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One year on from Brexit: The evolving approach of the English Courts to jurisdiction disputes

  • United Kingdom
  • Brexit
  • International arbitration - Briefings

21-01-2022

Introduction and Executive Summary  

One year on from the UK leaving the EU on 31 December 2020, we review the evolving approach taken by the English Courts when faced with disputes over jurisdiction.  

In our first publication of March 2021 we looked at some of the key decisions of the English Courts around the interpretation of the rules which govern its jurisdiction and enforcement in cross-border commercial disputes from 1 January 2021[1]. One year later in our second publication we look at what the key cases from the past year tell us about the Court’s evolving approach. Particularly:  

i. A more expansive approach to the tort jurisdictional gateway; tortious activities overseas can increasingly be the subject of claims before the English Court;

ii. A continued willingness on the part of the English courts to accept jurisdiction, even where jurisdiction clauses are in conflict, exclusivity is being challenged, or foreign law is deemed to apply; and

iii. The importance of giving credence to the case law of the Court of Justice of the European Union in relation to European Legislation.

We now take a closer look at 4 further decisions of the English Courts that illustrate these developments:

  1. The domestic regime for determining jurisdiction with particular reference to the breadth of the tort gateway under PD 6B 3.1(9)(a) (FS Cairo (Nile Plaza) LLC v Lady Brownlie (as Dependant and Executrix of Professor Sir Ian Brownlie CBE QC) [2021] UKSC 45); and 
  2. The treatment of conflicting choice of law, jurisdiction and arbitration clauses in complex reinsurance arrangements and whether jurisdiction clauses are deemed to be exclusive where not expressly stated (Axis Corporate Capital UK II Limited and Others v (1) ABSA Group Limited (2) ABSA Bank Limited (3) ABSA Nominees Proprietary Limited (4) ABSA Manx Insurance Company Limited [2021] EWHC 861 (Comm)) 
  3. Whether negotiated terms will prevail over standard terms in the context of jurisdiction clauses (AIG Europe SA v John Wood Group plc [2021] EWHC 2567)
  4. The interpretation of the Air Passenger Regulations in relation to flight delay claims and the treatment of CJEU authorities in Ms Kanaka Durga Chelluri v Air India Ltd [2021] EWCA Civ. 

 AFS Cairo (Nile Plaza) LLC v Lady Brownlie (as Dependant and Executrix of Professor Sir Ian Brownlie CBE QC) [2021] UKSC 45 (Brownlie II)

On 20 October 2021 the Supreme Court in FS Cairo (Nile Plaza) LLC v Lady Brownlie (as Dependant and Executrix of Professor Sir Ian Brownlie CBE QC) [2021] UKSC 45 was asked to determine 2 key issues:

  1. whether the claims in tort passed through the gateway in CPR PD 6B para 3.1 (9)(a); namely that “damage was sustained ….within the jurisdiction”; and if so, whether England and Wales was the proper place to bring the claim (the principle of forum non conveniens and CPR 6.37(3)); and
  2. whether the claims, both in contract and tort, had a reasonable prospect of success for the purposes of establishing jurisdiction (CPR 6.37(1)(b));

The Supreme Court held by a majority of 4:1 that the claim satisfied the domestic rules relating to jurisdiction and dismissed the appeal. Lord Leggatt gave his dissenting judgment at paragraphs [167] to [217].  The court was unanimous in its judgment that the claims had a reasonable prospect of success. 

Background

Following a serious road traffic accident in Egypt in 2010 in which Sir Ian Brownlie and his daughter were killed, Lady Brownlie, who was herself seriously injured, sought to recover damages from the operator of the hotel in Egypt which had provided the excursion.  Lady Brownlie claimed damages against the hotel company pursuant to Egyptian Law, both in contract and in tort, under 3 heads:

  1. in her own right for her personal injuries,
  2. in her capacity as Executrix of Sir Ian Brownlie’s Estate and on behalf of the Estate and its heirs, for his wrongful death
  3. for dependency for wrongful death.

The claim was first issued in December 2012 and after a long line of challenges over the jurisdiction of the English Courts, it transpired, during an appeal to the Supreme Court heard in 2017, that the then named defendant was a non-trading holding company which neither owned nor operated the hotel in Egypt. The appeal was therefore allowed on the basis that there was no realistic prospect of success against the named defendant, however, the Supreme Court granted the Claimant permission to apply to correct the name of the Defendant.

Both parties were in agreement that Egyptian Law would apply to the claims and sought permission to adduce written expert evidence of  Egyptian Law relating to personal injury and wrongful death claims in both contract and tort/delict, as well as the law of limitation.

On 1 October 2019, Nichol J granted permission to the Claimant to substitute the present defendant (FS Cairo (Nile Plaza) LLC) and to serve proceedings on it out of the jurisdiction. Permission to appeal was granted to the Court of Appeal on 2 grounds; (1) the scope of the tort gateway and (2) the requirement that there be a serious issue to try on the merits.

The Court of Appeal, by majority, affirmed the decision of Nichol J in FS Cairo (Nile Plaza) LLC v Brownlie [2021] EWCA Civ 996, however in doing so, ordered the Claimant to serve amended Particulars of Claim to plead the content, principles and sources of Egyptian Law on which she relied, such detail having been previously omitted from her claim.  Permission to appeal on the same two issues was granted to the Supreme Court and the appeal was heard on 20 October 2021.

The parties’ arguments

Issue 1 -  Whether the requirements under 6B 3.1(9)(a) and CPR 6.37(3) had been satisfied to permit service out of the jurisdiction

The claim fell outside the scope of the Brussels system requiring the Supreme Court to consider the domestic rules of England and Wales relating to jurisdiction.

The Claimant relied on CPR PD 6B para 3.1which states:

‘The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where ….(9) a claim is made in tort where (a) damage was sustained, or will be sustained, within the jurisdiction; or (b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction’

The first question before the court was whether each of the claims were claims where damages had been sustained within the jurisdiction pursuant to 6B 3.1(9)(a) and which therefore fell within the ‘tort gateway’.  It was common ground that 6B 3.1(9) (b) did not apply given that the accident itself had occurred in Egypt.

The Claimant’s case was that whilst the initial accident had taken place in Egypt, damage had also been sustained in England where she resided. The Claimant argued that where damage takes the form of pain, suffering and loss of amenity resulting from personal injury, the ‘damage’ for the purposes of 6B 3.1(9)(a) is not sustained at a single point in time when the injury is initially suffered or when a legal cause of action is completed, but extends to the continuing damage suffered thereafter.

The newly substituted Defendant submitted that CPR PD 6B 3.1(9)(a) did not apply to the Claimant’s claims because it only applies where the initial or direct damage was sustained in England and Wales and did not extend to any further consequences that the claimant suffered as a result of the initial damage.  It argued that the initial or direct damage of a road traffic accident occurs at the time and place of the accident which took place in Egypt.

Issue 2 – reasonable prospects of success

It was common ground between the parties that Egyptian Law applied to the claims, however, the dispute over whether the claim had reasonable prospects arose because the written expert evidence of Egyptian Law adduced by the Claimant contained significant gaps. 

The parties agreed that the ‘doctrine of cumul’ precluded a claimant from combining liability in contract and liability in tort, however, it remained unclear whether the Claimant would therefore be confined to a claim in contract only, whether she could pursue claims in tort instead, and if so whether there was any distinction between vicarious liability and direct liability claims under Egyptian Law.

The Claimant submitted that, where there gaps arose in the evidence of Egyptian Law, she was entitled to rely on the English Law principle stated as Rule 25(2) in Dicey, Morris and Collins, The Conflict of Laws[2], that where foreign law applies to a case, ‘in the absence of satisfactory evidence of foreign law, the court will apply English Law’. This argument had been accepted by the Court of Appeal.

On appeal to the Supreme Court, the Defendant argued that where foreign law had been identified as the correct applicable law governing a dispute, the Claimant was under an obligation to set out the legal principles under Egyptian Law upon which she asserted her claim could be established.  It submitted that it would be wrong to assume that foreign law is similar to English law, or that the English law should apply by default, where foreign law had been asserted but the evidence of that law contained gaps.  The Defendant submitted that the Claimant’s failure to properly plead her case pursuant to the applicable foreign law rendered her claim fatally flawed and as such there was no serious issue to be tried on the merits.

The Decision of the Court

Issue 1 - Whether the jurisdictional gateway at CPR PD 6B 3.1(9) had been satisfied to permit service out of the jurisdiction

The domestic rules of England and Wales require that in order to obtain permission to serve proceedings out of the jurisdiction in a case to which the Brussels system does not apply, a claimant must establish:

(1)  a good arguable case that the claims fall within one of the gateways in CPR PD 6B, para 3.1

(2)  that England is the appropriate forum for trial and the court ought to exercise its discretion to permit service out of the jurisdiction

The Supreme Court found that the word ‘damage’ in 6B 3.1 (9)(a) ‘extends, both in its natural and ordinary meaning and on a purposive reading, to the actionable harm caused by the tortious act, including all the bodily and consequential financial effects which the claimant suffers’ at [83].  In his judgment, Lord Lloyd-Jones employed the language of McHugh JA in Flaherty v Girgis[3] stating:

damage in this context is not confined to the element necessary to complete a cause of action but includes all the detriment, physical, financial and social which the Claimant suffers as a result of the tortious conduct of the defendant’.

The court therefore concluded that England and Wales was the proper jurisdiction to bring the claim.

This case had the unusual benefit of having been already considered by the Supreme Court in 2017. Whilst the case did not proceed at that time, Lady Hale, Lord Wilson, Lord Sumption, Lord Hughes and Lord Clarke, in the judgments handed down, expressed differing obiter views of the meaning of ‘damage’ in PD 6B 3.1(9)(a).  Such obiter views presented the Supreme Court in this appeal with a summary of authorities and principles which it went on to analyse in significant detail.

The analysis provides the following helpful guidance:

1. The gateways of the domestic law test should not apply the same restrictive approach adopted under the Brussels system[4] and there should be no attempt to assimilate the different tests. Lord Lloyd-Jones drew the following distinction between the two regimes at [55]:

a)   under the Brussels system, the allocation of jurisdiction is mandatory and notions of discretion and forum non conveniens play no part;

b)   under the domestic system the requirement of passing through one of the jurisdictional gateways is only one element of the test to be satisfied. It must also be demonstrated that England and Wales is the proper place in which to bring the claim and forum non conveniens and discretion play a vital part in the decision as to whether to accept jurisdiction.

2. Within the Brussels system the notion of direct damage is an autonomous EU law concept which determines whether the particular kind of loss sustained has sufficient connection to displace the Article 2 general rule.  Article 5(3) and Article 7(2) must be narrower than the domestic regime for the purposes of certainty and to restrict the number of potentially competing jurisdictions.

3. Considering the line of case law, Lord Lloyd-Jones concluded that the key determining factor should be the degree of connection between the cause of action and the country concerned.  He rejected the notion at [79] that  the forum non conveniens principle was a general discretion which could vary according to the differing subjective views of different judges creating a danger of legal uncertainty.  He stated that the principle applies a structured discretion as refined in the case law in a predictable manner and that ‘the principle of forum non conveniens will provide a robust and effective mechanism for ensuring that claims which do not have their closest connection with this jurisdiction will not be accepted here’.

Issue 2 – reasonable prospects of success CPR 6.37(1)(b)

The arguments put forward by the Claimant on this issue were somewhat entangled with the two legal principles of ‘presumption of similarity’ and the ‘default rule’ when relying on the application of English Law in the place of foreign law.   In his judgment, Lord Leggatt detangled the principles relied on by the Claimant, making a clear distinction between the principle of ‘presumption of similarity’ being a rule of evidence concerned with what the content of foreign law should be taken to be, and the ‘default rule’ which treats English law as applicable in its own right where foreign law is not pleaded.

Lord Leggatt concluded that both the principles of ‘presumption of similarity’ and the ‘default rule’ were valid rules of evidence and procedure to which, pursuant to Article 1(3), the Rome I and Rome II Regulations did not apply, however, the Claimant had presented her case on the basis of Egyptian Law, and in this instance, neither the default rule or the presumption of similarly were principles which should be used to fill the gaps in the pleaded case.

The Supreme Court unanimously held that the claims had a reasonable prospect of success for the purposes of establishing jurisdiction, and granted permission to serve the claim outside the jurisdiction.  Lord Leggatt noted that, in the absence of any evidence of Egyptian law to the contrary, there was no basis for challenging the decision of the judge.  Lord Leggatt agreed with McCombe J at [62] that it was ‘reasonable to presume for the purpose of showing a serious issue to be tried that under any system of law a hotel operator who enters into a contract with a customer to take a customer and members of her family on an excursion in a chauffeur-driven car provided by the hotel will owe obligations under the contract and/or under the law of tort to ensure the safety of those concerned’, concluding that this was an evaluative judgment with which the appellate court should be slow to interfere.

That being said, the Supreme Court agreed that the Court of Appeal was right to require the Claimant to serve revised particulars of claim giving proper particulars of how she intended to put her case under Egyptian Law going forward, accepting the submissions of the Defendant on this point and dismissing the Claimant’s cross-appeal.

The implications

The judgment in this case makes a clear distinction between the approach to assessing jurisdiction under the Rome I and Rome II Regulations (‘the Brussels System’) and the domestic rules of England and Wales.  Lord Lloyds-Jones expressed clear disagreement with the view that there should be an assimilation between the domestic and the Brussels Regime.

Whilst a line of authority had been developing for some years in which  the interpretation of ‘damage’ for the purposes of satisfying the gateway had been expanding in tort claims, the affirmation of these decisions by the Supreme Court, and its finding that there should be no distinctions between direct and indirect damage, will have no doubt widened the tort gateway under CPR 6B 3.1(9)(a) suggesting that more claims will fall within the jurisdiction of the English Courts in the future.  This is particularly important because the decision will not only impact claims for personal injury but is likely to  widen the gateway for all claims in tort, including actions for fraud where the events causing damage are often spread across multiple jurisdictions.

It is also interesting to note Lord Lloyd-Jones’ view on the approach to pure economic loss authorities at [69] – [76].  Whilst he did not suggest that the long-standing treatment of pure economic loss would change, he did point out that such authorities proceeded on ‘the erroneous assumption that the domestic tort gateway should be interpreted in line with the special rule of tort jurisdiction under the Brussels system and fail to appreciate the fundamental differences between the two systems’.  It remains to be seen whether this judgment will impact the treatment of pure economic loss going forward but it does suggest that the breath of the tort gateway could be  widened further still.

B.  Axis Corporate Capital UK II Limited and Others v (1) ABSA Group Limited (2) ABSA Bank Limited (3) ABSA Nominees Proprietary Limited (4) ABSA Manx Insurance Company Limited [2021] EWHC 861 (Comm)

On 13 April 2021 the High Court was asked to decide construction issues in relation to the choice of law and jurisdiction clauses within various reinsurance contracts to determine whether an anti-suit injunction should continue.

In summary, the Court held that the anti-suit injunction should continue in respect of the Excess Layer Reinsurance Contracts finding that the jurisdiction clause within those policies was indeed exclusive despite the word ‘exclusive’ not being used.  In disagreement with Calver J, however, the Court declined to continue the anti-suit injunction in respect of the proceedings commenced under the Primary Layer Re-Insurance Contract as it could not be shown that the English Courts were the most appropriate forum.

Background

The Fourth Defendant, ABSA Manx, a captive insurer incorporated in the Isle of Man, provided insurance for various liabilities to the First Defendant, ABSA Group Limited, and its 2 subsidiary companies (the Second and Third Defendants) based in South Africa (collectively referred to here as ‘the South African ABSA Entities’).   The Claimants reinsured the Defendants under a series of contracts of insurance; a Primary Layer Reinsurance Contract, three Excess Layers of Reinsurance and an Aggregate Retention Re-insurance Policy.  All of the insurance and re-insurance contracts were made in London.

The parties had become subject to court proceedings as a result of the Defendants seeking an indemnity from the Claimants pursuant to claims made against them by investors.  It was common ground that the South African ABSA entities had the right in principle to recover claims under the Primary Re-insurance Contract directly from the Reinsurers and the Defendants issued proceedings in November 2020 against the Claimants in South Africa.

In January 2021, the Claimant Re-insurers applied for an anti-suit injunction, stating that any claim for an indemnity (which was disputed) should be brought in the English Courts.  Calver J granted the anti-suit injunction on 2 February 2021 on the basis of exclusive jurisdiction clauses contained within the re-insurance contracts, restraining the Defendants from continuing the proceedings in South Africa until the return date of 13 April 2021.

The parties’ arguments

The Court was  asked to consider the conflicting wording of the jurisdiction and choice of law clauses within the Primary Layer Re-insurance Contract and the Excess Layer Re-insurance Contracts to determine whether the English Courts had jurisdiction.

The Primary Layer Reinsurance Contract contained a worldwide jurisdiction and choice of law clause:

‘Any dispute concerning the interpretation of the terms, conditions, limitations and/or exclusions contained in this policy is understood and agreed by both the Reinsured and the Reinsurers to be subject to England Wales Law.

Each party agrees to submit to a worldwide jurisdiction and to comply with all requirements necessary to give such court jurisdiction.

In respect of claims brought against the insured and indemnified under this policy, as more fully described herein, the choice of law applicable is Worldwide and the choice of jurisdiction is Worldwide’

The equivalent wording in each of the Excess Layer Reinsurance Contracts stated:

‘Any dispute concerning the interpretation of the terms, conditions, limitations and/or exclusions contained in this policy is understood and agreed by both the insured and the insurers to be subject to England Wales.

Each party agrees to submit to the jurisdiction of England and Wales to comply with all requirements necessary to give such court jurisdiction.

In respect of claims brought against the insured and indemnified under this policy, as more fully described herein, the choice of law applicable is Worldwide and the choice of jurisdiction is Worldwide’

The Claimant Re-insurers contended that whilst the Primary Layer Reinsurance Contract did not provide an express jurisdiction or choice of law clause, on the true construction of the contract, or by implied term, the parties were obliged to submit any dispute arising under or connected with the Primary Reinsurances, where such claim would impact the Excess Reinsurances and/or the Aggregate Retention Insurances, to the exclusive jurisdiction of the courts of England and Wales as a result of the wording in the second limb of the Excess Layer Policies. In support of this argument it submitted that:

  1. The language in the second limb of the clause was in transitive or positive terms;
  2. The English choice of law clause indicated that the English Jurisdiction Clause was intended to be exclusive, despite the absence of the word ‘exclusive’; and
  3. Article 25(1) of the Recast Brussels Regulation created a presumption that a jurisdiction clause falling within its scope (as this one did) is an exclusive jurisdiction clause.

The Defendants argued that there could be no such construction or implied term into the Primary Layer Re-insurance Contract.  They submitted that whilst the existence of the second limb of the clause in the Excess Layer Re-insurance Contracts conferred jurisdiction on the English Courts, such jurisdiction was not exclusive.  The clause operated only to prevent the parties from objecting to jurisdiction where proceedings were started in the English Courts, but did not compel them to commence proceedings there for the following reasons:

  1. The language was not transitive;
  2. The clause was merely an agreement not to object if one party sued the other in England;
  3. The clause used permissive language as opposed to mandatory language used elsewhere in the contract; and
  4. An interpretation of non-exclusivity was supported by the ‘service of proceedings provision’ elsewhere in the contract which stipulated the permitted place for service of any claim to be an address in South Africa.

The Decision of the Court

In these proceedings, some claims were brought under the Primary Re-insurance Contract  and some were advanced under the Excess Layer Contracts. The Court first considered the interpretation of the jurisdiction clause under the Primary Re-insurance Contract. 

Nicholas Vineall QC rejected the Claimants’ proposition that on either its proper construction or as a matter of implication, the second limb of the Primary Re-insurance Contract jurisdiction clause could oblige the parties to submit any dispute to the exclusive jurisdiction of the courts of England and Wales.   The judge stated that ‘to construe the provision in this way, as opposed to considering the implication of a term, would seem to me to be an exercise in re-writing it, as opposed to reading it in its commercial context’ at para [52]. The Judge referenced the test established by Marks & Spencer v BNP Paribas[5].

The Judge then turned to the question of whether the second limb of the Excess Layer Re-insurance Contracts was an exclusive jurisdiction clause or merely an agreement by the parties to submit to the jurisdiction of the English Courts in the event their counterparty were to sue them there.  The court concluded that the second limb of the clause in the Excess Layer Reinsurance Policy did confer exclusive jurisdiction on the English Courts.  Nicholas Vineall QC expressed that he had been persuaded by the following key factors:

  1. the choice of law was English law;
  2. the immediate juxtaposition of the choice of law clause referring to ‘disputes’ to the jurisdiction clause; and
  3. given the clear commercial advantage of exclusive jurisdiction clauses,  each party to the Excess Layer Reinsurance contracts was most likely to have agreed to submit any dispute that might arise to the Courts of England and Wales and to no other[6].

The Judge noted that he reached the decision without recourse to Article 25(1) of the Brussels Regulation Recast which states that jurisdiction ‘shall be exclusive unless the parties have agreed otherwise’ and noted that had the question of construction been evenly balanced, Article 25(1) would have been applied as a tie breaker, following the approach adopted by Mr Justice Foxton in Generali Italia v Pelagic Fisheries[7] at [92].

Persuaded that the jurisdiction clause in relation to the Excess Layer Reinsurances was an exclusive jurisdiction clause, the judge concluded that there were strong reasons for continuing to enjoin the South African proceedings on the Excess Layer Insurances.

The implications

The judgment provides some helpful take away points regarding the approach taken when interpreting jurisdiction clauses:

  • The courts will not imply terms into a clause where to do so would be to re-write it, especially where such a clause may have been the result of a negotiated commercial solution. 
  • The courts are unlikely to be heavily influenced by the presence or risk of parallel proceedings as a reason to construe a jurisdiction clause in a particular way – the jurisdiction clause must bite on its own merit;
  • The judge was not swayed by the ‘service of proceedings’ clause which identified a single address in South Africa for service.  This was considered to be of some support to the intended jurisdiction but not of significant weight at [71]; and
  • In dealing with the regularly occurring argument over the distinction between transitive and non-transitive jurisdiction clauses, the Judge adopted the approach taken by Males J in BNP Paribas v Anchorage  Capital[8], where he quotes Dicey, Morris & Collins on the Conflict of Laws[9] that the distinction between transitive and intransitive verbs to determine whether a clause is exclusive or non-exclusive “would appear to have nothing to recommend it” [at 86] and that a common sense approach should be taken at [87] to [91].

CAIG Europe SA v John Wood Group plc [2021] EWHC 2567

On 15 September 2021 the High Court in AIG Europe SA v John Wood Group plc[10] was asked to decide whether to maintain the anti-suit relief obtained by the Claimant.  In doing so it had to determine three key questions:

(i)  Whether a jurisdiction clause which is not expressed to be exclusive can in fact be deemed exclusive;

(ii)  Where there is a conflict between a negotiated jurisdiction clause and a jurisdiction clause contained within standard terms, which clause should prevail; and

(iii)  Whether the risk of multiplicity of proceedings is sufficient reason to vacate an anti-suit injunction.

In summary, the Court held that in respect of each issue (1) jurisdiction clauses do not have to be expressly exclusive in order to be deemed exclusive, (2) a presumption that a negotiated clause should prevail over a standard term cannot be applied where the negotiated clause is silent on the issue, and (3) the risk of multiplicity of proceedings is not sufficient to derail an anti-suit injunction, particularly in circumstances where such multiplicity is inevitable where there are multiple and variable clauses in play. 

Background

The Claimant insurers had provided a programme of excess liability insurance to the Defendants.   The Defendants, who were already party to proceedings in the Courts of Alberta Canada as a result of a pipeline failure, commenced protective proceedings for limitation purposes, also in the courts Alberta, in anticipation of reliance on the excess policies entered into with the Claimant. 

In August 2021, the Claimants obtained anti-suit relief from the English Court on the basis of the jurisdiction clauses in the policies which sought to confer jurisdiction on the Commercial Court.  The anti-suit injunction had been obtained without notice and in September 2021 the Court had to consider whether to maintain those injunctions.

The parties’ arguments

The Claimant relied on the jurisdiction clauses within the insurance and re-insurance policies.

The insurance structure was complex, with several layers, but essentially there was a Global Commercial Liability Insurance Policy and an Excess Liability Programme which consisted of a Global Umbrella Policy and 3 further layers of re-insurance with a First, Second and Third Excess Policy.  Each of the policies contained varying jurisdiction and/or choice of law clauses.

The Global Commercial Liability Insurance Policy (‘the Primary Policy’) contained no provisions on governing law or jurisdiction. All of the policies within the Excess Liability Programme contained a jurisdiction clause which stated:

Any dispute concerning the interpretation of the terms, Conditions, Limitations, Exceptions and/or Exclusions of the policy are understood and agreed by both the Insured and the Insurers to be subject to the same law and the same jurisdiction as the primary policy. Each party agrees to submit to the jurisdiction of any court of competent jurisdiction within said territory and to comply with all requirements necessary to give such court jurisdiction. All matters arising hereunder shall be determined in accordance with the law and practice of such court.”  (‘the Primary Policy Jurisdiction Clause’ (‘PPJC’))

The Global Umbrella Policy stated at Clause 11:

“This Policy of insurance shall be governed by and construed in accordance with the laws of England and Wales, or Scotland (in respect of any policies issued in Scotland), and except in the case of Scottish policies the [English] Commercial Court…shall have jurisdiction in respect of any dispute under this Policy.”

Each of the First, Second and Third Excess Policies contained the PPJC.  The Second and Third Excess Policies contained an Arbitration Clause.  The First and Third Excess Policies contained an exclusive choice of law and jurisdiction clause, expressing English Law and the English Courts (Clause 12), and the Second Excess Policy contained a choice of law only clause, stipulating English Law. 

The Claimant asserted that Clause 11 contained within the Global Umbrella Policy conferred exclusive jurisdiction on the English Commercial Court in respect of all policies and was therefore entitled to anti-suit relief. One of the Claimants, AWAC, relied on the existence of the Arbitration Clauses.

The Defendants argued that jurisdiction should not be conferred on the English Courts for the following reasons:

(i)  The PPJC stated that the policies should be the subject to the same law and the same jurisdiction of the Primary Policy.  The Primary Policy was silent on governing law or jurisdiction;

(ii)  The PPJC, being a negotiated clause rather than a standard term, should prevail;

(iii)  Whilst the Defendant accepted that the AWAC policies contained a valid agreement to arbitrate disputes, anti-suit relief should be denied in order to avoid multiplicity of proceedings.

The Decision of the Court

The main question for the Court in deciding whether to maintain the anti-suit relief, was whether to ‘a high degree of probability’[11], the jurisdiction clauses conferred exclusive jurisdiction on the English Courts or whether there was a valid Arbitration Clause.

The court upheld the anti-suit relief in respect of claims under  the Global Umbrella, First and Third Excess policies on the basis that there was an effective jurisdiction clause conferring jurisdiction on the English courts or a valid Arbitration Clause to which the Defendant was bound.  With regard to the Second Excess Policy, the anti-suit relief was maintained for the AWAC policies only where there existed a valid Arbitration Clause.

In considering the standard jurisdiction clause within the Global Umbrella Policy (Clause 11) the court found that:

  1. Clause 11 did constitute an exclusive English Jurisdiction clause, even though it was not expressly stated to be ‘exclusive’.  The court noted at [74] that “the authorities show that it is not necessary to use the words “exclusive jurisdiction”.  This would amount to an inappropriate surrender to formalism’[12];
  2. Where there exists an express choice of law clause, this provides a persuasive indication that the jurisdiction is intended to be both the same and exclusive; and
  3. Clause 11 was not displaced by the PPJC because the Primary Policy did not contain a jurisdiction clause.  The court noted that whilst the principle of construction of a contract would ordinarily mean that a negotiated clause would prevail over a conflicting standard clause, that could not be the case where the negotiated clause was silent on the issue contained within the standard clause.

The implications

It is not unusual for insurance arrangements to involve multiple contracts of insurance and layers of re-insurance, each containing their own provisions regarding dispute resolution.  This case highlights the different views which can arise when it comes to the interpretation of clauses.  Disputes over jurisdiction in the insurance and re-insurance sector are likely to continue given the multi-jurisdictional application of policies and the parties’ natural desire to have disputes resolved in their home courts.

The case follows the earlier decision in Axis[13] in its treatment of clauses as exclusive even where such wording is not used in order to confer jurisdiction on the English Courts where possible, however, it is interesting to note from this decision that the courts will not be persuaded to continue anti-suit relief simply because of multiplicity of proceedings or indeed parallel arbitrations.

D. Ms Kanaka Durga Chelluri v Air India Ltd [2021] EWCA Civ 1953

In this case the Court of Appeal was asked to decide whether on the facts liability to pay compensation for air flight delay arose under Article 3(1)(a) of EU Regulation 261/04 ("the Regulation") and whether the decision of the Court of Justice of the European Union (‘CJEU’) in Case-537/17 Wegener v Royal Air Maroc SA[14] ("Wegener") was good authority on the question of when the Article is triggered.

The Court of Appeal dismissed the appeal, affirming and further clarifying the decision in Wegener and the importance of following that authority.

The Background

The appellant had travelled by air from Kansas City, Missouri USA to Bengaluru, India.  The flight had four legs, the third of which departed from London Heathrow and was delayed by 48 hours. Delta Airlines was the air carrier for the first two legs and Air India was the carrier for the third and fourth legs of the journey.  Both Airlines were non-EU carriers.

The appellant had sought compensation for the delay to the third leg of her flight and commenced proceedings in England pursuant to Article 3(1)(a) of the Regulation. Article 3(1)(a) applies to non-EU carriers and gives rise to compensation where the delayed departure is from an EU or UK airport, often referred to as the ‘territorial gateway’.

On 9 September 2020, the District Judge allowed the claim for compensation on the basis that the flights operated by Air India were separate from the flights operated by Delta Airlines and as such should not be treated as a ‘single booking’.  This interpretation triggered the application of Article 3(1)(a) because the first of the two Air India flights departed from London Heathrow.  Air India appealed the decision. 

His Honour Judge Berkley allowed the appeal, considering himself bound by the decision of the CJEU in Wegener and the subsequent authorities, stating that because the overall journey had started and finished outside the EU, the appeal would be allowed and the claim dismissed.  Ms Chelluri appealed to the Court of Appeal.

The parties’ arguments

The parties were essentially debating the application of Article 3(1)(a) of the Regulation and specifically whether the 4 legs of the journey should constitute a single booking or separate bookings.

Article 3 of the Regulation stated:

Scope

  1. 1.    This Regulation shall apply:

(a)   to passengers departing from an airport located in the territory of a Member State to which the Treaty applies;

….

Following the withdrawal of the UK from the EU, Regulation 8(4) of the Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2019 amended the Regulation as follows:

(4) In Article 3 (scope)—

(a) in paragraph 1, in point (a), for “the territory of a Member State to which the Treaty applies” substitute “the United Kingdom”;

In the case of Wegener, the CJEU held at [25] that “Article 3(1)(a) of Regulation No 261/2004 must be interpreted as meaning that the regulation applies to a passenger transport effected under a single booking and comprising, between its departure from an airport situated in the territory of a Member State and its arrival at an airport situated in the territory of a third State, a scheduled stopover outside the European Union with a change of aircraft”.

The appellant argued that the Wegener case was not good authority for the meaning of “flight” and sought to distinguish the facts on the basis that Wegener related to delays occurring outside the EU. The appellant also submitted that the correct interpretation of the decision in Wegener was that any flight which left an EU airport was caught by Article 3(1)(a) and that His Honour Judge Berkley’s interpretation of the decision was wrong.  

The appellant also argued that the Wegener case was largely concerned with the issue of compensation under Article 7 of the Regulation rather than jurisdiction under Article 3 and as such was not a decision which was binding on the appeal court.   

Air India argued that the Wegener case was related to the issue of jurisdiction under Article 3 and was binding authority that a single booking could not be broken down into separate legs for the purposes of the Regulation. As such, it submitted that Article 3(1)(a) was not triggered and the Respondent was not liable to pay compensation.

The Decision of the Court

The Court of Appeal found no basis for departing from the decision in Wegener and after careful consideration of the subsequent authorities, accepted the position taken in Tunein Inc v Warner Music UK Ltd[15] that ‘although both the House of Lords and the Supreme Court have the power to depart from CJEU case law, they can only do so on the same basis that the Supreme Court can depart from one of its own precedents[16]. Coulson LJ noted that it has been consistently held that such a power must "be exercised with great caution" and exercised "rarely and sparingly"[17].

The Coulson LJ also commented at [63] ‘….. if we were to depart from Wegener and the subsequent cases, the consequences might be profound. On one view, every flight that comes into the UK from the Americas or Asia for an onward destination anywhere in the world would be liable to claims brought under Article 3(1)(a). In my view, it is both unnecessary and undesirable to depart from Wegener to bring about such consequences without express consideration of the point by the legislature. That is sufficient to refuse ground 2 of this appeal’.

Whilst Coulson LJ expressed reluctance to do any more than decide the case at hand, he recognised the importance expressed by the parties of the decision on a series of other airline delay claims.  As such the Court of Appeal’s decision helpfully offers the following clarification on issues which have attracted some debate in cases for flight delay compensation:

  1. The meaning given to Article 3(1)(a) and, in particular, the reference to the "passengers departing from an airport” has been settled by Wegener and the subsequent CJEU cases;
  2.  In summary [at 65]:

a. EU/UK carriers are caught under Article 3(1)(b);

b. Non-EU/UK carriers are caught under Article 3(1)(a) if the single booking initially departs from the EU/UK, no matter where the journey ends; and

c. If the single booking with a non-EU/UK carrier departs from outside the EU/UK, it is not covered by the Regulation, wherever it lands along the way.

3. The approach adopted by Wegener helpfully eliminates the argument about the difference between "layovers" and "stopovers" and what happens if either is extended for one reason or another.

4. The Wegener approach, of treating a single booking as a whole, irrespective of its constituent legs, is affirmed as the common sense approach.

The implications

This decision is an important example of the English Courts choosing not to depart from the principles adopted by the CJEU post Brexit.  Coulson LJ noting that  “it is both unnecessary and undesirable to depart from Wegener to bring about such consequences without express consideration of the point by the legislature” at [63]. 

The Court of Appeal was clearly influenced by a potential floodgates argument specific to the Air Passenger Regulations but it shows that the English Courts will decline jurisdiction where there are sound arguments for doing so and to recognise the authority of the European Courts.

This decision will have been welcomed by the airline industry which may otherwise have suffered a flurry of claims in an already challenging period as it seeks to recover from the damaging impact of the pandemic.

CONCLUSION

Questions over jurisdiction are often entangled with a multitude of other issues which the court has to determine in order to reach a decision on the most appropriate forum.  The decisions discussed above show that it is likely the domestic rules relating to jurisdiction will continue to develop and possibly widen to increase the number of cases which are deemed to fall within the remit of the English Courts’ jurisdiction and highlight the importance of clear and consistent jurisdiction clauses.

The most recent decision in the Air India case sends a very clear message that despite the UK’s departure from the EU, the English Courts will still give importance to the principles adopted by and decisions of the CJEU, particularly where those relate to the interpretation and application of EU Law.


[1] https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/International_arbitration/English_Court_doing_about_jurisdiction_disputes

[2] 15th edn 2012 para 9-025

[3] (1985) 63 ALR 466

[4]  Rome 1 Regulation and Rome II Regulation

[5]  [2016] AC 742 (as stated by Lord Neuberger at [18])

[6]   quoting Christopher Clark LJ in CSAV v Hin-Pro [2015] 2 Lloyds Rep at [63]

[7]    [2020] Lloyds Rep IR 466

[8]    [2013] EWHC 3073 (Comm

[9]    (15th Edition 2012)

[10]   [2021] EWHC 2567

[11]  Bankers Trust Co v PT Mayora Indah (unreported) 20 January 1999 and American International Specialty Lines Insurance Co v Abbott Laboratories [2003] 1 Lloyd's Rep 267 and recently affirmed by Christopher Clarke LJ in Ecobank v Tanoh [2016] 1 WLR 2231 at 2250

[12]  Joseph: Jurisdiction and Arbitration Agreements and their Enforcement at para 4.12: “where parties agree to submit disputes to an identified court or submit disputes to the jurisdiction of such a court then, as a matter of construction, an English court is likely to conclude that an exclusive jurisdiction agreement has been affected“.

[13]  Axis Corporate Capital UK II Limited and Others v (1) ABSA Group Limited (2) ABSA Bank Limited (3) ABSA Nominees Proprietary Limited (4) ABSA Manx Insurance Company Limited [2021] EWHC 861 (Comm)

[14]   [2018] Bus LR 1366 

[15]   [2021] EWCA Civ 441

[16]    Tunein Inc v Warner Music UK Ltd [2021] EWCA Civ 441 at [74]

[17]  Lord Bingham in Horton v Sadler [2007] 1 AC 307 at [29]