ACE CAPITAL LTD V CMS ENERGY CORPORATION

[2008] EWHC 1843 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Christopher Clarke, 20 July 2008

Insurance (political risks) – Conflict of laws – Arbitration – Policy containing English arbitration clause and US service of suit clause – Assured commencing proceedings in Michigan – Underwriters seeking anti-suit injunction – Whether assured obliged to go to arbitration

Ace was the lead underwriter on a series of primary and excess layer political risks policies issued to CMS in Michigan. General Condition 1 provided that: (a) disputes were to be submitted to arbitration in London; and (c) in the event of a dispute as to payment, the underwriters agreed to submit to the jurisdiction of any court of competent jurisdiction in the US. General Condition (b) stated that the effect 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”. A payment dispute arose. CMS commenced proceedings in Michigan, and the underwriters responded by seeking an anti-suit injunction, in reliance on the arbitration clause. The underwriters asserted that the arbitration clause was paramount and overrode the service of suit clause, which was concerned purely with the underwriters agreeing to submit to the jurisdiction of the US courts for the purposes of the enforcement of any arbitration award. CMS argued that the service of suit clause operated to give CMS the right to commence proceedings in any US court of competent jurisdiction in respect of a money claim, and that the arbitration clause applied only to non-money claims. Christopher Clarke J held that the CMS was obliged to go to arbitration in London and that an anti-suit injunction should be granted. The learned judge gave weight to four considerations. (1) There was a strong legal policy in favour of arbitration where the parties had agreed to submit their disputes to arbitration, and that policy required an expansive interpretation of arbitration clauses. To construe the contract as meaning that the arbitration clause applied only to disputes which were not in the form of money claims and that money claims were to be litigated in the US under the service of suit clause would thwart that objective and probably give rise to fragmentation of proceedings. (2) US case law gave primacy to the arbitration clause, and the contract should be construed against that background. (3) Condition 1(b) was framed in US terms, so the reference to “without waiver of any defence” was intended to be to arbitration, which was regarded as a defence by the US courts. (4) The service of suit clause was a limited one and did not provide (contrary to what is commonly the case) that the law applicable to the dispute should be the law of the court in which the proceedings were brought. An anti-suit injunction was thus granted.