibition or adverse action". By Council Regulation 961/2010/EC the European Union imposed economic sanctions upon Iran in the light of concerns over Iran's development of "sensitive technologies". Article 26.4 provided that: "This Article prohibits the extension or renewal of insurance and re-insurance agreements concluded before the entry into force of this Regulation, but, without prejudice to Article 16(3), it does not prohibit compliance with agreements concluded before that date". Arash commenced proceedings on 7 April 2011 to determine its rights, and on the following day Groupama served a notice of cancellation to the effect that the policy would not be renewed on 10 May 2011. The Court of Appeal held as follows.