We previously reported the judgment of Mr Justice Hamblen in Gard Marine & Energy Ltd v LLoyd Tunnicliffe and Ors [click here for our previous blog] concerning the law applicable to a contract of reinsurance. At first instance, Hamblen J held that it was “overwhelmingly just, convenient and expedient that Gard’s claims against Advent, Glacier Re and its consequent contingent claim against AHP be determined in one jurisdiction” i.e. England.

The original claim centred on losses sustained to Devon Energy Corporation as a result of Hurricane Rita in September 2005. Gard, domiciled in Bermuda, was a participant in primary insurance that had been placed in the Lloyd’s market and was reinsured by, amongst others, Glacier Reinsurance AG (Glacier). Glacier, domiciled in Switzerland, disputed how the reinsurance claims had been calculated and issued proceedings against Gard in Switzerland (Gard had issued proceedings in England but had not served them prior to Glacier issuing its claim). The Swiss courts held that they did not have jurisdiction as Gard was not domiciled in Switzerland and proceedings were restored in England.

In the English proceedings that followed, Glacier submitted that the law applicable to the reinsurance contract should be Swiss law, while Gard submitted that English law applied. Glacier submitted that there was little connection between the claim by Gard against Glacier and England and Wales, therefore it was not right that Gard’s claim be heard in England.

Delivering the leading judgment of the Court of Appeal and dismissing Glacier’s appeal, Lord Justice Thomas held that “there is a very strong connection with England and Wales. In all the circumstances, the determination of the issues by one tribunal in England and Wales is plainly not only expedient for the purpose of avoiding irreconcilable judgments, but it is also just.“

Addressing the issue of jurisdiction, Thomas LJ said that “the court should approach the matter in the light of the policy of the [Lugano] Convention to produce predictable results and on the principle of the Convention that jurisdiction is generally based on the defendant’s domicile.” However, he acknowledged that when considering whether an exception to the general rule existed, the court should consider the risk of irreconcilable judgments arising out of separate proceedings.

Thomas LJ found that, absent an express choice of law clause, Gard demonstrated with reasonable certainty a real choice by the parties of English law under Article 3 of the Rome Convention (as incorporated in the Contracts (Applicable Law) Act 1990). Factors his Lordship considered relevant included, inter alia, that the brokers’ offer and Glacier’s acceptance was clearly on the basis that Glacier were participating in a London market placement and that it would make no commercial sense for one part of the reinsurance to be governed by one system of law and another by a different system.

In the event that his finding that there had been a demonstrable choice of English law was incorrect, his Lordship held that despite a presumption existing under Article 4.2 of the Lugano Convention that favoured Swiss law (on the basis that the obligation to pay the claim was an obligation to pay in Switzerland), this was rebuttable given the facts in the case.

Turning to whether Glacier Re could be sued in England by applying Article 6(1) of the Lugano Convention, Thomas LJ had to consider whether the reinsurance placed with Advent Syndicate 780 and that placed with Glacier was the same, namely governed by English law. His Lordship applied the principle established in Freeport v Arnoldson [2007] E.C.R. I-389 and Kalfelis v Schroeder, Muenchmeyer, Hengst & Co [1998] ECR 5565; that it is for the national court to assess, on the basis of the necessary factors, the connection between the claims and to determine the risk of irreconcilable judgments if the claims were determined separately. Thomas LJ held that the claims were on the same terms and part of the same placement and there would be a risk of irreconcilable judgments.  In seeming recognition of these turbulent economic times, his Lordship stated that the risk of irreconcilable judgments would be particularly damaging to financial markets.