Following the invasion of Kuwait by Iraq in 1990, the plaintiffs remained in Iraq at the Government’s insistence to complete the contract, and in so doing incurred extra costs of 84 million Dutch guilders through having to bear the special risks of working on after the invasion. However, before the question of their entitlement to be reimbursed for these extra costs could be resolved, sanctions were imposed on Iraq by United Nations Member States, including the Netherlands and Switzerland. The Iraqi government responded by enacting a law under which it purported to seize the assets of companies from those States, and pursuant to this law it seized the plaintiff’s dredging fleet. The Iraqi government also detained several hundred of the plaintiff’s employees and threatened to use them as a human shield against an attack on Iraq by foreign powers. To secure the demobilization of their fleet and the repatriation of their employees, the plaintiffs were obliged to sign a finalization agreement, under which they agreed to return what was left of the deposit, 24 million Dutch guilders, via a Swiss bank, and to waive their claims under the dredging contract inter alia to the extra costs arising from the special risks resulting from the invasion. The plaintiffs sought to recover the value of these waived claims from the defendants under the sue and labour clause, and the defendants repudiated liability.

At first instance, Rix, J., found as matters of fact that the return of the deposit to the Iraqi government was contrary to Dutch and Swiss sanctions law, although the plaintiffs could have obtained a dispensation from the Dutch and Swiss governments to avoid this illegality, and had neither intended to act illegally nor appreciated that they had done so; that the finalization agreement was valid and binding under Iraqi law, which was the proper law of that agreement as it was of the dredging contract; and that the finalization agreement had been induced by duress of goods and persons. None of these findings of fact was disputed on appeal.