In the case of Faraday Reinsurance Co Ltd v (1) Howden North America Inc (2) Howden Buffalo Inc [2011] EWHC 2837 (Comm), Howden sought to set aside an order allowing Faraday to serve it with proceedings out of the jurisdiction.

Faraday provided Howden, an international engineering group, with three policies of insurance. Two of these policies specified that the contracts were governed by English Law and jurisdiction. The third policy was silent in this regard. Howden is currently embroiled in proceedings in Pennsylvania USA in relation to insurance for its historic asbestos liabilities. In August 2010, an agent of Howden wrote to Faraday notifying it of occurrences which may entitle Howden to claim under the policies. Faraday commenced proceedings in the English Court seeking several declarations including that the contracts were governed by English law and that the period set out in the contracts are the only periods for which Faraday is on risk.

Howden argued that the permission to serve these English proceedings out of the jurisdiction should be set aside as Faraday could not show that the present proceedings were justified or served a useful purpose and that Pennsylvania was the appropriate forum for any proceedings between Howden and its insurers.

Mr Justice Beatson found that Faraday had a good arguable case that the policies were all governed by English law. He also found that the proceedings in Pennsylvania were not specifically applicable to the policies provided by Faraday,  and there were important differences between the laws of England and Pennsylvania in relation to how the policies in question would be interpreted. As a consequence, Beatson J found that Faraday had a legitimate interest in asking the English Court to determine the issues in dispute. The fact that there was currently no claim under the policies was irrelevant. Consequently, Beatson J ruled that Howden’s application be dismissed.

It appears from this decision  that the courts are  aware of the dangers faced by English insurers when their policies are subjected to certain jurisdictions in the US. In this case, the court allowed service out of the jurisdiction when there was no live claim but merely a claim for declaratory judgment. Without such permission, the insurer would have been at the mercy of the US court’s interpretation of the contract.