UK: "Jurisdiction Clause as Attached"- What if it Isn´t?

Last Updated: 10 April 2002
Article by George Mortimer

Originallly published in March 2002

The recent decision of Mr Justice David Steel in Brotherton v Colseguros (18th December 2001) in which RPC represented the successful reinsurers, sheds an interesting light on how the English Commercial Court will approach issues of disputed jurisdiction in facultative reinsurance contracts, and provides some pointers for those placing or underwriting such business in the London Market. his

The claimant reinsurers commenced English Commercial Court proceedings for a declaration that they had validly avoided the defendant’s reinsurance contract in respect of their original insurance of a Colombian bank.

The reinsurers argued that the presentation and placement of the reinsurance (under a lineslip) had taken place in London. The reinsurance was accordingly governed by English law and, because most of the relevant evidence and witnesses were located in this country, England was the appropriate forum in which the dispute should be determined - and the Commercial Court should therefore accept jurisdiction.

The reinsureds opposed English jurisdiction on the basis that, as they alleged, the reinsurance contract incorporated a clause imposing Colombian law and jurisdiction.

The underwriter at the Lloyd’s syndicate which led the lineslip had given his quotation for the risk on a "quotation sheet" prepared by the brokers, which as printed included the words "jurisdiction clause as attached". Those words were deleted by the underwriter in manuscript. Nonetheless the words reappeared in the final version of the slip. No jurisdiction clause was in fact attached either to the quotation sheet or to the final slip.

Notwithstanding the absence of any attachment, the reinsureds argued that a generic jurisdiction clause had already been discussed and agreed between the brokers and lineslip underwriters in terms which provided for local, in this case Colombian, law and jurisdiction to apply. The reference "jurisdiction clause as attached" was therefore sufficient to incorporate the clause.

In his evidence, the leading syndicate’s underwriter confirmed that a standard form of jurisdiction clause for us generally with the lineslip had indeed been discussed, and that the brokers had pressed for the same governing law to be applied to the reinsurance as to the underlying cover, ie that of the country in which the original risk and the reinsured were located. The underwriter’s philosophy however had remained that, although he had agreed to follow the fortunes of the reinsureds in two disputes under the underlying cover (which would obviously be subject to local law and jurisdiction), he was only willing for the reinsurance contract to be governed by English law, save in exceptional circumstances.

No clause reflecting this position had been put forward by the brokers, and no agreement had ever been reached in the discussions. In the particular case of the reinsurance contracts at issue, he had failed to strike through the reference to "jurisdiction clause as attached" when he checked that the final slip prepared by the brokers reflected his quotation, probably because he had overlooked it, or possibly in anticipation of agreement with the brokers of a standard clause which would reflect this philosophy.

The underwriter’s evidence was supported by other evidence from reinsurers to the effect that no generic clause had been agreed.

The reinsureds sought to counter this with evidence from the two senior brokers who were responsible for presentation of the risk and for declarations under the lineslip. They deposed to a firm belief that the clause had been drawn up and agreed by the leading underwriter (and other lineslip underwriters), and that a copy scratched by the leading underwriter had been retained in their office. However, they were unable to produce the signed copy, and neither was able to say from direct knowledge that he himself had secured the underwriter’s agreement, or had seen the scratched clause.

The judge characterised the brokers’ evidence as lacking both supporting documentation and consistency, and preferred reinsurers’ evidence that no jurisdiction clause was in fact agreed.

The judge went on to reject the reinsureds’ further submission, relying on another recent Commercial Court decision, Burrows v Jamaica Power2 (29 October 2001), that mere reference to a "jurisdiction clause" in the slip was sufficient to constitute an agreement that the local courts in Colombia had jurisdiction. That case concerned direct insurance of a Jamaican risk where the slip included a reference to the Lloyd’s NMA1483 clause. This is headed "Overseas Jurisdiction Clause" and has as its counterpart NMA1485, the so-called "English Jurisdiction Clause". NMA1483 includes a blank space which can be filled in to nominate the country whose courts and system of law will govern the contract. In Burrows, the judge accepted the Jamaican insured’s submission that, although no policy wording had been issued, and the blank in NMA1483 had not been completed to nominate Jamaica as the relevant country, the reference to it in the slip indicated agreement that the contract was to be subject to Jamaican law and jurisdiction.

The judge in Brotherton had no difficulty distinguishing Burrows. There was no analogy between Burrows, where a specific "Overseas Jurisdiction Clause" was referred to by reference to a recognised standard wording, and Brotherton, where the slip reference was to an unidentified jurisdiction clause which was not in fact attached or available to the market, and indicated no preference for a non-English jurisdiction.

The judge in Brotherton also rejected the further submission that because a version of a jurisdiction clause was in circulation at the time the slip was scratched, the reference to "jurisdiction clause" in the slip had to be construed as a reference to that draft. In the first place, it appeared that more than one version had been in circulation; second, this argument was entirely inconsistent with the reinsureds’ primary case that there had been a successful conclusion to the negotiations and that a jurisdiction clause had been agreed.

Because no specific applicable law/ jurisdiction clause had been agreed, the (English law) rule that English law governs reinsurance placed in the London market applied. For this reason, and because the primary factual issues concerned misrepresentation and non-disclosure at placement in London, and most of the relevant witnesses were in England, it was clear that the English courts were the most appropriate to hear the dispute and would accept jurisdiction. The fact that proceedings were already on foot in Colombia in relation to the underlying insurance was of no direct relevance - the issues were quite different.

Commentary

It is implicit in the nature of facultative reinsurance contracts that jurisdiction and applicable law may be controversial. Many reinsurers would accept that, in relation to claims under a direct policy, reinsurers should in the usual course follow the fortunes of the reinsureds, subject to local law and jurisdiction. A reinsured would be left high and dry if it is held liable to its original insured by the local courts, and is unable to recover under a reinsurance contract to which reinsurers seek to apply narrower English law principles to determine the scope of cover.

On the other hand, if there is a dispute between reinsurers and reinsureds unrelated to coverage under the direct policy (as was the case in Brotherton where reinsurers allege that the reinsureds failed to disclose matters within their own knowledge material to the underlying risk), most reinsurers would wish to ensure that those issues were determined against the framework of English insurance and reinsurance law in the English courts, which boast an established expertise in international reinsurance disputes. However, many reinsureds may not be willing to agree such an arrangement.

Leaving the slip silent as to jurisdiction and applicable law would not necessarily ensure English jurisdiction over a reinsurance contract placed in the London market; the English courts could decline jurisdiction if they believed a foreign court would apply English law, and if they considered that the factual issues, location of evidence, and convenience of witnesses all pointed to a foreign court as more appropriate and convenient.

Where possible, underwriters and brokers should seek to agree and incorporate jurisdiction and applicable law clauses acceptable to all the parties. Reinsurers who are happy to follow the fortunes of their reinsureds in relation to direct policy losses, but want the reinsurance to be subject to English law and jurisdiction, may wish to stipulate for a clause in the terms of the recently issued Lloyd’s Standard Wording LSW1125, which provides as follows:

"This reinsurance shall be governed by and construed according to English law. The English Courts shall have exclusive jurisdiction over the parties hereto on all matters relating to it but shall construe any terms and conditions of the original insurance and any obligations deriving therefrom which are or become governed by some other law, rule, practice or jurisdiction as having the same meaning and/or effect as has or would be given to them under such law, rule, practice or jurisdiction."

A clearly defined express agreement as to jurisdiction and applicable law should avoid the uncertainty and expense of jurisdiction disputes, and benefit all the parties to a facultative reinsurance or direct insurance contract.

1 LTL 04/01/2002

2 LTL 05/11/2001

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions