On December 22 2014 the Maritime and Commercial Court found that legal proceedings brought directly against the protection and indemnity (P&I) club of a Swedish carrier could not proceed in Denmark, as the insurance contract stipulated that disputes with the insurer would be considered exclusively by the UK High Court in London (for further details please see "Direct action against P&I insurers unable to proceed due to jurisdiction clause"). The judgment was appealed to the Supreme Court, which has referred the dispute to the European Court of Justice (ECJ) for guidance.
Swedish carrier SES bareboat chartered a tugboat from its owner 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, the tug caused damage to a pier in the Port of Assens. SES had taken out charterer's P&I insurance and the cover was provided by Lloyd's of London. The insurance was subject to English law and jurisdiction.
SES was subsequently declared bankrupt and legal proceedings to obtain compensation for the damage to the pier were brought by the port directly against the insurer before the Maritime and Commercial Court pursuant to Danish law, which allows an injured party to claim directly against the liability insurers of the party which is allegedly liable for the damage.
The court found that the jurisdiction clause in the insurance contract was binding and that the case could not proceed. It stated:
"The court finds that [Danish insurance law] must be interpreted to the effect that the party claiming damages steps into the rights of the insured against the insurer, including any possible 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 does not have jurisdiction over this case."
The port appealed to the Supreme Court.(1)
The Port of Assens requested that the decision of the lower court be overturned, and submitted that the jurisdiction clause in the insurance contract did not restrict its right to proceed directly against SES's liability insurers as any restriction would contradict the doctrine of privity of contract. The port also referenced a report prepared by Professor P Schlosser in 1979 on the Judgment Convention (now the Brussels I Regulation (1215/20012)) which states:
"Agreements on jurisdiction cover all legal proceedings between insurer and policy-holder, even where the latter wishes, pursuant to the first paragraph of Article 10, to join the insurer in the court in which he himself is sued by the injured party. However jurisdiction clauses in insurance contracts cannot be binding upon third parties. The provisions of the second paragraph of Article 10 concerning a direct action by the injured party are thus not affected by such jurisdiction clauses."(2)
The case raised the question as to whether an injured party which, under national law, may bring proceedings directly against the liability insurer of the liable party is, under EU law, bound by an enforceable jurisdiction agreement between the insurer and policyholder, pursuant to Articles 13(5) and 15(2) of the Brussels I Regulation.
The Supreme Court referred to the ECJ's May 12 2005 decision in Peloux,(3) which provided guidance on interpretation of Article 13(3) suggesting that a jurisdiction clause is not binding on the injured party. In Peloux, legal proceedings were brought in France against French company Peloux following claims that it had delivered certain defective panels. Peloux was a beneficiary under an insurance policy taken out by its French parent company with Belgian underwriters. Peloux issued third-party proceedings before the French court against the Belgian underwriters, despite the policy stating that proceedings should be heard before the Belgian courts. The French court had jurisdiction to hear the third-party claim, as Peloux was not bound by the jurisdiction clause in the policy. The ECJ found that:
"A jurisdiction clause conforming with Article 12(3)…cannot be relied on against a beneficiary under that contract who has not expressly subscribed to that clause and is domiciled in a Contracting State other than that of the policy-holder and the insurer."
In light of this, the Supreme Court referred the following question to the ECJ:
"The Supreme Court request the European Court of Justice to answer the following question: Should Art. 13(5), cf. Art. 14(2) [of the Brussels I-regulation] be interpreted to mean that an injured party who, 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 the Brussels I-regulation Art. 13(5), cf. Art(14), subsection 2(a)."
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.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.