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In a
dispute between the parties arising out of a facultative excess of loss
reinsurance contract, an anti-suit injunction was permitted to continue
until further order. The defendant had acted vexatiously by pre-empting
the English court from reaching its conclusions and by seeking to gain
a tactical advantage by that pre-emption.
Upon the
return date for an injunction granted without notice to the claimant,
Tonicstar, the court was required to determine whether to discharge
an order which restrained the defendant, AHA, from proceeding with its
petition to compel arbitration in the New York Federal Court. The dispute
between the parties had arisen out of a facultative excess of loss reinsurance
contract between AHA and Syndicate 1861, for which first CGU and then
Tonicstar were the capital providers. There was a reinsurance to close
to reflect these arrangements in the usual way. The Syndicate then asserted
that it had a right to avoid the contract on the grounds of misrepresentation
and non-disclosure.
Tonicstar
commenced proceedings in England on February 13, 2004 and AHA issued
proceedings in New York on February 17. Neither party had written a
letter before action and neither was aware that proceedings were about
to be started in the other jurisdiction. As a result of a motion by
CGU in the New York proceedings, AHA became aware of the arbitration
clause in the reinsurance. However, it contained no express provision
for the seat of arbitration and thus for its curial law. The parties
could not agree on the seat of arbitration and AHA discontinued the
New York action but issued a Demand for arbitration in New York. It
also made an application in the English court to stay the proceedings
brought by Tonicstar pending arbitration. AHA then brought a new petition
in New York seeking to compel arbitration and restrain the English proceedings.
Unaware
of this petition, Tonicstar issued an arbitration claim form in the
English High Court in May 2004 which sought a declaration that the seat
of any arbitration should be in England. Tonicstar maintained that the
anti-suit injunction should continue as AHA's petition was unjustified
and tactically driven. It was an attempt to keep in the New York court
issues which should naturally have been determined by the English court.
Mr Justice
Morison held that, having chosen to contract in the Lloyd's market on
a Lloyd's slip policy form, it was to be inferred that the parties intended
these provisions to be determined by the English court. The claimants'
performance, as reinsurers, was characteristic of the contract and their
place of business was in England. It was clear that the proper law of
the whole contract was English law and the applicable law of the arbitration
agreement could not be separated from the applicable law of the reinsurance
contract into which it had been incorporated.
AHA were
held to have acted vexatiously and oppressively as the effect of its
conduct had been to seek to pre-empt the English court from reaching
its own decisions on the arbitration questions. The logical and normal
course was for the natural forum to decide for itself whether it should
take jurisdiction over a dispute and whether the disputes fall within
the arbitration clause. AHA had conducted itself so as to secure what
it perceived to be a tactical advantage which flowed from the application
of US law to the arbitration proceedings. This was not to be permitted
and hence it was appropriate, within the court's discretion, to continue
the anti-suit injunction as required by the interests of justice. It
would ensure that the parties' rights were determined in an orderly
manner in the appropriate forum.
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