Fountain Court Chambers

London & Singapore

Court of Appeal rules on enforcement of exclusive jurisdiction agreement against insurers acting by way of subrogation

In an important case on the enforcement of exclusive jurisdiction clauses, the Court of Appeal has rejected a challenge to the exclusive jurisdiction of the English court made by insurers of an Italian airline who had brought proceedings in Italy against the aircraft manufacturer -Airbus. In response to the Italian proceedings Airbus commenced proceedings in England seeking declaratory relief to give effect to the exclusive jurisdiction clause against. The insurers of the airline challenged the jurisdiction of the English court. The insurers having been unsuccessful at first instance appealed. The Court of Appeal in dismissing the appeal has provided an instructive exposition on: (i) the approach taken to construing jurisdiction agreements where there are different agreements with different jurisdiction clauses; (ii) the applicable test to determine jurisdiction challenges where there are issues of fact in dispute and where there are questions of law in relation to which the court has all the relevant materials to make a final decision; and (iii) the power of the court to grant declaratory relief in support of an equitable obligation equivalent to a contractual right.

On this last point the Court of Appeal has made clear that where insurers are exercising rights derived by subrogation or assignment the English court has the power to make a declaration against the  insurers. In particular, the court held that: (i) insurers exercising rights of subrogation to make a non-contractual claim were bound by an English arbitration or jurisdiction clause to the same extent as an insured would have been; (ii) the commencement and pursuit of such proceedings by insurers was a breach of an equivalent equitable obligation equivalent to a contractual right not commence or pursue proceedings contrary to the terms of the arbitration or jurisdiction agreement; and (iii) the court would give effect to that equitable obligation by granting appropriate declaratory relief. The Court of Appeal expressly approved the first instance decision of Mr Justice Colman in West Tankers [2005] EWHC 454 on this point.

The Court’s judgment can be found here and is likely to be of interest to practitioners in cross-border disputes and in the insurance market.

Airbus was represented by Akhil Shah QC, instructed by Kathryn Ward and Sophie Brophy of DLA Piper.