Andrew Bandurka
Negotiating the jurisdictional maze
Insurance Company of the State of Pennsylvania (ICSP) v Equitas Insurance Company Ltd (EIL)
This case illustrates the complex jurisdictional issues and consequent tactical considerations which may arise when an insurance or reinsurance contract does not contain clear provisions as to jurisdiction.
A dispute arose under certain reinsurance contracts pursuant to which EIL (as transferee of the liabilities of the Lloyd’s syndicates originally subscribing to those contracts) reinsured ICSP.
The reinsurance contracts did not contain clear provisions as to jurisdiction. In order to protect its position, and despite the negotiations between the parties only having contemplated English proceedings, ICSP commenced proceedings in both the English Commercial Court and the New York Court. ICSP then wrote to EIL clarifying that it only intended to pursue the English proceedings if for any reason the New York proceedings could not proceed, and asking EIL to agree to a stay of the English action. EIL refused and so ICSP applied to the English Court for a stay. EIL made its own application in England for an anti-suit injunction against the New York proceedings.
EIL’s application for an anti-suit injunction failed. Whilst ICSP’s conduct in launching its claim in New York despite no previous mention of any such intention was, in the Court’s view, “most unsatisfactory”, EIL’s detrimental reliance on the impression created by ICSP that only English proceedings were in contemplation was not sufficiently prejudicial to make it unjust for ICSP to sue in New York.
Ben Atkinson
Nor, however, was the Court prepared to grant ICSP’s application for a stay of its English proceedings. The manner in which ICSP had negotiated with EIL by reference to contemplated English proceedings without informing EIL that it would sue in New York if negotiations failed, meant that ICSP had, in the Court’s view, failed to show that this was an exceptional case in which ICSP as claimant should be granted a stay.
As a result, both sets of proceedings continue.
The absence in this case of any clear provisions as to jurisdiction was at least partly explained by the age of the contracts and the incompleteness of the surviving documentation. Those negotiating insurance and reinsurance contracts in today’s market will of course ensure, with the assistance of their advisers, that clear, appropriate and effective provisions as to governing law are included, so as to prevent issues such as these arising in the event of future disputes.
In the absence of such provisions, ICSP was forced to take those steps which it considered necessary to pursue its claim. However, the case illustrates that parties faced with such circumstances must protect their own interests whilst at the same time recognising the need to conduct matters in a manner which will be regarded favourably, should it become necessary to seek the discretionary assistance of the Court. This will involve keeping the other party sufficiently informed of one’s intentions, on the basis that, as the Court put it in this case “generally speaking, parties to litigation, threatened or on foot, are entitled to know where they stand with the opposition”.
For more information, please contact Ben Atkinson, Associate, on +44 (0)20 7264 8238, or ben.atkinson@hfw.com, or Andrew Bandurka, Partner, on +44 (0)20 7264 8404, or andrew.bandurka@hfw.com, or your usual contact at HFW.
