The underwriting members of a Lloyd’s syndicate (“the reinsurers”) entered into an excess of loss liability reinsurance policy with the Ontario Municipal Insurance Exchange (OMEX), a mutual organisation which provided insurance to a number of municipalities in Ontario. Subsequently, a dispute arose about the effect of the policy’s excess provisions and claims cooperation clause.
The reinsurance contract was contained in a typical London market slip policy form. Although it was not a standard Lloyd’s policy, it did contain a number of standard London market clauses. Significantly, the policy contained neither governing law nor jurisdiction clauses.
OMEX issued proceedings before the Ontario Superior Court of Justice, claiming that the policy was governed by Ontario law. In response, the reinsurers sought, and were granted, permission from the English Commercial Court to start English proceedings against OMEX, with the reinsurers arguing that English law governed the policy.
OMEX applied to the Commercial Court for the English proceedings to be discontinued, claiming that Ontario, rather than England, was the appropriate location for the dispute to be judicially determined.
The court held that England was the appropriate place for the dispute to be determined, even though proceedings had first been brought before the Ontario court.
The most important factor was that the parties had, by implication, chosen that English law should govern the contract. This followed from the use of a London slip and London broker, the inclusion of London market clauses and the fact that the reinsurance was with a Lloyd’s syndicate.
The choice of English law was particularly significant because the Ontario court might deprive the reinsurers of their English law rights and the Commercial Court was in a far better position than the Ontario court to decide questions of English reinsurance law.
This case underlines the importance of including governing law and exclusive jurisdiction clauses in policies, to avoid these troublesome issues.
It also confirms that, in the absence of such clauses, the English courts will tend to assume that English law is implicitly chosen by the parties to govern Lloyd’s market policies, even though risks may be “… in all four quarters of the habitable globe, and sometimes outside it...”
Unfortunately, the existence of parallel proceedings in different countries puts each party in a difficult position, as they may be subject to conflicting obligations in each jurisdiction. However, as we have also recently seen in the parallel Texan and English High Court proceedings concerning the sale of Liverpool FC, this will not necessarily prevent litigants from forum shopping in an attempt to secure tactical advantage.