A review of English Commercial Court's decision in Aizkir Navigation Inc -v- Al Wathba National Insurance Company, which held that the word settlement could have a duel meaning in an English insurance context and dealt with the circumstances in which an English Court may accept jurisdiction over a dispute notwithstanding a jurisdiction clause in favour of another court.

The need for a clear jurisdiction clause in a UAE issued insurance policy has again been highlighted by the English Commercial Court's decision in Aizkir Navigation Inc -v- Al Wathba National Insurance Company.  In this decision the Court considered whether a clause contained in an insurance policy, issued by Al Wathba Insurance Company (Al Wathba), was a jurisdiction clause and also dealt with the basis on which an English Court would be considered the most appropriate forum to resolve a dispute even if the parties had previously agreed for the dispute to be resolved in another jurisdiction.

This article reviews the Court's decision as it serves as a useful reminder for the need to include an unambiguous jurisdiction clause and highlights the circumstances in which an English Court may accept jurisdiction over a dispute notwithstanding a jurisdiction clause in favour of another court. 

Background

The judgment followed an application by Al Wathba to set aside an order allowing  the service out of jurisdiction of a claim form for proceedings issued in England by Aizkir Navigation (the Insured). The dispute between Al Wathba and the Insured arose pursuant to a claim made under a marine hull and machinery policy for the alleged constructive total loss of a vessel, the Princess 7.  The policy incorporated the Institute Time Clauses – Hulls, which provided that the policy would be subject to English law and practice. Al Wathba, which has operations in the UAE, successfully argued that the policy contained a jurisdiction clause in favour of the UAE Courts. 

Interpretation of "Settlement"

The clause relied on by Al Wathba was contained in the policy schedule and read as follows:

"Claims: In the event of claim arising under this policy of insurance, it is agreed that it will be settled in accordance with English law and practice and shall be so settled in Abu Dhabi (UAE)."

The Insured had sought to argue that the use of the word "settlement" suggested that the clause related to the process of presentation, adjustment and settlement of claims under the policy (i.e. the process of making a claim under the policy), which is distinct from the process of submitting a dispute to arbitration or agreeing to the jurisdiction of a specific Court.

The Court analysed English case law on the use of the word "settlement" and found that,  in the insurance context, the use of the word "settlement" could mean both the settlement of claims (in the adjusting sense) or the adjudication of disputes (in the Court sense).  When deciding that the clause was a jurisdiction clause it was highlighted by the Court that English was in all likelihood not the first language of either party.   The Judge also noted that the reference to "practice" suggested the settlement of claims pursuant to the clause was in the more formal dispute resolution context; this was supported by the location of the clause at the end of policy (where choice of law and forum clauses are generally found) and the fact that the choice of law was dealt with in the same sentence as the settlement of claims.

The Most Convenient Forum

Having found that the policy contained a jurisdiction clause, the Judge referred to the principles set out in Antec International Limited -v- Bio Safety USA Inc  [2006], that held that the parties will be bound to their contractual agreement on jurisdiction unless there are overwhelming or at the least very strong reasons to depart from this principle.  With respect to the principle that the parties' agreement should be upheld  the Judge highlighted that:

"The agreement [on jurisdiction] will only be overlooked if the other jurisdiction is shown to be the natural forum for litigation and there are sufficient further reasons to condone the breaking of the contract, which there will rarely be". 

The Insured had sought to raise various reasons why there were sufficient reasons for the Court to overlook the parties' agreement.  The issues that the Insured raised will be familiar to parties litigating in the UAE and include that:

  1. the policy was subject to English law;
  2. there was a risk that the Abu Dhabi Court would not apply English law;
  3. Arabic is the language of the Courts in the UAE and therefore all documents would have to be translated into Arabic causing delays and the risk that evidence could be distorted;
  4. the UAE Courts do not have a dedicated Maritime Division, which would mean that there is no guarantee that the matter would be heard by judges with experience in marine insurance matters;
  5. legal costs are not recoverable in UAE proceedings to any material extent;
  6. there is no system of automatic disclosure;
  7. there may be no oral evidence and, if there is, it may not be tested by cross examination;
  8. there are delays in the system; and
  9. there were various other evidential or factual considerations (such as the location of the owner and crew), which pointed away from the UAE.

The Court nevertheless concluded that these factors did not constitute an overwhelming or strong reason to depart from the general rule that parties are bound by their agreement. The Court was not persuaded by the evidence provided by the Insured that the UAE Courts would not apply English law.

The Judge also held that, even if he was wrong on whether the claims clause was a jurisdiction clause, based on the limited connection with England and the fact that there were no aspects of English law of particular difficulty or significance that had been identified to the Court, the UAE would be a more appropriate Court to decide the dispute than the Courts of England.

Concluding Comments

While there are a number of interesting issues raised in the decision, two issues in particular should be highlighted to Middle Eastern insurers underwriting risks pursuant to policies governed by English law:

  1. It is apparent that although "settlement" can have a dual meaning in the insurance context, in this instance there would have been far more certainty regarding the Court with jurisdiction if the clause had expressly referred to the "Courts of Abu Dhabi" or the "Courts of the UAE".   Accordingly, expressly referring to a Court will make it more difficult for an insured to challenge a pre-agreed dispute resolution provision.
  2. Where a policy is said to be interpreted pursuant to English law, it will not automatically mean that the English Courts will accept that they are the most convenient forum and have jurisdiction over such dispute.  An English Court will consider the parties' agreement and/or the weight given to the facts linking the dispute to England and will then decide whether it is the most appropriate forum to decide the dispute. 
  3. In relation to the application of English law by a UAE Court, the finding is surprising. In our experience, it is practically impossible in many cases to prove English law before UAE Courts and attempts to do so are fraught with difficulty.

As a concluding comment it should be highlighted that although it is pleasing that the English Court gave effect to the parties' agreement on jurisdiction, it is unlikely that a GCC court would respect the parties' agreement on a foreign jurisdiction if the facts in the present case were reversed.

Legal advice should therefore always be sought if the choice of forum to resolve disputes is a court other than the local court.

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.