No choice when offered reasonably satisfactory security under the ASG 2 Collision Jurisdiction Agreement

August 3, 2022
LCI Law Shipping News

Does the ASG 2 Collision Jurisdiction Agreement (CJA) require you to accept security offered in a reasonably satisfactory form?

No, the High Court of England & Wales held in 2021 in The Panamax Alexander and Osios David, essentially on the basis that Clause C of the ASG 2 CJA, which said “Each party will provide security in respect of the other's claim in a form reasonably satisfactory to the other”, requires Party A to offer such security to Party B but does not require Party B to accept it – not even by implication.

However, the Court of Appeal has reversed the decision in 2022 on the basis that ASG 2 (intended to avoid security disputes/arrests outside of England) expressly and by implication requires Party B to accept such security when offered by Party A.

The decision provides needed clarity on ASG 2 and, we suggest, a sensible outcome. That said, the question will remain whether security being offered is in a reasonable form (in that case the High Court decided it was despite it containing a sanctions clause), and if possible parties should aim to agree on the form of security and on the CJA at the same time, to avoid subsequent disputes.

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