Arbitration Law Monthly

Effect of service of suit clause

It is very common to find in insurance policies issued by the London market to US policyholders a service of suit clause under which the insurers agree to submit to the jurisdiction of any court of competent jurisdiction in the US. In Ace Capital Ltd v CMS Energy Corporation [2008] EWHC 1843 (Comm) that form of wording was accompanied by an arbitration clause specifying arbitration in London. How are the two provisions to be reconciled? Mr Justice Christopher Clarke chose to give primacy to the latter.

Ace: the facts

Ace was the lead underwriter on a number of primary and excess layer political risks insurance policies issued to CMS, a Michigan company, and its associates. The policies were placed in the London market in 1999. The policies contained common ‘General Conditions’, Condition 1 of which was headed ‘Choice of Law and Arbitration’. Condition 1(a) stated that the policy was governed by English law and that disputes arising out of or in relation to the policy ‘shall be submitted to arbitration at the London Court of International Arbitration according to its rules at the date of submission. The award rendered by the Arbitrator(s) shall be final and binding upon all parties and may be enforced by any court having jurisdiction.’ Condition 1(c) was a Service of Suit clause. The learned judge accepted that the wording used was defective, and that what had been intended to have been said was that in the event of any failure by the underwriters to pay the amount claimed they would at the request of CMS submit to a court of competent jurisdiction within the US. Condition 1(b) said that the object of the service of suit clause was to ‘provide without waiver of any defence an ultimate assurance of the amenability of Underwriters to process of certain courts’.

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