Ace Capital Ltd v CMS Energy Corporation [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 30 July 2008 |
| Neutral Citation | [2008] EWHC 1843 (Comm) |
| Docket Number | Case No: 2007 FOLIO 1635 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 30 July 2008 |
[2008] EWHC 1843 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Christopher Clarke
Case No: 2007 FOLIO 1635
Steven Gee QC & Richard Waller (instructed by Clyde & Co) for the Claimant
Steven Berry QC & Ricky Diwan (instructed by Addleshaw Goddard) for the Defendant
Approved Judgment
Hearing dates: 8 th & 9 th April 2008
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The claimant, Ace Capital Ltd (“Ace”), is the Lead Underwriter under certain political risk insurance policies. It sues on behalf of itself and the other subscribing underwriters (“the Underwriters”). The defendant, CMS Energy Corporation (“CMS”), is a Michigan corporation and is the Insured under the policies (together with its associated, affiliated or subsidiary companies). Ace seeks a permanent injunction to restrain CMS from continuing proceedings commenced by it against the Underwriters on 22 nd October 2007 before the Circuit Court for the County of Jackson in the State of Michigan.
The Policies
The policies in question are as follows:
(i) Primary Policy: No 509/DF 054599;
(ii) First Excess Policy: No 509/DF 054699;
(iii) Second Excess Policy No 509/DF 054799;
(iv) Third Excess Policy No 509/DF 054899.
The Primary and First Excess policies expired in November 2007. The Second and Third Excess policies expired in November 2005. The policies were placed on the London market in 1999 through CMS' brokers, Marsh Ltd. The policies constituted a multi-national programme under which the Underwriters provided political risk cover to the companies insured in respect of investments in specified foreign countries. The policies covered, inter alia, Expropriatory Acts and Selective Discrimination of the Government in whose country the investment was based, provided that those actions had certain specified effects. One such effect was that the acts in question rendered the foreign enterprise Economically Unviable, as defined in the Policies for a term of 6 months.
CMS invested in the Atacama project. That involved a natural gas pipeline between Argentina and Chile; the transmission of natural gas from Argentina into Chile; the generation of electricity at a plant in Chile using that gas; and the sale of that electricity to off-takers in Chile. The insured percentage of cover for the project was agreed to be 50%. CMS claims that actions taken by the Government of Argentina during the period 2004–2006 amounted to Expropriatory Acts and/or Selective Discrimination rendering CMS's investment in the Atacama Project “Economically Unviable” within the meaning of the policies such that it is entitled to indemnification under them for 50%of its total net loss.
The Michigan proceedings
In the proceedings instituted in Michigan CMS claims $ 132,895,000 under the policies and, on the basis of an alleged “unfair trade practice” under a Michigan statute, interest at the rate of 12%per annum. It also claims trial by jury.
The policies contain the following wording:
“ARTICLES VI. GENERAL CONDITIONS
……………………
I. Choice of Law and Arbitration
a) The construction, validity and performance of this Policy, shall be governed by the laws of England and all disputes that may arise under, out of, or in relation to this Policy or to the determination of the amount of loss hereunder shall be submitted to arbitration at the London Court of International Arbitration according to its rules at the date of submission. The award rendered by the Arbitrator(s) shall be final and binding upon all parties and may be enforced by any court having jurisdiction.
b) The parties hereto agree that the speedy resolution of any disputes between them to be had as a consequence of this clause is a mutual and material inducement to enter into this Policy and that this in no way infringes on any rights accorded in the Service of Suit clause of this Policythe effect of which is to provide without waiver of any defence an ultimate assurance of the amenability of Underwriters to process of certain courts.
c) Service of Suit Clause (NMA 1998) in respect of US Insured's:
It is agreed that in the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any State in the United States.
It is further agreed that service of process in such suit may be made upon:
Mendes & Mount, 750 Seventh Avenue, New York, NY 10019–6829, USA.
And that in any suit instituted against any one of them upon this Policy, Underwriters will abide by the final determination of such court or of any appellate court in the event of any appeal.
The above-named are authorised and directed to accept service of process on behalf of Underwriters in any such suit and/or upon the request of the insured to give a written undertaking to the Insured that they will enter a general appearance upon Underwriters' behalf in the event such suit shall be filed.
Furthermore, pursuant to any statute of any state, territory or district of the United States which makes provision therefore, Underwriters hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other office specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be serviced any lawful process in any action, suit, or proceeding instituted by or on behalf of the insured or any beneficiary hereunder arising out of this Policy and hereby designate the above-named as the person to whom the said officer is authorised to mail such process or a true copy thereof”.
[Emphasis added in each case]
Ace submits that there is an obvious omission from the wording of the first paragraph of clause (c). You would not normally speak of submitting “to the jurisdiction of a court of competent jurisdiction within the United States, to remove an action … or to seek a transfer”. Clause (c) with the inclusion of the words said to be omitted underlined would read as follows:
“It is agreed that in the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States, Nothing in this clause constitutes or should be understood to constitute a waiver of Underwriter's right to commence an action in any court of competent jurisdiction in the United States to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any State in the United States”. [Bold and underlining added]
The reason why the mistake is said to be obvious is firstly, that the clause, as drafted leaves the words “to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any State in the United States” without any antecedent wording that is apt to govern them. Secondly, as the heading of clause (c) makes plain the wording is intended to be the NMA 1998 form, which includes the words omitted 1. Thirdly, the omission is readily explained as a homoeoteleuton, in which the writer (more accurately the typist) has allowed his or her eye to wander from an expression (here “United States”) to the same expression where it next appears, as a result of which he or she has left out the entirety of the intervening words. That he has done so is apparent from looking at the NMA 1998 clause, in which the second “United States” is followed, as with the only “United States” in the present clause, by a comma, whereas the first is followed by a full stop. The Court, applying English law, should interpret the clause with the words omitted written in: as the House of Lords did in Homburg Houtimport BV and Others v Agrosin Private Ltd, The “Starsin” [2004] 1 AC 715, where it read in 17 words omitted for this reason from a standard clause.
I accept these submissions. By heading the relevant clause “Service of Suit Clause (NMA 1998)” the parties showed that they intended to agree the clause that they specified, which they then purportedly set out. Something is obviously missing. In those circumstances, the Court is entitled to look at the full terms of the specified clause. The case is stronger in this respect than The “Starsin” where the clause was not specifically identified. When regard is had to the full terms, it is obvious that a mistake has been made, what it is, and how it has come about. The mistake was to omit the words underlined in paragraph 7 above, and it came to be made on account of a homoeoteleuton.
The contrary construction would appear to require reading in before the words “to remove an action to...
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