The claim concerned the attempted recovery by insurers of the proceeds of a settlement paid for the loss of a ship. The question before the Supreme Court was whether English courts had jurisdiction under the rules in the Brussels I regulation. The interpretation of that regulation in matters relating to insurance has been more commonly seen in road traffic accident cases and tour operator / holiday claims. The underlying facts in Aspen may be very different to personal injuries sustained abroad, but the decision is nevertheless relevant to them.
Following the loss of the Atlantik Confidence in the Gulf of Aden in 2013, a claim was made against the Aspen policy in which the ship was valued at around $22 million. A settlement payment was made to representatives in London.
The insurance policy had an exclusive jurisdiction clause in favour of the English courts, as did the settlement agreement. Credit Europe NV (a bank based in the Netherlands) had financed the ship. It had taken a charge over the ship and an assignment of the policy but it was not a party to it.
A first set of proceedings three years after the loss and not involving insurers found that it was deliberately caused by the owners. As a result the insurers began proceedings in England against the bank to attempt to recover the payment. The essence of this claim was that the payment under the policy was only made due to misrepresentation (being that the ship was lost as a result of an insured act, when in fact it was scuttled) which entitled the insurers to avoid the settlement agreement. The jurisdiction of the English courts was disputed and the appeal reached a 7-strong Supreme Court last November.
The general rule of jurisdiction in the Brussels I regulation is that defendants are to be sued where they are domiciled, subject only to specified exceptions within the regulation itself. Choice of jurisdiction clauses in contracts are one such exception and “matters relating to insurance” are another, in which special rules of jurisdiction afford protection to the non-insurer party.
The Supreme Court affirmed the earlier findings in the case that as the bank was not a party to either the policy or the settlement agreement it therefore could not be bound by the exclusive jurisdiction clauses in either.
This left the questions of whether the attempt to recover the sums was (i) “a matter relating to insurance” governed by section 3 of the regulation and (ii) if so whether the bank was entitled to the protective jurisdiction afforded in such matters. Within section 3, article 14 provides that the jurisdiction shall be that of “the member state in which the defendant is domiciled, irrespective of whether he is the policyholder, the insured or a beneficiary.” In this case that would be the Netherlands, where the bank was based.
Unsurprisingly, the Supreme Court agreed with the findings in the High Court and the Court of Appeal on (i) that the dispute was “a matter relating to insurance”. Both these lower courts, however, had gone on to decide (ii) by finding that the bank should not be regarded as “the weaker party” here, a phrase found in recital 18 to the regulation rather than in the body of article 14 itself. That had meant that it (the bank) was not entitled to rely on the protective jurisdiction and therefore could be sued in England.
The Supreme Court took the opposite view based on a thorough analysis of the relevant European case law on section 3 of the regulation.
Lord Hodge gave the judgment of the Court, finding that “There is no ‘weaker party’ exception which removes a policyholder, an insured or a beneficiary from the protection of article 14.” The lower courts had erred in this respect.
What he seems to have meant is that if the defendant pursued by the insurer is properly classified as a “policyholder, an insured or a beneficiary” of the policy that of itself is sufficient to establish the exclusive protective jurisdiction of their domicile. The assignment of the policy in this case clearly meant that the bank was a beneficiary.
It was not necessary to make a further qualitative inquiry into whether or not the bank was the “weaker party”. That phrase from recital 18 would be used only to consider whether the protective jurisdiction of article 14 should be extended beyond its three named categories – “a policyholder, an insured or a beneficiary” – as has been the case with injured parties and liability insurance.
He emphasised this conclusion by noting that “the CJEU in its jurisprudence has set its face against a case by case analysis of the relative strength or weakness of contracting parties as that would militate against legal certainty. Instead, it has treated everyone within the categories of the policyholder, the insured or the beneficiary as protected unless the Regulation explicitly provides otherwise.”
He then examined the relevant CJEU jurisprudence in some depth, which it is not proposed to cover here. It is probably sufficient to say that among the cases considered were KABEG, Hofsoe and Vorarlberger, all of which concerned conventional accident claims.
This clarification of the basis of jurisdiction in article 14 of the regulation could impact on insurers looking to pursue subrogated claims against defendants domiciled outside the UK, including those for indemnity/contribution proceedings arising out of a settled liability claim, or recovery proceedings against an insured for a fraudulent claim on, say, a property insurance policy.
The unsatisfactory outcome in this case – for the underwriters – was that the methodical approach adopted by the Supreme Court in the light of the European cases meant that their claims could not be pursued in England & Wales. Although there was some reference in the Court of Appeal’s decision to separate proceedings in the Netherlands it is not known if those are still in progress.