Mamancochet Mining Limited (the Claimant) v Aegis Managing Agency Limited & Others (the Defendants) is a case concerning a sanctions clause, with wording widely used in industry, within a marine cargo insurance policy. The insurers, being the defendants, sought to avoid payment, of what on the face of it was a valid claim, on grounds that payment would expose it to sanctions. The three main issues that arose for the judge to consider were: (i) the proper interpretation of the phrase in the insurance policy “to the extent that … payment of such a claim … would expose that insurer to any sanction, prohibition or restriction under … the trade or economic sanctions, laws, or regulations …”; (ii) as a matter of fact, whether payment of the claim would expose the Defendants to US and/or EU sanctions, within the meaning of the sanctions clause in the policy; and, (iii) if the answer to question (ii) was yes, would the Defendants be prevented from relying on the sanctions clause by virtue of the EU Blocking Regulation?

The decision of the Court indicated that it would interpret contractual clauses by looking at the language and context and considering the meaning it would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time of contracting. The judge decided that payment of the insurance claim would not expose the Defendants to sanction, so long as payment took place during the “wind-down” period before US sanctions against Iran came back into full effect on 4 November 2018. The Defendants were not exposed to any EU sanction as it was common ground between the parties that payment of the claim was not prohibited by EU law. While a decision on the point did not need to be made, the judge saw considerable force in the Defendants’ position that if the contractual sanctions clause did apply then the EU Blocking Regulation would not be engaged, as the insurer would not be complying with a third country’s prohibition but would simply be relying upon the terms of the policy to resist payment.

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