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A “Political hot potato”? Analysing the ECJ’s judgment in Assens Havn v Navigators Management (UK) Limited, European Court of Justice (8th Chamber) – 13 July 2017

  • United Kingdom
  • Financial services disputes and investigations
  • Insurance and reinsurance - E-briefings
  • Litigation and dispute management

25-07-2017

On 13 July 2017, the European Court of Justice (“ECJ”) decided that an exclusive jurisdiction clause in a liability insurance policy cannot be enforced against a third party victim bringing a direct action against the insurer in an alternative jurisdiction pointed to by the Brussels Regulation. 

The Danish Court’s reference to the ECJ related to Section 3 of the Brussels Regulation (since replaced by the Brussels Recast Regulation).  Section 3, which straddles Articles 8 to 14, concerns jurisdiction in insurance matters.  Article 10 allows liability insurers to be sued in the place where the harmful event has occurred and Article 11 extends this right to injured parties who are permitted to bring such direct actions in that jurisdiction.  However, Articles 13 and 14 provide that the provisions of Section 3 may be departed from by an agreement which relates to a liability insurance contract arising out of the use or operation of ships, installations or aircraft.   

The Danish claimant was the operator of quay installations damaged by a ship chartered by the Swedish insured.  It commenced proceedings against liability insurers as the insured had gone into liquidation.  The action was based on Danish insurance law providing that “[t]he injured party shall...be subrogated to the insured party’s claim against the company if the injured party’s claim for compensation is affected by the liquidation…of the insured party” (our emphasis).

The policy contained an exclusive law and jurisdiction clause in favour of the English courts, which was mirrored in the insurers’ conditions of insurance.  The Danish first instance court declined jurisdiction on the basis of this clause, but the appeal court asked the ECJ if Article 13(5) and 14(2) means that a victim entitled to bring a direct action against the insurer can be bound by such a clause.

The ECJ said it was necessary to consider the “scheme” and “underlying objectives” of Section 3 to answer the question.  As to the former, it noted that Article 11 does not expressly refer to the exceptions in Articles 13 and 14.  As to the latter, it noted that Section 3 seeks to correct the “imbalance between the parties” characteristic of insurance matters by “giving the weaker party the benefit of rules of jurisdiction more favourable to his interests than the general rules provide for”.  These factors underpinned its decision that a victim entitled to bring a direct action against the insurer is not bound by a jurisdiction agreement between the insurer and the insured party.

Comment

With due respect, a few aspects of the judgment are open to debate.  For example, it is of limited consequence that Article 11 does not expressly refer to Articles 13 and 14 given that they generally apply to the provisions of Section 3.  Arguably there is no more need for an explicit cross-reference to Article 11 that there is to any other provision of Section 3.  Further, if the basis of the claimant’s right in Danish law was the principle of subrogation then there ought to be doubt over whether it can benefit from “more favourable” jurisdiction rules (assuming such rules exist) as subrogation implies that the victim can be in no better position than the insured.  This was not a matter specifically addressed by the judgment.

Ultimately there is scope to argue whether the interests of justice have been served by this judgment.  In any event it is fair to observe that decisions of the ECJ attract as much scrutiny from the UK as ever, since there remains uncertainty over the jurisdictional regime that will apply post-Brexit.  Whilst that is a topic in itself, we note that one possibility raised by Sir Richard Aikens at the recent British Insurance Law Association Brexit Symposium is that the UK will subscribe to European jurisdiction rules by signing a bilateral agreement with the EU, much like Denmark did in 2005.  However, leaving the interpretation of any such agreement subject to ECJ jurisdiction would be, as he accurately described it, a “political hot potato”.

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