While crossing the Suez Canal, a Chinese ship drifted until it sank and "settled" on the bottom of the canal. Attempts to repair the engine on site failed until at the end of the day, with the help of several tugboats, the ship was pulled out and refloat. Following the "incident", the shipowner declared a "General Average", which means a demand for the participation of all owners of the cargo which was on board at the time of the incident, in the damage caused and the expenses incurred to rescue the ship. The shipowner appointed Average Adjustors to assess the damage, expenses and their division between the cargo owners and the shipowner, but in order to permit the cargo to be unloaded at the port of Ashdod in Israel, the shipowner required the cargo owners and the insurers to sign Average Guarantees in which they undertook to participate in their share of the General Average payments, as determined by the Adjustors. The guarantees included an exclusive jurisdiction clause for London, England. The cargo owners demanded the shipowner to indemnify them for any payment they would be required to make for the General Average and filed a claim in Israel despite the jurisdiction clause.
The Court held that the Israeli Court has subject matter jurisdiction to hear the indemnity claim despite the exclusive jurisdiction clause. Under Israeli law, all interested parties in the continuation of the ship's voyage must participate in the risk costs, including the sacrifice of their property. After the division of the damage has been determined by the Average Adjustors appointed for this purpose, the cargo owners may demand indemnity from each other as well as from the shipowner. However, a demand for participation between the interested parties is separate from an indemnity claim from the shipowner for the need for participation. Here, although the clause establishes exclusive jurisdiction, it was established only with respect to the documents of the commitment to participate, but not with respect to the claim for indemnity for General Average from the shipowner. Therefore, the foreign jurisdiction clause does not apply and the Court has jurisdiction over the indemnity claim.