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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> ACE (Formerly Cigna) v. Zurich Insurance Company & Zurich American Insurance Company [2000] EWHC Commercial 69 (31st July, 2000) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2000/69.html Cite as: [2000] EWHC Commercial 69

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ACE (Formerly Cigna) v. Zurich Insurance Company & Zurich American Insurance Company [2000] EWHC Commercial 69 (31st July, 2000)

JUDGMENT

1. As its name implies Zurich Insurance Company ("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:-

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

The 1998 Non Marine Association Service of Suit Clause relevantly provided:-

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 United States company Zurich American Insurance Company ("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 3rd 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 Part 6.17 and the following rules of Part 6 of CPR (the old Order 11). It is those applications that are now before me.

5. Mr. Milligan Q.C. for both Zurich companies submitted that, although the burden was on the Reinsurers in relation to the claim against ZAIC to show that the claim was a proper one for decision in England but on ZIC (having been properly served and indeed having submitted to the jurisdiction) to show that there was another jurisdiction (viz Texas) which was clearly more appropriate than England, it would be perverse to reach a different conclusion as to each intended defendant depending on the burden of proof. He then submitted that Texas was a clearly more appropriate jurisdiction because

6. Mr. Layton Q.C. for the Reinsurers submitted

7. This fourth argument is of some importance and does not appear to be covered by authority. Mr. Layton also said it was a matter of great dispute among jurists. Before grappling with that it is helpful to see how the case stands apart from that argument.

8. If I consider the case apart from the question whether I have any power to stay the claim against ZIC, it seems to me that the critical feature of the reinsurance contract is the Service of Suit Clause and that the other factors relied on by the parties have, relative to that, little weight.

9. I will say, however, that, in my view, the proper law of the reinsurance contract is English law because it was broked in London, where the contract has its centre of gravity to use the phrase used by the Court of Appeal in Citadel Insurance Co. v Atlantic Union Insurance Co. S.A. [1982] 2 Lloyd's Rep 543 and because the contract uses clauses which are well known in and known to be part of London reinsurance business, see Gan Insurance Co. v Tai Ping Insurance Co. [1999] Lloyd's Rep IR 472. That does not mean that an English court will not have regard to the law of Texas; that is because the liability reinsured is a liability under Texas law. Texas law will therefore be relevant and which ever court decides the case will have to know or be informed of Texas law. The fact, therefore, that the proper law of the reinsurance contract is English is not of any significant weight in concluding where the case is to be tried.

10. Likewise, the evidence of fact. If evidence is to be called on factual issues, it is likely to be mainly about the usual industry practice relating to installation of blow-out preventers. I have no reason to believe that such evidence is available more conveniently in London than in Texas or in Texas than in London. It is equally conveniently available in either place; even if reinsurers have already instructed an English expert, he would be unlikely to find it particularly inconvenient to give his evidence in Texas. He might anyway have had to visit Saudi Arabia where the incident took place. A visit to Texas would be all part of his retainer. Conversely if other factors pointed to England the fact that Zurich might prefer to have evidence from Texas (or elsewhere in the United States) about usual industry practice would not deter me from permitting the continuance of the proceedings in England.

11. The Service of Suit clause outweighs these comparatively minor considerations. Such clauses are well known to insurance practitioners and should be given a proper and sensible construction. It is fairly clear that, if the insured had exercised their option to sue in New York in Armadora v Horace Mann [1977] 1 WLR 520 and 1098, the courts would not have maintained the leave to serve out of the jurisdiction granted to the claimants in that case. The effect of the clause was also considered in the unreported case of Excess Insurance v Allendale Mutual Ins. Co. (CA 8 March 1995). In that case, as in this, reinsurers had sued for a declaration that they were not liable under a reinsurance policy. The reinsured carried on business in Illinois and had their head office in Rhode Island where proceedings were, later than the English proceedings, begun by the reinsured. There was a Service of Suit clause in virtually identical terms to the clause in this case. Saville J. held that it was a breach of contract for reinsurers to have brought suit in England and that the leave granted to serve out of the jurisdiction should be set aside. The Court of Appeal did not agree with his construction of the clause and held that underwriter had no obligations at all until they had received a request to submit to a court of competent jurisdiction in the United States. Hobhouse LJ said

Despite his disagreement with Saville J's approach, however, he decided (and the other members of the Court agreed) that it was "inevitable" that the court's discretion should be exercised to set aside the leave granted to serve out of the jurisdiction. That was because proceedings had been started properly in Rhode Island

Hobhouse LJ then made clear that the judge in Rhode Island would consider his own jurisdiction and could decide, if he wished, to stay the proceedings so that they could continue in England or allow them to continue in Rhode Island. But it was a matter entirely for him and it was inappropriate for the English court to give leave to serve out of the jurisdiction.

12. So here, proceedings have been properly started in Texas. Those proceedings are continuing. The judge in Texas can make any order he or she thinks fit as to the venue of those proceedings but the leave given by Thomas J. to serve ZAIC should be set aside and, other things being equal, there should be a stay of the proceedings against ZIC.

13. That brings me to the argument that I have no power to stay the proceedings against ZIC since they are domiciled in a Convention Country.

14. Absence of any power to stay?

Mr. Layton submitted that once ZIC had been sued and had submitted to the jurisdiction of the court in England, the court had no jurisdiction to stay the action because the terms of the Brussels-Lugano Convention prohibited any reliance on a doctrine of forum non conveniens. For this purpose he relied on Sarrio v Kuwait Investment authority [1996] 1 Lloyd's Rep. 656, The Xin Yang [1996] 2 Lloyd's Rep. 217 and Briggs and Rees, Civil Jurisdiction and Judgments 2nd ed. paras 2.225-238, a discussion which Lord Bingham C.J. has described as erudite and judicious, see [1999] 2 Lloyd's Rep. at 347. Sarrio concerned a defendant company incorporated in a non-Contracting State, namely Kuwait. The dispute related to the sale of a business by the Spanish claimants, Sarrio SA, to a subsidiary of the defendant company, KIA. Sarrio commenced proceedings in Spain for payment of moneys owed, and then commenced proceedings in England claiming damages in tort for negligent misstatement. KIA sought to stay the English proceedings on the grounds of forum non conveniens. Sarrio argued that a discretion to stay could not be exercised, because (page 654):-

Mance J. rejected this submission. He said (page 654):-

Mr. Layton argued that the present case falls within, to use the language of Mance J., "the pure Convention rules" on the grounds that ZIC is domiciled in Switzerland, a Contracting State, and, this Court has no discretion to stay.

15. The case of The Xin Yang arose in a similar way, in that the defendant was domiciled in a non-Contracting State and the question for the Court was whether it had the jurisdiction to stay proceedings on forum non conveniens grounds in favour of proceedings taking place in a second Contracting State. Clarke J. followed Mance J. and held (p. 222)

These expressions of view by Mance J. and Clarke J., which were approved by the Court of Appeal in Haji-Ioannou v Frangos [1999] 2 Lloyd's Rep 337, 346-7, do lend some support to the argument that if (as here) a defendant is domiciled within a Contracting State, whether it be the place where he is sued or some other contracting State, then the Convention applies and this court, being a court of a Convention State, has no power to stay on grounds of forum non conveniens since no such power is given by the Convention. It is, however noteworthy that neither judge was considering a case such as the present where a stay is sought for the purpose of enabling a defendant to litigate in a non-Convention State, particularly a non-Convention State where, by his contract, he has an express right to litigate. I do not think it would be right to regard the judgment of either judge as determining the point I have to decide.

16. In Re Harrods (Buenos Aires Ltd.) [1992] Ch. 72 affords a much closer parallel. In that case the plaintiff minority shareholder sought to exercise rights available to it on the basis that affairs of the company were being conducted in a manner unfairly prejudicial to it (as the minority shareholder). The minority shareholder petitioned the court pursuant to Sections 459 and 461 of the Companies Act in proceedings to which both the majority shareholder and the company were parties. The minority and majority shareholders were both domiciled in Switzerland which was not then a Convention country. The company was, however, an English company and thus domiciled in a Convention country. The majority shareholder sought to set aside the service of the petition and also applied for a stay on the grounds that Argentina was the appropriate forum for the trial of the issues raised by the petition since it was there that the company exclusively carried on its business.

17. Earlier decisions of Hobhouse J. and Potter J. had held that where a defendant was (or was claimed to be)domiciled in the United Kingdom there was no room for any application to stay proceedings on forum non conveniens grounds. The Court of Appeal disapproved these earlier decisions and held that the Convention was designed to regulate jurisdiction only as between contracting states. If, therefore, the competing jurisdiction was a non-Contracting State, the doctrine of stay for forum non conveniens was not inconsistent with the Convention and remained available to the English Courts.

18. Mr. Layton emphasised the fact that majority shareholder and substantial defendant was domiciled in Switzerland and thus not in a Convention country. While true, the case nevertheless proceeded explicitly on the basis that the company, as a necessary party to the petition (page 91A), was for the purpose of the Convention domiciled in England (pages 91G and 92D). It is, therefore, a direct authority that the jurisdiction to stay on the grounds of forum non conveniens can be exercised in favour of a non-Contracting state even though the defendant is domiciled in a contracting State. The decision was sufficiently controversial to have justified a reference to the European Court by the House of Lords which had given leave to appeal from the decision of the Court of Appeal. The case, was however, settled and the reference was withdrawn. I am, therefore, bound by the decision of the Court of Appeal; as I read that decision, Mr. Layton's argument is inconsistent with it.

19. The only possible distinction between the present case and In Re Harrods (Buenos Aires) Ltd. is that in the present case ZIC is not domiciled in England but in another Convention country viz. Switzerland which is now, by virtue of the Lugano Convention, a Contracting State. This distinction did not appeal to Mr. Richard Stone Q.C. in The Po [1991] 2 Lloyd's Rep 206 who accepted (see page 213), in the light of In Re Harrods (Buenos Aires) Ltd., that he could not argue on behalf of a plaintiff, who had sued in England the owners of the "Po" domiciled in Italy, that the court had no discretion to stay on the grounds of forum non conveniens. Nor does the distinction appeal to the editors of Dicey and Morris, Conflict of Laws, 13th ed. paras 12-017 to 018 where they indicate that In Re Harrods, if it is correct, must apply whether the defendant is domiciled in England or any other contracting state.

20. More courageously than Mr. Stone, Mr. Layton relied on this sentence of Dillon L.J. at pages 97-98:-

Mr. Layton submitted that this was not a case where the courts of a single contracting State were engaged but rather that two Contracting States were engaged (viz. the United Kingdom where proceedings have been instituted and Switzerland where ZIC is domiciled). Although that is true as a matter of fact, I cannot believe that the words of Dillon L.J. were intended to make that a vital distinction. It would, after all, be somewhat odd if the law were to be that a stay was available to a United Kingdom defendant but not to a defendant domiciled in any other Convention State. That would be the kind of discrimination which the Convention is intended to avoid.

21. It would be even odder if an agreement to submit to the jurisdiction of the courts of a non-Convention State had to be treated as ineffective in any Convention country. That is, however, the effect of Mr Layton's argument if, as he argued, article 17 has no application because pursuant to Excess v Allendale the Service of Suit clause was not an exclusive jurisdiction clause.

22. Lastly Mr. Layton argued that there was a potential conflict between courts of Contracting States if I stayed the action because the interest of Switzerland as the court of the domicile, if any judgment came to be enforced there, was to recognise a judgment of the English Court pursuant to the Convention which was a simple matter rather than to be concerned with a judgment of the Texan Court, the recognition of which would be governed by quite different and more complex rules. There was no evidence to that effect but in a case where the Claimant reinsurer sues for a declaration that he is not liable, Mr. Layton's argument cannot, in my judgment, have much force.

23. Conclusion.

I therefore reject Mr. Layton's submission that I have no power to stay the proceedings against ZIC. I decide I do have that power and, for the reasons given earlier, that I should exercise that power. I shall also set aside the leave granted to sue ZAIC out of the jurisdiction and grant the applications of both ZIC and ZAIC.