Dispute resolution is tricky Pick the wrong location and it can lead to huge delays, costs and inconvenience - not to mention potential exposure to punitive damages warn Michael Mendelowitz and Kiran Soar.

In dispute resolution, as in the property market, location can be critical and litigating in a jurisdiction not anticipated by the parties can lead to significant delays, costs and inconvenience, as well as a potential exposure to punitive damages. Traditionally, the English courts have had a number of remedies available to enforce the jurisdiction choices made by the parties and, in the absence of an express choice of jurisdiction or law, to determine the proper forum for a dispute. These include:

- Staying proceedings brought in breach of a express jurisdiction and/or arbitration agreement;

- Applying the doctrine of forum non conveniens to determine the proper forum for the dispute; and

- Ordering anti-suit injunctions to prevent a party from carrying on litigation abroad in relation to matters that should properly be heard in the English court.


A number of recent jurisdiction decisions from the European Court of Justice (ECJ) however, have created significant uncertainty on the future availability of such remedies to the English courts. In many cases, the remedies available to any party will depend on the particular facts of each case. We have set out a summary of some of the main cases, and their likely implications for international insurance and reinsurance disputes.

JURISDICTION CLAUSES

The English Commercial Court in Limit (No. 3) Ltd v PDV Insurance Company Ltd (11 April 2005) highlighted once more the dangers of entering into contracts of insurance or reinsurance without providing clear details on where and how disputes between the contracting parties are to be determined, and in particular, ensuring that any jurisdiction and law provisions apply to the entirety of the contract.

The decision concerned Venezuelan state-operated oil pipelines, reinsured by PDV Insurance (PDV). PDV sought retrocession cover from Limit. All of the insurance, reinsurance and retrocession contracts excluded cover for pollution in the US or Canada and provided for English law and jurisdiction to apply to any US and Canadian claims.

In 1998 and 2001, oil leaked from two pipelines in Venezuela. Prior to any proceedings beginning between the original insured and PDV, Limit instituted proceedings in London, seeking a negative declaration that it was not liable under the retrocession contract. Limit obtained leave to serve the claim form on PDV out of the jurisdiction, but this permission was later set aside. Limit appealed.

The Court of Appeal held that a "dispute clause" annexed to the retrocession slip was limited to US and Canadian claims and did not apply to the current Venezuelan claims. The construction and application of the underlying insurance and reinsurance contracts were to be determined under Venezuelan law and the proceedings would require factual and expert evidence from Venezuela.

The court also made a general observation that there was, "an unreality and considerable uncertainty in these proceedings in what amounts to a phoney war at the retrocessionary stage before the implications for it have emerged from the Venezuelan battles yet to be joined below." The judgment signals that English courts will not automatically entertain pre-emptive actions of this type, although this is perhaps slightly at odds with the practical consequences of the ECJ decision in the Gasser case (see below).

EXPRESS JURISDICTION AGREEMENTS AND THE ECJ

Erich Gasser GmbH v MISAT SrL (2003) concerned a dispute between two parties, both domiciled in Brussels Convention states (Gasser in Austria and MISAT in Italy). MISAT sued Gasser in Italy claiming damages for breach of contract. Soon after, Gasser sued MISAT in Austria claiming sums due under the disputed contracts, relying on an exclusive Austrian jurisdiction agreement.

The Austrian court declined jurisdiction on the basis that the Italian court was first seised of the case, and until the Italian court had determined its own jurisdiction, the Austrian action could not proceed. On referral, the ECJ agreed that the Austrian court, which was second seised, had to stay proceedings until the Italian court first seised had declared that it had no jurisdiction, despite the express Austrian jurisdiction clause agreed between the parties.

The decision clearly has wide-reaching implications. Even if there is an express jurisdiction agreement, a party could be forced to go through the time and expense of fighting a jurisdiction battle if the other party sues in a non-agreed forum. Whilst the costs of fighting such a jurisdiction battle may sometimes be recoverable from the party in breach of the jurisdiction clause, a party may choose to flout the jurisdiction clause deliberately in order to gain a tactical advantage. In a situation similar to Gasser, English courts would traditionally have considered the use of an anti-suit injunction to restrain foreign proceedings commenced in breach of an express jurisdiction clause.

In Turner v Grovit (2004) however, the ECJ held that the Brussels Convention did not permit the jurisdiction of a court to be reviewed by a court in another contracting state. It was necessary for each contracting state to trust the judicial systems of the other states. An injunction to prevent a party from commencing or continuing proceedings in another state constituted interference with the jurisdiction of the courts of the latter state, which was incompatible with the Convention.

The effect of these decisions is that even where there is an express jurisdiction agreement, a party could deliberately force the other party to fight jurisdiction in a non-agreed forum. Perhaps the safest way to try to secure jurisdiction is to be the first to issue proceedings, even if that means insurers and reinsurers suing for a declaration of non-liability.

JURISDICTION NOT AGREED

Between parties that are both domiciled in contracting states, the starting point is the provision in Council Regulation (EC) No. 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial matters (which has replaced the Brussels Convention) that proceedings should be commenced in the domicile of the defendant.

In UGIC v Group Josi Reinsurance Company (Case C412/98), the plaintiff was a Canadian company and the question arose as to whether France or Belgium was the correct jurisdiction in which to sue the Belgian defendants.

The ECJ held that even where the claimant was not domiciled in a Convention country, the correct jurisdiction was where the defendant was domiciled.

In Group Josi, the competing jurisdictions (France and Belgium) were both Convention countries. What would happen, however, if the competing jurisdictions involved a Convention and a non-Convention country? This question came before the ECJ in Owusu v Jackson (Case C-281/02) where the ECJ confirmed the long reach of the Convention.

Andrew Owusu had suffered serious injuries whilst diving from a private beach during a holiday in Jamaica and had sued a number of defendants in England including NB Jackson who had let Owusu the holiday villa with access to the private beach. Owusu also sued several Jamaican companies, including the various parties who were responsible for the management and control of the beach. The defendants applied to the English court for a stay of the proceedings, arguing that Jamaica was the more appropriate forum for the dispute to be heard. The judge at first instance held that, in light of the principles laid down in Group Josi, it was not open to the English Court to stay the action against Jackson (the only English defendant) since he was domiciled in a contracting state. On a reference to the ECJ the court agreed that the action against Jackson could not be stayed. The court noted that Convention was designed to set out down common rules on jurisdiction. Application of the English "forum non-conveniens" doctrine undermined the predictability of the rules of jurisdiction laid down in the Convention.

The ECJ did leave open a number of issues; in particular, what would have been the case had there been an express jurisdiction clause in favour of a non-contracting state? This question has now been addressed in the recent decision of the English Court in Konkola Copper Mines plc v Coromin (2005). Colman J considered in detail the Owusu decision, and considered that there was a significant difference between strategy where the courts were looking at forum non conveniens circumstances (such as in Owusu where there was no express jurisdiction agreement) and cases where there was an express jurisdiction agreement. As such, the Owusu case did not have any bearing on the discretion of the English court to stay proceedings in a Regulation state, in favour of an express jurisdiction clause of a non-contracting state.

ARBITRATION AGREEMENTS

The English courts have held that neither the Convention nor the Regulation applies to arbitration agreements. Thus, it seems that the traditional English remedies to police arbitration agreements are still available to the court.

In Through Transport Mutual Insurance Association (TTMIA) (Eurasia) Ltd v New India Assurance Co Ltd (the "Hari Bhum"), the defendant, New India, commenced proceedings in Finland in respect of its claim for a lost container.

TTMIA contested jurisdiction in Finland but at the same time issued arbitration proceedings in England on the basis that New India was required to arbitrate the dispute in England. TTMIA also sought to restrain the Finnish proceedings.

In the meantime, the Finnish court rejected TTMIA's jurisdiction challenge in Finland and held that New India was not bound by the arbitration agreement.

On the English application dealing with the injunction, the Court of Appeal took a different approach to the Finnish court and held that the arbitration clause did bind New India. Furthermore, the Convention did not apply to any court proceedings or judgments in which the principal focus of the matter was "arbitration". That expression included proceedings concerning the validity or existence of an arbitration agreement, the appointment of arbitrators, ancillary assistance to arbitration proceedings, and the recognition and enforcement of awards. On the facts of the case, however, the court declined to restrain the Finnish proceedings.

THE CURRENT SITUATION

English remedies remain available to litigants, albeit that their scope has been reduced, and the grant of a remedy will depend on the facts of each case. Perhaps the most obvious point to note is that parties will always be in a more certain position where jurisdiction has been agreed in advance by the parties. To date, the English courts have held that arbitration clauses do not fall within the terms of the Regulation and remain able to stay proceedings and/or enjoin foreign proceedings that are in clear breach of an arbitration clause.

As regards litigation, if an express jurisdiction clause is agreed, the English courts will no longer be able to enjoin proceedings brought by the other party in breach of the jurisdiction clause, if the other proceedings are brought in a Regulation country. If the other proceedings are brought in a non-Regulation country, an injunction remains available.

If there is no express jurisdiction or arbitration clause generally the correct forum is the state where the defendant is domiciled. The ECJ has been rigid in enforcing this rule, even where another forum is clearly more appropriate.

- Michael Mendelowitz is a partner and Kiran Soar an associate in the Reinsurance & International Risk team at Barlow Lyde & Gilbert.