The Supreme Court held that the High Court of England and Wales had no jurisdiction over the insurers’ claims against a Dutch bank to recover sums paid under a settlement of a marine hull policy. The bank, as loss payee and beneficiary, was entitled under article 14 of the Brussels Regulation Recast to be sued only in the courts of its domicile. It was not bound by the policy’s exclusive English jurisdiction clause because it had not asserted its rights by legal proceedings.
The insurers insured the vessel Atlantik Confidence under a hull and machinery policy. The policy was governed by English law and contained a clause by which each party submitted to the exclusive jurisdiction of the courts of England and Wales. Credit Europe Bank NV, domiciled in the Netherlands, had lent money to refinance the vessel and another ship. Its security included mortgages and assignments of the insurances. The policy identified the Bank as mortgagee, assignee and loss payee, and a loss payable clause provided for relevant claims to be paid to the mortgagee up to its mortgage interest.
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The vessel sank in 2013. The bank authorised payment through the brokers but did not negotiate the settlement. The insurers later sought to recover payments after the loss was found to have resulted from deliberate sinking. They attempted to sue the bank in England.
The policy’s jurisdiction clause
The first issue was whether the Bank was bound by the exclusive jurisdiction clause in the policy. Lord Hodge, with whom Lady Hale, Lord Reed, Lord Kerr, Lord Lloyd-Jones, Lord Kitchin and Lord Sales agreed, held that it was not. Under EU law, a jurisdiction agreement binds a person only where consensus is clearly and precisely demonstrated, or where national law treats that person as the successor to the rights and obligations of a party. An equitable assignment transfers rights but not obligations. An assignee must take a conditional or qualified right as it stands and cannot assert it inconsistently with the contract. The relevant inconsistency arises where the assignee enforces the right through legal proceedings contrary to an arbitration or exclusive jurisdiction clause.
The Bank had neither commenced proceedings nor asserted a disputed claim. Its letter of authority facilitated payment and enabled the insurers and brokers to obtain discharges. When the proceeds were paid, there was no dispute about the Bank’s entitlement. Its conduct was therefore not inconsistent with the jurisdiction clause, and it was not bound under article 15 or article 25 of the Regulation. The Court rejected the argument that the position should be equated with a claim by the insurers for negative declaratory relief. The Bank was not a party to the policy and was not contractually bound to submit to the English courts if sued there.
Matters relating to insurance
The claims were nonetheless matters relating to insurance within section 3 of the Regulation. As both Teare J and the Court of Appeal had held, their foundation in reality and substance was the policy: the crucial question was whether the vessel had been lost by an insured peril or by wilful misconduct. Lord Hodge rejected the insurers’ argument that the claim had to be, in substance, a claim for breach of an obligation in an insurance contract. The heading of section 3 is wider than “matters relating to a contract”, and section 3 protects not only parties but also beneficiaries and, in liability insurance, injured parties. Even if a narrower contractual test applied, it would be met: an insurance fraud would involve a breach of the duty of utmost good faith.
Who may rely on article 14
Article 14 provides that an insurer may bring proceedings only in the courts of the member state in which the defendant is domiciled, irrespective of whether the defendant is the policyholder, the insured or a beneficiary. Unlike provisions creating alternative or derogating grounds of jurisdiction, article 14 reinforces the general rule that a defendant is sued in the courts of its domicile.
Teare J and the Court of Appeal had held that this protection was available only to a weaker party and that the Bank’s involvement in ship finance excluded it. Lord Hodge disagreed. Recital (18) explains the policy of protecting the weaker party in insurance, consumer and employment contracts, but the recital is an aid to interpretation rather than the operative rule. Article 14 names the policyholder, insured and beneficiary without qualification. The Court of Justice treats those categories as protected without a case-by-case comparison of economic strength, because such an assessment would undermine the predictability of the jurisdiction rules. The weaker-party rationale is used when deciding whether protection should be extended by analogy to persons outside the named categories, such as reinsurers or certain professionals, not to withdraw protection from persons within them. Articles 15(5) and 16 permit parties to contract out of section 3 for specified risks, including marine risks, but only by an agreement. There was no such agreement binding the Bank.
As the named loss payee, the Bank was a beneficiary. It was therefore entitled to the protection of article 14 and had to be sued in the Netherlands. The insurers could not establish jurisdiction under article 7(2). It was unnecessary to decide whether their restitution claims were matters relating to tort, delict or quasi-delict.
Verdict: The Court unanimously dismissed the insurers’ appeal and allowed the bank’s appeal. The English High Court lacked jurisdiction over all the claims against the bank. The separate question about whether restitution fell within article 7(2) did not arise.
Source: Aspen Underwriting Ltd and others v Credit Europe Bank NV [2020] UKSC 11
