In Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [2010] EWHC 2279 (Comm), the Commercial Court found that it was strongly arguable that parties to a reinsurance contract placed in London by London brokers with a London reinsurer, and incorporating a number of standard London market clauses, had impliedly chosen English law as the governing law of the contract.

The reinsured was the insurer of a number of Canadian municipalities under two pool arrangements. The reinsurers had reinsured under a slip policy written in the Lloyd’s market on standard London wording on a back to back basis with the underlying policies. Disputes arose, and the reinsured commenced proceedings in Ontario. The reinsurers contested jurisdiction and commenced proceedings in England for negative declaratory relief. The question for the court to decide was whether England was the most convenient forum for hearing the action, or whether the English proceedings should be stayed. The High Court held that they should be allowed to continue.

Under English conflict of law rules, which the English court was bound to apply, there was a strong case that the law applicable to the reinsurance agreement was English law. Article 3 of the Rome Convention provides that a London market placement on London terms impliedly chooses English law. Alternatively, the presumption in Article 4 of the Rome Convention works in favour of the place of business of the reinsurers.

The fact that the direct policy was governed by the law of Ontario and the two contracts were back to back did not prevent the application of English law. Further, in reinsurance cases where there was an issue of construction of a policy governed by English law (whether by agreement or by default), that issue should be determined by an English court.