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The UK Supreme Court confirms that the bank has been designated as the recipient of a loss due to the assignment of an insurance policy that is not bound by the exclusive jurisdiction clause under the recast Brussels Regulation 1215/2012 UK INSURANCE

Aspen Underwriting Ltd & Ors v Credit Europe Bank NV [2020] UKSC 11

in the Aspen Underwriting Ltd & Ors v Credit Europe Bank NV (Full judgment available Here), the Supreme Court recently ruled that the High Court of England and Wales has no jurisdiction to file fraudulent misrepresentation and / or insurance claims against Credit Europe NV (the Bank) in relation to the amounts claimed by them that were wrongly paid to the bank as the ceded loss recipient of an insurance policy after the loss of an insured ship.

By rejecting the insurers’ appeal and approving the bank’s appeal, the Supreme Court ruled that the bank, which was based in the Netherlands and, as a legal successor, was not a party to the insurance policy, was entitled to appear before the courts of the Bank sued its own member state on the grounds that insurers’ claims against it “Insurance matters”In the sense of the new version of the Brussels Regulation (Regulation (EU) 1215/2012) (the regulation). The Supreme Court also clarified that the bank did not have to demonstrate that it was an economic “weaker party”To take advantage of the protection of jurisdiction contained in the regulation.

background

Aspen Underwriting Ltd and certain other insurers (the insurer) assured the “Atlantic Confidence” (the ship) according to a hull and machine insurance (the politics). The directive had an exclusive jurisdiction clause in favor of the courts of England and Wales.

Under certain refinancing arrangements agreed with the owners, the bank accepted an assignment of the policy and became the only loss recipient. The ship then sank off the coast of Oman. The owners and insurers settled the owners’ claim for damages under the policy without the involvement of the bank, and the insurers agreed to pay $ 22 million for the loss. The bank, in its capacity as a loss recipient, issued a letter to the insurers authorizing the insurers to pay the settlement amount through the owners’ insurance broker (the Power of attorney).

A few years later, the Admiralty Court found in a separate trial that the owners had intentionally sunk the ship. When the insurers learned of this development, they initiated proceedings before the High Court of England and Wales to seek reimbursement of the sums paid to the bank under the policy, either as a refund or as compensation for fraudulent misrepresentation.

The bank contested the jurisdiction of the English High Court to examine the claims made against it. In two judgments at first instance, Judge Teare considered that the bank was not bound by the exclusive jurisdiction clause in the policy, but that the bank was notweaker partyIn its relations with insurers, it was not entitled to be sued in its own Member State in accordance with Section 3 of the Regulation. His honor stated that the English High Court had jurisdiction to rule on misrepresentation claims under Article 7 (2) of the Regulation, but not the claims for reimbursement, as these were not “Matters related to tort, offense or quasi-offense”. The appeals court agreed.

The Supreme Court was asked to clarify four questions in the appeal process:

  1. Did the High Court of England and Wales have the power to review insurers’ claims against the bank under the exclusive jurisdiction clause in the policy?
  2. Whether the claims of the insurers “Insurance matters”For the purpose of protection in section 3 of the regulation?
  3. If the answer to (2) was yes, whether the protection in Section 3 of the Ordinance applies only if the accusedweaker party”Regarding the insurer?
  4. Whether insurers’ claims for misrepresentation and / or reimbursement in connection with “tort, offense or quasi-offense”Under Article 7 (2) of the Regulation and should therefore be heard in the High Court of England and Wales as the place where the damage is said to have occurred?

Lord Hodge (with whom Lady Hale, Lord Reed, Lord Kerr, Lord Lloyd-Jones, Lord Kitchin and Lord Sales agreed unanimously) made a judgment. In line with the latest authorities on the common law doctrine of Forum non conveniens,[1] It was up to the insurers to show that they had a good case that the High Court of England and Wales should hear their claims.

Problem 1 – Was the English High Court responsible for insurers’ claims against the bank under the exclusive jurisdiction clause in the policy?

The insurers claimed that by issuing the power of attorney letter, the bank had asserted a claim from the policy for payment of the sums insured as the assignor and beneficiary and subject to the exclusive jurisdiction clause in the policy. The parties did not dispute that the bank would be bound by the clause if it sued the insurers, but the question for the Supreme Court was whether the behavior of the bank in assigning the policy and issuing the power of attorney was sufficient to operate the exclusive English jurisdiction clause in the directive.

The Supreme Court rejected the insurers’ arguments. Under EU law, there has to be an actual consensus between the parties, which is clearly and precisely demonstrated to supersede the general thesis that a party must be sued in the Member State in which it is based.[2] The Supreme Court found that the bank, as the assignee and beneficiary of the policy, was not a party to the agreement with the insurers.[3] Although EU law also recognizes that a person who is not a party to a jurisdiction agreement may be deemed to have agreed if, under applicable national law, theysuccessorWith regard to the rights and obligations under the contract, this was not the case in this case, since the bank was a fair assignee of the policy rather than a legal successor.[4]

However, as the legal successor, the Supreme Court found that the bank could not exercise its rights in a manner that was inconsistent with the provisions of the directive, including the English jurisdiction clause. However, the bank had not exercised any rights under the policy. The Letter of Authority merely facilitated payment of the settlement amount between the owners and the insurers and provided a mechanism by which the bank, as the assignee and beneficiary, could receive payments through the owners’ insurance broker.[5] Therefore, the Supreme Court ruled that the bank that is not a party to the policy is not bound by the exclusive jurisdiction clause.

Problem 2 – Whether the insurers’ claims “Insurance matters”According to section 3 of the regulation?

The Supreme Court then addressed the question of whether insurers’ claims were properly covered by Section 3 of the Regulation, which would oblige insurers to bring an action against the bank in the courts of the EU Member State in which the bank is located to raise the Netherlands.

Section 3 of the regulation is entitled “Responsibility in Insurance Matters” and contains rules for responsibility in insurance matters under EU law. Where relevant, Article 14 (1) provides:

“… An insurer can file a lawsuit just in the courts of the Member State in which the defendant is domiciled, regardless of whether he is a policyholder, insured or beneficiary. ”(Emphasis added)

The insurers argued that their claims against the bank were not a matter. “in terms of insurance“Since it was not a claim for breach of an obligation specifically related to the fulfillment of the policy as an insurance contract. The insurers argued that the heading of Section 3, “Insurance matters“Should be read closely as”Matters related to insurance contracts”.[6]

The Supreme Court ruled that insurers’ claims against the bank “Insurance matters”As defined in section 3 of the regulation.[7] The Supreme Court placed particular emphasis on widening the title of section 3 than other sections of the regulation that dealt with individual contracts rather than matters. “relating toInsurance.[8] The Supreme Court also found that it is important that Article 14 (1) expressly refer to beneficiaries’ rights (such as the bank as the assignee) in addition to policyholders.[9] The Supreme Court found that even if, as the insurers had argued, Section 3 applies only to claims based on a breach of a single insurance contract, this test would in any event be met in the present case based on the insurance fraud alleged The insurers would also include a policy violation.[10] The Supreme Court concluded that insurers’ claims against the bank were insurance-related matters within the meaning of Section 3 of the regulation.

Questions 3 and 4 – Whether the protection in section 3 of the regulation only applies if the defendant receives a “weaker party”Regarding the insurer?

In the first instance and before the Court of Appeals, it was decided that the bank could not avail itself of Article 14 because it was not an economic “weaker party ” in relation to insurers. This finding was based on the interpretation by the lower courts of recital (18) of the regulation:

In terms of insurance … the weaker party should be protected by jurisdictional rules that are more beneficial to its interests than the general rules. “ (Emphasis added)

The Supreme Court respectfully contradicted the first instance decisions and the Court of Appeals, making it clear that there were no “weaker partyException that excludes an insured or beneficiary policyholder like the bank from the protection of Article 14 and the right to be sued in the courts of its own Member State.[11] The Supreme Court gave six reasons for this conclusion:

  1. First, the insured and the beneficiary of an insurance policy are generally considered “weaker parties”In a trade negotiation with an insurance company and are of course presented with a standard contract form;[12]
  2. Second, while the recital (3) of the Regulation can be explained in recital (18), it is the words of the relevant articles that have legal effect.[13]
  3. Third, deviations from the rules of jurisdiction in insurance matters must be interpreted strictly and the existence of an unspoken “weaker partyAn exception to the protection of the policyholder, the insured and the beneficiary contradicts this approach.[14]
  4. Fourthly, it is clear that the European Court of Justice (ECJ) does not perform a case-by-case analysis to take into account the relative strengths and weaknesses of the parties under Section 3, as this would lead to legal uncertainty and unpredictability;[15]
  5. Fifth, the CJEU in recital (18) does not want to decide whether a particular policyholder, insured or beneficiary should be protected by Section 3, but only as part of a decision as to whether this protection should be extended to other persons who are not on the list of explicitly protected persons;[16] and
  6. Sixth, when the CJEU decides whether to extend protection to persons not specifically mentioned in Section 3, it tries to uphold the general rule in Article 4, according to which suspects should be sued in the courts of their own Member State, and allows only an extension of protection from Section 3, where in line with the protection of the “Weaker party. ”[17]

The Supreme Court ruled that the bank, as the assigned loss recipient under the policy, “beneficiary“The policy referred to in Article 14 and was entitled to be sued before the courts of its registered office in the Member States (Netherlands) in accordance with Section 3 of the Regulation.[18] On this basis, the fourth question was whether insurers’ claims for misrepresentation and / or reimbursement in connection with “tort, offense or quasi-offense”According to Article 7 (2) of the Regulation and should therefore be heard before the courts of England and Wales since the place where the damage occurred did not occur.

comment

The Supreme Court decision will be of interest to both policyholders (including policyholders and beneficiaries such as assignees / loss recipients) and insurers as it provides helpful guidance on the interpretation and application of the rules in Section 3 of the recast Brussels Regulation on insurance-related jurisdiction . The decision makes it clear that there is no economic “weaker partyException that excludes a policyholder, insured or beneficiary from the protection of Article 14; You have the right to be sued by an insurer, regardless of its economic strength, only in the courts of its own Member State. The decision also makes it clear that “Insurance matters“Is not to be understood as”Matters related to insurance contracts”; The title of Section 3 is broader, and Section 3 is therefore not limited to claims for breach of an obligation specifically related to the performance of a single insurance contract.

In the case of beneficiaries under an insurance contract, the Supreme Court decision also confirms that an exclusive jurisdiction clause does not normally bind a beneficiary that was not a party to the contract unless it initiates a process to enforce its rights under the contract.

contacts

Anthony Dempster
Tristan Smith

[1] See Brownlie v Four Seasons Holdings Inc. [2017] UKSC 80.

[2] [24];; see Coreck Maritime GmbH v Handelsveem BV (Case C-387/98) [2000] I-9337, para. 13-15.

[3] [26]

[4] [26]

[5] [29]

[6] [33]

[7] [41]

[8] [35]

[9] [36]

[10] [40]

[11] [43]

[12] [44];; see Gerling Group Speziale Kreditversicherungs-AG v Amministrazione del Tesoro dello Stato (Case 201/82) [1983] Coll. 2503.

[13] [45];; see Folien Fischer AG v Ritrama SpA (Case C-133/11) [2013] QB 523,

[14] [46];; see Société Financière et industrial du Peloux v Axa Belgium (Case C-112/03) [2006] QB 251

[15] [47];; see Landeskrankenanstalten-Betriebsgesellschaft – KABEG v Mutuelles du Mans Assurances – MMA IARD SA (Case C-340/16) [2017] IL Pr 31

[16] [50];; see Universal General Insurance Co (UGIC) v Group Josi Reinsurance Co SA (Case C-412/98) [2001] QB 68

[17] [55]

[18] [60]

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