In XL Insurance Company SE v AXA Corporate Solutions Assurance  EWHC 3431 (Comm), the Commercial Court has held that, pursuant to Article 4 of EU Regulation 1215/2012, it had no jurisdiction to hear a dispute between a French insurance company, AXA Corporate Solutions Assurance (“AXA”) and its UK based co-insurer, XL Insurance Company SE (“XL”). The decision was made on the basis that a defendant who is resident in an EU Member State should be sued under the jurisdiction of that state.
The main action
XL and AXA were co-insurers of a US based train operator. Following an accident involving a passenger train, a $200m liability fund was established, into which XL paid $65m in line with its accepted liability.
AXA, however, denied liability on the basis of a provision in the policy which relieved AXA of liability where indemnity from “local” insurers covered the total liability and, in this case, it did. XL argued, however, that the situation was akin to a double insurance and sought a contribution from its co-insurer on that basis i.e. that by operation of law, the co-insurers ought to be put in the position they would have been in, had the insured claimed against both insurers. XL therefore brought a claim to recover AXA’s contribution.
The matter for discussion here, however, is a jurisdictional one. As XL was domiciled in the UK, the main claim was filed in the English court but AXA contested the court’s jurisdiction and it is this dispute which formed the basis of the application to the Commercial Court.
AXA contended that, under Article 4, a defendant should be sued in the Member State in which it was domiciled, namely France. The Article provides that “persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State”.
XL, however, submitted that the case should be heard in the English courts because, the “harmful event” occurred in England and pursuant to Article 7(2), “[a] person domiciled in a Member State may be sued in another Member State […] in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred”.
It is widely accepted that Article 4 is the default position and, as such, any derogation from this position, should be narrowly interpreted; notwithstanding that Article 7(2) constitutes just such a derogation, XL maintained that it was appropriate to hear this case in the English courts.
In his judgement, Judge Waksman QC emphasised that the application of Article 7(2) turned “fundamentally on the true scope of the words “matters relating to tort, delict or quasi-delict”” and further went on to clarify that “one need not find a tort, delict, or quasi-delict strictly so-called or perhaps even a “wrong”[but] what one needs is some event caused by the defendant which causes damage to the claimant, which may be paraphrased as a “harmful event”, resulting in a liability of the defendant to pay the claimant in respect of that damage”. i.e., in order to successfully invoke Article 7(2), there needs to be a harmful event and this event must be “allied” to an identifiable liability (and vice-versa).
This presented the court with a number of questions:
- Was there a “harmful event”;
- Could a corresponding liability be identified; and, if so
- Did the event take place in England?
The Court held that XL’s entitlement to contribution arose only once it had “overpaid” into the fund. Consequently the “event”, if any, must have been the overpayment (and not AXA’s non-payment of contribution to XL). It decided, therefore, that it could not characterise this as a “harmful” event. The judge explained that the right to contribution was not based on a dispute or wrongful act but rather the right merely arose due to an overpayment by XL itself. By way of analogy, he compared the situation to that of an insured simply choosing to claim from only one of two co-insurers and explained that when considered in this light, the Court could not possibly find that XL’s right to a contribution was founded on any damage-causing event for which AXA was liable.
As such, parts (i) and (ii) of the test failed and AXA’s application was granted, meaning any further action against AXA would be taken in France. It was, therefore, unnecessary to consider part (iii) (although the Court did make some observations on this issue).