The respondents (six insurers and one broker) raised an action against the appellant (Gatoil International Inc) in the Sheriff Court at Lerwick claiming payment of overdue premiums under an insurance policy on cargo.

In order to found jurisdiction over the appellant, a Panamanian company, and also in order to obtain security for their claim, the respondents on 24 February 1984 arrested the Sandrina in the Shetland Islands. Neither that ship nor any other ships owned by the appellant had been concerned with the carriage of the oil cargo which was the subject of the insurance policy. Subsequently, the appellant raised an action against the respondents in Lerwick Sheriff Court seeking recall of the arrestment. They denied ownership of the Sandrina and also pleaded that there was no power to order the detention of the vessel in support of a claim for premiums due under a contract of insurance. The appellant's action was transferred to the Sheriff Court of Aberdeen and dismissed. On appeal by the appellant, the Second Division of the Court of Session dismissed the appeal. The appellant appealed to the House of Lords. The core issue on appeal was whether certain marine insurance premiums fall within s 47(2)(e) of the Administration of Justice Act 1956 (UK) (the 1956 Act) which was passed for the principal purpose of enabling the United Kingdom to ratify and comply with the International Convention Relating to the Arrestment of Seagoing Ships 1952 (the Arrest Convention 1952).

Held: Appeal allowed.

The issue in this appeal concerned the interpretation of s 47(2)(e) of the 1956 Act. Did the words 'any agreement relating to the carriage of goods in any ship whether by charterparty or otherwise' in this section cover an agreement to pay premiums on a policy of insurance under a war risk open cover on cargo? If so, the arrestment of the appellant's ship, the Sandrina, by order of the Sheriff at Lerwick, was valid; if not, it must be discharged.

Section 47(2)(e) repeated art 1.1.e of the Arrest Convention 1952. Therefore, to fully understand the words of s 47(2)(e), the meaning which they ought to receive under the Arrest Convention 1952 should be ascertained.

The proceedings of the conference which led to the Arrest Convention 1952 decided not to include premiums on policies of insurance among the maritime claims justifying arrest. In the face of this legislative intention, the adoption of the provisions of the Arrest Convention 1952 in the 1956 Act must be treated as carrying the same meaning as that evidently placed upon them in the Convention and as not extending to premiums on insurance policies. In addition, according to both English and Scottish authorities, it was to be observed that a marine insurance contract over the ship and its cargo did not come within the provisions of either ss 47(2)(d) or (e) of the 1956 Act, and therefore, the arrestment was incompetent.