In the recent case of AIG Europe SA and others v John Wood Group Plc and another [2021] EWHC 2567 (Comm), the High Court (the Court) maintained certain anti-suit injunctions granted in favour of a number of insurers who subscribed to various excess liability policies, two of which contained a valid arbitration clause. The Court refused, however, to maintain relief in respect of other insurers subscribed to one of the excess policies.

In doing so, the Court provided guidance on the approach taken by English courts to conflicting standard term and negotiated dispute resolution clauses, and in particular when it will construe jurisdiction clauses in favour of the English courts as exclusive.

Background

The Claimants were several insurers whose policies provided a programme of excess liability insurance (the Excess Liability Programme). The Defendants commenced proceedings in the courts of Alberta for protective limitation purposes, in anticipation that they might be required resort to the excess liability cover in relation to some other proceedings that had been brought against them in the courts of Alberta in relation to the failure of a pipeline.

In August 2021, the claimants had obtained anti-suit relief from the English Court in respect of the Alberta proceedings, granted on a without notice basis, on the grounds that there were exclusive jurisdiction clauses in the relevant policies, providing for English jurisdiction (other than in respect of one Claimant, AWAC, who had the benefit of an arbitration agreement). The question for the English Commercial Court was whether to maintain those injunctions.

The insurance policies

The underlying insurance policies included a global commercial liability insurance policy (the Global CGL), while the Excess Liability Programme consisted of a global umbrella policy (the Global Umbrella) and three further excess liability policies forming three further layers of reinsurance (the “First Excess“; “Second Excess” and “Third Excess” respectively).

The Global CGL did not contain any provisions on governing law or jurisdiction. All the policies comprising the Excess Liability Programme contained a clause known as the “Primary Policy Jurisdiction Clause” (the PPJC) which provided:

Any dispute concerning the interpretation of the terms, Conditions, Limitations, Exceptions and/or Exclusions of the policy are understood and agreed by both the Insured and the Insurers to be subject to the same law and the same jurisdiction as the primary policy. Each party agrees to submit to the jurisdiction of any court of competent jurisdiction within said territory and to comply with all requirements necessary to give such court jurisdiction. All matters arising hereunder shall be determined in accordance with the law and practice of such court.”

The policies and their dispute resolution provisions are summarised in Figure 1.

The policies forming the Excess Liability Programme each also contained further provisions on governing law and jurisdiction (which are set out below).

The main question for the Court in deciding whether to maintain the anti-suit relief was whether there existed “to a high degree of probability” relevant English arbitration or English exclusive jurisdiction clauses in the policies forming the Excess Liability Programme.

Decision

The Court maintained the anti-suit relief for all claimants who subscribed to the Global Umbrella, First Excess and Third Excess on the basis that there existed, to a high degree of probability, relevant English exclusive jurisdiction clauses (or, in the case of one of the claimants (AWAC), a valid English arbitration agreement).

While the Court also maintained the anti-suit relief for AWAC in respect of the Second Excess (given the arbitration clause in that policy to which AWAC had agreed), it refused to maintain the relief for the other subscribers to the Second Excess as they could not establish to a high degree of probability that the policy contained an exclusive English jurisdiction clause.

We briefly describe the Court’s reasoning in respect of the policies forming the Excess Liability Programme below.

The Global Umbrella

Clause 11 of the Global Umbrella (Clause 11), provided:

“This Policy of insurance shall be governed by and construed in accordance with the laws of England and Wales, or Scotland (in respect of any policies issued in Scotland), and except in the case of Scottish policies the [English] Commercial Court…shall have jurisdiction in respect of any dispute under this Policy.”

The Court had to consider (i) whether the Global Umbrella was issued in Scotland; (ii) if it was not, whether Clause 11 was, on its proper construction, a non-exclusive jurisdiction clause; and (iii) whether Clause 11 was “displaced” by the PPJC.

  • Was the Global Umbrella Issued in Scotland?

The Court concluded that the Global Umbrella was not issued in Scotland. While the insured was a company registered in Scotland, the policy was “negotiated in London, with London underwriters by London brokers” and “the contracts with each underwriter were concluded when the policy documentation was scratched, in London, by each underwriter“.

  • Was Clause 11 an exclusive English Jurisdiction clause?

In finding that Clause 11 was an exclusive English jurisdiction clause, the Court noted that “the authorities show that it is not necessary to use the words ‘exclusive jurisdiction’“, and relied on the principle that “where parties agree to submit disputes to an identified court or submit disputes to the jurisdiction of such a court then, as a matter of construction, an English court is likely to conclude that an exclusive jurisdiction agreement has been affected“.

The Court further considered that “the choice of English law in conjunction with the reference to English jurisdiction is itself a powerful factor in construing the choice of English jurisdiction as exclusive“. The Court further considered that the exception for Scottish policies was only included so that the parties were not “required to litigate Scottish policies in the Commercial Court…“.

  • Did the PPJC “displace” Clause 11?

The Court found that the “primary policy” referred to in the PPJC was the Global CGL (as the latter was identified as being “primary” in the “Underlying Insurers clause” in the Global Umbrella) but disagreed with the Defendants’ argument that Clause 11 was displaced by the PPJC. The Defendants had argued that as Clause 11 was a standard term it should be disregarded because it conflicted with the PPJC.

In rejecting this argument, the Court considered that Clause 11 was in “clear terms” as to governing law and jurisdiction, which contrasted with the PPJC which sought to “incorporate terms as to jurisdiction and applicable law which – if the PPJC is taken as referring to the Global CGL – do not exist within that policy“. As there was “no relevant jurisdiction, or indeed applicable law, provision in the primary policy” the Court did not “consider that there is anything which can or should be construed as displacing the clear terms of clause 11“.

The Court also found that it was inappropriate in this case to apply the principle of construction that a specifically negotiated clause (the PPJC) would prevail over a standard term (Clause 11) in the event of conflict. The Court considered in particular that here it was really “considering and comparing two standard clauses” as the PPJC did not specifically identify a particular governing law or jurisdiction, and was also included in all of the policies forming the Excess Liability Programme.

The First and Third Excess

Clause 12 of the First Excess (Clause 12) provided for English law as the governing law and for the jurisdiction of the English Courts. The Third Excess also contained a clause providing for English law and jurisdiction that was materially identical to Clause 1, and an arbitration agreement agreed to by AWAC.

The Court considered that there existed “clear exclusive jurisdiction clauses providing for English law and jurisdiction“. The Court further took the view that its conclusions that Clause 11 of the Global Umbrella prevailed over the PPJC and that the “high degree of probability requirement is satisfied“, applied equally here.

The Second Excess

The Second Excess contained an arbitration clause to which AWAC solely agreed, and at Clause 4.10 provided for English law, but did not contain any further provision on jurisdiction.

Considering AWAC’s application to maintain the anti-suit relief, the Court considered that “in principle, the arbitration agreements should be enforced, by the grant of anti-suit relief, unless there [were] strong reasons not to do so“. The Court considered that the risk of a multiplicity of proceedings in arbitration and the courts was not a strong reason to refuse anti-suit relief.

The Court did, however, consider that the position of the other insurers subscribed to the Second Excess was “more difficult“.

As Clause 4.10 did not provide for jurisdiction, the insurers needed to “rely on the PPJC as providing a route to exclusive jurisdiction“. The Court was not persuaded by their argument that the “primary policy” should be construed as reference to the Global Umbrella. The Court viewed that the PPJC’s language did “not naturally refer to a Global Umbrella policy which sits above a series of underlying policies“, but instead “indicates a policy which provides the insured with its first tranche of insurance cover”. As such, save for AWAC, the insurers subscribed to the Second Excess had “failed to establish the requisite high degree of probability necessary to maintain the anti-suit injunction“.

Comment

This judgment is another reminder of the importance of ensuring that dispute resolution clauses in complex transactions with multiple contractual documents are clear and non-conflicting to avoid facing multiple disputes, higher costs, and delays. This is especially important where more than one form of dispute resolution mechanism is provided for by the contract.

Where arbitration is a chosen means of dispute resolution in a multi contract scenario, one way of ensuring consistency is by using an Umbrella Agreement to identify which disputes arising under the contractual documents should be resolved through arbitration.

The case also provides useful guidance on the English court’s approach to the construction of exclusive jurisdiction clauses. The English courts do not generally take a formalistic approach to construing jurisdiction clauses, meaning that a dispute resolution clause does not necessarily have to expressly state that it is “exclusive” to be considered an exclusive jurisdiction clause by the English courts.

For more information, please contact Craig Tevendale, Partner, Liz Kantor, Professional Support Lawyer, Cedric Saliba, Associate, or your usual Herbert Smith Freehills contact.

Craig Tevendale
Craig Tevendale
Partner
+44 20 7466 2445
Elizabeth Kantor
Elizabeth Kantor
Professional Support Lawyer
+44 20 7466 2406
Cedric Saliba
Cedric Saliba
Associate
+44 207 466 7536

The authors would like to thank Luke Hard for his assistance in preparing this blog post.