UK & Europe
Insurance & Reinsurance
Court of Appeal holds that third party is entitled to a declaration where insurers bring a claim abroad in breach of an English jurisdiction clause in a contract between the insured and the third party
The Italian insurers of an Italian insured sought to bring a subrogated claim against a third party alleged tortfeasor ("the third party"). That claim was brought in Italy and was based on the Italian Civil Code for negligence. The third party argued that the insurers were in breach of an exclusive jurisdiction clause in favour of England, contained in a contract between the insured and the third party. The insurers argued that an arbitration clause in a different contract between the insured and the third party applied, and that in any event their claim in Italy did not fall within the scope of either clause. The Court of Appeal has now found in favour of the third party. It held as follows:
(1) Although the test for determining whether the English court has jurisdiction because of a jurisdiction clause is usually whether the claimant has a good arguable case, in some cases it will be sensible for the English court to finally decide the jurisdiction point (although the parties in this case agreed that the test of good arguable case should be applied).
(2) It is well-established that, where the parties have entered into a number of agreements with different dispute resolution clauses, "rational businessmen" will not generally intend a dispute to be litigated in two different tribunals. The court must try to ascertain the intention of the parties, whilst taking into account the transaction as a whole. In this case, too, the Court of Appeal stressed the need to concentrate on "the bigger picture" and avoid a "detailed textual analysis" of the different contracts.
(3) It was concluded that the insurers' claim brought in Italy fell within the scope of the English jurisdiction clause.
(4) Following the decision in West Tankers, it is no longer possible to grant an anti-suit injunction against the insurers where Italy is the court first seised (in breach of an English jurisdiction clause). However, the insurers argued that the English court was not entitled to make a declaration against it either, since they were never a party to the contract containing the jurisdiction clause and their claim in Italy is not based on that contract.
The Court of Appeal rejected that argument. West Tankers was concerned with anti-suit injunctions and "does not affect the analysis that an English arbitration or jurisdiction clause gives rise to an equitable right enforceable against subrogated insurers who seek to act inconsistently with the clause". The Court of Appeal held that insurers exercising subrogation rights to bring a non-contractual claim are bound by an English arbitration or jurisdiction clause to the same extent as the insured would have been. The insurers are not in breach of contract, but they are in breach of "an equivalent equitable obligation which the English court will protect". It will exercise that protection by using remedies which include the grant of a declaration in an appropriate case.