Contract certainty combined with regulatory change has required the insertion of governing law and jurisdiction clauses into insurance and reinsurance contracts for a number of years. Yet the English courts continue to hear disputes over jurisdiction. We analyse below two recent decisions of the Commercial Court. The first evidences the scope for ambiguity where the contract contains no express jurisdiction clause but does contain a US service of suit clause. The second illustrates the difficulties that can ensue when a contract contains conflicting law/jurisdiction and arbitration clauses.

In Insurance Company of the State of Pennsylvania v Equitas Insurance Ltd [2014] Lloyd’s Rep IR 195, the Claimant reinsured (The Insurance Company of the State of Pennsylvania) brought proceedings to identify the syndicates responsible for underwriting policies of reinsurance which had originally been subscribed to by various Lloyd’s names, in the 1960s and 1970s, under policies governed by Hawaiian law, but whose rights and obligations had subsequently been transferred to the Defendant, Equitas. The reinsurance related to risks covered by the Claimant’s liability insurance of Dole Food Company Inc (as was) which was involved in growing and selling bananas with a little help from dibromochloropropane as a soil fumigant and nematocide. The underlying claims concerned a range of ill-effects resulting from the use of the chemicals allegedly suffered by fruit farm and plantation workers, which were said to exceed US$30 million, with the Claimant seeking to recover US$10,246,025 of that pursuant to the reinsurance contracts.

The Claimant brought concurrent actions in England and in New York against Equitas, with the latter having been provided with no forewarning of the US proceedings - it was simply informed that a complaint in the US had been filed on the same day that the English proceedings were served. The Claimant advised it did not intend to pursue both actions but had commenced proceedings in England as a fall back in the event the US action was unable to progress, maintaining that the US court had jurisdiction on the basis of the Service of Suit clause in the reinsurance contracts. Equitas subsequently sought an anti-suit injunction from the English Court whilst the Claimant requested a stay of its own action in England pending the outcome of the US proceedings.

Mr Justice Field refused both applications. He found that the Commercial Court in London was the most appropriate forum for the complaint to be heard and concluded that the reinsurance contracts were governed by English law as the parties’ implied choice of law. Important to his decision on forum was his conclusion that English law was the applicable law under English conflict of law rules, together with the likelihood that the practices of the London reinsurance market would be examined. Whilst the Judge also considered other facts, in particular that witnesses would not be required from London or New York and that the documentary evidence was based largely in California, he concluded that given these facts had no “pull” in either direction; they were neutral to his decision. The Judge held, however, that Equitas had suffered insufficient prejudice for it to be unjust (vexatious or oppressive) for the Claimant to sue in New York in circumstances in which the Claimant said it would apply to discontinue or dismiss the London action if the New York Court rejected Equitas’ application to stay the New York proceedings. He therefore refused to grant an injunction restraining those proceedings.

In conclusion, Field J found that in order for the court to grant a stay in favour of the party which itself issued the claim, the circumstances must be exceptional. Here they were not and he therefore also refused the Claimant’s application to stay its own London action.

The outcome, Field J’s preservation of the status quo, is unsatisfactory for both parties, leaving neither with much clarity other than the possibility of another battle following the New York Court’s determination in Equitas’ concurrent application for a stay of those proceedings.

The case of British-America Insurance Kenya Ltd v (1) Matalec SAL and (2) Thika Power Ltd [2013] EWHC 3278 (Comm) involved a claimant insurer which agreed to provide marine cargo and delay in start-up cover relating to the construction of a power plant in Kenya for which both Defendants were contractors. The insurer purchased facultative reinsurance in respect of its exposure and the policy issued to the Defendants contained a hybrid of insurance and reinsurance terms with little clarity as to which terms applied to what. To confuse matters further, the policy had also been amended by numerous inconsistent endorsements, for example, the original policy identified “Kenya” as the choice of law and jurisdiction. The subsequent endorsement provided that, "This reinsurance shall be governed by and construed in accordance with the law of England and Wales and each party agrees to submit to the exclusive jurisdiction of the Courts of Kenya. All disputes arising hereunder shall be submitted to a competent court in Kenya. Seat of Arbitration: London. Appointer: Appointing officers of ARIAS (UK)"

One of the questions for the Court’s determination was whether the arbitration provision applied as between the parties to the proceedings or whether this term applied solely to the reinsurance of the Claimant. 

In reaching his decision, Mr Justice Walker referred to the decision in Sulamerica CIA Nacional De Seguros SA v Enesa Engenharia SA [2012] 1 Lloyd’s Rep 671 which confirmed the principle that when faced with conflicting exclusive jurisdiction and arbitration agreement clauses the latter should prevail. In light of that, and his analysis of the policy and the endorsement, the Judge ruled that the arbitration agreement was binding. In reaching that conclusion, Walker J said that it should be borne in mind that, in reality, an arbitration agreement does not always prevent one or other party bringing Court proceedings and nor does it prevent the parties from disposing with arbitration if they so wish. In that way, the apparently conflicting terms of the endorsement could be reconciled.

Both of these cases reinforce the importance of clarity when drafting jurisdiction clauses, as any ambiguity may be a recipe for a costly preliminary skirmish.