Swedish carrier SES bareboat chartered a tugboat from its owners, SST, in Norway. The tugboat was used to transport a carriage of sugar beet, among other things, to a plant in Nykoebing Falster, Denmark. During carriage from the Port of Assens in Denmark to Nakskov, the tug caused damage to a pier in the port. SES had taken out charterer's protection and indemnity (P&I) insurance through a Swedish insurance broker and the cover was provided by Lloyd's of London. The insurance was subject to English law and it followed from the insurance contract that disputes with the insurer were to be exclusively decided by the High Court in London:
"This insurance shall be governed by and construed in accordance with English law and, in particular, be subject to and incorporate the terms of the Marine Insurance Act 1906 and any statutory modification thereto. This insurance, including any dispute arising under or in connection with it, shall also be subject to the exclusive jurisdiction of the High Court of London."
SES was subsequently declared bankrupt and legal proceedings – in order to obtain compensation for the damage to the pier – were brought directly by the port against the insurer before the Danish Maritime and Commercial Court pursuant to Section 95 of the Danish Insurance Contracts Act, which provides a right for an injured party to claim directly against the liability insurers of the party which is alleged to be liable for the damage. During the proceedings, the insurer submitted that the Danish court did not have jurisdiction to hear the dispute and referred to the exclusive jurisdiction clause in the insurance contract. In particular, the insurer submitted that the jurisdiction agreement also applied to the claim brought by the Port of Assens. The port disputed that the jurisdiction clause was of relevance to the proceedings.
The Maritime and Commercial court found that the jurisdiction clause in the insurance contract was binding on the Port of Assens, as the court found that the injured party claiming damages "steps into the rights of the insured against the insurer", including any special terms and conditions applicable between these parties – in this case, the choice of law and jurisdiction agreement providing for jurisdiction in England and Wales. Consequently, the court dismissed the case.
The judgment was appealed to the Danish Supreme Court, which requested a decision from the European Court of Justice (ECJ) as to whether Article 13(5), cf Article 14(2) of the EU Brussels I Regulation should be interpreted to mean that an injured party which, pursuant to national law, is entitled to bring proceedings directly against the liability insurers of the liable party is bound by a jurisdiction agreement entered into between the insurer and the policyholder in accordance with Article 13(5), cf Art(14), sub-section 2(a) of the EU Brussels I Regulation (for further information please see "Supreme Court asks ECJ whether jurisdiction clause binds third-party proceedings against P&I insurer").
The ECJ decided as follows:
"Article 11(2) of Regulation No 44/2001, pursuant to which Articles 8, 9 and 10 of that regulation apply to direct actions brought by a victim against an insurer, does not refer to Articles 13 and 14 of that regulation and, accordingly, agreements of prorogation of jurisdiction. It is therefore not apparent from the scheme of the provisions of Chapter II, Section 3, of Regulation No 44/2001 that an agreement on jurisdiction may be invoked against a victim… The view must therefore be taken that an agreement on jurisdiction made between an insurer and an insured party cannot be invoked against a victim of insured damage who wishes to bring an action directly against the insurer before the courts for the place where the harmful event occurred, as recalled in paragraph 31 of this judgment, or before the courts for the place where the victim is domiciled."(1)
The ECJ decided on the basis of its interpretation of the EU Brussels I Regulation that a jurisdiction clause agreed between an insurer and an insured does not bind an injured party claiming directly against the insurer. The decision implies that an injured party may – if the national law applicable grants a right to claim directly against the liability insurer of the liable party – issue proceedings at the place where the damages occurred or where it is domiciled.
For further information on this topic please contact Jesper Windahl at Windahl Sandroos & Co by telephone (+45 3525 3800) or email ([email protected]). The Windahl Sandroos & Co website can be accessed at www.wsco.dk.
Endnotes