The recent judgment of the Commercial Court in Ace Capital Ltd v CMS Energy Corporation [2008] EWHC 1843 (Comm) considered the inter-relationship between a USA service of suit clause and an English arbitration clause in the context of a policy of insurance. Mr Justice Christopher Clarke found that the service of suit clause in the policy did not override the contractual obligation of the parties to arbitrate all disputes.


In 1999 the Defendant, CMS Energy Corporation ("CMS"), a Michigan corporation, took out multi-layered multinational political risk insurance cover with the Claimants, certain Lloyd's underwriters (the "Underwriters"). The four layers of the policies provided cover for political risks for CMS's international investments. One investment was the Atacama project, a gas pipeline transporting natural gas from Argentina to Chile. CMS planned to export natural gas to Chile, and sell electricity generated from that gas within Chile.

Following the Argentine financial crisis of 2002, the Argentine government enacted legislation restricting natural gas exports and imposing taxes on any such exports. CMS claimed that these actions damaged its investment in Atacama and advanced a claim under the policies. In November 2007, CMS commenced proceedings against the Underwriters in Michigan. In December 2007, the Underwriters applied to the Commercial Court in London for an anti-suit injunction restraining CMS from pursuing the Michigan proceedings, on the grounds that these had been brought in breach of an agreement to submit all disputes to arbitration.

Policy wordings

In deciding the anti-suit injunction, the court was concerned with the obligations contained in two clauses of the Choice of Law and Arbitration provision in the policies. Clause (a) stated that “all disputes that may arise under, out of, or in relation to this Policy … shall be submitted to arbitration at the London Court of International Arbitration.” Clause (c) was the service of suit clause headed “Service of Suit Clause (NMA 1998) in respect of US Insured's” which provided that “in the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States.”

Clause (b) dealt with the interaction between clause (a) and clause (c) and stated that “[the arbitration provision] in no way infringes on any rights accorded in the Service of Suit clause of this Policy the effect of which is to provide without waiver of any defence an ultimate assurance of the amenability of Underwriters to process of certain courts.”


CMS submitted that the service of suit clause entitled it to sue the Underwriters on the merits in the United States (Michigan), notwithstanding the existence of the arbitration clause, as the parties had agreed that the arbitration clause "in no way" infringed on the rights accorded in the service of suit clause. One of those rights was a right on the part of CMS to require the Underwriters to submit to the jurisdiction of a court of competent jurisdiction in the United States. 

The Underwriters contended that the arbitration clause "in no way" infringed on any rights accorded by the service of suit clause whose effect was to provide an "ultimate assurance of the amenability of Underwriters to process of certain courts". The ultimate amenability of the Underwriters to process had to be contrasted with the exclusive and primary forum for dispute resolution, in this case arbitration.


Clarke J held in favour of the Underwriters that the service of suit clause did not mean that CMS could litigate on the merits in the United States if it did not favour arbitration. Having reviewed extensive US authorities and the rather less voluminous English authorities, Clarke J based his decision to grant a permanent injunction restraining CMS's proceedings in Michigan on four factors:

  1. The clauses were written in the context of strong legal policy on both sides of the Atlantic in favour of arbitration. Clarke J cited with approval Premium Nafta Products v Fili Shipping [2007] UKHL 40 where the House of Lords held that reasonable businessmen were to be taken to have intended a single tribunal to deal with all disputes between them (unless a contrary intention was expressly stated). The arbitration clause in the present case did not exclude any particular grievance from arbitration. On the contrary, it provided that all disputes should be arbitrated. In those circumstances, the law’s policy in favour of arbitration provided a strong impetus: (i) not to read the service of suit clause as removing from the scope of arbitration, at the option of CMS, the sort of disputed claim most likely to arise under the policy (ie, a claim for payment); and (ii) to confine the clause so as not to give CMS an option to have the US courts determine a dispute which the parties agreed to have determined by LCIA arbitration.

Such an interpretation still left the service of suit clause with meaningful scope. It enabled an insured to found jurisdiction in the US to declare the arbitrable nature of the dispute, to compel arbitration, to declare the validity of an award, to enforce the award, or to confirm the jurisdiction of the US courts on the merits in the event that the parties agreed to dispense with arbitration.

  1. US case law had consistently interpreted a service of suit clause as an aid to arbitration. The parties should have been aware that this would be determinative in a US court if these issues fell to be determined there. Clarke J considered the US authorities to have persuasive effect, and noted that it was in the interests of commercial certainty for clauses to be interpreted in the same manner wherever the interpretation took place.
  1. Clarke J held that clause (b) was designed to say something about the relationship between clause (a) and clause (c). If the parties had wanted to make clear that if the Underwriters failed to pay any amount claimed, then the arbitration clause would, at the option of CMS, be inapplicable to any dispute about the claim, they could easily have done so. What the parties in fact did was to state in clause (b) that “speedy resolution” of disputes was important and describe the service of suit clause as “[providing] without waiver of any defence an ultimate assurance of the amenability of Underwriters to process of certain courts.”

The words “without waiver of defence” indicated that the service of suit clause did not remove the Underwriters’ right to insist on arbitration in accordance with the US concept of arbitration as a defence to an action. The words “ultimate assurance” expounded the interpretation of the service of suit clause adopted in the majority of US decisions, namely that the purpose of such a clause was to ease any difficulty that might arise in establishing personal jurisdiction in the US for the purpose of enforcement.

  1. The service of suit clause did not contain an undertaking that all matters in dispute should be determined in accordance with the law and practice of the relevant US court, whereas the arbitration clause was an agreement that the merits be determined by arbitration. Accordingly, the service of suit clause did not operate so as to exclude from arbitration a money claim whenever CMS so requested.


Underwriters insuring US risks will be familiar with service of suit clauses of the kind used in this case. Whilst the English Courts have previously considered the meaning and effect of service of suit clauses and their interaction with an express choice of law and jurisdiction clause (see Catlin Syndicate Ltd v Adams Land & Cattle [2006] EWHC 2065 (Comm)), this is the first case in the English Courts to have considered the interplay between a service of suit clause and a mandatory arbitration clause. The judgment serves as a reminder of the English court’s willingness to interpret liberally clauses providing for arbitration as the dispute resolution forum, but also the importance of ensuring through clear drafting that there can be no doubt as to the choice of arbitration.