Sulamérica Cia Nacional de Seguros SA and Others v Enesa Engelharia SA and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lady Justice Hallett,The Master of the Rolls |
| Judgment Date | 16 May 2012 |
| Neutral Citation | [2012] EWCA Civ 638 |
| Docket Number | Case No: A3/2012/0249 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 May 2012 |
[2012] EWCA Civ 638
The Master of the Rolls
Lord Justice Moore-Bick
and
Lady Justice Hallett
Case No: A3/2012/0249
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(COMMERCIAL COURT)
Mr. Justice Cooke
2011 Folio 1519
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. David Wolfson Q.C. and Miss Nehali Shah (instructed by White & Case LLP) for the appellants
Mr. Michael Crane Q.C., Mr. Stephen Houseman and Mr. Damien Walker (instructed by Clyde & Co. LLP) for the respondents
Hearing date : 20 th March 2012
This is an appeal against the order of Cooke J. continuing an anti-suit injunction restraining the appellants, Enesa Engenharia S.A. and other insured ("the insured"), from pursuing proceedings against the respondents, Sulamérica Cia Nacional de Seguros S.A. and other insurers ("the insurers"), in the courts of Brazil.
The dispute between the parties has its origin in two policies of insurance against various risks arising in connection with the construction of a hydroelectric generating plant in Brazil known as the Jirau Greenfield Hydro Project. In March 2011 certain incidents occurred which led the insured to make claims under the policies, but the insurers declined liability on the grounds that the losses were uninsured or excluded by express terms of the policies and that there had been a material alteration in the circumstances disclosed to them at inception of which they had not been notified as required by condition 3 of each of the policies. Since the policies are in substantially the same terms, it is convenient to refer to them simply as "the policy", as did the judge below.
The policy contains a London arbitration clause, to which I shall refer in more detail later, but it also contains an express choice of Brazilian law as the law governing the contract and an exclusive jurisdiction clause in favour of the courts of Brazil. On 29 th November 2011 the insured gave notice of arbitration. In response the insured started proceedings in Brazil seeking to establish that the insurers were not entitled to refer the dispute to arbitration and obtained from the court in São Paulo an injunction restraining the insurers from resorting to arbitration in order to pursue a claim for a declaration that they were not liable under the policy. In response the insurers made an application without notice to the Commercial Court seeking an injunction to restrain the insured from pursuing the proceedings in Brazil. Stadlen J. granted an order in those terms which Cooke J. subsequently continued after hearing argument from both parties.
The judge made the following findings about the circumstances in which the policy had been entered into:
"2…. The insurance was, however, reinsurance-led, in the sense that the insureds, through brokers JLT, sought to arrange the terms of the reinsurance cover before local insurers were put in place to "front" the covers. The reinsurances are led by Swiss Re, Allianz and Zurich Re. The programme was tailor-made for the Jirau project and was the subject of lengthy and detailed negotiation between the insureds, who are substantial enterprises, and the reinsurers. The reinsurances are expressed in the English language and the policy, although in the Portuguese language, contained essentially the same terms as the reinsurances, translated from the English. In determining the issues which arise, both parties proceeded on the basis of the policy, translated into English, as reflecting the reinsurance terms and conditions."
The General Conditions forming part of the policy included the following:
"7. Law and Jurisdiction
It is agreed that this Policy will be governed exclusively by the laws of Brazil.
Any disputes arising under, out of or in connection with this Policy shall be subject to the exclusive jurisdiction of the courts of Brazil.
11. Mediation
If any dispute or difference of whatsoever nature arises out of or in connection with this Policy including any question regarding its existence, validity or termination, hereafter termed as Dispute, the parties undertake that, prior to a reference to arbitration, they will seek to have the Dispute resolved amicably by mediation.
All rights of the parties in respect of the Dispute are and shall remain fully reserved and the entire mediation including all documents produced or to which reference is made, discussion and oral presentation shall be strictly confidential to the parties and shall be conducted on the same basis as without prejudice negotiations, privileged, inadmissible, not subject to disclosure in any other proceedings whatsoever and shall not constitute any waiver of privilege whether between the parties or between either of them and a third party.
The mediation may be terminated should any party so wish by written notice to the appointed mediator and to the other party to that effect. Notice to terminate may be served at any time after the first meeting or discussion has taken place in mediation.
If the Dispute has not been resolved to the satisfaction of either party within 90 days of service of the notice initiating mediation, or if either party fails or refuses to participate in the mediation, of if either party serves written notice terminating the mediation under this clause, then either party may refer to the Dispute to arbitration.
Unless the parties otherwise agree, the fees and expenses of the mediator and all other costs of the mediation shall be borne equally by the parties and each party shall bear their own respective costs incurred in the mediation regardless of the outcome of the mediation.
12. Arbitration
In case the Insured and the Insurer(s) shall fail to agree as to the amount to be paid under this Policy through mediation as above, such dispute shall then be referred to arbitration under ARIAS Arbitration Rules. The Arbitration Tribunal shall consist of three arbitrators, one to be appointed by the Insured, one to be appointed by the Insurer(s) and the third to be appointed by the two appointed arbitrators. The Tribunal shall be constituted upon the appointment of the third arbitrator.
The arbitrators shall be persons (including those who have retired) with not less than ten years' experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry.
Where a party fails to appoint an arbitrator within 14 days of being called upon to do so where the two party-appointed arbitrators fail to appoint a third within 28 days of their appointment, then upon application ARIAS (UK) will appoint an arbitrator to fill the vacancy. At any time prior to the appointment by ARIAS (UK) the party or arbitrators in default may make such appointment.
The Tribunal may at its sole discretion make such orders and directions as it considers to be necessary for the final determination of the matters in dispute. The tribunal shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions.
The seat of the arbitration shall be London, Engl and."
Before the judge the insurers argued that they had commenced valid arbitration proceedings in accordance with condition 12, the insured having failed or refused to join in a mediation as contemplated by condition 11. They also argued, however, that condition 11 was ineffective to create a binding obligation or to impose a condition on the commencement of arbitration. The insured argued that they were not bound to arbitrate because the arbitration agreement was governed by the law of Brazil, under which it could be invoked only with their consent. They also argued that the right to refer disputes to arbitration arose only after the requirements of condition 11 had been satisfied. Those requirements were not satisfied in this case and in any event the scope of the arbitration clause was limited to disputes about the quantum of the insurers' liability and did not encompass disputes about substantive rights and obligations of the kind which the insurers had sought to refer.
The proper law of the arbitration agreement
It was not suggested that the approach which the court is required to take to resolving the issues of construction which arise in relation to conditions 11 and 12 of the policy is affected by the choice of proper law. However, since the insured say that under the law of Brazil the arbitration agreement is not enforceable against them without their consent, it is an issue that has to be determined, since it is an essential factor for the court to take into account in deciding whether to continue the injunction. Although the judge made no finding about the position under Brazilian law (because he did not need to), if the insured's argument were correct, the reference to arbitration would be ineffective and the injunction would have to be discharged.
The judge held that the proper law of the arbitration agreement in this case was English law, notwithst anding the express choice of Brazilian law as the law governing the policies and the obvious connection of the policy to Brazil. He considered (paragraph [10]) that the key question was the weight to be given to the choice of London as the seat of the arbitration. He pointed out that the choice of the seat of the arbitration determines the curial law and the supervising jurisdiction of the courts of the country where the seat is located, in this case Engl and. That led him...
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