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Islamic Republic of Iran Shipping Lines -v- Steamship Mutual and HM Treasury

26th Oct 2010

[2010] EWHC 2661 (Comm)

Christopher Butcher QC – Oil Pollution – Counter Terrorism Act; Financial Restrictions (Iran) Order – Effect of Club cover for Liability and Frustration of Contract.

Under the International Convention on Civil Liability for Bunker Oil Pollution Damages 2001 a vessel trading in the waters of states who are parties to the Convention must obtain liability insurance in respect of bunker oil pollution. The defendant, Steamship Mutual, a P&I Club, provided such cover to shipowner members, including the claimant. On 20 February 2009 the claimant entered 28 ships with the Club, including the vessel Zoorik. HM Treasury, under powers granted by the Counter-Terrorism Act 2008, adopted the Financial Restrictions (Iran) Order 2009, SI 2725/2009, and this came into force on 12 October. The order prohibited transactions and business relationships with the claimant. The Club terminated the agreement with the claimant on 30 October 2009. On 31 October 2009 the vessel suffered a casualty which led to bunker pollution. The Club asserted that the policy had been frustrated. The claimant argued that by the terms of a licence issued by the Treasury on 30 October 2009 it had been exempted from the prohibition. Beatson J held as follows. (1) The licence of 30 October 2009 permitted the Club to continue to provide the claimant to continue to provide insurance cover under the Bunkers Convention to the claimant. (2) The contract as a whole was not discharged by frustration.