Modern Law of Marine Insurance Volume Five, The

Professor D; Rhidian Thomas

Document

CHAPTER 10 Page 213

Jurisdictional rules and anti-suit injunctions post-Brexit: Uncertainties and opportunities

Sara Masters and Patrick Dunn-Walsh

Introduction

10.1 The United Kingdom's withdrawal from the European Union (EU), and the European Commission's decision to oppose the UK's application to accede to the Lugano Convention, has removed from the jurisdictional rules applied by the English court1 the sharp, immediate distinction drawn between cases where the defendant is domiciled in an EU member state and where it is not. All cases are now to be dealt with in accordance with the English, as opposed to EU, principles of private international law,2 albeit that those rules have undergone some limited modification post-Brexit. 10.2 It is fair to say that this is doubled-edged from the perspective of those who wish to litigate their disputes in London; in very broad terms, the jurisdiction and powers of the English courts are broader under the English common law rules than under either the Recast Brussels Regulation3 (hereinafter, “the Recast Regulation”), whereas the ease with and extent to which judgments rendered in English courts will be recognised in EU member states is reduced. 10.3 This chapter will examine the key questions that a practitioner instructed in a marine insurance dispute post-Brexit may need to consider. In particular, the focus will be on two main questions:

1. What are the rules that determine whether the English court has jurisdiction to try a marine insurance dispute?
2. What powers does the English court have to restrain proceedings brought before foreign courts or tribunals?

Jurisdiction in relation to marine insurance matters

10.4 Under the Recast Regulation and the Lugano Convention, insurance contracts were carved out for special treatment, along with employment contracts and consumer contracts, and contained rules granting additional protection to employees, consumers

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and policyholders. Although the protections granted to employees and consumers were transposed into domestic law under ss.15B-E of the Civil Jurisdiction and Judgments Act 1982, no comparable transposition was made of the special insurance provisions.4 10.5 In one sense, this is consistent with the scheme of the Recast Regulation, under which the core consumer- and employment-specific protections enshrined under Art 18(1) and Art 21(2) applied universally, irrespective of the defendant's domicile5 and therefore irrespective of whether the defendant's home court would reciprocate, whereas the insurance-specific provisions contained under Section 3 applied only to cases where the defendant was domiciled in an EU member state, whose conflicts rules included the Recast Regulation. 10.6 Post-Brexit, therefore, it is largely a question of applying the traditional “common law”6 rules on jurisdiction, without the need to apply bespoke, insurance-specific principles, and the same is true whether a defendant is domiciled in France or Ruritania. Importantly, however, the common law rules are supplemented by the 2005 Hague Convention on Choice of Court Agreements (hereinafter, “the Hague Convention”), which provides for a coordinated regime amongst signatory states as to the effect of qualifying jurisdiction agreements. This is likely to be important to marine insurance matters, as many policies will contain such jurisdiction agreements. 10.7 Consequently, at least for now,7 cases decided under the Recast Regulation, such as the Supreme Court's decision in Aspen Underwriting Ltd v Credit Europe Bank NV (The Atlantik Confidence),8 would today be decided applying wholly different reasoning, and quite possibly with a different result.9

The basic principle: Jurisdiction as a function of service of the claim form

10.8 The following section contains a brief summary of the structure of the English rules. A full examination of this topic is outside the scope of this work, but it is nevertheless helpful to remind the reader of the basic framework, with an eye on specific questions that are likely to arise in the context of a marine insurance dispute. 10.9 Jurisdiction as understood in the English sense is founded by service of process. The English court has jurisdiction where a claimant has served a claim form on a defendant in accordance with the English Rules of Civil Procedure (CPR). The question is, therefore, one of when and how a claimant may serve process on the defendant. 10.10 Where a defendant is physically located within the jurisdiction, even fleetingly, the CPR permits the service of the claim form, and if so served, the English court has

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jurisdiction over it. The rules on what counts as presence are examined fully in specialist works, but a company may be served if its registered office is in England, or if it is an overseas company but has a place of business in England.10 An individual may be served if physically present even if for only a limited period. 10.11 Where a claim is brought against a number of insurers domiciled in different countries, the presence of a “lead underwriter” clause, empowering a nominated, English-based insurer to act as representative of the entire body of defendant insurers enables the court to treat the lead underwriter as such, and in such cases there is no need for the claimant to obtain permission to serve each of the insurers out of the jurisdiction.11 Further, it was held in National Bank of Greece SA v Outhwaite 12 that a lead underwriter clause was not necessary for one insurer to act as representative, provided that the insurers had the same interest in a claim.13 10.12 Presumably the analogous conclusion would also follow where the lead insurer was domiciled out of the jurisdiction, i.e. provided that jurisdiction was established against the leader, it would be unnecessary to go on and establish jurisdiction against each individual insurer forming part of the defendant group. 10.13 If the defendant thus served wishes to argue that the claim against him should be tried in a different forum, he is entitled to ask the English court to stay its proceedings, either as a matter of discretion on the ground that the claim should be tried in a different country's courts (on forum non conveniens grounds), or on the ground that the claim is caught by an arbitration agreement (and therefore that the Court is bound to stay its proceedings under s.9 of the Arbitration Act 1996 (hereinafter, “the 1996 Act”). 10.14 An application under s.9 of the 1996 Act is governed by CPR Part 62. Otherwise, an application is made under CPR Part 11 and is commonly referred to as a jurisdiction challenge, although the challenge is not, strictly speaking, to the court's jurisdiction (which is established by lawful service of the claim form within the jurisdiction) but to its exercise of that jurisdiction. It being the defendant's application to persuade the court that it should not exercise the jurisdiction that has been founded, it is the defendant who bears the burden of establishing that an alternative forum would be a more appropriate venue for the trial of the dispute. 10.15 The relevant test is, first, whether the defendant can show that there is an available forum elsewhere that is clearly or distinctly more appropriate than England for the resolution of the dispute between the parties, with the second stage then being for the claimant to establish that nevertheless it would be unjust for it to be prevented from suing in England. 10.16 Where a defendant does not have a presence within the jurisdiction, the claimant can still serve the claim form out of the jurisdiction as a matter of right if the dispute is one that the parties have agreed will be subject to the jurisdiction of the English courts.14 10.17 However, in other cases it will be necessary for the claimant to obtain permission to serve the claim form on him out of the jurisdiction. Permission is normally obtained ex

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parte on the documents alone, with any challenge subsequently made determined at an oral hearing at which the defendants are represented. To obtain permission, the claimant must jump through three hoops. 10.18 First, it must establish that its claim raises a serious issue to be tried. This is a relatively low threshold, under which a claimant must only show a case that would be strong enough to survive summary judgment.15 10.19 Second, the claimant must show that the claim falls within one or more of the jurisdictional “gateways” found in CPR Part 6. Here, the claimant must show a good arguable case that each claim satisfies one or more of the gateways.16 However, this is approached on the footing that the “safety valve” of the court's exercise of its discretion is yet to come. 10.20 In the context of marine insurance, a relatively broad approach has been taken to the application of the CPR gateways. By way of example, a dispute as to the validity of a marine insurance policy, including the insurers' alleged right to terminate for breach or avoid for material non-disclosure or misrepresentation, has been held to constitute a dispute “in respect of a contract” for the purpose of paragraph 6(a).17 10.21 It should be noted, however, that paragraph 6(b) (“made by or through an agent trading or residing within the jurisdiction”) is to have words implied into it to restrict its scope, namely that the agent must be the agent of the defendant to be served.18 Any other conclusion would be absurd, as there is no reason whatsoever why a foreign defendant should be subject to the English court's jurisdiction simply because an English claimant traded via an English agent. This has the practical consequence, however, that the trading or residential address of the broker is irrelevant, because the broker is the agent of the assured; the assured must show that it is an agent of the insurer, such as an underwriting agent, that was trading or residing in the jurisdiction. 10.22 Third, the claimant must show that England “is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction”.19 10.23 The analysis at stage 3 involves the weighing of the same factors as the court is required to consider when faced with an application for a stay by a party lawfully served without permission on forum non conveniens grounds,20 but this time the burden is on the claimant, who must persuade the court that service out should be permitted. Whilst some have suggested that this should be sole enquiry and the gateways should be jettisoned altogether – if England is indeed the proper forum, why should it not try the claim? – this has not happened yet, despite the steady relegation of the gateways in importance from

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primary legislation, to Rules of the Supreme Court, to the CPR, and now to a Practice Direction.21

The effect of a jurisdiction agreement in favour of the English Court

10.24 Many marine insurance policies will contain a jurisdiction clause in favour of the English court, and the presence of such a clause will be very important indeed in identifying the proper forum. The consequences of such clauses therefore deserve separate treatment. 10.25 The CPR now provides that a claimant may serve a claim form out of the jurisdiction without the court's permission where each claim made against the defendant falls within a jurisdiction agreement in favour of the English court.22 10.26 A defendant served in reliance upon an English jurisdiction clause has two, independent means of jurisdictional counterattack. First, it can seek to set aside service on the basis that the claim is not in fact caught by a valid jurisdiction agreement at all. If the defendant is successful, service will be set aside, and the English court will rule that it does not have jurisdiction. 10.27 Second, the defendant can try to persuade the court (leaving aside cases to which the Hague Convention applies23) that there are countervailing considerations (often, but not always, questions of appropriate forum) powerful enough to outweigh the parties' contractual choice in choosing a particular forum, and therefore that the court should stay its proceedings. Such an argument is always likely to be difficult – judges are understandably reluctant to decline to give effect to the parties' contractual agreement as to jurisdiction – but English law's approach to the question of the appropriate forum recognises that party autonomy is not the only principle at play.

Is the claim caught by a jurisdiction agreement?

10.28 The first route of attack will depend on an examination of the jurisdiction agreement relied upon, and whether it covers each of the claims brought.24 This is, of course, a question to be determined using familiar principles of contractual interpretation, but there is a body of jurisprudence that has developed in this particular context. There are three main questions that arise:

1. Is the jurisdiction agreement valid?
2. Does the dispute in question fall within its scope, as a matter of interpretation?
3. Is the jurisdiction agreement exclusive or merely permissive?

10.29 These first two questions must be examined in light of the seminal House of Lords decision in Fiona Trust & Holding Corp v Privalov,25 which demolished a raft of

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previous authorities where the courts had tied themselves up in knots, and set out a new and much-improved approach. 10.30 As to the validity or not of the agreement, one potential problem could be this: the assured sues the insurer in respect of a loss, and the policy contains an exclusive jurisdiction agreement in favour of the English courts. The insurer disputes the claim on the basis that the assured misrepresented or failed to disclose a material fact, and therefore it has lawfully rescinded the policy. Since the jurisdiction agreement is part of the policy, it might follow that, if the insurer is right, there was no jurisdiction agreement, and the court cannot know whether the insurer is right until after it has exercised jurisdiction and tried the claim or at least determined whether the jurisdiction clause is valid and binding. 10.31 The Gordian knot is cut through by virtue of the principle of separability, enacted under s.7 of the 1996 Act in the context of arbitration, but applicable to jurisdiction agreements too,26 which means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a “distinct agreement” and can be voidable only on grounds that relate directly to the arbitration agreement. 10.32 This was confirmed in Fiona Trust, where the House of Lords held that an allegation that a contract was voidable would only impeach an arbitration agreement in circumstances where the argument is based on facts specific to the arbitration agreement itself.27 Where it is common ground that a contract was agreed, the parties will be held to have agreed that any jurisdiction agreement operates independently of the substantive agreement, and thus binds the parties to have disputes resolved in accordance with it, including any dispute as to its validity or involving a claim for rescission.28 10.33 As to the second question, this is a question of construing the wording of the particular arbitration or jurisdiction agreement, and the fundamental approach is no different from that applicable where any contractual term has to be construed.29 However, Fiona Trust provides valuable guidance here too. That case rejected what might be described as excessive parsing of contractual language in earlier cases, such as the drawing of distinctions between phrases such as “arising under” and “arising out of” an agreement, and adopted the approach that

the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal.30

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Modern Law of Marine Insurance Volume Five, The

CHAPTER 10

Page 213 Jurisdictional rules and anti-suit injunctions post-Brexit: Uncertainties and opportunities

Page 213