The DIFC Court of Appeal upheld ABNIC's third ground of appeal, declaring that the facultative marine war reinsurance contract between ABNIC and AWRIS incorporated a follow-the-decisions and follow-the-settlements clause in specific terms, reversing the first-instance judge who had declined to find that clause incorporated. The Court also declared that ABNIC had not breached any duty of fair presentation or good faith at placement — defeating AWRIS's avoidance defence — and that ABNIC's claim was notified and brought within time. AWRIS's cross-appeal succeeded on its second ground, setting aside one declaratory order made at first instance; its third ground was rendered unnecessary to determine. Both parties therefore achieved partial success. The decision is significant across three planes. It confirms that a follow-the-settlements and follow-the-decisions obligation can be found incorporated into a facultative slip on its proper construction by reference to the full placement documentary record, without requiring express verbatim reproduction in the slip itself. It applies DIFC fair-presentation principles to a cedant placing reinsurance in circumstances where the underlying insured's own misrepresentation to the primary insurer is the source of the alleged non-disclosure risk. It also resolves how notification obligations and limitation interact in vessel-disappearance claims where the date and cause of loss are uncertain and primary proceedings are multi-jurisdictional.
Decision
ABNIC's appeal on grounds 1, 2 and 4 was dismissed. Ground 3 was upheld: the Court declared that the reinsurance contract contains the following term — 'Warranted all terms and conditions as per original Policy and facultative reinsurers to follow all decisions agreed between the insuring company and the insured in regard to all terms, conditions, exceptions, limitations, warranties, return and additional premium. The facultative reinsurers shall also follow in every respect all settlements agreed between the ceding company and the insured.' AWRIS's first ground of cross-appeal was dismissed. AWRIS's second ground was upheld and first-instance Order 1 of 9 September 2025 was set aside. AWRIS's third ground was rendered unnecessary to determine. The Court further declared that ABNIC was not in breach of any duty of good faith or fair presentation at placement and that AWRIS has no entitlement to avoid the reinsurance contract for misrepresentation or non-disclosure. It was also declared that ABNIC's claim was notified and brought within time and is not barred by reason of any late notification, time-bar, or limitation period.
Facts
ABNIC is an insurance company incorporated in Sharjah, UAE, with over 45 years of operating history and branches throughout the UAE. It writes various lines of business including Marine Hull Insurance. AWRIS is a syndicate of more than 194 insurers from the MENA region, incorporated in the Kingdom of Bahrain, of which ABNIC is itself a member. AWRIS exists to protect Arab insurers' interests in relation to marine war risks, amongst other perils, and offers reinsurance cover on both treaty and facultative bases for marine war and related perils — including terrorism and piracy — that are normally excluded from a standard Marine Hull and Machinery Policy. ABNIC wrote a Marine Hull War Risks Policy in favour of Horizon Energy LLC, a Dubai-incorporated company, and its subsidiaries and affiliated companies, including Al Buhaira International Shipping Inc (ABIS), a Liberian company that was the registered owner of the tanker M/T BETA. The sum insured under the War Policy was USD 70 million. ABNIC also wrote a separate Marine Hull and Machinery Policy covering the BETA for Horizon. ABNIC placed facultative reinsurance of its war-risks exposure with AWRIS. That reinsurance was originally placed in 2015 and renewed in 2018, the 2018 renewal being the policy period in issue. Toward the end of November 2018, Horizon arranged for the BETA to be anchored at the borders of the outer port of Fujairah, UAE. By May 2019, the vessel was last recorded at a specific anchorage location. On 12 May 2019 the UAE Coastguard requested assistance from the Federal Transport Authority Land and Maritime to tow the BETA, together with two other vessels, to the nearest port due to risks those vessels posed to other shipping in the area. By mid-November 2019, the security company retained by Horizon was unable to access the BETA. Horizon notified ABNIC of a claim under the Hull Policy on 18 November 2020 on the basis that the BETA had disappeared during the period of cover. ABNIC forwarded that notification to AWRIS on 6 January 2021. Horizon separately gave notice to ABNIC of a claim under the War Policy on 25 October 2021, asserting facts consistent with the vessel's disappearance during the insured period. In parallel DIFC proceedings, H.E. Justice Robert French delivered judgment on 26 September 2024 finding that Horizon and ABIS had misrepresented to ABNIC, through a responsible officer, that the BETA was in class when in fact it was not, and that ABNIC would not have issued the relevant policies had it known the true position. H.E. Justice French held that ABNIC was entitled to avoid both the Hull and War Policies with effect ab initio. Horizon and ABIS did not appear at the trial of those proceedings and brought no appeal. At the time of the present trial, Horizon had applied to the Sharjah Courts to lift the stay of its parallel claim against ABNIC, while ABNIC sought dismissal of that claim on the strength of the DIFC judgment against Horizon. ABNIC then commenced these reinsurance proceedings against AWRIS seeking declarations of entitlement to indemnity under the reinsurance contract in respect of any liability under the War Policy following the loss of the BETA, and in respect of all reasonable costs and expenses incurred in proceedings brought by or against Horizon under the War Policy. AWRIS defended and asserted it had no liability. H.E. Justice Michael Black gave judgment at first instance on 9 September 2025, each party achieving partial success. Both parties applied for permission to appeal; the first-instance judge dismissed both applications on 27 November 2025. On renewal, Chief Justice Martin granted permission to both parties on 4 March 2026, including permission on all of ABNIC's grounds and ABNIC's supplementary cross-appeal ground. The appeal was heard on 29 and 30 June 2026.
Issues before the court
- Whether the facultative reinsurance contract incorporated a follow-the-decisions and follow-the-settlements clause obliging AWRIS to follow all decisions agreed between ABNIC and Horizon/ABIS and to follow in every respect all settlements agreed between them, and if so in what precise terms.
- Whether ABNIC was in breach of any duty of fair presentation or good faith at the time of placing the reinsurance contract, entitling AWRIS to avoid the reinsurance for misrepresentation or non-disclosure.
- Whether ABNIC's claim under the reinsurance contract was notified and brought within time, or was barred by late notification, a contractual time-bar, or the applicable limitation period.
- Whether the first-instance declaratory Order 1 of 9 September 2025 should be set aside on AWRIS's cross-appeal.
- Whether it was necessary to determine AWRIS's third ground of cross-appeal given the outcome on its second ground.
The court's reasoning
The judgment resolved three analytically distinct questions. On the follow-the-settlements and follow-the-decisions clause — ABNIC's successful ground 3 — the Court undertook a contractual construction exercise by reference to the documentary record of the reinsurance placement in 2015 and at the 2018 renewal. The clause as declared reproduces a wording that is well-established in English marine reinsurance practice: facultative reinsurers warrant compliance with all terms and conditions of the original policy and agree to follow all decisions agreed between the insuring company and the insured across the full range of contractual terms, conditions, exceptions, limitations, warranties, and premium adjustments, and further to follow in every respect all settlements agreed between the ceding company and the insured. The first-instance judge had declined to find that clause incorporated into the reinsurance contract. The Court of Appeal reversed that conclusion. Reading the placement materials as a whole, and against the background of AWRIS's own stated objective of protecting the interests of Arab insurers in relation to marine war risks, the Court concluded that the documentary record compelled the finding that this clause formed part of the contractual matrix. The practical consequence is significant: once ABNIC reaches a bona fide decision or settlement with Horizon within the scope of the reinsured risk, AWRIS is bound to follow it and cannot re-litigate the underlying merits — subject to the well-known qualification, inherent in follow-the-settlements clauses, that the settlement must not be dishonest or collusive and must fall within the risks covered by the reinsurance. The Court also noted the evidence concerning practice. AWRIS's witness Mr Hamama had asserted that decisions on reimbursement of costs incurred by the primary insurer were taken case by case depending on circumstances. The Court's finding on incorporation of the clause addresses that contested practice point by establishing the contractual position as a matter of construction rather than discretion. On fair presentation and good faith, AWRIS maintained that ABNIC had misrepresented or failed to disclose material facts at placement, entitling AWRIS to avoid the reinsurance. The Court examined what ABNIC knew or ought to have known at the time of the 2018 renewal and found no actionable breach. A critical feature of the analysis was the prior DIFC finding by H.E. Justice French that it was Horizon — through a responsible officer — that had misrepresented the BETA's class status to ABNIC, and that ABNIC would not have written the policies had it known the truth. That finding, which was not appealed and stands as res judicata, necessarily meant that ABNIC did not itself know at placement that the BETA was out of class. A cedant cannot be fixed with knowledge it did not possess; accordingly ABNIC's failure to disclose the class position to AWRIS was not an actionable non-disclosure because ABNIC was itself the victim of the same misrepresentation. AWRIS's avoidance defence therefore failed and the Court declared AWRIS not entitled to avoid. On notification and time-bar, the Court applied a close textual analysis of the reinsurance policy's notification provisions alongside the applicable DIFC limitation framework. The unusual circumstances of a vessel disappearance — where the precise date and cause of loss are uncertain, where primary claims evolved across different policy sections (Hull then War) over an extended period, and where multi-jurisdictional parallel proceedings were in progress — required the Court to assess the point at which notification obligations crystallised and whether they were satisfied. The Court held that ABNIC's act of forwarding Horizon's claim communication to AWRIS in January 2021 constituted adequate notification under the reinsurance contract, and that the proceedings were commenced within the applicable limitation period. The claim was therefore not barred. AWRIS's successful second ground of cross-appeal resulted in the setting aside of first-instance Order 1 of 9 September 2025. Given that outcome, the Court found it unnecessary to determine AWRIS's third ground. AWRIS's first ground of cross-appeal was dismissed.
Applicable law
- DIFC Insurance Law (DIFC Law No. 1 of 2008, as amended) — duties of fair presentation and good faith as applicable to a cedant placing facultative reinsurance
- DIFC Contract Law (DIFC Law No. 6 of 2004) — principles of contractual construction and incorporation of terms into a reinsurance slip
- DIFC Limitation Law (DIFC Law No. 4 of 2020) — applicable limitation periods for contractual claims under the reinsurance contract
- Follow-the-decisions and follow-the-settlements clauses — as declared incorporated into the facultative reinsurance contract on its proper construction by reference to the 2015 and 2018 placement documentary record
- Institute War and Strikes Clauses (Hulls) — standard clauses incorporated by reference into the reinsurance policy
- DIFC Court Rules (RDC) — procedural framework governing permission to appeal, dismissal of permission applications at first instance, and renewed permission applications before the Court of Appeal
Practical implications
Reinsurance contract drafting across the MENA market warrants immediate review. The Court of Appeal was prepared to find the follow-the-settlements and follow-the-decisions clause incorporated on the documentary record of placement alone — but that exercise required appellate litigation to resolve. The litigation risk is substantially reduced by setting out the clause verbatim in the slip and the policy schedule. Cedants intending to bind facultative reinsurers to downstream settlement decisions should not rely on implied incorporation by reference to market practice or AWRIS's stated objectives; express inclusion is the only reliable approach. Reinsurers auditing legacy slips should assess whether such clauses are incorporated by reference, by course of dealing, or by the documentary placement record, and should not assume silence defeats incorporation. On fair presentation, the judgment confirms that a cedant is not fixed with knowledge it did not possess at placement — but that proposition must be supported by a contemporaneous paper trail demonstrating that the cedant's own presentation was made in good faith on the information available to it. Where the underlying insured's representations are the source of the misrepresentation risk, cedants should document clearly what they knew at placement and what they were told by the insured. AWRIS and similar syndicates should build pre-placement due diligence processes that do not depend solely on the cedant's disclosure. On notification and time-bar, the decision confirms that in vessel-disappearance claims, where the date and cause of loss are uncertain and claims evolve across multiple policy sections over time, forwarding the primary insured's notification to the facultative reinsurer promptly upon receipt is sufficient to satisfy the contractual notification obligation. Here a gap of approximately six weeks between receipt of the Hull claim notification and forwarding to AWRIS was accepted. Cedants should not read this as establishing any fixed grace period; the outcome was fact-specific and dependent on the particular notification wording. The prudent practice is to forward all primary insured notifications to facultative reinsurers immediately upon receipt, without waiting for the nature or basis of the claim to be fully clarified.
Precedent value: As a decision of the DIFC Court of Appeal, this judgment is binding on the DIFC Court of First Instance and all courts within the DIFC judicial hierarchy. It is the first Court of Appeal authority directly addressing the incorporation of follow-the-decisions and follow-the-settlements clauses into a facultative marine war reinsurance slip governed by DIFC law. It also constitutes binding authority on the application of DIFC fair-presentation and good faith duties to a cedant placing reinsurance where the underlying insured's own misrepresentation to the primary insurer is the source of the alleged non-disclosure, and on the interaction between vessel-disappearance notification timelines, contractual notification clauses, and the DIFC Limitation Law.
Action point
Insurers and reinsurers active in the MENA marine war-risks market — particularly AWRIS syndicate members and cedants holding facultative slips with AWRIS — should immediately review their reinsurance documentation to confirm whether follow-the-settlements and follow-the-decisions clauses are expressly incorporated, and to audit their notification procedures against both contractual requirements and the DIFC Limitation Law.
Source
This case note is generated from a public court record and reviewed under the firm's automated editorial quality gate. General information only — it does not constitute legal advice. For advice on a specific matter, please contact us.