The DIFC Court of Appeal has just drawn a firm line under how far an unwritten Middle East insurance custom can stretch a reinsurance contract, in a ruling that London-market underwriters trading into the Gulf will want on file.
The DIFC Courts are the English-language common-law court system of the Dubai International Financial Centre, a financial free zone that operates as a separate jurisdiction from the UAE's onshore, Arabic-language civil courts, even though the DIFC sits within Dubai. That distinction mattered in this case, since Horizon Energy, one of the underlying parties, was pursuing a parallel claim in the onshore Sharjah courts at the same time.
The DIFC Court of Appeal ruled on 10 August in Al Buhaira National Insurance Company v Arab War Risks Insurance Syndicate, a dispute that began with a tanker's disappearance off the UAE coast in 2019 and ended up testing three separate questions: which country's law governs the contract, whether an unsigned placement document counted as part of the deal, and who pays a cedant's legal bills when a reinsurance claim turns into years of litigation.
Horizon Energy LLC, a Dubai company, had insured its tanker M/T BETA for hull and war risks with Al Buhaira National Insurance Company (ABNIC), a Sharjah insurer that has written business in the UAE for more than 45 years. The vessel, owned through Horizon's Liberian subsidiary Al Buhaira International Shipping, was insured for USD 70m.
According to Horizon's account, the BETA had been anchored off Fujairah in late 2018, and its last confirmed position was recorded in May 2019. Horizon says the tanker later reappeared under the name MV Makran, allegedly converted into a naval auxiliary vessel serving the Iranian navy. Vessels going quiet in the Gulf and turning up repurposed elsewhere has been a live concern for marine underwriters through the recent run of tension around the Strait of Hormuz, which has already pushed up war-risk premiums and led some insurers to pull capacity from the wider Gulf region.
ABNIC went to the DIFC Courts to avoid both the hull and war policies for misrepresentation, arguing Horizon had wrongly told it the BETA was in class when it was not. That claim succeeded in 2024 and Horizon did not appeal it. It has, however, kept a separate claim against ABNIC alive in the Sharjah courts, which is reportedly still pending. That left ABNIC turning to its own reinsurer, Arab War Risks Insurance Syndicate (AWRIS), a Bahrain-based facility bringing together some 194 Arab insurers, which had taken on 100% of the facultative war-risk reinsurance. ABNIC wanted AWRIS to cover any liability it might ultimately owe Horizon, plus the legal costs it had already spent fighting the claim. AWRIS contested nearly all of it.
Each side left the hearing with something to show for it. The panel, sitting as Chief Justice Wayne Martin, Sir Peter Gross and Patrick Anthony Keane, split the result across the three main issues in the appeal.
The court confirmed English law applies to the reinsurance contract, despite no express choice-of-law clause. The judges pointed to the contract's use of Institute Clauses and standard London market wordings, and to evidence from the trial that "the risks end up in the London market" regardless of where the paper gets signed. That reasoning tracks older House of Lords authority on marine policies written on English-market forms between non-English parties. Gulf cedants and reinsurers who reach for London Market Association wordings out of habit can end up importing English law and its case law along with them.
ABNIC fared better on contract formation. AWRIS had argued that a "Placement Note" sent each year, setting out cover limits, premium and a clause requiring reinsurers to follow the cedant's settlements, never became binding because AWRIS had never signed and returned it, despite the document asking for that. The court held that four years of AWRIS taking premium and cover under that document, without ever objecting to its terms, amounted to acceptance by conduct. A request for a signature is not automatically a condition of the deal.
Defence costs went the other way. At first instance, the trial judge had accepted expert evidence that Middle East reinsurance market practice requires reinsurers to cover a cedant's legal costs of fighting a claim, unless the contract expressly says otherwise. Robert James of Clyde & Co, part of the team that acted for ABNIC at first instance, described that original ruling as one that "re/insurers operating in the Middle East should take note of," given it appeared to establish a regional market practice entitling insurers to recover defence costs from reinsurers even where no indemnity is ultimately payable under the underlying policy. The Court of Appeal has now overturned that finding. It held the implied term was inconsistent with the contract's own express cover limits, and unreasonable, because it would have left AWRIS liable for open-ended costs with no way to recover the same sum from its own London-market retrocessionaires, who would have had no notice that an unwritten Gulf custom existed at all. The panel relied on the English Court of Appeal's 1985 decision in Insurance Co of Africa v Scor (UK) Reinsurance Co, which rejected an implied indemnity that would have exceeded a policy's express monetary cap.
The court never had to work out what the defence costs actually added up to. The judgment leaves the quantum of any recoverable costs as a question that was never reached, and the reversal makes it moot in any event.
For UK brokers and reinsurers writing facultative war-risk business into the Middle East, the message is straightforward: don't assume an unwritten regional custom on costs recovery will travel further up the chain, particularly once the contract is governed by English law. If a market practice isn't written into the reinsurance wording, retrocessionaires in London have no way of knowing it exists, and per this ruling, shouldn't be expected to fund it.
The case also sits alongside a wider pattern of Gulf-linked marine disputes working their way through the courts years after the underlying loss. The BETA went missing in 2019, but litigation over the fallout has run through DIFC proceedings against a live backdrop of Hormuz-related disruption that has already pushed Lloyd's and government-backed reinsurers to add fresh capacity further along the same stretch of coastline.
The two sides now have 21 days from the ruling to file submissions on liability for costs at first instance and across the various stages of appeal, with the court to rule on the papers. Nicholas Craig KC acted for ABNIC, instructed by Clyde & Co; Alex Potts KC represented AWRIS, instructed by Pinsent Masons. The full judgment is published by BAILII.
