English High Court Awards Equitable Compensation for Insurer’s Breach of London Arbitration Agreement l ZFZ Postcard Cases

In The Frio Dolphin, a subrogated marine cargo insurer mistakenly sued the manager of the carrying vessel in Spain, in breach of the London arbitration clause in the bill of lading.

The manager prevailed in Spanish litigation but suffered $200,000 as irrecoverable costs.

When the insurer commenced arbitration against the carrier in London, the latter counterclaimed for the irrecoverable costs. The carrier claimed them as “equitable compensation” for the insurer’s previous breach of the arbitration clause.

Though the insurer’s claim in Spain was against the vessel’s manager, the carrier could recover the costs as “transferred loss” – as the manager itself would be unable to claim them.

The tribunal agreed and the High Court upheld the award following an appeal on a question of law.

Read the full judgment here.