QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| YOUELL & OTHERS
|- and -
LA REUNION AERIENNE & OTHERS
Richard Slade (instructed by Messrs Barlow, Lyde & Gilbert) for the Defendants
Hearing dates: 14 July & 30 September 2008
Crown Copyright ©
Mr Justice Tomlinson :
"8.13 DISPUTES – ARBITRATION CLAUSE:
In the event of disagreement or dispute concerning the interpretation of the present contract or its effects or consequences, each of the parties shall appoint an arbitrator in Paris.
In the event of disagreement between the appointed arbitrators, this shall be settled by a third arbitrator appointed by the other two, or in the absence of agreement, by the President of the Court of Paris by an interim ruling.
Should either party fail to appoint an arbitrator, he will be appointed using the same procedure.
The arbitrators will decide as conciliators, exempted from formalities and procedural delays and as the last resort, the parties waiving the right to appeal against their decision, by any means whatsoever, even extraordinary."
The present insurance is issued by companies specified elsewhere.
The cover provided by each Insurer is limited, exclusively within the settlement of claims, to a fixed share, without joint and several liability between them.
By joint agreement between the parties, it is agreed that, in respect of operations resulting from the present contract (declarations, claims, transmission of documents, payment of premiums and losses, etc.) the Insured shall contact the Leading Insurer acting for and on behalf of the Insurers.
For their part, the Co-Insurers delegate to the Leading Insurer the fullest powers to accept all declarations, claims or notifications, to acknowledge them, issue valid receipts, and settle and transact all claims, within the limits of the powers conferred upon them by the present policy, but without the Leading Insurer having any power to incur any liability on them as a result of its powers."
"The Claimants are underwriters at Lloyds. The First Defendant is 'Groupment d'Interet Economique' ('GIE') under French Law. The Second to Fourteenth Defendants are French insurers and are or were members of the GIE. In 1993, the Defendants insured, inter alia, Societe Labinal and Turbomeca S.A. (being companies involved in the manufacture and sale of helicopters) under policy 93/14313 for a variety of aviation liability related risks. The Claimants insured the same entities in London for the same categories of risks over the same period under policy AW589293. In 1995, claims brought by a Mr and Mrs Roth in proceedings issued in 1993 in the Jackson County Circuit Court in Missouri ('Roth I'), arising out of a helicopter crash covered by the said policies, were settled on terms agreed by both the Claimants and the Defendants. That settlement has been fully performed and has not been rescinded or otherwise set aside.
The Defendants allege that the Claimants are liable to pay US$2.45 million by way of contribution to the settlement of a claim for fraud and misrepresentation brought by Mr and Mrs Roth in Jackson County in 2000 ('Roth II'). The Claimants deny they are liable to pay the contribution claimed or any contribution to the Defendants arising out of the settlement of Roth II. The Claimants are entitled to and seek a declaration of non-liability to the Defendants. The claims made in Roth II did not arise from, and were not risks covered by, Policy AW589293 or policy 93/14313. The Defendants' settlement of Roth II was not agreed by the Claimants. The Defendants' settlement of Roth II is not binding on the Claimants. The Defendants had no authority to bind the Underwriters to that settlement.
By a notice dated 22 October 2007, the Defendants have purported to commence an arbitration against the Claimants as a means of pursuing their contribution claim. The Claimants are entitled to and seek a declarations [sic] that (i) the said notice is ineffective and/or a nullity; and (ii) No arbitration agreement exists (or has ever existed) between the Claimants and the Defendants; and (iii) The proper jurisdiction for the Defendants' claim is the High Court of Justice in England.
I state that the High Court of England and Wales has power under Council Regulation (EC) No. 44/2001 of 22 December 2000 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) to hear this claim and that no proceedings are pending between the parties in Scotland, Northern Ireland or any other Regulation State as defined by section 1(3) of the Civil Jurisdiction and Judgments Act 1982."
"A person domiciled in a Member State may, in another Member State, be sued:
1(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question."
True it is that the English market denies the existence of any contract between itself and the French market. But the decision of the Court of Appeal in Boss Group Limited v. Boss France S.A.  1 WLR 351 shows that the English market establishes a good arguable case that there is a matter relating to a contract by relying on the fact that that is what the French market is contending against it in Paris. In its Statement of Claim in the Paris arbitration the French market says this:
"The aforementioned co-insurance agreement gave authority to the leading insurance company (LRA) to settle any loss.
Consequently, the settlement made by LRA was legitimately in an official capacity as representative of the London market.
LRA has good grounds to principally claim reimbursement on the basis of the power of representation of the London market which it had at its disposal under the terms of the insurance policy.
In order to avoid any difficulty, LRA was also granted by Turbomeca an assignment of its rights against the insurers of the London market.
This assignment of an obligation was concluded by a 'reiterative assignment of debt' deed dated 30 June 2008.
Owing to the refusal of the London market to execute its contractual obligations, LRA was forced to initiate this arbitration procedure."
Thus both the principal direct claim and the alternative derivative claim by assignment from Turbomeca are said to be contractual claims. It is accepted that I should approach the matter upon the basis that the English policy is governed by French law. If there exists a contract of mandate pursuant to which the French market had the power to represent and to bind the London market to the Roth II settlement, there must equally be a good arguable case that that contract is governed by French law. It is common ground that in French law, absent contrary agreement, the place of performance of contractual obligations involving the payment of money is the place of domicile of the debtor. In French law, unlike English law, a creditor must seek out his debtor. As it happens this basic rule is also reflected in that part of the French policy which deals with claims against Turbomeca arising out of death or injury – see Article 7(c). The requirements of Article 5.1(a) of the Regulation are thus satisfied since the place of performance of the London market's alleged obligation to pay is England.
"In matters relating to insurance, jurisdiction shall be determined by this Section, without prejudice to Article 4 and point 5 of Article 5."
Thus since there is no saving for Article 5.1, in contradistinction to that for Article 5.5, Article 5.1(a) is unavailable as a source of jurisdiction. It is common ground that there is no provision of Section 3 of the Regulation which would justify the court in assuming jurisdiction in respect of this claim for negative declaratory relief. Secondly, if that be wrong, the French market says that if this is to be regarded as a dispute relating to a contract, and thus as prima facie falling with Article 5.1(a), nonetheless the contract relied upon by the French market, or more accurately as I would think the two contracts relied upon by the French market, is or are a contract or contracts containing an arbitration clause. Article 1.2(d) of the Regulation provides that the Regulation shall not apply to arbitration.
"The rules on insurance should be viewed as being inspired by the same philosophy as that underlying the rules concerning consumer contracts in Section 4 of Title II…"
The social policy of protecting the weaker party has been recognised as providing a compelling context which requires the words in Section 3 to be given a restrictive interpretation – see per Lord Millett in Agnew v. Lansforsakrings Bolagens A.B.  1 AC 223 at 260. Thus in the Group Josi case the ECJ determined that the special rules of Section 3 are not to be extended to those for whom protection is not justified. The ECJ said this, at pages 85 and 86 of the report cited above:
"64. First, according to settled case law, it is apparent from a consideration of the provisions of section 3 of Title II of the Convention in the light of the documents leading to their enactment that, in affording the insured a wider range of jurisdiction than that available to the insurer and in excluding any possibility of a clause conferring jurisdiction for the benefit of the insurer, they reflect an underlying concern to protect the insured, who in most cases is faced with a predetermined contract the clauses of which are no longer negotiable and is the weaker party economically: Gerling Konzern Speziale Kreditversicherungs-AG v. Amministrazione del Tesoro dello Stato (Case 201/82)  ECR 2503, 2516, paragraph 17.
65. The role of protecting the party deemed to be ecomonically weaker and less experienced in legal matters than the other party to the contract which is fulfilled by those provisions implies, however, that the application of the rules of special jurisdiction laid down to that end by the Convention should not be extended to persons for whom that protection is not justified (see, by analogy, in respect of Articles 13 et seq of the Convention in relation to jurisdiction over consumer contracts, Shearson Lehman Hutton v. TVB (Case C-89/91)  ECR I-139, 188, paragraph 19).
66. No particular protection is justified as regards the relationship between a reinsured and his reinsurer. Both parties to the reinsurance contract are professionals in the insurance sector, neither of whom can be presumed to be in a weak position compared with the other party to the contract.
67. It is thus in accordance with both the letter and the spirit and purpose of the provisions in question to conclude that they do not apply to the relationship between a reinsured and his reinsurer in connection with a reinsurance contract.
68. That interpretation is confirmed by the system of rules of jurisdiction established by the Convention."
The same conclusion had earlier been reached by the House of Lords in the Agnew case to which I have referred above.
"16. It seems to me that, despite the broad wording of Article 7, the rules in that section are not designed to apply to proceedings between insurers.
17. There is support for that view in all the substantive provisions of the section, and in particular in Articles 8, 10 and 12, which clearly contemplate proceedings brought by a policy holder, insured or injured party, and Article 11, which refers to proceedings brought against a policy-holder, insured or beneficiary.
18. It is further buttressed by the Court's case-law to the effect that this section, like many of the other special rules in the Convention, is intended to protect the weaker party…".
"18. Secondly, the special system established by Article 13 et seq of the Convention is inspired by the concern to protect the consumer as the party deemed to be the economically weaker and less experienced in legal matters than the other party to the contract, and the consumer must not therefore be discouraged from suing by being compelled to bring his action before the courts in the Contracting state in which the other party to the contract is domiciled.
19. The protective role fulfilled by those provisions implies that the application of the rules of special jurisdiction laid down to that end by the Convention should not be extended to persons for whom that protection is not justified."
"Articles 12.1, 13.2 … refer to as possible parties to proceedings alongside the insurer, the policyholder, the insured, the beneficiary and the injured party. In addition to these possible parties are all persons who derive rights or obligations from the contract of insurance. As in consumer law, the legal assignees of protected persons are not protected."
Professor Robert Merkin would appear to subscribe to the same view – see paragraph D-0710/1 of Colinvaux and Merkin's Insurance Contract Law. In that paragraph he notes the distinction between a claim by an assignee and a claim by right of subrogation in the name of the insured. It may be open to question whether the ECJ would assimilate a claim brought by right of subrogation, not generally recognised in continental legal systems, to a claim brought by way of assignment. Furthermore Mr Slade points out that Article 9 of the Regulation does not define who may sue an insurer whereas Article 16 is concerned with claims by a consumer, so that the structure of the two sections is not identical. Nonetheless, it is in my judgment clear that the European Court of Justice is most unlikely to regard as falling within Section 3 a claim by one co-insurer against another brought by the former as assignee of the insured's rights against the latter. Professor Merkin writes, in the paragraph to which I have referred above:
"An action by one insurer against another is not a matter relating to insurance."
Then, having set out the decision in the GIE Réunion case, he continues:
"Jurisdiction in such an action was held by the Court to be determined by the general jurisdiction rules of Regulation 44/2001. As far as English law is concerned, it is unlikely that the same principle would apply in a subrogation action where, for example, a property insurer having indemnified its assured was to commence direct proceedings against liability insurers in circumstances where a direct action was permissible (for example, under the Third Parties (Rights Against Insurers) Act 1930 where the assured whose liability was in issue had become insolvent, or in respect of a motor claim). In these circumstances, the action is in the name of the assured under the property policy and not in the name of the insurers, so the claim remains one relating to insurance."
It might be thought at first sight anomalous that the question whether a matter relates to insurance should depend on by whom the claim is brought. But the words are not to be construed in a vacuum. They are contained within a community instrument and in my judgment the guidance given by the European Court of Justice as to the proper approach is clear.
"Finally it should be emphasised that a legal relationship does not fall outside the scope of Regulation 44/2001 simply because the parties have entered into an arbitration agreement. Rather the Regulation becomes applicable if the substantive subject-matter is covered by it."
The Front Comor is concerned with a different question from that raised by the present case, which, translated into the present context, is the ability of the French court to issue an injunction restraining the English market from proceeding with this, English, action. Advocate General Kokott's conclusion on the issue for decision in that case was, contrary to that reached by Colman J and the House of Lords (see  2 Lloyd's Rep 257 and  1 Lloyd's Rep 391) that the Regulation precludes a court of a Member State from making an order restraining a person from commencing or continuing proceedings before the courts of another Member State because, in the opinion of the court, such proceedings are in breach of an arbitration agreement. That conclusion is of itself of course inconsistent with any notion that the Regulation is without more inapplicable to disputes concerning contracts containing arbitration clauses. According to Advocate General Kokott, an anti-suit injunction designed to restrain a party from proceeding with an action brought in the court of a Member State, inconsistently with an arbitration agreement, but in accordance with the allocation of jurisdiction prescribed by the Regulation, constitutes an impermissible interference with that action which itself falls within the scope of the Regulation as being permitted thereby. However that may be, and whether or not that conclusion is endorsed by the ECJ, I have with respect little doubt that the Advocate General is correct in her more limited conclusion that a legal relationship does not fall outside the scope of the Regulation simply because the parties have entered into an arbitration agreement. It would be absurd to regard the arbitration exclusion as extending to an action which does not have as its subject matter arbitration. The subject matter of these proceedings, at any rate as now constituted, is not arbitration.