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Anti-suit injunction to restrain breach of London arbitration agreement in insurance policy

News / / London

QBE Europe SA/NV and another v. Generali Espana de Seguros y Reaseguros [2022] EWHC 2062 (Comm)
In this case, a Spanish insurer sought to assert a direct right of action against a UK insurer in Spanish proceedings. The English Court found that the Spanish proceedings had been brought in contravention of a London arbitration agreement in the relevant liability insurance policy and granted an anti-suit injunction to restrain those proceedings.

This is the latest in a number of decisions in which the Court has made it clear that a party seeking to benefit from rights arising out of or derived from a contract must also comply with any contractual obligation to bring its claims in a particular forum.

The background facts

In June 2016, QBE Europe issued a P & I insurance policy to yacht owners. In November 2020, QBE UK took over QBE Europe’s rights and obligations under the policy, effectively replacing QBE Europe as the insurer under the policy.

In July 2016, the yacht had caused damage to an undersea power cable between the islands of Menorca and Mallorca. The owners of the cable, REE, claimed in respect of the damage on their property insurance with Generali, which Generali paid. Generali then sought to recover the sum paid from QBE in Spanish court proceedings by way of a direct action claim under the Spanish Maritime Navigation Act 2014 and related legislation.

QBE sought an anti-suit injunction from the English Court to restrain the Spanish proceedings, relying on a clause in the policy which provided for English law and London arbitration.

Generali contended that its claim was brought in tort under the Spanish statutory provisions, not under any contractual rights under the policy, so the London arbitration clause in the policy did not apply.

The legal context

Most anti-suit injunctions are sought in cases where the respondent simply chooses to bring proceedings that are in breach of its arbitration or jurisdiction agreement with the applicant. In such situations, the English Court will usually exercise its discretion to grant an anti-suit injunction to restrain the non-contractual forum proceedings unless the respondent can show strong reasons why it should not do so.

There are, however, situations where the respondent might argue that the arbitration or jurisdiction agreement does not apply to the claim it is bringing. This can be because the claim is said to be brought under a different contract to which the jurisdiction/arbitration agreement applies. Or it can be because the claim being brought is alleged not to come within the scope of the arbitration or jurisdiction agreement.

Specifically, the Court highlighted cases of “derived rights”. These are where the respondent relies on a right derived from a contracting party to bring proceedings in a non-contractual forum. Such a derived right can be by virtue, as here, of a direct action statute of the kind that allows the victims of torts or those who are subrogated to their rights to proceed directly against the wrongdoer’s liability insurers.

In such cases, the respondent claims it is not party to the underlying insurance contract and so not bound by its jurisdiction clause, even though it is seeking to enforce certain rights that are connected with or ancillary to that contract. Nonetheless, the Court will still treat the arbitration or jurisdiction agreement as highly relevant in deciding whether or not to grant the anti-suit injunction. In particular, the Court applies a “benefit and burden” rationale, meaning that it will not allow the respondent to enjoy the benefit of the derived right without complying with the associated obligation to bring its claim in the contractual forum. To all intents and purposes, therefore, the Court will not treat these cases any differently to those where it is accepted that there is an effective arbitration and jurisdiction agreement binding the parties.

The Commercial Court decision

Having reviewed the evidence and heard expert testimony on Spanish law, the Court rejected Generali’s argument that it was asserting independent rights of recovery derived from the Spanish statute that allowed a direct right of action.

Rather, the Court found that the Spanish statutory provisions provided Generali with a right to enforce QBE’s contractual obligation to indemnify. The characterisation of the Spanish claims as being tortious in nature did not answer the question whether the statutory right was, in substance, a right to enforce the insurance contract. The Court thought that it was. Therefore, the Spanish claims were contractual in nature and were covered by the London arbitration agreement in the policy.

Consequently, the Court concluded that it was appropriate to grant the anti-suit injunction sought.

Comment

In deciding whether a third party is seeking to enforce a contractual obligation derived from the contract of insurance or advancing an independent right of recovery under the relevant statute, the Court will consider the nature of the claim as a matter of substance.

Where appropriate, it will grant an anti-suit injunction to ensure that the third party seeking to enforce derived rights under the relevant contract of insurance also accepts  associated jurisdictional obligations

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