UK: (Re)Insurance Weekly Update 42 - 2015

Last Updated: 27 November 2015
Article by Nigel Brook

Welcome to the forty-second edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015

This week's caselaw:

Essar Shipping v Bank of China

The effect of delay on an anti-suit injunction application

The claimant sought an anti-suit injunction restraining the defendant from continuing proceedings in China in breach of a London arbitration agreement. The claimant had waited two months before challenging the jurisdiction of the Chinese courts in those proceedings, and a further seven months to bring its application for an injunction in England. The defendant argued that as a result, it would be inequitable to grant the injunction.

Walker J held that the Court of Appeal's decision in the Angelic Grace [1995] had set out two cumulative provisos to the grant of an injunction: "The court need feel no diffidence provided that the injunction is sought promptly and provided that, even if the application cannot be criticised for lack of promptness, the foreign proceedings are not too far advanced. In my view there can be no doubt that lack of promptness alone may justify refusal of an anti-suit injunction".

Reference was also made to the recent case of Ecobank v Tanoh (see Weekly Update 25/15), where an anti-enforcement injunction was refused because of delay (the claimant there having unsuccessfully sought to challenge jurisdiction in the foreign proceedings before then seeking to challenge enforcement in England). Walker J rejected an argument that that case should be distinguished from this one because an anti-suit injunction, and not an anti-enforcement injunction, was being sought here: "It is clear, however, that Knowles J was treating the relevant principles in enforcement cases as being at least no less onerous than those identified in Angelic Grace. Moreover, I consider that the approach adopted by Knowles J is supported by strong public interests in requiring that those who seek an anti-suit or anti-enforcement injunction should act promptly even though, on the facts of a particular case, there has been no detrimental reliance upon the delay".

Finally, although the claimant accepted that there is no requirement for an applicant for an anti-suit injunction first to apply to the foreign court for a stay of the foreign proceedings or to challenge the foreign court's jurisdiction, it sought to argue that it was entitled to first challenge jurisdiction before seeking an anti-suit injunction. Walker J held that if that meant the claimant could thereby delay an application for an injunction, that was wrong: "it is not a question of whether it is reasonable to apply to the foreign court, nor of whether there will be long delay in the foreign court, but a question of whether the application in this court has been made promptly".

Iveco v Magna Electronics

Jurisdiction in a product liability case: where does the harm occur?

Clyde & Co (Ian Plumley and Sian Purath) for claimants

An Italian company (A) supplied defective components to another Italian company (B), which incorporated them into vehicles which it manufactured. Those vehicles were then sold by B's distributor company in the UK (C). The vehicles caught fire in England. Claims brought by the vehicle owners were settled and B and C then sought a contribution from A. Of issue in this case is whether the English courts had jurisdiction over that claim.

Under the Recast Brussels I Regulation (Regulation 1215/2012), a defendant should be sued in the country of its domicile unless the special jurisdiction rules apply. These provide (inter alia) that "in matters relating to a contract" the defendant can be sued in the place of performance of the obligation in question (ie where the goods have been delivered) (Article 7(1)), or, in matters relating to tort, "where the harmful event occurred". Edwards-Stuart held as follows:

  1. It could not be said that there was a contractual relationship between A and C. Nor could it be argued that, since there was a contract between A and B, everything that followed from that was "related to a contract": "It seems to me, as a matter of construction, that the reference to "a contract" in Article 7(1)(a) must be to a contract between the claimant and the defendant, or a situation very close to it - for example, where one of the contracting parties is, or is effectively, acting as agent for one of the parties to the litigation".
  2. It was common ground that the place "where the harmful event occurred" means both the place where the event giving rise to the damage occurred (it being accepted that in this case that was Italy) and also the place where the damage occurred. The judge rejected an argument that the damage had occurred in Italy when the defective components had been incorporated into the vehicles in Italy. Instead, he found that no one had suffered any damage prior to the occurrence of each of the fires: "It is true that, if(B) had discovered the defects in the relay systems before it sold the vehicles, it would have suffered a loss in that it would have had to replace the defective relay systems. But this never happened. Similarly, [C] suffered a potential loss in that it purchased vehicles which contained a serious defect, but since the vehicles were sold on at the agreed price in ignorance of the defect, it suffered no loss".

Accordingly, the English courts had jurisdiction to hear the claim brought by C (but the claim brought by B, which did relate to a contract, should be heard in Italy).

Hashwani v OMV Maurice Energy

Whether court should stay proceedings for arbitrators to hear jurisdiction challenge

After an ICC arbitration was commenced by OMV against two parties (OPL and Zaver), those parties issued an application to the English court under section 72 of the Arbitration Act 1996 ("the Act"), seeking a declaration that the ICC did not have jurisdiction. OMV sought a stay under section 9 of the Act, or pursuant to the court's inherent jurisdiction. The judge decided to stay Zaver's application in order to give the ICC arbitrators an opportunity to decide whether they had jurisdiction to act. His reasoning was that there would be an arbitration in any event (the arbitrators having jurisdiction over the dispute between OMV and OPL) and so the question of jurisdiction should be left to the arbitrators. In so doing, the judge had relied on earlier caselaw to the effect that a stay is appropriate if the court can be virtually certain that there is an arbitration agreement and that the dispute falls within it.

The Court of Appeal has now held that the judge erred in his approach. This was not a case where it was clear that there was an arbitration agreement between OMV and Zaver. Furthermore, support was given to the views expressed by Lightman J in Albon v Naza Motor Trading (see Weekly Update 14/07) that "it will only be in exceptional cases that a court faced with proceedings which require it to determine the jurisdiction of arbitrators will be justified in exercising its inherent power to stay those proceedings to enable the arbitrators themselves to decide the question". That is because, although arbitrators have jurisdiction to decide their own jurisdiction, that will not be "the final word", since the parties can still challenge the award under section 67 of the Act, on the ground that the arbitrators lacked substantive jurisdiction and "In simple terms, a party is not bound by the award of a tribunal on a matter that he did not agree to refer to it. It may be that in a few cases there may be practical reasons for allowing the tribunal to reach a decision on its own jurisdiction before the court finally rules on the matter, but such cases are likely to be rare. In the present case a decision by the tribunal might have had some persuasive authority, but could not finally determine the matter before the court".

Property Alliance v RBS

Court considers waiver of privilege point

If a privileged document is referred to in a pleading (but not quoted in full), then privilege will not have been waived. However, if the document is relied on, there will have been a waiver and the privileged document can be inspected by the other side. The short point considered in this case is whether there has been a waiver of privilege where a party decides to no longer rely on a privileged document and amends its pleading. Although this point has been previously considered in various textbooks, Birss J confirmed here that, if the amended pleading is permitted, "no waiver will have taken place merely by virtue of having been pleaded before". That principle was said to derive from the nature of a pleading (which is to set out the case a party intends to make at trial). Here, an amended defence had removed a plea which had previously put in issue a matter which had led to a waiver of privilege – accordingly, the waiver would not now take place.

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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