In the latest and, potentially, final substantive decision in the English court proceedings arising out of the loss of the ALEXANDROS T in 2006, the Commercial Court1 has considered the interpretation of settlement agreements, and the remedies available to underwriters where an assured and related entities commenced fresh proceedings in relation to the loss against the underwriters in Greece.
The dispute concerns proceedings brought by underwriters in England to enforce agreements settling a coverage dispute. Years later, notwithstanding those settlement agreements, the assured commenced fresh proceedings in Greece in relation to the original insurance claim.
In July 2014, the Court of Appeal2 had held that the settlement clauses in the settlement agreements should be interpreted so as to give a sensible commercial meaning. That Court went on to find that the Greek proceedings fell within the settlement and indemnity provisions of the settlement agreements. They granted damages to underwriters accordingly.
The proceedings in the Commercial Court in September 2014 concerned the rights of and remedies available to the individual employees or agents of the Lloyd’s Syndicates and insurance companies in question, who had also been sued by the assured in Greece in their personal capacity.
Underwriters’ servants and agents
It was argued on behalf of these individuals that the true construction of the word “underwriters” in the settlement agreements covered underwriters’ servants and agents. The intention of the settlement agreements was to give the parties a “clean break”, but this intention would be defeated if individuals faced claims, as they would then turn to their employers or principals for an indemnity. Such an interpretation would also be commercially unreasonable. Further, although the term “underwriters” was defined in the agreement’s preamble in such a way as not to refer to servants and agents, it was necessary to consider what a reasonable person would have understood the parties to have meant by the use of the term and, if there were two possible constructions, to adopt the construction consistent with business common sense.
The Court agreed, and stated that to exclude servants and agents from the term “underwriters” defied business common sense.
Remedies available to underwriters
The Commercial Court also ordered specific performance by the assured of the agreement to accept the settlement sum in “full and final settlement”, holding that such an order by an English court was not incompatible with EU law.
The remedies available in the case of a breach of an English law and jurisdiction clause have therefore, helpfully, been clarified by the various ALEXANDROS T decisions, as including damages, indemnities, and orders for specific performance. Anti-suit injunctions, however, remain unavailable where there are parallel proceedings in more than one EU state.
The Courts have adopted a practical approach to the interpretation of the settlement agreements in this case, seeking to apply a construction consistent with business common sense. It is hoped that this approach, combined with the confirmation that damages, declarations and orders for specific performance are available for breaching English jurisdiction clauses, should discourage parties to settlement agreements from seeking to re-open settled issues by commencing proceedings overseas.
However, this case turned on the interpretation of the particular words used in the settlement agreements, and each case will therefore turn on the wording of the agreements under dispute.