Mamancochet Mining Ltd v Aegis Managing Agency Ltd & Ors

Factual and Procedural Background

This case concerns a marine insurance claim arising from the theft of two cargoes of steel billets shipped from Russia to Iran in August 2012, insured under a policy governed by English law. The Claimant is the assignee of the original assured's rights under the policy. The cargoes were stolen from bonded storage in Iran in late 2012. The Claimant submitted a claim under the policy in March 2013. The Defendants, being underwriters of the policy, acknowledged the validity of the claim but resisted payment based on a sanctions limitation clause in the policy, citing US and EU sanctions against Iran.

The claim was issued against 30 Defendants in May 2018 following the US President’s decision in May 2018 to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and re-impose sanctions on Iran effective from June 2018, subject to a wind-down period ending November 2018. The claim has been settled with 19 Defendants; 11 remain, with 9 relying on both US and EU sanctions and 2 relying solely on EU sanctions.

The court expedited the resolution due to the impending expiration of the US sanctions wind-down period, after which payment of the claim would be prohibited by US law.

Legal Issues Presented

1. What is the proper interpretation of the phrase in the policy "to the extent that payment of such claim would expose that insurer to any sanction, prohibition or restriction under the trade or economic sanctions, laws, or regulations"?
2. As a matter of fact, would payment of the claim "expose" the Defendants to US and/or EU sanctions within the meaning of the sanctions clause in the policy?
3. If the answer to the above is affirmative, are the Defendants prevented from relying on the sanctions clause by virtue of Article 5 of Council Regulation (EC) No. 2271/96 (the "Blocking Regulation") as amended by Commission Delegation Regulation (EU) 2018/1100?

Arguments of the Parties

Defendants' Arguments

• The sanctions clause exempts them from liability to pay if payment would expose them to sanctions under US or EU law.
• "Exposure" means being at risk of sanction from the relevant authorities, even if the sanction has not yet been imposed.
• Payment of the claim after March 2013 would expose them to US sanctions under section 560.215 of the Iranian Transactions & Sanctions Regulations (ITSR).
• Payment in US dollars remains prohibited even under the JCPOA’s General License H; thus, payment in sterling would be necessary.
• They contend that once the sanctions clause is triggered by the claim’s submission after 8 March 2013, the claim is extinguished and no payment is due.
• They argue that the wind-down provision in section 560.537 may not apply to payments of claims arising before General License H came into effect.
• They assert that the Defendants are not "complying" with US sanctions but are simply relying on the contractual terms to resist payment, thus not breaching the EU Blocking Regulation.

Claimant's Arguments

• The sanctions clause requires the Defendants to prove that payment would be prohibited by law, not merely that there is a risk of sanction.
• Payment of the claim before 4 November 2018 would not expose the Defendants to sanctions due to the wind-down provision under US law and the relaxation of EU sanctions following the JCPOA.
• The Defendants cannot rely on the sanctions clause where payment is lawful, and the clause should be construed as suspending liability rather than extinguishing the claim.
• The EU Blocking Regulation prevents the Defendants from relying on US sanctions to resist payment, as such reliance would constitute prohibited compliance.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
The Triton Lark [2011] EWHC 2862 (Comm)	Interpretation of contractual language in context	Used to support the proposition that dictionary definitions are a starting point but not determinative of contractual meaning.
The Triton Lark [2012] EWHC 70 (Comm)	Interpretation of contractual language in context	Reinforced the approach to interpreting the sanctions clause in light of the factual matrix.
Dexia Crediop SPA v Commune di Prato [2017] EWCA Civ 428	Approach to findings of foreign law as findings of fact	Supported the court’s exercise of judgment in resolving conflicting expert evidence on US sanctions law.

Court's Reasoning and Analysis

The court began by construing the sanctions clause, concluding that "expose" means that payment must be prohibited by law to "expose" the insurer to sanction. Mere risk or possibility of sanction is insufficient; the conduct must be unlawful under the relevant sanctions regime.

The court then examined the US sanctions regime. It found that at the time of shipment in 2012, the Defendants, as US-owned or controlled foreign entities (USCFEs), were not subject to the sanctions. However, from 22 October 2012, section 560.215 of the ITSR prohibited such entities from engaging in transactions with Iran, including payment of insurance claims, subject to a wind-down provision.

The claim was submitted after the expiry of the initial wind-down period in March 2013, meaning payment would have been prohibited absent the JCPOA. The JCPOA and General License H, effective from January 2016, authorized USCFEs to engage in certain transactions including payment of insurance claims, except for specific exceptions such as payment in US dollars.

The US withdrawal from the JCPOA in May 2018 and revocation of General License H in June 2018 re-imposed sanctions, subject to a new wind-down provision valid until 4 November 2018. The court accepted expert evidence that this wind-down provision authorizes payment of the claim until that date.

Regarding EU sanctions, the court found that the relevant prohibitions on financial assistance for the cargoes were lifted on 16 January 2016, so payment of the claim is not prohibited by EU law.

On the construction of the sanctions clause, the court rejected the Defendants' argument that the clause extinguishes the claim once triggered. Instead, the clause suspends liability while payment is prohibited, reviving liability when payment becomes lawful.

The court also considered the EU Blocking Regulation. It noted that since payment is lawful under US and EU law until 4 November 2018, the Defendants are not "complying" with foreign sanctions by relying on the clause to suspend payment. Therefore, the Blocking Regulation does not prevent reliance on the clause in this context.

Holding and Implications

The court held that payment of the claim under the Policy before 1159 pm eastern standard time on 4 November 2018 will not expose the Defendants to a sanction within the meaning of the sanctions clause. Consequently, the Claimant is entitled to payment of the claim.

The decision suspends the Defendants' liability to pay only during periods when payment is prohibited by law, rather than extinguishing the claim. This interpretation allows for management of claims affected by changing sanctions regimes without extinguishing rights or causing uncommercial outcomes. The court did not set new precedent regarding the Blocking Regulation as the issue was not determinative on the facts.