C V D

[2007] EWHC 1541 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Cooke, 28 June 2007

Arbitration – Insurance – Policy issued by US insurer to US corporation – Policy governed by New York law but subject to English arbitration – Award in favour of assured – Insurers seeking to bring proceedings to challenge award in New York – Whether anti-suit injunction should be granted – Arbitration Act 1996, section 2, 4, 58 and 69

D, an insurer incorporated in the US, issued a claims made liability policy to C, also a US corporation. The policy was governed by New York law but the parties agreed that any disputes would be resolved by arbitration in England under English legislation. It was agreed that any award would be final and binding. The arbitrators issued a partial award in favour of the assured, and the insurers made preparations to challenge the award in the New York courts on the ground that the arbitrators had disregarded substantive New York law. C argued that the award could be challenged only in England under section 69 of the Arbitration Act 1996, but that the parties had agreed to exclude any right of challenge for error of law. D asserted that the New York courts possessed jurisdiction, in that the Federal Arbitration Act overrode any contrary agreement where the parties were both US citizens. Cooke J granted the injunction. He ruled as follows. (1) A choice of English procedure was, unless qualified in some way, a choice of England as the seat of the arbitration under sections 2 and 4 of the Arbitration Act 1996, which meant that the Arbitration Act 1996 applied to the arbitration. The parties had thus validly excluded any right of appeal. (2) An application to a foreign court was (i) a breach of the implied agreement by the parties to honour the award; (ii) a breach of the statutory principle in section 58 of the 1996 Act under which the award was to be final and binding; and (iii) the application was unconscionable). (3) The law applicable to the arbitration agreement and to the submission agreement (if different) was irrelevant. The matter was governed by the law applicable to the seat. However, even if that was wrong the arbitration clause in the present case was governed by English law even though the policy itself was governed by New York law.