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
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.