For reinsureds and reinsurers alike, certain principles must be borne in mind when deciding where to bring a claim

Disputes over Jurisdiction have dominated the major reinsurance decisions of the past few years. In a disproportionate amount of cases, invariably before the Court tries the action, there are costly Court hearings to determine where the dispute should be heard. For reinsureds and reinsurers alike, certain principles must be borne in mind when deciding where to bring a claim.

The general view - European Union:
For Defendants domiciled in the European Union, the rule is that the parties to a dispute should be sued in the State in which they are domiciled. The mandatory terms of Article 2 of the Brussels Convention provide that:

“Subject to the provisions of this Convention, persons domiciled in a contracting State shall, whatever their nationality, be sued in the Courts of that State.”

The critical date for testing whether the Defendant was domiciled in England for the purposes of Article 2 is the date of the issue of proceedings; Canada Trust Co -vs- Stolzenberg (no 2) [1998] 1 WLR 547.

Although this is the effective starting point to determine where a dispute is to be heard, there are notable exceptions and departures from the general rule which make the position on Jurisdiction rather more complex than it first appears.

If the Defendant is domiciled and sued in England, the Court here will only not assume Jurisdiction in four cases:

Under Article 16 of the Civil Jurisdiction and Judgments Act 1982 (“CJJA 1982”) (where Courts of another State have exclusive Jurisdiction);

Under Article 16 of Schedule 4 to the CJJA 1982 (where Courts of Scotland/Ireland have exclusive Jurisdiction);

Under Article 17 (where the parties have agreed that the Courts of another contracting State shall have Jurisdiction);

Where proceedings involving the same cause of action have already been commenced in the Courts of another contracting State

Further exceptions include that “in matters relating to a contract”, the Defendant may be sued in the Court of the Country where the contractual obligation that is in dispute was to be performed. This exception is superseded by a further provision that “in matters relating to insurance” an insurer may bring proceedings only in the Courts of the contracting State in which the Defendant is domiciled, whether he is the policyholder, the Insured or a beneficiary.

The Reinsurance View:
The rules of special Jurisdiction in matters relating to Insurance set out in Articles 7 to 12 of the CJJA 1982 do not apply to disputes between reinsurers and reinsureds in the context of reinsurance contracts. In Agnew -vs- Lansforsakringsbolagens AB the Claimants were reinsurers in the London Market. The Defendant was an insurance company incorporated in Sweden underwriting Facultative Reinsurance in relation to the Defendants' exposure under manufacturers' guarantee insurance. The claimants issued proceedings in London on the grounds that they had entered the reinsurance contracts on the strength of material misrepresentations. The Defendants applied to have the proceedings set aside stating that the English Courts had no Jurisdiction in accordance with the provisions that the reinsured had to be sued in the State in which he was domiciled.

The House of Lords held that “matters relating to insurance” did not include reinsurance on the basis that provisions relating to Insurance protected the consumer, the weaker party whereas the reinsured could not be regarded as the weaker party.

How to overcome the ambiguity – consensus:
It seems logical that in order to avoid any uncertainty with regards to Jurisdiction, the reinsurer and reinsured should agree a particular Jurisdiction for the determination of such disputes. The Court will look for a clear and precise demonstration that the Jurisdiction clause relied upon is in fact the subject of a consensus between the parties. The Court will not look at the presumed or actual intention of the parties but merely to the form of the contract. There must be absolutely no doubt. Issues relating to Jurisdiction should be clearly signposted in any contract between the parties.

In certain instances, however, despite the outward appearance that both parties agree to a Jurisdiction, the Court will focus on the need to be confident that the Jurisdiction clause had been effectively brought to the attention of the other contracting party so as to satisfy the need for genuine consensus.

In AIG Europe -vs- QBE International Insurance Limited [2002] Lloyds Rep IR 22, the underlying policy contained a clause that the French Courts would have sole Jurisdiction in the event of a dispute between the underlying insured and the reinsured. The reinsurance agreement provided “all terms, clauses and conditions as original and to follow the original in all respects including settlements”. Moore-Bick J held that despite the reference to “all terms clauses and conditions as original“ in the reinsurance agreement, it was clear that some of the terms of the original policy were not intended to apply to the contract of reinsurance and therefore the word “all” was not to be taken literally. The assertion was too vague. General words of incorporation will not satisfy the requirements of Article 17. Very clear words demonstrating consensus on the part of both reinsurer and reinsured are necessary to show that both parties have agreed on where the dispute is to be heard.

Defendants domiciled outside the EU:
For claims relating to Defendants domiciled outside the European Union (EU), Claimants will need to satisfy the High Court that England is the proper place in which to bring a claim. Once this Court has been satisfied then Jurisdiction is determined on the basis of whether England is the appropriate forum. Courts will take into account the overriding objective and the interests of Justice.

For technically complicated cases such as reinsurance disputes involving the London Market there are various factors which will be taken into account when deciding whether the English Courts are seised. In Brotherton -vs- Asegurado Colseguros SA [2002] Lloyds Rep IR 848, England was held to be the most appropriate forum because the contract was governed by English Law, the issues of fact focused on misrepresentations and non-disclosure by London brokers to London Underwriters in London and witnesses both expert and factual were in England.

In Prifti (on behalf of Lloyd's Syndicates and others) -vs- Musini SA de Seguros y Reaseguros 2003 EWHC 2796 (comm) QBD, the English Court held that as Musini was a front with reinsurers bearing the financial risk, the reinsurance was underwritten in the London Market and an English action would not give rise to a risk of irreconcilable judgments with the underlying claim litigation in Spain. The obligation was to make a fair presentation to reinsurers in England and therefore the English Court had Jurisdiction.

Conclusion:
For EU related reinsurance disputes, the starting point to determine where a dispute should be heard stems from Article 2 of the Brussels Convention which provides that the person domiciled in a contracting State shall be sued in the Court of that State.

However, Insurers and reinsurers must keep an eye on the derivations to this rule. First and foremost, reinsurance is not considered to be a “matter relating to insurance” and therefore the stipulations relating to Articles 7-12 of the CJJA 1982 will not apply. In Facultative reinsurance, the words “as original” will not be sufficient to evince consensus between the parties on the matter of Jurisdiction without clear and precise words to demonstrate agreement.

Where a Defendant is not domiciled in an EU country and is not signatory to the Brussels or Lugano Conventions, after satisfying the Court that it is the proper place to bring a claim, Jurisdiction cases are determined on the basis of whether England is the appropriate forum for the dispute. In these instances the Court generally places significant weight on where the evidence lies as between reinsurers and reinsureds.

This Special item appeared in issue 110 of JTW News - November 2006

Author: Jonathan Moss - Fishburns