Following the leak of 5000m3 of bitumen from a pipeline in Canada the Second Defendant faced a claim in relation to construction work carried out on the pipeline. The Second Defendant had in place a general liability coverage policy and four layers of excess cover. The Second Defendant prepared proceedings in Alberta, Canada for a declaration of its entitlement to an indemnity for the claim.
In response, the underwriters of the excess layers applied for anti-suit injunctions to prevent the Alberta proceedings. The Claimant underwriters sought to prevent the Defendants from gaining an advantage by way of their choice of jurisdiction. The Claimants succeeded in obtaining interim injunctions.
The majority of the Claimant underwriters argued that exclusive jurisdiction clauses in the policies required proceedings to be initiated in England and Wales, while Allied World Assurance Company (Europe) DAC (AWAC) argued that their policies required disputes to be arbitrated in England and Wales.
The Defendants argued that the Primary Policy Jurisdiction Clause (PPJC) featured in all of the policies except AWAC’s policy should take precedence over the exclusive jurisdiction clauses in those policies and that the PPJC provided for multiple potential jurisdictions. The Defendants asked the Court to exercise its discretion against the enforcement of the AWAC arbitration agreement in order to avoid a multiplicity of proceedings.
The Court held that the PPJC had precedence because it had been specifically negotiated by the parties while the exclusive jurisdiction clauses were standard terms. However, as the PPJC referred to the general liability coverage policy which did not determine jurisdiction, the exclusive jurisdiction clauses were to be preferred in order to maintain certainty.
The anti-suit injunctions were made permanent in respect of the first and third excess layers, where the policy wording included clear exclusive jurisdiction clauses, but not in respect of the second excess layer which only featured a clause specifying that the law of England and Wales applied.
The AWAC arbitration agreement was also enforced; the Court having found that the potential for a multiplicity of proceedings was “inherent in the agreements reached".
Points to note
- The Court will favour certainty over a ‘permissive’ interpretation of jurisdiction clauses
- The Court will look to standard wording where individually negotiated terms fail to provide certainty
If you would like to discuss this briefing or any other policy coverage issues, please contact James Thompson.