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A jurisdiction
clause in an insurance contract could only be incorporated into a reinsurance
slip by reference if the terms were properly identified and the parties
had reached a clear consensus on jurisdiction at the time of entry into
the contract. Notwithstanding that the risk was Spanish, it was likely
to be desirable that a reinsurance contract placed in the London market
would be determined by English law and heard in the English court.
The Spanish
football club, Real Sociedad ("the Club"), obtained insurance
cover from the Defendants ("M"), insurers domiciled in Spain,
against its players suffering personal accidents or sickness for two
consecutive years. M were in turn reinsured, as to 98% of the risk,
in the London market.
The first
year's reinsurance cover was a slip contract. No wording was produced.
The terms of the slip referred to a wording "agreed by Leading
Underwriter". This wording was in fact a translation of the conditions
of the underlying cover written by M which included a pre-existing condition
exclusion and a jurisdiction clause. This jurisdiction clause provided
that disputes should be heard by the Court with jurisdiction over the
policyholder's address in Spain and in any other situation the Court
with jurisdiction over the insurer's address. The slip agreement also
included a full reinsurance clause stating the agreement to be ".
. . a reinsurance of and warranted subject to the same terms and conditions
as . . . the reassured."
The second year's reinsurance cover was also a slip agreement and included
a full reinsurance clause in the same terms as the first year's reinsurance
cover.
However,
it did not refer to a wording "agreed by Leading Underwriter".
However,
the wording of the second year's underlying cover did include a jurisdiction
clause, but in different terms to the first year.
The Club
made a claim against M under the second year's insurance cover on the
basis of a player's permanent injury. M disputed the Club's claim that
the player's injury was unrelated to an earlier injury and that this
earlier injury had been disclosed. The Club issued proceedings in Spain
against M. Reinsurers in turn commenced proceedings against M in London
seeking a declaration that reinsurers were entitled to avoid the reinsurance
contract and/or that they were not liable in relation to the claim in
question. M applied for an order in the London proceedings that the
Court had no jurisdiction over the reinsurance claim. It was agreed
that the question whether there was a relevant jurisdiction agreement
was to be determined not by the proper law of the contract, but by Community
law. It was also agreed that the reinsurer's claim was a matter "relating
to a contract" within Article 5 of Council Regulation No. 44/2001
("the Regulation"), the place of performance of M's obligation
to make a fair presentation of the risk was London and so in the absence
of jurisdiction agreement, the proceedings were properly brought in
an English Court. M claimed that on the basis of the full reinsurance
clause and commercial background, the parties agreed Spanish jurisdiction
and so under Article 23 of the Regulation, the Spanish Court had exclusive
jurisdiction.
Mr Justice
Andrew Smith adopted the principles set out by Gross J in Siboti v BP
France [2003] EWHC 1278 that:-
1 Community
law recognises the validity of incorporation by reference provided the
terms to be incorporated are clearly identified.
2 For the
purposes of Article 23, Community law, like English law, regards jurisdiction
clauses as ancillary to the substantive provisions of the contract,
general words of incorporation being sufficient only to incorporate
terms germane to the subject matter of the contract and not ancillary
terms.
3 Although
in Community law the language of the contract is emphasised rather than
extrinsic factors, this does not involve ignoring the commercial background
and in each case the Court must consider the language of the contract
in context and enquire whether a consensus on the subject matter of
the jurisdiction clause had been clearly and precisely demonstrated.
Mr Justice
Andrew Smith did not accept any of M's contentions, which he described
as "barely arguable", that a jurisdiction agreement existed
providing to the effect that the Spanish Court should have jurisdiction.
He held that the full reinsurance clause in question did not expressly
refer to the jurisdiction clause in the second years insurance cover.
Further, the warranty did not assist with the incorporation of ancillary
terms as opposed to terms germane to the subject matter of the contract.
In any event, the express exclusion of "limits and rates"
and the express incorporation of 24 hour cover indicated that not all
terms were incorporated, germane or otherwise. The leaders' agreement
to the first year's wording did not evidence agreement to the incorporation
of the jurisdiction clause in either the first or second year reinsurance.
Finally it would be more natural to suppose that parties to reinsurance
underwritten in the London market would expect the litigation to be
in the English courts.
M's alternative
application was for a dismissal or stay of the proceedings under Article
28 of the Regulation on the basis that related proceedings were pending
in different member states and there was a risk of irreconcilable judgments
resulting from separate proceedings. Upon reinsurers' undertaking not
to pursue the pre-existing condition claim in the London proceedings,
Mr Justice Andrew Smith dismissed M's Article 28 application.
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