The question of whether a barrister is a person “with not less than 10 years’ experience of insurance or reinsurance” for the purposes of a standard form arbitration clause was recently considered at the High Court of England and Wales. In Tonicstar Ltd. v Allianz Insurance PLC and Sirius International Insurance Corporation, Justice Teare, bound by an unreported decision, determined the appointed arbitrator was not qualified despite more than 10 years’ experience as a lawyer in insurance and reinsurances disputes.
This question arose in the context of a reinsurance dispute. The dispute concerned the reinsurance by the Respondents, Allianz Insurance PLC, and Sirius International Insurance Corporation of risks underwritten by the Claimant, Tonicstar Limited with regard to $47.5 million dollars of liabilities incurred by the Port of New York following the World Trade Center attack.
The arbitration clause in dispute read as follows:
“Unless the parties otherwise agree the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance.”
The Respondents appointed Mr. Alistair Schaff, QC as their arbitrator. Mr. Schaff was a lawyer with significantly more than 10 years’ experience in insurance and reinsurance. While the Claimant agreed that Mr. Schaff had 10 years’ experience in this area of law, Mr. Schaff did not have the necessary experience within the meaning of the arbitration clause. The Claimant submitted the experience must be acquired from the business or trade of insurance or reinsurance, not as a practicing lawyer in the area. The Claimants sought to remove the arbitrator on the grounds he was not qualified.
This exact question previously appeared before the court in July 2000. Justice Morison in Company X v Company Y determined an appointed Queen’s Counsel (“QC”) with considerable experience as a lawyer in insurance and reinsurances disputes was not qualified as arbitrator within the meaning of the arbitration clause. Justice Morison held it was reasonably clear that the parties intended a “trade arbitration,” which meant that the tribunal was to consist of persons from the trade or business of insurance or reinsurance. The Respondents submitted this decision was wrong and should not be followed. The Respondents argued that lawyers or other professional advisers serving the industry could acquire such experience by working on behalf of that industry. If the parties intended to limit their choice of arbitrators to those working in the industry or if they wished to exclude lawyers they could have expressly done so. The Claimant’s interpretation imposed a limitation when there was no basis for doing so. Further, the Respondents submitted that the ordinary and natural meaning of the phrase, “experience in insurance or reinsurance” does not limit the fields in which experience could be acquired.
In the present decision, Justice Teare admitted he may have accepted the Respondents’ submissions if he had not been inhibited by a previous decision. However, the Court made its determination 17 years ago and the Court was bound to that decision despite the decision being unreported and not cited in most of the well-known texts on insurance and reinsurance. Justice Teare was not willing to depart from the unreported decision despite agreeing the ordinary and natural construction of the phrase did not limit the field in which experience could be acquired. Justice Teare ordered the parties to appoint a new arbitrator.
Tonicstar Ltd. v Allianz Insurance PLC and Sirius International Insurance Corporation is significant as many international arbitration disputes are subject to the laws of the United Kingdom. The case shows it is important to give careful thought when drafting arbitration clauses. If the parties’ intention is not to limit the choice of arbitrators and allowing for persons engaged in the industry itself or as lawyers or as other professional advisers, the language selected must ensure that intention is clear.