Ace Insurance SA-NV v Zurich Insurance Company
| Jurisdiction | England & Wales |
| Judge | Longmore J,Kennedy,Rix L JJ,Jacob J. |
| Judgment Date | 02 February 2001 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 February 2001 |
Court of Appeal (Civil Division).
Longmore J; Kennedy and Rix L JJ and Jacob J.
Alexander Layton QC and James Eadie (instructed by Kennedys) for Ace.
Iain Milligan QC and Sara Masters (instructed by Diarmuid Brennan & Co) for Zurich.
The following cases were referred to in the judgment of Longmore J:
Armadora v Horace MannWLR [1977] 1 WLR 520.
Citadel Insurance Co v Atlantic Union Insurance Co SAUNK [1982] 2 Ll Rep 543.
Excess Insurance Co v Allendale Mutual Insurance CoUNK (unreported, 8 March 1995, CA).
Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd [1999] CLC 1270.
Haji-Ioannou v Frangos [1999] CLC 1075.
Harrods (Buenos Aires) Ltd, ReELR [1992] Ch 72.
Po, TheUNK [1991] 2 Ll Rep 206.
Sarrio SA v Kuwait Investment Authority [1996] CLC 211.
Xin Yang, TheUNK [1996] 2 Ll Rep 217.
Insurance — Reinsurance — Conflict of laws — Stay of proceedings — Service out of jurisdiction — Service of suit clause — Reinsurer took proceedings for declaration of non-liability in England — Reinsured took proceedings in Texas under service of suit clause (NMA 1998) — Court could stay proceedings on forum grounds where competing forums were Lugano Convention state and non-contracting state — Whether Texas was appropriate forum — English law as proper law of reinsurance contract not decisive — Claimant had to show why service of suit clause should not be enforced.
This was an appeal by reinsurers (“Ace”) from a judgment of Longmore J staying English proceedings against the defendant insurers on the ground of forum non conveniens in favour of proceedings in Texas.
A Texan oil company, “Nabors”, and its associated companies were insured on a world-wide basis against loss and damage to its oil rigs and installations by “Sol” which reinsured with “ZIC”, a Swiss insurance company. The insurance and reinsurance contained a Texan jurisdiction clause, a condition preventing assignment without underwriters' consent, a claims co-operation clause and a blow-out preventer (“BOP”) warranty. ZIC retroceded part of its non-American liability to Ace. That retrocession contained a service of suit clause (NMA 1998) by which underwriters agreed to submit to US jurisdiction. In 1998 one of Nabors' associated companies, “Nadrico”, suffered a loss when a well blew out in Saudi Arabia during installation of the blow out preventer. ZIC settled a claim by Nabors for $11m. ZIC did not give immediate notice of Nabors' claim to Ace as required by the claims co-operation clause. Ace refused to pay ZIC and issued proceedings in England for a declaration of non-liability on the basis that there was a breach by Nadrico of the blow out preventer warranty, which required the preventer to be installed in accordance with usual industry practice, and breach by ZIC of the claims co-operation clause. ZIC then informed Ace that ZIC's business had been transferred to a New York company, “ZAIC”. Ace claimed that that was a breach of the prohibition on assignment. ZAIC was added as second defendant and Ace obtained permission to serve ZAIC out of the jurisdiction. ZIC and ZAIC applied for the English proceedings to be stayed in favour of proceedings which they had commenced in Texas. Longmore J set aside the permission to serve out of the jurisdiction on ZAIC. Although the proper law of the reinsurance contract was English law that was not determinative. Applying Excess Insurance Co v Allendale Mutual Insurance CoUNK (unreported, 8 March 1995, CA) the effect of the service of suit clause was to tip the balance in favour of Texan jurisdiction. The judge stayed the proceedings as against ZIC on the basis that he had jurisdiction to do so, even though ZIC was domiciled in a Lugano Convention state, and had been properly served and submitted to the English jurisdiction, where the appropriate forum was a non-contracting state, Texas, applying Re Harrods (Buenos Aires) LtdELR [1992] Ch 72. Ace appealed.
Held, dismissing the appeal:
1. The court was bound by its own previous decisions to say that staying Ace's proceedings against ZIC would not be inconsistent with the Lugano Convention, as the judge held. Those cases were not decided per incuriam and were binding authority for the proposition that where the choice was between the exercise of jurisdiction properly conferred on the English court (in this case under art. 18 of the Convention because ZIC entered an appearance, subject to a reservation of forum non conveniens) and the exercise of jurisdiction by a foreign court in a non-contracting state, the power to stay on forum grounds was not excluded by the Convention. ( Re Harrods (Buenos Aires) LtdELR [1992] Ch 72 and Eli Lilly & Co v Novo Nordisk A/S[2001] CLC 519.
2. The judge was right to conclude that although the proper law of the reinsurance contract was English law, the proper law of the reinsurance was not of significant weight in concluding where the case was to be tried, by comparison with the law of Texas, which was arguably relevant to issues of liability under the BOP warranty and the effect of the claims co-operation clause, or New York law, which was arguably relevant on the assignment issue. The judge was also right to treat the service of suit clause as a critical factor. ZIC had not waived its right to enforce the clause. In light of the service of suit clause it was for Ace to show why that clause should not be enforced. There was no challenge to the judge's decision that on issues of fact, witnesses and other such matters there was little to choose between the convenience of London and Texas. The action should be stayed against ZIC and service on ZAIC set aside on forum grounds. ( Excess Insurance Co v Allendale Mutual Insurance CoUNK (unreported, 8 March 1995, CA) applied; British Aerospace plc v Dee Howard CoUNK[1993] 1 Ll Rep 368considered.)
Longmore J:
1. As its name implies Zurich Insurance Co (“Zurich”) is a Swiss company. Through a captive insurance company (Sol Insurance Ltd) they insured a Texan company known as Nabors Industries Inc and its associated companies including Nadrico Saudi Ltd, against loss and damage to their oil rigs and installations in, among other places, Saudi Arabia. General condition 24 provided that the insurance was to be void if assigned or transferred without insurers' consent. General condition 32 provided that all disputes were to be submitted to the exclusive jurisdiction of the court of Texas. General condition 36 was a claims co-operation clause providing that it was a condition precedent to liability that notice of claim be given to the insurer as soon as practicable. There was also a blow-out preventer warranty in the following terms:
“A blowout preventer of standard make will be set on the surface casing per usual industry practice, same to be installed and tested in accordance with the usual practices.”
2. Zurich reinsured their non-American liability to Nabors with Cigna (“the reinsurers”) who scratched the reinsurance slip in London on 11 May 1998. The conditions of the insurance were:
“As original and/or as original following the original in all respects including claims settlements …
Service of Suit Clause NMA 1998”
The 1998 Non Marine Association service of suit clause relevantly provided:
“It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon at the request of the Insured (or Re-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 Underwriters' rights to commence an action in any Court of competent jurisdiction in the United States …”
3. On 26 May 1998 one of Nadrico's wells blew out in Saudi Arabia. The blow out preventer was in the process of being installed but there is an argument whether such installation was being conducted in accordance with usual industry practice. For the purpose of the application, Zurich accept it is arguable that they did not notify reinsurers until after they had settled Nadrico's claim in December 1998. After a claim on the reinsurers, it was the reinsurers who in September 1999 started proceedings in England claiming a declaration that they had no liability to Zurich because there was (1) a breach of the blow out preventer warranty which had itself been incorporated into the reinsurance contract, (2) a failure to comply with the claims co-operation clause which had been likewise incorporated.
4. ZIC responded by asserting a right to arbitrate and saying that, pursuant to the terms of a domestication agreement taking effect on 31 December 1998, all rights and liabilities in respect of American policies had been transferred to a US company, Zurich American Insurance Co (“ZAIC”). They accordingly applied on 19 January 2000 to set aside the service. Before that application could be heard, ZIC and ZAIC on 28 April 2000 instituted their own proceedings in Texas pursuant to the service of suit clause. The right to arbitrate proved to be illusionary and, when the English application came on before Thomas J on 3 May 2000, he made no order save for giving leave to reinsurers to amend by adding ZAIC to the proceedings and fixing a timetable for service of evidence in what became (1) an application by ZIC on forum non conveniens grounds to stay proceedings which were properly brought against them under the terms of the Brussels-Lugano Convention and to which, being domiciled in Switzerland, they had submitted in England, and (2) an application by ZAIC to set aside the leave to serve granted by Thomas J pursuant to r. 6.17 and the following rules of Pt. 6 of CPR (the old O. 11). It is those applications that are now before me.
5. Mr Milligan QC for both Zurich companies submitted that, although the burden was on the reinsurers...
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