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Lloyd's Maritime and Commercial Law Quarterly

THE EFFECTIVENESS OF SETTLEMENT AGREEMENTS AND ENGLISH JURISDICTION AGREEMENTS

Yvonne Baatz*

The Alexandros T

Introduction

The recent decision of the Supreme Court in Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG (The Alexandros T) 1 is of immense significance in relation to the effectiveness of settlement and English jurisdiction agreements. English insurers faced the nightmare scenario of further proceedings by the assured in another jurisdiction over three years after the case had been settled and payment made in full. Had the case really been settled or were years of further expensive litigation to be endured in an unexpected jurisdiction, so that the insurers could not close their accounts?
The case required consideration of the provisions on lis pendens, “related actions” and seisin in Arts 27, 28 and 30 of the EC Jurisdiction Regulation.2 Those provisions seek to ensure that the Regulation's aim to achieve free movement of judgments of the courts of the EU Member States within those states is not jeopardised by the risk of irreconcilable judgments being given by the courts of two or more EU Member States. Although the Supreme Court was unanimous in deciding that Art.27 did not apply to the claims relating to an indemnity and exclusive jurisdiction agreement, a majority, two Law Lords dissenting, held that that Art.27 did not apply to the insurers’ application for declaratory judgments that they were released from all claims in view of the full and final settlement of the claims. In light of that disagreement, the Supreme Court decided that, unless the latter claims were abandoned by the insurers, an issue on those claims should be referred to the Court of Justice of the European Union (“ECJ”). In that event further issues would arise on the interpretation of Arts 27 and 28 which should also be referred to that court. The Supreme Court was unanimous in its judgment that, if Art.28 applied, as the proceedings were “related actions”, and if the English court were second seised, they would not exercise their discretion to stay the English proceedings in light of the English jurisdiction agreements.

The facts

On 3 May 2006, the vessel Alexandros T sank and became a total loss. Her owners, Starlight Shipping Company (“Starlight”), claimed against their insurers for the insured value of US$32 million. The latter denied the claim, alleging: that the vessel was unseaworthy with the privity of Starlight; that Starlight had failed properly to report and repair damage to the vessel in accordance with Class Rules; and material non-disclosure. Starlight made serious allegations of misconduct against the insurers, involving alleged tampering with and bribing of witnesses, in particular the bosun, Mr Miranda, and of “malicious scuttlebutt”, ie spreading false and malicious rumours about Starlight. They also claimed

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