Sulamérica Cia Nacional de Seguros Sa v Enesa Engenharia Sa
| Jurisdiction | England & Wales |
| Judge | Lord Neuberger of Abbotsbury,Moore-Bick,Hallett L JJ. |
| Judgment Date | 16 May 2012 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 May 2012 |
Court of Appeal (Civil Division).
Lord Neuberger of Abbotsbury Mr, Moore-Bick and Hallett L JJ.
David Wolfson QC and Nehali Shah (instructed by White & Case LLP) for the appellants.
Michael Crane QC, Stephen Houseman and Damien Walker (instructed by Clyde & Co LLP) for the respondents.
The following cases were referred to in the judgment:
Ace Capital Ltd v CMS Energy Corp [2008] EWHC 1843 (Comm); [2008] 2 CLC 318.
Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AGUNK [1981] 2 Ll Rep 446.
C v DUNK [2007] EWCA Civ 1282; [2007] 2 CLC 930.
Cable & Wireless plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm); [2002] CLC 1319.
Channel Tunnel Group Ltd v Balfour Beatty Construction LtdELR [1993] AC 334.
Fiona Trust & Holding Corp v PrivalovUNK [2007] UKHL 40; [2007] 2 CLC 553.
Holloway v Chancery Mead [2007] EWHC 2495 (TCC); [2008] 1 All ER (Comm) 653.
Leibinger v Stryker Trauma GmbH [2006] EWHC 690 (Comm).
Sonatrach Petroleum Corp v Ferrell International LtdUNK [2002] 1 All ER (Comm) 627.
Sumitomo Heavy Industries v Oil & Natural Gas CommissionUNK [1994] 1 Ll Rep 45.
XL Insurance Ltd v Owens Corning [2001] CLC 914.
Insurance — Anti-suit injunction — Insurance in connection with construction of hydroelectric generating plant in Brazil — Policy providing for Brazilian law and jurisdiction but London arbitration — Insured made claims under policies but insurers declined liability and gave notice of arbitration — Insured obtained injunction from Brazilian court restraining insurers from referring dispute to arbitration — Under Brazilian law arbitration clause could not be invoked without insured's consent — Insurers obtained anti-suit injunction to restrain Brazilian proceedings — No implied choice of Brazilian law to govern arbitration agreement — Arbitration agreement had closest and most real connection with English law and accordingly governed by English law — Mediation clause did not give rise to binding obligation and not condition precedent to arbitration — Dispute fell within scope of arbitration agreement which covered liability as well as quantum — Anti-suit injunction upheld.
This was an appeal against an order of Cooke J continuing an anti-suit injunction restraining the appellants, Enesa Engenharia SA and other insureds (“the insureds”), from pursuing proceedings against the respondents, Sulamérica Cia Nacional de Seguros SA and other insurers (“the insurers”), in the courts of Brazil (see [2012] EWHC 42 (Comm)).
The dispute between the parties had 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 insureds 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.
The policies contained a London arbitration clause, but also an express choice of Brazilian law as the law governing the contract and an exclusive jurisdiction clause in favour of the courts of Brazil.
In November 2011 the insurers gave notice of arbitration. In response the insureds started proceedings in Brazil seeking to establish that the insurers were not entitled to refer the dispute to arbitration and obtained from the Brazilian court 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. The insurers obtained an injunction without notice restraining the insureds from pursuing the proceedings in Brazil. Cooke J subsequently continued that injunction.
The insureds 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 under condition 12 of the policy arose only after the requirements of condition 11 relating to mediation had been satisfied, which they had not.
Held, dismissing the insureds' appeal:
1. The parties expressly agreed that the policy was to be governed exclusively by the law of Brazil. That was a strong pointer towards an implied choice of the law of Brazil as the proper law of the arbitration agreement. Condition 12 of the policy formed part of a dispute resolution procedure which included a mediation agreement and the two had to be read in conjunction with each other. It was difficult to believe that the parties intended the provisions relating to mediation to be governed by any system of law other than the law of Brazil, but there was no reason why condition 11 should not be governed by the law of Brazil, even though condition 12 was governed by the law of England.
2. Although there were powerful factors in favour of an implied choice of Brazilian law as the governing law of the arbitration agreement, two important factors pointed the other way. The first was that, as the parties must have been aware, the choice of England as the seat of the arbitration inevitably imported an acceptance that English law relating to the conduct and supervision of arbitrations, namely the Arbitration Act 1996, would apply to the proceedings. That tended to suggest that the parties intended English law to govern all aspects of the arbitration agreement, including matters touching on the formal validity of the agreement and the jurisdiction of the arbitrators. The second factor was the consequence that was said by the insureds to follow from the choice of the law of Brazil as the law governing the arbitration agreement, namely that it rendered the agreement enforceable only with their consent. Condition 11, which provided the immediate context for condition 12, expressly provided that either party could refer to arbitration a dispute that had not been satisfactorily resolved by mediation. The possible existence of a rule of Brazilian law which would undermine that position tended to suggest that the parties did not intend the arbitration agreement to be governed by that system of law. (XL Insurance Ltd v Owens Corning[2001] CLC 914considered.)
3. In the light of the conflicting indications, the parties' express choice of Brazilian law to govern the substantive contract was not sufficient evidence of an implied choice of Brazilian law to govern the arbitration agreement. The arbitration agreement had a close and real connection with the contract of which it formed part, but its nature and purpose were very different. An agreement to resolve disputes by arbitration in London, and therefore in accordance with English arbitral law, did not have a close juridical connection with the system of law governing the policy of insurance, whose purpose was unrelated to that of dispute resolution; rather, it had its closest and most real connection with the law of the place where the arbitration was to be held and which would exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure was effective. Its closest and most real connection was with English law. The judge was right that the arbitration agreement was governed by English law. (C v DUNK[2007] EWCA Civ 1282; [2007] 2 CLC 930followed.)
4. Condition 11 did not set out any defined mediation process, nor did it refer to the procedure of a specific mediation provider. The first paragraph contained merely an undertaking to seek to have the dispute resolved amicably by mediation. No provision was made for the process by which that was to be undertaken and none of the succeeding paragraphs touched on that question. The judge was, therefore, right that condition 11 was not apt to create an obligation to commence or participate in a mediation process. The most that might be said was that it imposed on any party who was contemplating referring a dispute to arbitration an obligation to invite the other to join in an ad hoc mediation, but the content of even such a limited obligation was so uncertain as to render it impossible of enforcement in the absence of some defined mediation process. The judge was right to hold that condition 11 was incapable of giving rise to a binding obligation of any kind and the conditions identified in the fourth paragraph did not constitute a legally effective precondition to arbitration.
5. Condition 12 enabled either party to refer to arbitration any dispute arising out of or in connection with the policy, and was not limited to disputes about the amount to be paid in respect of any individual loss.
Moore-Bick LJ:
1. This is an appeal against the order of Cooke J continuing an anti-suit injunction restraining the appellants, Enesa Engenharia SA and other insureds (“the insureds”), from pursuing proceedings against the respondents, Sulamérica Cia Nacional de Seguros SA and other insurers (“the insurers”), in the courts of Brazil (see [2012] EWHC 42 (Comm)).
2. 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 insureds 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...
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