UK: Insurance And Reinsurance Weekly Update - 30 April 2013

Last Updated: 9 May 2013
Article by Nigel Brook

Welcome to the fifteenth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2013.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

This week's caselaw

  • Lawlor v Sandvik Mining
    Court of Appeal clarifies the approach of the court when deciding if there has been an implied choice of law.
  • Arbuthnot Latham v M3 Marine
    A decision on whether the English or French court was "first seised".
  • Morris Homes v Keay & Anor
    The correct approach for the court to adopt on an application under section 69 of the Arbitration Act 1996.
  • (Granton Action) JSC BTA Bank v Ablyazov
    Court decides the appropriate discretionary rate of interest for a foreign bank.

Lawlor v Sandvik Mining

Court of Appeal clarifies approach of the court when deciding if there has been an implied choice of law

The appellant argued that the judge had erred in finding that there had been no implied choice of English law in its contract with the respondent. The parties had entered into the contract before 17 December 2009, and so the Rome Convention applied. This provides that an implied choice must be "demonstrated with reasonable certainty" (the Rome Convention has now been replaced by the Rome 1 Regulation, which provides that the implied choice must be "clearly demonstrated". However, the Court of Appeal confirmed that the change of language was not intended to involve a change of meaning).

The appellant argued that the judge had been wrong to require evidence of actual consideration and discussion of the choice of law. The Court of Appeal accepted that "logically, there may be a certain artificiality in attributing to the parties a tacit choice in circumstances which do not suggest that they gave actual thought to the matter...However, one can see the justice of inferring a choice of law in circumstances where it would not reasonably have occurred to the parties to suppose that a different law might apply. It would lack practical sense to require that they should have contemplated that which would not reasonably have occurred to them".

The party asserting an implied choice has to satisfy the court that, on an objective view, the parties must have taken it without saying that their contract was governed by a particular law. There is no need to prove that there was in fact a subjective conscious choice. However, applying that test to this case, the appellant had not established an implied choice of English law.

The Court of Appeal also cautioned against attempting to to apply the Rome Convention/Rome 1 "through the prism of the preceding common law". The court should try to achieve uniformity with the courts of other countries when interpreting the convention/regulation.

Arbuthnot Latham v M3 Marine

Whether English or French court was "first seised"

Regulation 44/2001 provides that where proceedings involve the same cause of action between the same parties, any court other than the one "first seised" must stay its proceedings until the jurisdiction of the court "first seised" is established. Article 30 defines when a court is "seised": under Article 30(1) it is when the document instituting the proceedings is lodged with the court; under Article 30(2) it is when the document is received by the authority responsible for service, if the document has to be served before it is lodged at court. Article 30(1) applies to proceedings in England and Wales, whereas Article 30(2) applies to proceedings in France. The "authority responsible for service" in England is the Foreign Process Section at the Royal Courts of Justice ("FPS").

In this case, a French writ was faxed to (and received by) the FPS on 24 October. It was posted to the FPS on the same day, but was not received by the FPS until 30 October. English proceedings were commenced on 26 October and the defendants sought a stay of those proceedings. The issue was therefore when the French court had been seised.

In furtherance of the objectives of Regulation 44/2001, a Manual is published on the European Commission's internet site. In the UK section of the Manual, it states that "documents will be transmitted by fax and post". Did that mean that for a document to be deemed received by the FPS it must be received by both fax and post or by either of those methods?

Hamblen J held that receipt by either fax or post would suffice. A double receipt requirement would "undermine certainty" as there would be a greater chance of something going wrong (and no other country imposes such a requirement). Furthermore, speed and efficiency are important aims of Regulation 44/2001.

Accordingly, the French court was first seised and a stay of the English proceedings was granted.

Morris Homes v Keay & Anor

The correct approach for the court to adopt on an application under section 69 of the Arbitration Act 1996

The claimant sought leave to appeal an arbitration award on a question of law, pursuant to section 69 of the Arbitration Act 1996. Grant HHJ held as follows:

  1. Applying CMA v Beteiligungs [2003], the process whereby the court deals with such an application for permission to appeal is essentially summary in nature. In CMA, Lord Phillips MR referred to a prior practice in the Commercial Court to deal with such applications in half an hour or so. Here, the judge said he had taken "considerably longer than that". He said his approach had been as follows: "irrespective of the amount of time it in fact takes the judge to read and understand all the relevant underlying material, once the judge has carried out that part of the exercise, the process of determining the application for leave to appeal should be a summary one".
  2. As to the criteria to be applied when considering the application itself, the judge referred to both CMA and the earlier (pre-1996 Act) case of "The Nema" [1982]. In The Nema, Lord Diplock said that for a case concerning a "one-off" clause in a contract, leave should only be given if it was apparent to the judge (on a mere perusal) that the arbitrator was "obviously wrong", whereas where the construction of standard term clauses was concerned, the test was "rather less strict", but the applicant still had to establish a strong prima facie case that the arbitrator had been wrong.

In CMA, Lord Phillips held that The Nema had been replaced by statutory criteria in the 1996 Act. However, Grant HHJ pointed out that the Act only says that the court must be "satisfied" and does not define the way in which the criteria for giving leave have to be satisfied. The judge concluded that the correct approach was that the applicant has to establish that "it is clear-cut" that the criteria in section 69 are satisfied. He did not draw any specific distinction between "one-off" and "standard terms" cases.

The judge went on to find that the criteria had not been satisfied in this case and leave to appeal was refused.

(Granton Action) JSC BTA Bank v Ablyazov

Appropriate discretionary rate of interest for a foreign bank

One of the issues in this case was the rate of discretionary interest which the winning claimant would be entitled to (pursuant to section 35A of the Senior Courts Act 1981). There was no dispute that interest should be awarded at the rate of interest at which borrowers with the general attributes of the claimant could have borrowed money over the relevant period.

The claimant is a Kazakh bank and argued that "Kazakh banks" was the appropriate class of borrower. The defendants sought to argue that that was too narrow and the appropriate class should be "banks" or "financial institutions". Teare J rejected that argument: "Whilst Kazakh banks obviously have some attributes in common with other banks or financial institutions they also have some characteristics which Western banks do not."

The judge also rejected an argument that interest should only start to run from the date of judgment (rather than from the date the cause of action accrued, as is normal). The defendants had sought to argue that, when exercising its discretion, the court should take into account the treatment of interest according to the lex causae (ie the law governing the substantive issues in the case – here Kazakh law). The judge found that it had not been proven that interest runs from the date of judgment under Kazakh law. In any event, an award from the date of judgment would substantially deprive the claimant of compensation for being kept out of its money: "Interest under section 35A is essentially a procedural remedy ... and I consider that it is appropriate, when this court is awarding its own procedural remedy, to have regard to economic reality".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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