In a late 2020 judgment (Aegean Baltic Bank SA v Renzlor Shipping Ltd and Ors  EWHC 2851 (Comm)), the High Court provided important guidance on the position of a bank under security documents relating to a loan agreement, and its obligations when exercising its rights as assignee to the insurance policies over a vessel. The case also highlights the intricacies of disputes involving multiple applicable laws, and the difficulties faced by a party in breach of its disclosure obligations and subject to an order pursuant to which they are not entitled to adduce or rely upon any factual or expert evidence.
Aegean Baltic Bank (“Bank”) had entered into a shipping loan facility agreement (“Loan Agreement”) with the owners of the M/T “Starlet” (“Owners” and “Vessel”, respectively) as borrowers. The Loan Agreement was governed by English law.
In return the Bank had received a security package, which included:
- An assignment of the Vessel’s insurances, which was governed by English law (“Assignment”). As is common in such agreements, the Assignment included a power of attorney in favour of the Bank, allowing the latter to collect, recover, compromise, and give a good discharge for all claims arising under those insurances;
- A corporate guarantee from the managers of the Vessel (“Managers”), which was governed by Greek law; and
- A personal guarantee from the managing director of the Managers (“Personal Guarantor” and, together with the Owners and the Managers, the “Defendants”), which was also governed by Greek law.
The Vessel was insured against H&M risks under two different policies for a total amount of US$10.75 million. Under the first policy, which was governed by Italian law, Generali Italia SpA (“Generali”) underwrote 20% of the risk (“Generali Policy”). The balance of the risk was underwritten by various Lloyd’s syndicates under a second policy governed by English law (“Lloyd’s Policy”)…
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