lloyd’s law reports - kpmg...2005] vol. 1 lloyd’s law reports 67 ‘.a.] through transport...

2005] Vol. 1 LLOYD’S LAW REPORTS 67

‘.A.] Through Transport Mutual v. New India Assurance Co. Ltd. PART 2

COURT OF APPEAL

Dec. 2, 2004

THROUGH TRANSPORT MUTUALINSURANCE ASSOCIATION (EURASIA) LTD.

V.

NEW INDIA ASSURANCE CO. LTD.

[2004] EWCA Civ 1598

Before Lord Chief Justice WOOLI,

Lord Justice CLARKE andLord Justice Rix

nsurance — Arbitration — Carriage of goods fromCalcutta to Moscow — Goods lost in transit — Losspaid by owner’s insurers and cause of actionassigned to insurers — Claim by insurers againstcarriers — Carriers becoming insolvent — Judicialproceedings brought by insurers against carriers’P&I Club in Finland — Whether insurers bound byarbitration dause in contract between carriers andP&I Club — Whether anti-suit injunction should begranted — European Council Regulation 44/2001,art. 1.2(d).

In October, 1999 a container of garments wasshipped on board the vessel Han Blum at Calcutta forcarriage to Moscow. The container was shipped under athrough bill of lading issued by Borneo Maritime Ltd.,which provided for the goods to be carried by sea toKotka, Finland and thence by road to Moscow. Thecontainer arrived at Kotka on Nov. 30, 1999. On Dec.16 Borneo Maritime Oy, an associated company of thecarrier incorporated in Finland, issued a CMR waybillfor the carriage of the container by road from Kotka toMoscow. However, the container did not reach Moscow, having been, lost somewhere in the course of itsjourney through Russia.

The goods were insured against loss or damage intransit by New India Assurance Co. Ltd. The shippermade a claim against New India in respect of the lostgoods. The claim was compromised and the benefit ofany action against the carrier was assigned to NewIndia. During 2002 Borneo Maritime Oy filed forbankruptcy and on Nov. 26, 2002 it was struck off theregister. No payment had been made by Borneo Maritime Oy or Borneo Maritime Ltd. in respect of the lossof the container.

Borneo Maritime Ltd. and Borneo Maritime Oy wereinsured by Through Transport Mutual Insurance Association (Eurasia) Ltd. (“the Club”). The Club’s rulescontained the following provisions:

You are insured for your liability for physical lossof or damage to cargo and for consequential lossresulting from such loss or damage.

The Association shall pay you only

(b) after you have expended money, for example,by paying a claim of your customer or third party or

which you are liable or by paying for repairs toinsured property.

Every insurance provided by the Association andthe rights and obligations of you (or any otherperson) and the Association arising out of or inconnection with such insurance, is subject to andshall be construed in accordance with English law.

If any difference or dispute shall arise between you(or any other person) and the Association out of or inconnection with any insurance provided by the Association or any application for or an offer of insurance,it shall be referred to arbitration in London.On Dec. 16, 2002 New India began proceedings

against the Club in Finland by applying to the DistrictCourt of Kotka for the issue of a writ in respect of itsclaim for the loss of the container. The claim was madeunder s. 67 of the Finnish Insurance Contracts Act,1994, which gave the claimant the right to proceeddirectly against the defendant’s liability insurers whenthe defendant himself was insolvent. On Jan. 3, 2003 awrit was issued, and this was served on the Club inEngland on Mar. 31, 2003. On Apr. 30 the Club tooksteps to contest the jurisdiction of the District Court ofKotka and on May 8 it issued an arbitration claim formin England seeking a declaration that New India wasbound to pursue any claim in arbitration, and aninjunction to restrain it from pursuing its claim inKotka. On May 16 Mr. Justice Gross gave the Clubpermission to serve the claim form on New India out ofthe jurisdiction.

On July 2 New India applied for the order for serviceout of the jurisdiction to be set aside or, in thealternative, for the English proceedings to be stayed.On Oct. 22, 2003 the District Court of Kotka rejectedthe Club’s challenge to its jurisdiction. It held that ithad jurisdiction to determine the claim because it aroseout of an international contract for the carriage of goodsby road and because under art. 10 of the EC JudgmentsRegulation (Council Regulation 44/2001IEC) claimsagainst insurers might be brought in the courts of thecountry where the harmful event occurred. It held thatneither the shipper nor New India were parties to thecontract of insurance and that New India’s claimagainst the Club was not derived from Borneo MaritimeOy. Accordingly, the Club was not bound by thearbitration agreement.

On hearing of New India’s application for service outof the jurisdiction to be set aside, or for the Englishproceedings to be stayed, the Club sought a declarationand an anti-suit injunction. The Club argued that theclaim being pursued by New India in Kotka was insubstance one to enforce directly against the Club therights of indemnity available to Borneo Maritime Oyunder the contract. The Club’s case was that in effectNew India was seeking to obtain the benefits of astatutory assignment and was therefore bound by thearbitration clause in the Club’s rules. New India contended that it was not seeking to enforce a derivativeclaim but was pursuing an independent statutory remedy provided by the Finnish Contracts Act, and therefore that the arbitration clause had no application.

Mr. Justice Moore-Bick granted an anti-suit injunction preventing New India from pursuing its claim

68 LLOYD’S LAW REPORTS [2005] Vol. 1

Through Transport Mutual v. New India Assurance Co. Ltd. [C.A.

against the Club in Finland. The learned Judge held thatthe although New India was pursuing a claim in Finlandunder a Finnish statute, a dispute about the nature ofNew India’s claim had to be resolved by applyingEnglish principles of characterization, and in the present case the action was to be characterized as onebased on a contractual obligation rather than one basedon the Finnish statute. The obligations of the Clubunder the contract of insurance were governed byEnglish law and the Finnish statute did not modifythem: if New India wished to pursue a claim against theClub it had to do so in accordance with the terms of thecontract under which it arose, and that included thearbitration clause. It followed that the Court had jurisdiction to give permission to serve the claim form outof the jurisdiction and to grant an anti-suit injunction toprevent the continuation of proceedings contrary to theterms of the arbitration clause. Although the DistrictCourt of Kotka was first seised of the proceedingsrelating to the applicability of the arbitration clause, theE.C. Judgments Regulation did not apply to arbitrationby virtue of art. 1.2(d). As to the anti-suit injunction,one the Court was satisfied that the claim being madeby New India in Finland was in substance one toenforce an obligation governed by English law, it wouldbe wrong to allow it to be pursued in disregard of thearbitration clause. Accordingly, an anti-suit injunctionwould be granted against New India restraining it frompursuing the claim in Finland.

Mr. Justice Moore-Bick also granted to declarations,as follows:

(a) It is declared that the defendant is bound torefer any claims against the claimant, in respect ofthe consignment carried from Calcutta (India) toKotka (Finland) and onwards to Moscow (Russia)pursuant to two bills of lading... and CMR International Way Bill (“the consignment”), to arbitrationin accordance with the arbitration clause contained ins. D, cl. 2.1 of [the certificate] (“the arbitrationclause”).

(b) It is declared that the proceedings commencedby the defendant against the claimant in Kotka,Finland, by summons dated Dec. 16, 2002 (“theKotka proceedings”), are in breach of the arbitrationclause.New India appealed against the assertion of jurisdic

tion by the English Courts and against the grant ofdeclarations and the anti-suit injuniction.

Held, by C.A. (Lord WOOLF, L.C.J., CLARKEand Rix, L.JJ.), that the appeal would be allowed inpart, and that the anti-suit injunction and the seconddeclaration would be discharged.

(1) The English Court was not required to declinejurisdiction or stay the proceedings under the Regulation, since the Regulation had no application to theclaims brought in the English proceedings (see par.49).

(a) It was common ground that the Finnish court wasthe court first seised (see par. 23).

(b) It was open to the Court in which the issuewhether the arbitration exception applied to considerthat question, even if it was the Court second seised. Ifit concluded that the arbitration exception applied so

that the claim and proceedings were outside the Convention it was entitled to proceed in the ordinary way.If, on the other hand, it concluded that the exception didnot apply and that the proceedings were within theConvention, the provisions of the Convention appliedin their full rigour, in which event, if a question arose asto whether the Court second seised had jurisdictionunder an exclusive jurisdiction clause to which art. 23applied, it would be for the court first seised todetermine that question by reason of art. 27. It followedthat the submission that the Judge should have stayedthe proceedings under art. 27 of the Regulation pendinga decision by the Finnish court on the question whetherthe English proceedings were within the arbitrationexception under art. 1.2(d) of the Regulation would berejected (see par. 37);

Marc Rich & Co. A.G. v. Societa Italiana PA.(The Atlantic Emperor), [1992] 1 Lloyd’s Rep. 342.Erich Gasser G.m.b.H. v. Misat Sri Case C-i 16/02,[2004] 1 Lloyd’s Rep. 222, applied.

(c) The Judge had been right to hold that the claim inthese proceedings came within the arbitration exceptionand was thus outside the Regulation altogether byreason of art. 1.2(d). The Convention did not apply toany Court proceedings or judgments in which theprincipal focus of the matter was “arbitration”. Thatincluded proceedings concerning the validity or existence of an arbitration agreement; the appointment ofarbitrators; ancillary assistance to arbitration proceedings and the recognition and enforcement of awards.Proceedings in the English Court for (I) a declarationthat arbitration clauses bound the defendants; and (ii)an injunction to restrain proceedings in Courts inbreach (or threatened breach) of binding arbitrationagreements fell within the exception in art. 1(4) of theConvention (see par. 44).

Navigation Maritime Bulgare v. Rustal Trading Ltd. (The Ivan Zagubanski), [2002] 1 Lloyd’s Rep.107, followed; Partenreederei MIS ‘Heidberg’ v. Grosvenor Grain and Feed Co. Ltd. (The Heidberg), [1994]1 Lloyd’s Rep. 287. overruled; Qingdao Ocean Shipping Co. v. Grace Shipping Establishment (The Xing SuHai), [1995] 2 Lloyd’s Rep. 15, Toepfer InternationalG.m.b.H. v. Molino Boschi Sri, [1996] 1 Lloyd’s Rep.510, Lexmar Corporation and The Steamship MutualUnder’.vriting Association (Bermuda ) Ltd. v. NordiskSkibsrederforensig and Northern Tankers (Cyprus) Ltd.(“The Lexmar case”), [1997] 1 Lloyd’s Rep. 289,Toepfer International G.m.b.H. v. Société CargillFrance, [1997] 2 Lloyd’s Rep. 98, referred to.

(d) The fact that arbitration was excluded from theConvention meant that from time to time there werelikely to be conflicting judgments in different memberstates and it was therefore possible that questions ofrecognition and enforcement of conflicting judgmentsmight arise in the future. Such questions were best leftfor decision when and if they arose (see par. 51).

(2) The Judge had been right to hoLd that, if NewIndia wished to pursue a claim under the Finnish Act, itwas bound to do so by arbitration in England becausethe Club was entitled to rely upon the arbitration clause,just as it was entitled to rely upon any other clause inthe contract to defend the claim.

;j Vol. 1 LLOYD’S LAW REPORTS

Through Transport Mutual v. New India Assurance Co. Ltd.

a) New India did not become a party to an arbitraI agreement (see par. 52).

b) The Judge had been right to hold that the claimer s. 67 of the Finnish Act was properly characed under English principles of conflict of laws as am under the contract to enforce the obligations ofClub. The Judge was also plainly correct to holdthe Club could, as a matter of English law, rely

‘n the terms of the rules, whether they were provis relating to the extent of the cover or the arbitra

clause (see par. 54).

c) The Judge was right to hold that the substance ofw India’s claim under s. 67 of the Finnish Act was toorce against the Club as insurer the contract made byinsured. The title to s. 67 was the “insured person’sitlement to compensation under general liabilityrance” and the right was defined as a right “torn compensation in accordance with the insurancetract direct from the insurer” in certain defined;umstances. The claim under the Act was not there

in any sense independent of the contract ofurance but under or in accordance with it. In these;umstances the Judge was correct to hold that theie under the Act was one of obligation under theitract (see par. 58);

Macmillan Ltd. v. Bishopsgate Investment1st Plc (No. 3), [1996] 1 W.LR. 387, applied..

3) There was no basis upon which the Court couldrfere with the exercise of the Judge’s, discretion, touse to set aside. service and to: refuse a stay on the‘is of forum non conveniens. Once it was held by theglish Court that New India was bound to submit itsim under the Finnish Act to arbitration it would’rotjust to stop the Club seeking a declaration to thatct in proceedings in England (see par 62)

4) The Club was entitled to the first declaration toeffect that New India was bound to refer any claims

arbitration in accordance with the ‘arbitration clause.•wever, the Club was notentitled to the ‘second;laration if it meant that that New India was in.breach:ontract in commencing the Kotka proceedings. Newha was not inbreach of contract, and the Club couldhave sued New India for damages. for- commencingproceedings in Finland. The Club was sufficiently

Itected by the first declaration and either did not need• second or, if construed as suggested, was notitled to it (see pars 64 and 65);

Socony MobilOil Ca. Inc. v. West of Englandp Owners Mutual Insurance AsEociation (London)I. (The Padre Island (No. 1)), [1984] 2 Lloyd’s Rep8, applied. . . .

(5) The anti-suit injunction would be discharged.is was not a case in which, in the language of s. 37(1)the Supreme Court Act, 1981, it was or would be justI convenient to grant an injunction restraining Newha from pursuing a claim under the Finnish Act infland.

(a) The Judge had left open the point that an anti-suitunction should not be granted to restrain proceedingsthe courts of a country to which the Regulation

plied, but he had been right to hold that that ordersde in support of agreements to refer disputes tolitration were directed at the defendant and not in any

sense at the court in which he had chosen to commenceproceedings. The submission that the court should notgrant an anti-suit injunction in a case where a party toan arbitration agreement began proceedings in thecourts of a contracting state in breach of an arbitrationclause in a contract would be rejected. The properdistinction was between a case involving an exclusivejurisdiction clause and an arbitration clause, as in thelatter case the proceedings were outside the Convention. There was nothing in the Convention to preventthe courts of a contracting state from granting aninjunction to restrain a claimant from beginningproceedings in a contracting state which would bein breach of an arbitration clause (see pars. 7, 83and 92);

The Angelic Grace, [199511 Lloyd’s Rep. 87,applied; Turner v. Grovit Case C-159/02 [20041 1Lloyd’s Rep. 216, Erich Gasser G.m.b.H. v. Misat SriCase C-i 16/02, [2004] 1 Lloyd’s Rep. 222,distinguished.

(b) The claim was brought in Finland under a Finnishstatute conferring rights on third parties against liabilityinsurers in circumstances in which the insured wasinsolvent. The statute was no doubt passed because, asa matter of public policy in Finland, it was thought thatliability insurers should be directly liable to thirdparties who had suffered loss in respect of which theinsured was liable. Further, this was not a case in whichit could fairly be said that the proceedings in Finlandwere vexatious or oppressive. New India was simplyproceeding in Finland under a Finnish statute whichgave it the right to do so (see pars. 94 and 96);

Akai Pty. Ltd. v. People’s Insurance Ltd.,[19981 1 Lloyd’s Rep. 90, The Angelic Grace, [1995] 1Lloyd’s Rep. 87, distinguished.

The following cases were referred to in thejudgment:

Adams v. National Bank of Greece, (H.L.) [1961]A.C. 255;

Aggeliki Charis Compania Maritima S.A. v. Pagnan S.p.A. (The Angelic Grace), [1994] 1Lloyd’s Rep. 168; [1995] 1 Lloyd’s Rep. 87(C.A.);

Akai Pty. Ltd. v. People’s Insurance Ltd., [1998] 1Lloyd’s Rep. 90;

Bankers Trust Co. V. P.T. Jakarta InternationalHotels & Development, [1999] 1 Lloyd’s Rep.910;

Continental Bank N.A. v. Aeakos Compania Nayiera S.A., (C.A.) [1994] 1 W.L.R. 588;

Donohue v. Armco Inc., (H.L.) [2001] UKHL 64,[2002] 1 Lloyd’s Rep. 425;

Effer S.p.A. v. Kantner Case C-38/81, [1982]E.C.R. 825;

Erich Gasser G.m.b.H. v. Misat SrI Case C-i 16/02,[2004] 1 Lloyd’s Rep. 222;

69

70 LLOYD’S LAW REPORTS [20051 Vol. 1

CLARKE, L.J.] Through Transport Mutual v. New India Assurance Co. Ltd. [C.A.

Firma C-Trade S.A. v. Newcastle Protection andIndemnity Association (The Fanti); SoconyMobil Oil Co. Inc. v. West of England ShipOwners Mutual Insurance Association (London)Ltd. (The Padre Island) (No. 2), (H.L.) [1990] 2Lloyd’s Rep. 191;

Kongress Agentur Hagen G.m.b.H. v. ZeehagheB.V. Case C-365/88 [1990] E.C.R. 1-1845;

Like Avery, The [1997] 1 Lloyd’s Rep. 540;

Lexmar Corporation and The Steamship MutualUnderwriting Association (Bermuda) Ltd. v.Nordisk Skibsrederforensig and Northern Tankers (Cyprus) Ltd., [1997J 1 Lloyd’s Rep. 289;

Macmillan Ltd. v. Bishopsgate Investment Trust plc(No. 3), (C.A.) [1996] 1 W.L.R. 387;

Marc Rich & Co. A.G. v. Societa Italiana PA (TheAtlantic Emperor), [199211 Lloyd’s Rep. 342;

National Bank of Greece and Athens v. Metliss,(H.L.) [19581 A.C. 509;

Navigation Maritime Bulgare v. Rustal TradingLtd. (The Ivan Zagubanski), [2002] 1 Lloyd’sRep. 107;

Partenreederei M/S ‘Heidberg’ v. Grosvenor Grainand Feed Co. Ltd. (The Heidberg), [1994] 1Lloyd’s Rep. 287;

Qingdao Ocean Shipping Co. v. Grace ShippingEstablishment (The Xing Su Hal), [1995] 2Lloyd’s Rep. 15;

Socony Mobil Oil Co. Inc. v. West of England ShipOwners Mutual Insurance Association (London)Ltd. (The Padre Island) (No. 1), [1984] 2Lloyd’s Rep. 408;

Toepfer International G.m.b.H. v. Molino BoschiSri, [1996] 1 Lloyd’s Rep. 510;

Toepfer International G.m.b.H. v. Société CargillFrance, [1997] 2 Lloyd’s Rep. 98;

Turner v. Grovit, (H.L.) [2001] UKHL 65, [200211W.L.R. 107;

Turner v. Grovit Case C-159/02, [2004] 1 Lloyd’sRep. 216 (ECJ);

Welex AG v. Rosa Maritime Ltd. (The EpsilonRosa), (C.A.) [2003] EWCA Civ 938; [2003] 2Lloyd’s Rep. 509;

XL Insurance Ltd. v. Owens Corning, [2000] 2Lloyd’s Rep. 500.

This was an appeal against the decision of Mr.Justice Moore-Bick, [20041 1 Lloyd’s Rep. 206,granting the claimants an anti-suit injunction preventing the defendants from proceeding with anaction in Finland. The defendants appealed.

Mark Howard, Q.C. and Ricky Dirwan,instructed by Birketts, for the claimants; Christopher Smith, instructed by Holmes HardinghamWalser Johnston Winter, for the defendants.

The further facts are stated in the judgment of theCourt of Appeal.

Thursday, Dec. 2, 2004

JUDGMENT

Lord Justice CLARKE:

Introduction

1. This is the judgment of the Court on an appealfrom an order of Mr. Justice Moore-B ick dated Dec.18, 2003. By that order he dismissed the defendant’s challenge to the jurisdiction of the EnglishHigh Court, declared that the defendant was boundto refer certain claims to arbitration in England andthat proceedings issued by the defendant in Finlandwere brought in breach of the agreement to arbitrateand granted an injunction restraining the defendantfrom continuing with the proceedings in Finlandand/or from commencing proceedings otherwisethan by way of arbitration in London. The Judgealso ordered the defendant to pay the claimant’scosts and gave the defendant permission toappeal.

The facts

2. The, facts are’ not in dispute and can be takenfrom the Judge’s judgment. In October, 1999 anIndian merchant, Saluja Fabrics; shipped on boardthe vessel Han Bhüm.at Calcutta a container said tocontain various, types of garments. for, .carriágë toMoscow. The: container. was. shipped under twothrough transport bills. of lading issued by BorneoMaritime. Ltd. (“BML”), which provided for thegoads to be carried by sea to Kotka in Finland andthence byroad to Moscow. The goods were insuredagainst loss or damage in transit by the defendant,New India Assurance Company Ltd., (“NewIndia’’%. . .

3. ‘The container arrived at Kotka on Nov. 30,1999: On Dec. 16 BOrneo Maritime Oy (“BMO”),an assoàiatéd company of the carrier incorporatedin Finland, issued a CMR waybill for the carriageof’ the container by road from Kotka to Moscow.Unfortunately, the container did not reach Moscow,having been lost iti circumstances which are still indispute somewhere in, the course of its. journeythrough Russia.’

0051 Vol. i LLOYD’S LAW REPORTS

.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE. L.J.

4. The claimant, Through Transport Mutual

isurance Association (Eurasia) Ltd. (“the Club”),

a mutual insurance association which provides

isurance to its members in respect of various kinds

flosses and liabilities incurred in connection with

ie carriage of goods. BML was a member. of. the

lub for the year beginning Sept. 1, 1999: BMO

‘as also insured under the: same’ cover as an

ssociated company of BM1’.

5. Following the toss of the container, Saluja

abrics made a claim against New India which was

• due, course compromised. As a result of. the

ompromise New India became entitled to exercise

aluja. Fabrics’ rights against the carrier,.either as

ssignee. of those rights or by way of subrogation;

ye are not sure which.. During.2002 BMO filed for

ankruptcy and on Nov. 26,. 2002:it was struck off

he register in Finland. As the Judge observed, it is

iot clear whether any c!aim had. been’ intimated, to

he company before that occurred, but.it is. common

;round that no payment had.been made by either

3M0 or BML in respect of the loss’ of the

:ontainer.

6. The Club rules for the year beginning Sept. 1,

1999 included the following provisions:

Clause A. Cargo Liabilities

I RISKS INSURED

1.1 Loss of or Damage to Cargo

You are insured for your liability for physical

loss of or damage to Cargo and for consequential

loss resulting from such loss of damage.

General Provisions

Clause A. Exclusions & Qualifications

I. STANDARD EXCLUSIONS AND

QUALIFICATIONS

1.3 Indemnity insurance

Insurance with the Association is on the basisof indemnity, which. means. that the Associationshall pay you only

(a) after you have suffered a physical loss ofyour insured, property, for example, your

• equipment, or:

(b) after you have expended money, forexample, by paying a claim of your customer

• or a third party for which you are liable or bypaying for repairs to your insured property.

Clause D. Law & Disputes

I.LAW .

Every insurance provided by the Association

and the rights and obligations ofyou.(or’anyother person) and the Association arising out ofor in connection with such insurance, is subject

to and shall be construed in accordance with

English law.

2. DISPUTES

If any difference or dispute shall arise between

you (or any other person) and the Association outof or in connection with any insurance provided

by the Association or any application for or anoffer of insurance, it shall be referred to arbitration in London.

2.2 The submission to arbitration and allproceedings in connection with it shall be subject

to English law.

2.3 No action or other legal proceedingsagainst the Association upon any such disputemay be maintained unless and until it has beenreferred to arbitration and the award has beenpublished and become final.

2.4 The sole obligation of the Association toyou in respect of such dispute is to pay such sum,if any, as such final award may direct.

7. Clause A 1.3(b) is colloquially known as a pay

to be paid clause and dl. D2, 2.3 and 2.4 together

contain both an arbitration clause and a Scott v.Avery clause and are very similar to the clausesconsidered by Mr. Justice Leggatt in Socony Mobil

Oil Co. Inc. v. West ofEngland Ship Owners MutualInsurance Association (London) Ltd. (The PadreIsland) (No. 1), [1984] 2 Lloyd’s Rep. 408.

8. On Oct. 19, 1999 the Club issued a certificate

of membership (“the certificate”) with the terms ofthe cover attached. The parties to the contract at

that time were of course only BML and BMO onthe one hand and the Club on the other. Neither

Saluja’ Fabrics nor New India was a party. However,having paid Saluja’ Fabrics, New India naturallywantedto recover the’amount it had paid from thoseresponsible for the loss. It could not recover fromBMO because it’ wás insolvent (or indeed fromBML presumably for the same reason) and itnaturally considered how it could recover directly

from the Club as the liability insurer of both BMOand BML The claim is, by today’s standards,

comparatively modest.We’werç tOld that it is of theorder of ‘U.S.$250,000’ plus interesL;”

9. New. India did not prOceed in England under theThird Party (Rights Against Insurers) Act, 1930, nodoubt because of the pay to be paidclause and thedecision ofthê House of Lords in Firma C-Trade

S.A v. Newcastle Protection and Indemnity Associa

tiOn The Fanti, and Socony Mobil. Oil Co. Inc. v.West of England Ship Owners Mutual Insurance

Association (London) Ltd. (The Padre Island) (No.2) [19901.2 Lloyd’s Rep: 191. Instea& on’ Dec 16,2002 New India began proàeedings in its own nameagainst the Club in Finland by applying to theDistrict Court of Kotka for the issue of a writ inrespect of its claim for the loss of the container. Theclaim was made under s. 67 of the Finnish Insurance

ContractsAct, 1994 (“the Finnish Act”).

71



10. Section.67 provides as follows:

Injured person’s entitlement to compensationunder general. liability insurance.

A person’ who has’ sustained bodily injury,property’ damage or financial loss under generalliability’insurance is entitled to claim compensation in accordance with the insurance’contractdirect from the’ insurer, if:

(1) the insurance policy has been taken outpursuant to laws or regulations issued by theauthorities;

(2) the insured has been declared bankruptor is otherwise insolvent; or

(3) the general liability insurance has beenmentioned in marketing efforts launched topromote the insured’s business.

If such claim is made to the insurer, the insurershall inform the insured of the claim withoutundue delay and reserve the insured an opportunity to give further information on the occurrenceof the insured event. The insured shall also benotified of the subsequent processing of theclaim.

If the insurer accepts a claim made by a personwho has sustained bodily injuiy, property damage, or financial loss, such acceptance is notbinding on the insured.

Section 67 thus gives a third party the right in somecircumstances to proceed directly against a liabilityinsurer such as the Club when the insured whowould otherwise be liable to the third party isinsolvent.

11. The only other section of the Finnish Actwhich is (so far as we are aware) relevant orpotentially relevant is s. 3, which provides asfollows:

Peremptory nature of the provisions

(1) Any terms or conditions of an insurancecontract that deviate from the provisions of thisAct to the detriment of an injured person or aperson entitled to compensation or benefits otherthan the policyholder shall be null and void.

(2) Any terms or conditions of an insurancecontract that deviate from the provisions of thisAct to the detriment of the policyholder shall benull and void if the policyholder is a consumer ora business which in terms of the nature and scopeof its operations or other circumstances can becompared to a consumer as a party to the contractsigned with the insurer. What is provided inthis subs. is not applied to group insurancecontracts.

(3) The provisions contained in subs.s 1 and 2are not applied to credit insurance, marine ortransport insurance taken out by businesses, or

insurance taken out by businesses to insureaircraft.

As can be seen, s. 3 is an anti-avoidance provisionnot dissimilar from that contained in the Third Party(Rights Against Insurers) Act, 1930.

12. On Jan. 3, 2003 a writ was issued in Finlandwhich was served on the Club in England on Mar.31. On Apr. 30 the Club took steps to contest thejurisdiction of the District Court of Kotka. As weunderstand it, it did so without submitting to thejurisdiction for any other purpose. On May 8 itissued an arbitration claim form in the High Courtseeking a declaration that New India is bound topursue any claim in arbitration and an injunction torestrain it from pursuing its claim in Kotka. OnMay 16 Mr. Justice Gross gave the Club permissionto serve the claim form on New India out of thejurisdiction and on July 2, following service of theproceedings in Mumbai, New India applied for theorder for service out of the jurisdiction to be setaside or, in the alternative, for the proceedings hereto be stayed in the exercise of the Court’sdiscretion.

13. On Oct. 22, 2003 the District Court of Kotkarejected the Club’s challenge to its jurisdiction. Inreaching its conclusion the Court held that it hadjurisdiction to determine the claim because it aroseout of an international contract for the carriage ofgoods by road and because, under art. 10 of the ECJudgments Regulation (Council Regulation (EC)No. 44/2001) (“the Regulation”), claims againstinsurers may be brought in the Courts of thecountry where the harmful event occurred. Itappears to have held that, although the lossoccurred in Russia, the harmful event occurred inFinland on the basis that the loss was caused there,although the court does not spell out the basis ofthat finding in its judgment.

14. As to the arbitration clause the Court said:

As grounds for the District Court’s lack ofjurisdiction, T1’-Club has also invoked the factthat the insurance contract made betweenTl’-Club and Borneo Maritime Oy’s parent company Borneo Maritime Ltd. contains an arbitration clause. According to it, all disputes risingfrom the insurance and the insurance contractmust be settled according to the arbitration procedure in London under English law. The DistrictCourt observes that Saluja Fabrics and The NewIndia are not contractual parties to that insurancecontract. The arbitration clause thus does notconcern The New India. Because The New Indiadoes not derive its right to insurance compensation from Borneo Maritime Oy, the arbitrationclause does not concern The New India on thisbasis either. Nor have such other grounds beenpresented in the case as would lead to a situation


‘.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

in which the arbitration clause would be bindingupon The New India.15. The court thus held that neither Saluja

‘abrics nor New India was a party to the contract ofsurance and that New India’s claim against the‘tub was not derived from BMO. For these reasons

was not bound by the arbitration agreement. Wenderstand that an appeal against that decision isending, although no date for it has yet been fixed.‘he order which is the subject of this appealxpressly permits New India to defend the appeal in‘inland, notwithstanding the injunction.

‘he issues

16. The parties’ positions before the Judge can beummarized in this way, The Club.reliedupon therbitration clause in its rules. It said. that; if Newadia is to recover under s. 67 of the Finnish Act, itan only. do so “in accordance with the insuranceontract” between the BMO and the Club and thatfollows that it is, at least for that purpose, bound

y all the Club rules including the arbitrationlause. It thus follows that New India’ must bringe claim by way of arbitration in England; It makesatsubinission in these proceedings. Indue coursewill submitin thearbitration that it is entitled todeclaration that New India’s claim is doomed to

ilure because it is bound: by (and cannot satisfy)e pay to be paid clause. The.Club said that inese circumstances, it is entitled to an injunction tostrain. New.. India from proceeding in Finland orlsewhere’ in breach. of the arbitration:clause.

17. New ‘India’s case was that it. is.. suing ininland in reliance upon an independent statutoryause of action created by aFinnish statute and thate English. Court has. no jurisdictiàn because. the‘innish. court was first seised of the dispute underrt. 27 of the Regulation. Moreover, it said that it isot suing on the contract of insurance in the Club.iles. or indeed bringing a claim in contract at allnd that it is not bound by thearbitratiön clause ine rules. In any event it said that the issue whether

was bound by the arbitration clause wasone inspect of which the Finnish court was• first seisednd that under Finnish law both the arbitrationlause and the pay to be paid. clause are.. voidlternatively New India said that the English procedings should be stayed on. the ground of forumon conveniensand in any event that no injunctionhould be granted.

18. Since the case was before the Judge thereave been two important decisions of the European‘ourt of Justice (“ECJ”) upon which New Indialaces considerable reliance in support of its subissions, and especially in support of its case thato injunction should. be granted by the English‘ourt restraining proceedings in Finland. They are

Erich Gasser G.m.b.H. v. Misat Sri Case C- 116/02,[2004] 1 Lloyd’s Rep. 222, in which the judgmentwas given on Dec. 9, 2003, and Turner v. GrovitCase C-159/02 [2004] 1 Lloyd’s Rep. 216, in whichjudgment was given on Apr. 27, 2004. The judgment of the Judge was given on Dec. 18, 2003 at atime when he was unaware of the decision inGasser.

The decision of the Judge

19. The Judge’s conclusions may be shortlysummarized in this way.. . .

(i) New India was bound to submit the. claimunder. s. 67 of the Finnish. Act to arbitration. inLondon. In proceedings before an English Courta dispute about New India’s claim can only beresolved by applying the principles of Englishprivate international., law. relating. to characterization. On the. authorities,, notably NationalBank, of.Greece andAthens .v. Metiiss, [1958]A.C., 509,. Adams v. National Bank of Greece,[1961].A.C.255and Macmillan.Ltd.. v. Bishops-gate: Investment. Trust Plc (No.. 3), [1996] 1W.L.R: 387, the. question’, depends on. whetherNew India is seeking. to enforce a contractualobligation derived from the.contract of insuranceor. an independent right of recovery arising underthe’ Finnish Act.. If insubstance.. the. claim isindependent’ of the, contract of. insurance andarises under the Finnish legislation simply as aresult of its having a right of action against aninsolvent insured,, the issue would have, to becharacterized as one of statutory entitlement to.which there may be no. direct equiválent’ inEnglish law In that case the issue..would have tobe determined in accordance with Finnish law. If,on the other hand; the claim is insubstance oneto enforce against the insurer the contract madeby the insolvent insured; the issue is. to becharacterized as one of obligatiOn. In that casethécourt will reSolve it by applying English lawbecause the proper law of the’ contract creatingthe obligation is English law: see Adams v.National Bank of Greece.

(ii) The effect.àf’s. 67 is in substance to.enablean injured party who has a claim against aninsolvent insured to bring proceedings directlyagainst the insurer to obtain the benefit that theinsured would himself. have been entitled toobtain under the contract. The essential nature ofthe right created by s. 67 is to enforce the termsof the contract.

(iii) The obligations of the Club under thecontract of insurance are governed by Englishlaw and accordingly Finnish legislation will notbe recognized in this country as effective tomodify them. It follows that if New India wishes



to pursue a claim against the Club, it must do soin accordance with the terms of the contractunder which it arises. That includes the arbitration clause.

(iv) It further follows that the Court hadjurisdiction in this case to give permission toserve the claim form out of the jurisdiction underCPR 6.20(5)(c) and rule 62.5(l)(c) and that it hasjurisdiction to grant an injunction to prevent thecontinuation of proceedings contrary to the termsof the arbitration clause.

(v) The Court was not bound to stay theproceedings under art. 27.1 of the Regulationbecause by art. 1.2(d) it does not apply toarbitration and because, following the decision ofMr. Justice Aikens in Navigation Maritime Butgare Rustal Trading Ltd. (The Ivan Zagubanski), [2002] 1 Lloyd’s Rep. 107, theseproceedings are within the arbitration exceptionand thus outside the Regulation.

(vi) There was no basis for staying the proceedings or setting aside the service outside thejurisdiction as a matter of discretion, given theJudge’s conclusion that the Club was entitled tohave the matter arbitrated in England and notpursued in litigation in Finland or elsewhere.

(vii) Applying the principles in the authoritiesas to anti-suit injunctions, the club was entitled toan injunction restraining New India from proceeding further in Finland.

The appeal

20. The argument in the appeal ranged somewhatmore widely than before the Judge because it wassubmitted by Mr. Smith on behalf of New Indiathat, as the court first seised, the Finnish court andnot the English Court must decide whether theseproceedings are within the arbitration exception ornot. He also submitted that, if it was open to theEnglish Court to determine that question, we shouldhold that The Ivan Zagubanski was wronglydecided and that the proceedings are outside thearbitration exception, with the consequence that theproceedings are within the Regulation and that thiscourt must decline jurisdiction or stay the proceedings under art. 27. Mr. Smith further relied upon thedecisions of the ECJ in Gasser and Turner v. Grovitin support of his submission that in any event noanti-suit injunction should have been granted.

21. The principal questions which arise in theappeal seem to us to be these:

(i) Should the Court decline jurisdiction orstay the proceedings under the Regulation?

(ii) Was the Judge right to hold that New Indiais bound to pursue its claim under the FinnishAct by arbitration in England?

(iii) Should the permission to serve the claimform out of the jurisdiction be set aside or theproceedings be stayed as a matter ofdiscretion?

(iv) Should the Judge have granted the declarations he did?

(v) Should he have granted an anti-suitinjunction?

We will consider those questions under these headings: the Regulation, the arbitration clause, settingaside service and stay, the declarations and the anti-suit injunction.

The Regulation22. The Regulation provides, as far as relevant,

as follows:CHAPTER 1 — SCOPEArticle 1

2. The Regulation shall not apply to:

(d) arbitration.CHAPTER II— JURISDICTIONSECTION 9— US PENDENS — RELATED

ACTIONS

Article 27I. Where proceedings involving the same

cause of action and between the same parties arebrought in the courts of different Member States,any court other than the court first seised shall ofits own motion stay its proceedings until suchtime as the jurisdiction of the court first seised isestablished.

2. Where the jurisdiction of the court firstseised is established, any court other than thecourt first seised shall decline jurisdiction infavour of that court.

Article 28I. Where related actions are pending in the

courts of different Member States, any courtother than the court first seised may stay itsproceedings.

2. Where these actions are pending at firstinstance, any court other than the court firstseised may also, on the application of one of theparties, decline jurisdiction if the court firstseised has jurisdiction over the actions in question and its law permits the consolidationthereof.

3. For the purposes of this Article, actions aredeemed to be related where they are so closelyconnected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separateproceedings.


2.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

CHAPTER III — RECOGNITION ANDENFORCEMENT

Article 32

For the purposes of this Regulation ‘judgment’means any judgment given by a court or tribunalof a Member State, whatever the judgment maybe called, including a decree, order, decision orwrit of execution, as well as the determination ofcosts or expenses by an officer of the court.Section 1 — Recognition

Article 33

1. A judgment given in a Member State shallbe recognized in the other Member States without any special procedure being required.

2. Any interested party who raises the recognition of a judgment as the principal issue in adispute may, in accordance with the procedureprovided for in Section 2 and 3 of this Chapter,apply for a decision that the judgment berecognized.

3. If the outcome of proceedings in a court ofa Member State depends on the determination ofan incidental question of recognition that courtshall have jurisdiction over that question.

Article 34

A judgment shall not be recognized:1. if such recognition is manifestly contrary to

public policy in the Member State in whichrecognition is sought;

2. where it was given in default of ãppearánce,if the defendant was not served, with the document which instituted the proceedings or with anequivalent document in; sufficient time’ and• insuch a way as to enable him to arrange’ for hisdefence, ., unless. the defendant. failed to commence proceedings to challenge, the judgment.when it was possible for him to do so;.

3. if it is irreconcilable with-a-judgment givenin a dispute. between the same parties’ in theMember State in which recognition is sought;.

4 if it is irreconcilable with an earlier judgment given in another Member ‘State or in a thirdState involving the same’ cause o action andbetween the same parties, provided that. theearlier judgment fulfils the conditions necessaryfor its recognition in the Member’. Stateaddressed.

Article 35

1. Moreover, a judgment shall not be recognized if it conflicts with Sections 3, 4 or 6 ofChapter II, or in a case provided for in Article72.

2. In its examination of the grounds of jurisdiction referred to in the foregoing paragraph, thecourt or authority applied to shall be bound bythe findings of fact on which the court of theMember State of origin based its-jurisdiction:

3. Subject to the paragraph-i, the jurisdictionof the court of the Member State of origin maynot be reviewed. . The- test’ of, public’ policyreferred to in point ‘1 of Article 34 may not beapplied’ to the rules relating to jurisdiction.

Article 36 ., ‘

Under no circumstances may a foreign jtidgment be reviewed; as to its; substance -

23. It is common ground that the Finnish court isthe court first seised. Mr. Smith submitted that theEnglish Court should decline jurisdiction or stay theproceedings under art.’ 27 or stay them under art.28. Mr. Howard’ submitted on behalf of the Club’that the Regulation has no application because theseproceedings relate-to arbitration ‘and are within thearbitration exceptiOn in art.. 1.2(d). However, Mr.Smith took a prior point, namely that, as the courtfirst.’seised, it is for the Finnish.court, and not theEnglish Court to decide, whether these proceedings.are; within. the’ Regulation. or not and’.,that theEnglish Court should. stay these proceedings’ in themeantime under art 27. of, the Regulation, pendinga decisiOn of the Finnish court on that uestion. Wewill therefore consider that’ question’ first.’

24 There is- undoubted force’.in Mr.. Smith’ssubmission- if it is considered’ in principle ‘andwithout regard to the decided cases. It sëemsto usto be at, least arguable thatc the,, court’ first seisedshould’ indeed’ decide whether any relevant set ofproceedings in a member state is, within the RegulaLion, or outside it because the, arbitration exceptionapplies,, in’ order to have a clear rule, on thatquestion’ and in order- to avoid conflicting judgments on that very’question. However, that is notthe approach which has’ so far been adopted

25; Mr. ‘Howard.’relied’ upon the decision. of theECJin Marc Rich ,&, co. A.G v. Societa ItaliandPA. (The AtlantiO Emperor), [1992], 1 Lloyd’s Rep..342. He submitted that that decision is inconsistentwith the proposition advanced by Mr. Smith. In thatcase plaintiff buyers (‘Marc Rich’) claimed damages for breach of contract from defendant sellersof crude’ oil (‘Impianti’) alleging that the oil wascontaminated. On Feb. 18,1988 Impianti issued a’writ in Italy claiming: a declaration that it was notliable to Marc Rich. The writ was served on Feb. 29and on’ the same day. Marc Rich commenced an,arbitration in London; Impianti failed to appoint anarbitrator; On May 20 Marc Rich issued an originating summons askmg the’ English. COurt to appointan’ arbitrator and obtained leave to serve the summons out ofthejurisdiction1 On July 8 Impianti



applied to set aside the order giving leave to serveout of the jurisdiction on the ground that the disputebetween the parties was whether. or not the contractcontained an arbitration clause and fell within thearbitration exception in art. 1(4) of the Conventionon Jurisdiction and Enforcement of Judgments inCivil and Commercial Matters, 1968 (“the BrusselsConvention”),, which was of course-the forerunnerto the Regulation. Marc Rich argued that theBrussels Convention did not apply on the groundthat the arbitration exception in art. 1(4), which wasin the same terms as art. 1.2(d) of the Regulation,applied..

26. The Court- of- Appeal referred these questionsto the ECJ. for a preliminary ruling:.

1. Does the exception in art. 1(4) of; theConvention extend: -

(a) to ‘any litigation or judgments and, ifso,

(b) to litigation or judgments where theinitial existence of an arbitration agreement isin issue?2. If the present dispute falls within the Con

vention and not within the exception to theConvention, whether the buyers can neverthelessestablish jurisdiction in England pursuant to:

(a) Article 5(1) of the Convention, and/or(b) Article 17 of the Convention.

3. If the buyers are otherwise able to establishjurisdiction in England than under par. 2 above,whether:

(a) the Court must decline jurisdiction orshould stay its proceedings under art. 21 of theConvention or, alternatively,

(b) whether the Court should stay its proceedings under art. 22 of the Convention, onthe grounds that the Italian court was firstseised.

27. Impianti relied upon a report prepared forthem by Mr. Jenard, who had of course previouslymade a report on the Brussels Convention and the1971 Protocol to which, like that of ProfessorSchiosser on the 1978 Accession Convention, thecourt may consider and which must be given suchweight as is appropriate in the circumstances, byreason of the express terms of s. 3(3) of the CivilJurisdiction and Judgments Act, 1982. In par. 22 ofhis report prepared for Impianti Mr. Jenard saidthis:

Both the Italian and the English Courts arepresently seised of this matter. The Italian court(which was the court where proceedings werefirst brought) is asked to deal with the merits ofthe claim brought by Marc Rich under the salecontract and, incidentally to that claim, to con-

firm its own jurisdiction and determine the validity of the disputed jurisdiction clause in thecontract. The English Court, on the other hand isasked to decide whether the arbitration clause isvalid and if so to appoint an arbitrator. It istherefore certain that both the English and ItalianCourts will directly or indirectly rule on thevalidity of the arbitration clause and it is furtherpossible that they could come to different conclusions, in the event that the Italian courts, inreaching a conclusion on the merits, consider theArbitration Clause to be invalid or non-existentand the English Court find that there is a validArbitration Agreement. In this respect it isimportant to remember the aims of the BrusselsConvention.

28. Mr. Jenard then referred to Effer i’. Kantner,[1982] E.C.R. 825 and in par. 24 stressed thedesirability of avoiding simultaneous proceedingson the same subject matter before the courts of-twoor more contracting parties “since this would leadto conflicting judgments and difficulties in theenforcement thereof”. His. view was that, since theItalian court was the’ court - fiist- seised, it shoulddetermine the question whether- - the, arbitrationclause was valid and that, if it held that it was, theparties should be sent to arbitrate in England,whereas if it held thatit. was not, the litigationshould remain in Italy. In themeantime the EnglishCourt should stay, its proceedings .under art. 21 ofthe Brussels Convention, which. was the equivalentof art. 27 of the Regulation.

29. There was in our view some- fórce in thatapproach but Advocate General’. Darmon did notagree. His - -view- was that-. the principal: subjectmatter of ,the proceedings pending before: the. English Court was arbitration,-. that. the- arbitrationexception therefore applied and that the Conventiondid: not apply because. it-. did not. apply to -that.principal subject-matter and that was so whether:orriot-the English Court- had before it- the preliminaryissue of whether or not the arbitration: existed: -seee.g. par. 30’ and following. The: Advocate Generalwas of the view that. it was of decisive importanceto determine whether the principal issue befote thecourt fell within.’ the scope of the Convention(par. 47),’ which in his view the principal issue inthe English proceedings did not. - . -:

30. In considering question 1, the ECJ reformulated it by posing this question: -

Whether a preliminary issue concerning, theexistence or validity of an arbitration agreementaffects the application of ‘the. Convention to thedispute in question.’

It answered the question in this way:

05] Vol. 1 LLOYD’S LAW REPORTS

\.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

22 Impianti contends that the exclusion in art.1(4) of the Convention does not extend to dis)utes or judicial decisions concerning the exisence or validity of an arbitration agreement. Ints view, that exclusion likewise does not applywhere arbitration is not the principal issue in the)roceedings but is merely a subsidiary or mciJental issue.

23 Impianti argues that, if that were not so, a)arty could avoid the application of the Convenion merely by alleging the existence of anirbitration agreement.

24 Impianti contends that, in any event, theexception in art. 1(4) of the Convention does notapply where the existence or validity of anarbitration agreement is being disputed beforeJifferent courts to which the Convention applies,regardless of whether that issue has been raisedas a main issue or as a preliminary issue.

25 The Commission shares Impianti’s opinionin so far as the question of the existence orvalidity of an arbitration agreement is raised as apreliminary issue.

26 Those interpretations cannot be accepted.In order to determine: whether a: dispute fallswithin the scope of the Convention, referencemust be made solely to the subject-matter of thedispute. If, by virtue of its subject-matter, such asthe appointment of an arbitrator; a dispute fallsoutside the scope of the Convention, the existence of a preliminary issue which the court mustresolve.in order to determine the dispute cannot,whatever that issue may be, justify application ofthe Convention.. ..

27 It would also be contrary to the. principle oflegal certainty, which is one of the .objectivespursued by the . ,Convention (see judgment inCase 38/81, Effer v. Kantner, [19821 ECR 825,par. 6) for the applicability of the exclusion laiddown in art. 1(4). of the Convention, to. varyaccording to the existence or otherwise of apreliminary issue, which might be raised at anytime by the parties.

28 It follows that, in the case before the court,the fact that a preliminary issue relates to theexistence or validity of the arbitration agreementdoes not affect the exclusion from the scope ofthe Convention of a dispute concerning theappointment of an arbitrator.

29 Consequently, the reply must be that art.1(4) of the Convention must be interpreted asmeaning that the exclusion provided for thereinextends to litigation pending before a nationalcourt concerning the appointment of an arbitrator, even if the existence or validity of anarbitration agreement is a preliminary issue inthat litigation.

31. The court then said that, in view of theanswer given to the first question, the second andthird questions did not call for a reply. Mr. Howardsubmitted that it follows from the reasoning of theECJ that it rejected the suggestion that only theItalian court, as the court first seised, was entitled todetermine the question whether the; English proceedings fell within the Convention. He submittedthat, if it had reached that conclusion, it wouldsimply have so held and the problems with which itwas faced would have been solved.

32. There is force in that submission. It seemsclear that the Advocate General did not think that itwas a matter for the Italian. court, as the court firstseised, to determine whether the English proceedings were within the arbitration exception.. Moreover there is nothing . in. the ECJ decision orreasoning to suggest that that was not a matter forthe court in which the proceedings said to besubject . to• the arbitration: eiception are brought,which was of course the English Court in that case,to determine. AlthOugh the ECJ did not specificallyaddress that questiOn, it is we think reasonably clearthat that was its view and we do not accept Mr.Smith’s submission that,. because the Finnish courtwas the court first seised,. the Judge should havestayed.the proceedings under art. 27 of the Regula-tion pending a decision by.the Finnishcouft on thequestion whether.. the . English proceedings. werewithin, the arbitration exception under art., 1.2(d) ofthe Regulation.

33. Mr. Smith. submitted that that conclusion isinconsistent with.the decision of the.ECJ in Gasser,where the facts were, shortly these. On Apr. 19,2000 MISAT, who were. Italian buyers of children’sclothing from an Austrian company called Gasser,started proceedings. in Rome seeking a ruling thatthe contract between the parties had been terminated. On Dec.. 4 Gasser brought an action .inFeLdkirch in Austria for payment of outstandinginvoices Gasser; asserted not only that Austria wasthe place of performance under the contract but alsothat the.Austrian court was designated by a choiceof jurisdiction clause which had’.contractual effectbetween the parties so that it had jurisdiction underart. 17 of the Convention, which is now art. 23 ofthe Regulation. MISAT challenged the existence ofthe agreement as to jurisdiction and asserted thatthe question whether there was such an agreementwas a matter for the court first seised, which wasthe court in Rome. On Dec. 21, 2001 the Austriancourt declined jurisdiction of its own motion pending: the decision on jurisdiction by. the court inRome.

34.’ On appeal’ the Oberlandesgericht inlnnsbruck stayed the proceedings and. referred anumber of questions to the ECJ, including what was

77



the second question, which the ECJ formulated inthis way in par. 28:

whether art. 21 of the Brussels Conventionmust be interpreted as meaning that, where acourt is second seised and has exclusive jurisdiction under an agreement, it may, by way ofderogation from that article, give judgment in thecase without waiting for a declaration from thecourt first seised that it has no jurisdiction.

The ECJ held in pars. 51 and 54 of its judgment thatthe answer to the second question must be thatart. 21 must be interpreted as meaning that a courtsecond seised must await the decision of the courtfirst seised as to whether it (i.e. the court secondseised) has jurisdiction to determine the disputeunder a jurisdiction clause.

35. Mr. Smith relied upon pars. 41, 42, 47, 48 and51 of the judgment, where the court made it clearthat the issues to be determined solely by the courtfirst seised included issues “as to the very existenceof a genuine agreement between the parties,expressed in accordance with the strict formalconditions laid down by art. 17” because, as thecourt put it, “it is conducive to the legal certaintysought by the Convention that, in cases of uspendens, it should be determined which of the twonational courts is to establish whether it has jurisdiction under the rules of the Convention.” It heldthat it was clear from the wording of art. 21 that itwas for the court first seised alone to determine thatquestion.

36. Mr. Smith submitted that the same reasoningleads to the conclusion that the court first seisedshould decide whether the claim in the court secondseised is within the Regulation or outside it becauseof the arbitration exception. As we indicated earlier,there is force in that submission but we do notaccept it for the reason given by Mr. Howard. Thereason is that there is a crucial distinction betweenthis case and Gasser, namely that in Gasser it wascommon ground that the claims in both Courts werewithin the Convention and governed by art. 21 and22, whereas here that is not common ground. Thequestion here is whether the claim in England iswithin the Regulation or not..

37. In these circumstances we do not accept Mr:Smith’s submission that the. English Court is nOmore entitled to consider the applicability of thearbitration exàeption than• the Austrian court wasentitled to consider a-t. 17 of the Convention iiiGasser: As already indicated, it àppeärs to us that’the reasoning of the Advocate General and of the’ECJ in The Atlantic Emperor supports the conclusion that it is open to.the court in which the issuewhether the arbitration’ exception’ applies to consider that question, ‘even if it is the court secondseised. If it concludes that the arbitration exception

applies’ so’ that the ‘claim and proceedings areoutside the Convention it is’ entitled to proceed inthe ordinary, way: If, on the other hand, it concludesthati the exception does not apply and.. that theproceedings: are’within the Convention, the provisions of the Convention apply in their full.rigour, inwhich event, if’ a question arose as to whether thecourt second seised had jurisdiction underan exclusive. jurisdiction clause to•.which art. 23 applied, itwould be for the’court’ first seised to determine thatquestion, by reason of art 27 in accordance with thedecision of the ECJ in Gasser. It follows that. we donot accept the submission., that the. Judge shouldhave stayed the proceedings under art. 27 of theRegulation pending a decision by the Finnish courton’ the ,question whether the English proceedingswerewithin the arbitration, exception .underart. 12(d), of the Regulation...

38. The next question is whether’ the Judge wasright to hold that; the claim in these proceedingscomes within the arbitration exception and is thusoutside the Regulation altogether by reason of art.1.2(d). Mr. Smith submitted that the decision of Mr.Justice Aikens in The Ivan Zagubanski was wrongand that it follows that the decision of the Judge,which followed it, was also wrong. This is a topicupon which there has been some divergence ofopinion at first instance. This can be seen from thejudgment of Mr. Justice Aikens, who (at pp.118—119) disagreed with the analysis of JudgeDiamond, Q.C. in Partenreederei MIS ‘Heidberg’ v.Grosvenor Grain and Feed Co. Ltd. (The Heidberg), [19941 1 Lloyd’s Rep. 287.

39. We note in passing that at one stage duringthe argument we considered referring a number ofquestions to the ECJ because this appeal seems tous to raise some issues which are at least arguablynot actes clairs. However, since the conclusion ofthe argument our attention has been drawn to art. 68of the revised EC Treaty which adapted art. 234(formerly 177) so that it provides in this context:

Where a question on the interpretation of [theRegulation] ,is raised in a case pending before acourt or tribunal of a member state against whosedecisions there is no judicial remedy undernational law,. that’ court, or tribunal shall, if itconsiders that a decision’. on the. question isnecessary to enable it to give.judgment, ,requestthe [ECJJ to give a, ruling thereon.

It is commoä. ground between the parties that, underthe revised EC Treaty this court no. longer haspower to refer questions on the interpretation of theRegulation to the.ECJ.. The only’ court which can doso is the House of Lords, which, as a court againstwhose decisions there is no judicial remedy” in theUnited Kingdom, is bound to refer such a question

[20051 Vol. 1 LLOYD’S LAW REPORTS 79

C.A.J Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

in the circumstances identified in the adaptedart. 234 quoted above.

40; In The Ivan Zagubanski’ Mr. Justice ‘Aikensconsidered’ a number of first instance decisions inaddition- to The Heidberg, including’. QingdaoOcean Shipping Co: v. Grace Shipping. Establish,nent.(The Xing Su Hal), [1995] 2 Lloyd’s Rep. 15,Toepfer International G.m.b.H. v. Molino BoschiSri, [1996] 1 Lloyd’s Rep. 510,. Lexmar Corporation and The Steamship Mutual Underwriting Association.. (Bermuda ) Ltd. . v. NordiskSkibsrederforensig and Northern Tankers (Cyprus)Ltd’(”The Lexmar’case”), [1997]. 1 Lloyd’s Rep:289 and Toepfer International G.m.b.H. : SociétéCargill France; [1997] 2 Lloyd’s Rep; 98:.

41. In The Ivan Zagubanski explosions and firehad caused damage to cargo, which’. had: beenshipped under bills of ladihg containing EnglisharbitratiOn clauses. Cargo interests brotight -proceedings in Marsei!le’ and elsewhere against theshipowners. The claimant- shipowners claimed- adeclaration that there. was-a valid arbitration agreement between the’ parties- and sought ‘an anti-suitinjunction restraining the cargo interests from pursuing. court proceedings in Marseille or elsewhere.Mr. Justice Aikens held that the clà.ims’were withinthe arbitration exception and thus outside the ‘Brussels Convention and granted both the dedarationand. the’ injunction sought’ In’ reaching his conclusion’.on the first.’point he analyzed the opinion’ ofAdvocate General Darmon in The Atlantic Emperorand relied both upon it and upon thç,, decision andreasoning’ of the,. ECJ,. part of. which-we havealready set out. .. .

. .., . .

42. Mr. Justice Aikens set out what in our view isan entirely accurate- account of the AdvocateGeneral’s opinion -in par.. 70 of his judgment. asfollows: . ‘ , - .

,

Mr. Advocate General Darmon’s opinion iselaborate and gives a detailed . analysis of. thestructure and scope of the’ Convention and itsrelationship with arbitration.. The. followingpoints in his opinion seem particularly relevant tothe present case:

(1) Before the Brussels Convention there werealready important international conventions governing the enforcement of arbitration agreementsand awards, particularly the New’ York Convention of 1958. .

(2) AIthough the application, before’ the English Courts in Marc,Rich was for the appointmentof an arbitrator, there was a threshold: or “prelimmary”. question’, that. had. to be. considered;whetheran.arbitration agreement existed at all..

(3) The “principal issue” before the EnglishCourt was the appointment of an arbitrator. Thatis not within the Convention.. . -.

(4) If the “principal issue” is outside the scopeof the Convention, then even if a “preliminarymatter” is within the Convention, that cannotbring the whole proceedings within the scope ofthe Convention. In this case the “preliminarymatter” is whether an arbitration agreementexists.

(5) In any event a dispute as to the existence ofan arbitration agreement falls outside the scopeof the Convention. This opinion is reinforced bythe view at par. 64 of Professor Schlosser’sreport on the Accession Convention.

(6) Whether or not the existence of an arbitration agreement is a preliminary or principalissue, “it seems that the principal subject-matterof the dispute before the national court relates toarbitration.”

(7) The views of Mr. Schlosser (expressed inan opinion prepared specifically for that casewhen before the ECJ) that the Conventionapplied to all proceedings before courts must berejected. They are contrary to the viewsexpressed in the reports by Mr. Jenard and Mr.Schlosser on the original Convention and theAccession Convention. They stated:

(a) The Brussels Convention.., does notapply for the purpose of determining the jurisdiction of courts and tribunals in respect oflitigation relating to arbitration... and doesnot apply to the recognition of judgmentsgiven in such proceedings.

(b)... the 1968 Convention does not covercourt proceedings which are ancillary to arbitration proceedings, for example the dismissalof arbitrators, the fixing of the judgment determining whether an arbitration agreement isvalid or not.., is not covered by the 1968Convention.(8) The report of Messrs Evrigenis and Kera

meus (on the accession of the Hellenic Republicto the Brussels Convention in 1986) also statedthat: ,, ‘

Proceedings which. are directly concernedwith arbitration. as the, principal issue... arenot covered by the Convention..(9) It is not legitimate’ to suggest that arbitra

tion awards that are made into judgments must becapable of recognition and: enforcement’ underthe ConventiOn; They’ are’ enforceable under- the -

New York. Conventions; as: awards or- as’judgments “under bilateral ‘conventions-or by domes-tic law”. Furthermore, there is noreason for it tobe “desirable” to apply the Brussels ConventiOnand annul arbitration awards.,

(10) The Brussels Conventionshould also notapply to the issue of the ‘recogmtion and enforcement of judgments concerning the existence and -

80 LLOYD’S LAW REPORTS [2005] Vol. I


validity of arbitration agreements. That isbecause there is the danger that such a judgmentmay be given in a state other than the place of thearbitration.

(11) Finally on this aspect of the case he saidthat the application of the Brussels Convention todetermine jurisdiction would undermine international arbitration. That is because arbitrationneeds the assistance of the courts of the statewhere the arbitration is to take place in order toaid the arbitration process itself. Yet that Courtmight not have jurisdiction under the Conventionunless a special jurisdiction. could be invoked byart. 5(1) or 17. Butattempts to usethose articlesto found a Court’s. jurisdiction in relatin toarbitration were. open. to. strong objection orcriticism.43. In-par. 70(5). Mr. Justice Aikens referred to

par. 64 -of Professor Sëhlosser’s report on theAccession Convention. Paragraph 64(b) is in theseterms:-.

The 1968 Cônvéntion does not cover courtproceedings whichr ‘are ancillary to arbitrationproceedings, for example, the appointment ordismissal of arbitrators, the fixing of the place ofarbitration, the extension of the time-limit formaking awards or the obtaining of a preliminaryruling on the question of substance as providedunder English law in the procedure known as“statement of special case” (Section 21 of theArbitration Act, 1950). In the same way a judgment determining whether an arbitration agreement is valid or not, or because it is invalid,ordering the parties not to continue the arbitration proceedings, is not covered by the 1968Convention.

The case contemplated in the last sentence is veryclose to this case on the facts.

44. Mr. Justice Aikens expressed his conclusionsderived from the Advocate General’s opinion inpars. 71 and 72 in this way:

71. In my respectful view the opinion of Mr.Advocate General Darmon is comprehensive andits analysis compelling. The theme and overallconclusion of it is that the Brussels Conventiondoes not apply to any court proceedings orjudgments in which the principal focus of thematter is “arbitration”. That includes proceedings concerning the validity or existence of anarbitration agreement; the appointment of arbitrators; ancillary assistance to arbitration proceedings and the recognition and enforcement ofawards.

72. Based on his opinion and the views ofMessrs Jenard and Schlosser on which he relies,I would have no hesitation in saying that proceedings in the English Court for (i) a declaration

that arbitration clauses bound the defendants; and(ii) an injunction to restrain proceedings in courtsin breach (or threatened. breach) of bindingarbitration agreements fall within the exceptionin art. 1(4) of the Convention.. That: is simplybecause the principal focus of those-proceedingsis “arbitration”. . V V V V V V

We entirely agree with that analysis and caiinotimprove upon it V

45. In par. 73 Mr. Justice Aikens summarized the’conclusions of the ECJ, the substance of which wehave set out in par. 30 abOve. We should also refer.to par. 18 Of the ECJ judgment upon which Mr..Justice Aikeñs placed ‘some reliance. It is,. in theseterms: ‘ V

The international agreements, and in particularthe abovementioned’ New. York. Convention onthe recognition and enforcement of foreign arbi-’tral awards , lay down rules which must berespected not by arbitratOrs themselves but by thecourts of. the Contracting States., Those rulesrelate, for example, to agreements whereby. parties refer a dispute to arbitration’ and the recognition and enforcement of arbitral awards. Itfollows that,. by excluding arbitration from thescope of’the Convention on the.ground that it isalready covered by international conventiOns, theContracting -Parties intended to exclude arbitration in its entirety, including’ proceedings beforenational courts. ‘..‘ V

46. Mr. Justice Aikens correctly observed in par.73 that the ECJ generally followed the vieIofthéAdvocate General and in par. 74 he’ said this:’’

[Counsel]’ submitted that’ the decision of theECJ was narrow and confined to the single’ issueof whether litigation fOr the appointment of atiarbitrator was’ excluded from the, Conventionunder art.’ 1(4): He is’ correct about the’decisibn.BOt that -cannot ‘detract from’ the fact that theCourt took’a very broad view of the scope ‘of the“arbitration exception” ‘in’ art. 1(4), as’ particularly expressed’ in’ pars. 18 and 21 of its jOdgment. Nor is there one word of disapproval’ ofthe approach of Mr. Advocate General Darmonor his views. : - ‘

47. In the result’ Mr. Justice Aikens, in ouropinion correctly, held that the question in eachcase is whether the (or a) principal focus of theproceedings is arbitration. That test seems to us tobe consistent, not only with The Atlantic Emperor,but also with the first instance decisions to which hereferred and we agree with him that the reasoning inthose decisions is to be preferred to that in TheI-Ieidberg. Another way of putting the same point isto ask the question posed by Mr. Justice Rix in TheXing Su Hal, namely whether the essential subjectI

[2005] Vol. 1 LLOYD’S LAW REPORTS 81

C.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

matter of the claim concerns arbitration. We do notthink that that is any different from the test whichseemed to Mr. Justice Clarke to be correct in TheLake Avery, [1997] 1 Lloyd’s Rep. 540, namelywhether the relief sought in the action can be said tobe ancillary to, or perhaps an integral part of thearbitration process.

48. In our opinion the decisions in The IvanZagubanski that both the claim for a declarationthat there was a binding arbitration agreementbetween the parties and the claim for an anti-suitinjunction were within the arbitration exceptionwere correct for the reasons given by Mr. JusticeAikens. We see no distinction in this regardbetween the facts of that case and this. It followsthat the Judge was correct to hold on the facts of theinstant case both that the claims for declarationsthat New India was bound to refer its claim toarbitration and that the Finnish proceedings werebrought in breach of an agreement to arbitrate andthat the claim for an anti-suit injunction were withinthe arbitration exception in art. 1.2(d) of theRegulation.

49. It follows that the answer to the first questionidentified in par. 21 above, namely whether thecourt should decline jurisdiction or stay the proceedings under the Regulation is no, since theRegulation has no application to the claims broughtin the English proceedings.

50. A number of other questions which mightarise under the Regulation were touched on inargument. In particular, there was some debate onthe question whether the judgment of the DistrictDourt of Kotka is entitled to recognition under art.33. However, we do not think that this questionirises for decision at present. As we understand it,.he judgment obtained to date is simply to the effectWhat that court has jurisdiction to entertain a claim3)’ New India under the Finnish Act. That wasssentially a matter for that court in proceedingsA’hich seem to us to be within the Regulation.Whether that judgment is entitled to recognition orlot does not seem to us to be relevant to theluestion whether the Judge was correct to grant theleclarations or injunction which he did.

51. The fact that arbitration is excluded from theonvention means that from time to time there are

ikely to be conflicting judgments in different memer states and it is therefore possible that questions

)f recognition and enforcement of conflicting judgnents may arise in the future in a case like this. Inur opinion such questions are best left for decisionvhen and if they arise.

he arbitration clause

52. Some of the argument in this appeal pro-ceded on the footing that the question is whether

New India became a party to the agreement toarbitrate contained in ci. D2 of the General Provisions in the Club Rules. However, we do not thinkthat that is quite the right question and, as we readhis judgment, the Judge did not go so fai We acceptMr. Smith’s submission that New India did notbecome a party to an arbitration agreement. Weagree that self-evidently New India was not anoriginal party and there is no basis upon which itcould be held that there was any notation or transferto New India of the rights and obligations of theinsured under the Club Rules. This is in our viewimportant on the question whether it was appropriate to grant an anti-suit injunction discussedbelow.

53. As we read his judgment, the Judge acceptedthe submission made to him on behalf of the Clubthat, if New India wished to make a claim against itunder s. 67 of the Finnish Act, the claim wasproperly characterized under English principles ofconflict of laws as a claim under the contract toenforce the obligations of the Club and that, just asNew India could rely upon the terms of the rules toestablish liability, so the Club could rely upon theterms of the rules to defeat or limit the claim. Oneof those rules was the arbitration clause in clauseD2 of the General Provisions and another was theScott v. Avery clause in clause D2.3, whichexpressly provided that no action can be brought ona dispute “unless and until it has been referred toarbitration and the award has been published andbecome final”.

54. In our judgment, if the Judge was right tohold that the claim under s. 67 of the Finnish Actwas properly characterized under English principlesof conflict of laws as a claim under the contract toenforce the obligations of the Club, he was plainlycorrect to hold that the Club could, as a matter ofEnglish law, rely upon the terms of the rules,whether they be provisions relating, say, to theextent of the cover or the arbitration clause. Thekey question under this head is therefore whether hecorrectly classified New India’s claim under s. 67of the Finnish Act.

55. Mr. Smith submitted that he did not. Hepointed to the Judge’s own conclusion that if insubstance the claim is independent of the contractof insurance and arises simply as a right of actionunder the Finnish Act against an insolvent insured,the issue must be determined under Finnish law.Mr. Smith submitted that that is precisely what theFinnish Act is. There is undoubtedly some force inthat submission but, like the Judge, we do notaccept it. The authorities, which are referred to inpar. 19(i) above and were relied upon by the Judge,show that the nature of New India’s claim can onlybe resolved by applying the principles of Englishlaw relating to characterization.


CLARKE, U.] Through Transport Mutual v. New India Assurance Co. Ltd. [C.A.

56. We agree with the Judge that those principlesinvolve a. consideration,, of. the substance of: theclaim being advance& The Judge: cited two:pas

sages from the:judgments of this court in MacmilIan Ltd. v. Bishopsgate Investment Trust Plc (No;3), [1996]1W.LR. 387 which: bear this: out. Thefirst is in the judgmentofLord Justice Auld at page407B—C,wherehë saidthis:: -

• Subjéct’to. what I’ shall say in a moment,characterizatiàti or ôlassiflcation is governed bythe le5cfóri But characterization or classificationof what? It follows from what I have said that theproper approách is ‘to look beyond the formulation of the clairñ’ and to identify according to thelex fori the true issue or issues thrown up by theclaim and defence. This requires a parallel exercise in classification of the relevant rule of law.However, classification of an issue and rule oflaw for this purpose, the underlying principle ofwhich is to strive for comity between competinglegal systems, should not be constrained byparticular notions or distinctions of the domesticlaw of the lex fori, or that of the competingsystem of law, which may have no counterpart inthe other’s system. Nor should the issue bedefined too narrowly so that it attracts a particular domestic rule under the lex fori which maynot be applicable under the other system: seeCheshire & North’s Private International Law,12th ed., pp. 45—46, and Dicey & Morris, vol. 1

pp. 38—43, 45—48.

The second is in the judgment of Lord JusticeAldous at page 418A—B, where he said this:

I agree with the Judge when he said [1995] 1W.L.R. 978, 988: “In order to ascertain theapplicable law under English conflict of laws, itis not sufficient to characterise the nature of theclaim: it is necessary to identify the question atissue.” Any claim, whether it be a claim that canbe characterized as restitutionary or otherwise,may involve a number of issues which may haveto be decided according to different systems oflaw. Thus it is necessary for the court to look ateach issue and to decide the appropriate law toapply to the resolution of that dispute.

57. We agree with the Judge that those arehelpful statements because they recognize that thecourt is concerned to identify the true issues or, asLord Justice Aldous put it, the question at issue.Applying that approach the Judge expressed hisconclusion in par. 16 as follows:

The issue in the present case is whether NewIndia is bound by the arbitration clause which inturn depends on whether it is seeking to enforcea contractual obligation derived from the contractof insurance or an independent right of recoveryarising under the Insurance Contracts Act. If in

substance the claim is independent of the. contract of insurance and arises under the Finnishlegislation simply as a result of its having a rightof action against an insolvent insured; the issuewouldhave tobe characterizedas one of statutory entitlement: to which there may be ‘no directequivalent in English law. In that case the issue-would in my view have’ to be. determinecF inaccordance with’ Finnish law; If, on- the’ otherhand, the claim is in’substänce one to enforceagainst the itisurer the’ contract made’ by’ theinsolvent insured, the-issue is to be characterizedas one of obligation. In that case the court willresolve it by applying English• law because theproper law of the contract creating theobligationis English law: see Adams i National Bank ofGreece.

We entirely agree with that approach, which seemsto us to be consistent with the authorities.

58. The question is therefore what is the substance of New India’s claim under s. 67 of theFinnish Act. The Judge held that the claim is insubstance to enforce against the Club as insurer thecontract made by the insured. He was in ouropinion right so to hold for the reasons he gave. Inshort, the title to s. 67 is the “insured person’sentitlement to compensation under general liabilityinsurance” and the right is defined as a right “toclaim compensation in accordance with the insurance contract direct from the insurer” in certaindefined circumstances. The claim under the Act isnot therefore in any sense independent of thecontract of insurance but under or in accordancewith it. In these circumstances it seems to us thatthe Judge was correct to hold that the issue underthe Act is one of obligation under the contract. TheJudge noted in passing in paragraph 18 of hisjudgment that the Finnish court itself described theAct as giving the injured party the right to claimcompensation “according to the insurancepolicy”.

59. In all the circumstance, we agree with theJudge that, although the Act gives the claimant aright of action directly against the insurer withoutthe need for the formalities of an assignment, whathe obtains is essentially a right to enforce thecontract in accordance with its terms. As to the anti-avoidance provisions in s. 3 (quoted above), theJudge said this in par. 19:

The statute renders void those terms of thecontract which have the effect of resthcting theright to recovery in a way that is inconsistentwith its terms and those provisions must, ofcourse, be applied in any action before theFinnish courts. However, that does not in my



view detract from the conclusion that the essential nature; of the. right created by s. 67 is toenforce the terms of the. contract.

We agree. . .

60. For these reasons, which are essentiallythose. of the Judge, ouranswer to the questionposcd in par 21(u) is that the Judge was.right tohold that, if New Indiawishes to. pursue a claim.under the FinnishAct,. itis bound to;do so. byarbitration in England because. the. Club: is: entitled to rely uponthe arbitration clause,just as itisentitledto rely uponany .other,clause in the.contractto defend the claim.

Setting aside service and stay61. Mr. Smith submitted that the Judge should in

any event have set aside service out of the jurisdiction or granted a stay on the basis of forum nonconveniens. The Judge rejected two specific submissions in this regard in pars. 22 and 23 of hisjudgment:

22. The first of these is his submission thatKotka is clearly the appropriate forum for anyclaim against Borneo Maritime Oy and the factthat the same issues will necessarily arise in NewIndia’s action against the ‘VT’ Club makes Kotkathe more appropriate forum for the trial of thatclaim as well. I do not regard this as a factor ofmuch importance in this case. No doubt Kotkawould have been an appropriate forum for aclaim against Borneo Maritime Oy because itwas a Finnish company which carried on business there. It was also the place where the goodswere accepted for carriage and where the documentation relating to the road haulage leg oftheir journey was issued. However, the questionin this case is not whether the claim should belitigated in Finland or England but whether itshould continue to be litigated through the courtsor determined in arbitration. There is nothing asfar as I can see to suggest that the issuessurrounding the issue of the documents or theloss of the goods cannot be effectively and fairlydetermined in arbitration and, to be fair to him,Mr. Smith did not suggest otherwise.

23. The second is his submission that the veryfact that the District Court was first seised of thedispute is itself a factor that points in favour ofKotka. However, that is of no relevance once thecourt is satisfied if the parties have agreed thatthe claim should be pursued in arbitration. Thefact that proceedings were begun first in Kotka issimply a consequence of the failure on the part ofNew India to accept that the obligation it seeks toenforce must be pursued in that way.62. In our judgment, the Judge was plainly

correct in this regard. Once it is held by the English

Court that New India is bound to submit its claimunder the Finnish Act to arbitration it does not seemto us that it would be just to stop the Club seekinga declaration to that effect in proceedings in England. In any event we see no proper basis uponwhich this court could interfere with the exercise ofthe Judge’s discretion under this head.

The declarations

63. The declarations granted were set out inpars. 2(a) and (b) of the order as follows:

(a) It is declared that the defendant is bound torefer any claims against the claimant, in respectof the consignment carried from Calcutta (India)to Kotka (Finland) and onwards to Moscow(Russia) pursuant to 2 bills of lading... andCMR International Way Bill (“the consignment”), to arbitration in accordance with thearbitration clause contained in s. D, cl. 2.1 of [thecertificatel (“the arbitration clause”).

(b) It is declared that the proceedings commenced by the defendant against the claimant inKotka, Finland, by summons dated Dec. 16, 2002(“the Kotka proceedings”), are in breach of thearbitration clause.

64. It seems to us to follow from the conclusionswhich we have reached so far that the Club isentitled to the first of those declarations. For thereasons given above under the heading ‘the arbitration clause’, an application of English conflict oflaws principles leads to the conclusion that, if NewIndia wishes to pursue a claim under the s. 67 of theFinnish Act, it must do so in arbitration in Londonbecause the Club is entitled to rely upon thearbitration clause in the Club Rules, which are thevery rules which New India relies upon in order tomake a claim under the Act: see, in the context ofthe Third Parties (Rights Against Insurers) Act,1930, The Padre Island (No. 1).

65. It is less clear that the Club is entitled to thesecond declaration. In our view the Club is notentitled to such a declaration if it means, on its trueconstruction, that New India was in breach ofcontract in commencing the Kotka proceedings. Asindicated in par. 52 above, we do not think that NewIndia was in breach of contract. So, for example,the Club could not in our view sue New India fordamages for commencing the proceedings in Finland. It seems to us that the declaration could be soconstrued and for that reason we think it right to setaside that declaration. As we see it, the Club issufficiently protected by the first declaration andeither does not need the second or, if it is construedas just suggested, is not entitled to it.


CLARKE, L.J.] Through ‘fransport Mutual v. New India Assurance Co. Ltd. [C.A.

The anti-suit injunction

66. The Judge granted an anti-suit injunctionrestraining New India from commencing or continuing any claims arising out of the consignmentotherwise than by arbitration in London. As a resultNew India is at present enjoined from proceedingwith the Kotka proceedings, save so far as necessary to defend the Club’s appeal on jurisdiction.The Judge considered this topic in detail betweenpars. 25 and 43 of his judgment.

67. The Judge referred to what is now a considerable body of authority to the effect that the courtwill readily grant an injunction to restrain proceedings elsewhere in breach of an exclusive jurisdiction clause or an agreement to arbitrate. The casesinclude: Aggeliki Charis Compania Maritima S.A.v. Pagnan S.p.A. (The Angelic Grace), [1995] 1Lloyd’s Rep. 87, Bankers Trust Co. v. P.T JakartaInternational Hotels & Development, [1999] 1Lloyd’s Rep. 910, XL Insurance Ltd. v. OwensCorning [2000] 2 Lloyd’s Rep. 500, Donohue v.Armco Inc. [2001] UKHL 64, [2002] 1 Lloyd’sRep. 425 and Welex A.G. v. Rosa Maritime Ltd.(The Epsilon Rosa), [2003] EWCA Civ 938; [2003]2 Lloyd’s Rep. 509.

68. The rationale of the cases on exclusivejurisdiction clauses can be seen from these passagesin the speeches of Lord Bingham and Lord Hobhouse in Donohue v. Armco Inc., which werequoted by the Judge in pars. 27 and 28 of hisjudgment. Lord Bingham said at page 433 (par.24):

If contracting parties agree to give a particularcourt exclusive jurisdiction to rule on claimsbetween those parties, and a claim falling withinthe scope of the agreement is made in proceedings in a forum other than that which the partieshave agreed, the English Court will ordinarilyexercise its discretion (whether by granting a stayof proceedings in England, or by restraining theprosecution of proceedings in the non-contractual forum abroad, or by such other proceduralorder as is appropriate in the circumstances) tosecure compliance with the contractual bargain,unless the party suing in the non-contractualforum (the burden being on him) can show strongreasons for suing in that forum. I use the word“ordinarily” to recognize that where an exerciseof discretion is called for there can be no absoluteor inflexible rule governing that exercise, andalso that a party may lose his claim to equitablerelief by dilatoriness or other unconscionableconduct. But the general rule is clear: whereparties have bound themselves by an exclusivejurisdiction clause effect should ordinarily begiven to that obligation in the absence of strongreasons for departing from it. Whether a party

can show strong reasons, sufficient to displacethe other party’s prima facie entitlement toenforce the contractual bargain, will depend onall the facts and circumstances of the particularcase. -

Lord Hobhouse said at. page 439 (par 45):

The -position• of a ‘party who has an exclusiveEnglish-jurisdiction clause is very different fromone who doesnot The former has a contractualright to have the contract enforced The latter hasno such- right. The, former’s right-specifical1y- tOenforce his contract:. can only be - displaced bystrong reasons being- shOwn by the opposite partywhy an injunction should - not be granted Thelatter has• to show that justice requires .,that- heshould be granted an injunction.

69. Almost identical principles have been appliedin thecase of arbitration clauses. As the Judgeobserved .n - par.. 29,,. in-. The- Epsilon Rosa LordJustice Tuckey, havingreferred to the passage in thespeech of Lord Bingharn cited bove, said at page518 (par. 48): ,- -

the starting point is, as the Judge said, thatthe party suing in the non-contractual forum mustshow strong reasons for doing so or he faces theprospect of an injunction being granted againsthim. I accept that the court should take intoaccount how serious the breach is. In other wordsa defendant who cynically flouts a jurisdictionclause which he has freely negotiated is morelikely to be enjoined than one who has had theclause imposed upon him and has acted in goodfaith. But I do not think this leads to a slidingscale of enforcement. The parties to a contract,however it is made, should abide by its terms. Ifthey have agreed to resolve their disputes in aparticular way they should be kept to theirbargain unless there are strong reasons for notdoing so.

70. The Judge essentially applied those principles to the facts of the instant case. He rejected Mr.Smith’s submissions that this case is to be distinguished from the ordinary case. He accepted thatNew India was not cynically flouting the clause butsaid that that did not take the matter very far onceit was established that the claim is subject to thearbitration clause and the Club had made it clearthat it wanted the matter decided in arbitration.

71. The Judge rejected the submission that theClub should be left to apply for a stay in Finland, onthe basis that there is now a strong line of authoritythat the mere fact that an application for a stay ofthe foreign proceedings for the purposes of arbitration can be made to the court in which they arepending is not a ground for refusing to grantinjunctive relief. The Judge took account of thedelay in making the application and the fact that the

[2005] Vol. 1 LLOYD’S LAW REPORTS 85C.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

Club had made an unsuccessful challenge to thejurisdiction of the District Court in Kotka beforemaking the application but (in the latter case)expressed the view that it was not a factor whichcarried great weight.

72. As to Mr. Smith’s submission based oncomity, the Judge said in paragraph 34:

I need hardly say that this court attaches thegreatest importance to judicial comity and is veryconscious of the respect due to the courts of othercountries. It is for that reason that it cannot beemphasised too strongly that orders made insupport of agreements to refer disputes to arbitration are directed at the defendant and not in anysense at the court in which he has chosen tocommence proceedings. The question for thecourt in the present case is whether it shouldmake an order preventing New India from disregarding the arbitration clause or whether itshould allow it to do so and leave the Club toresist enforcement and pursue any remedy it mayhave for its breach.

We return to this point below in the context of thedecision of the ECJ in Turner v. Grovit, which wasnot of course decided until after the judgment inthis case.

73. A key aspect of the Judge’s reasoning wasthis. He recognized (in par. 35) that if the proceedings continue in Finland, subject to any possibledefences on the merits, it is likely that the claimwill succeed because the pay to be paid clause inthe Club Rules will not be effective because of s. 3of the Finnish Act, whereas if the claim proceeds byway of arbitration in London the claim will failbecause the pay to be paid clause will be held to beeffective in accordance with the decision of theHouse of Lords in The Fanti and The Padre Island(No. 2).

74. In support of his conclusion the Judge reliedupon the decision of Mr. Justice Thomas in AkaiPly. Ltd. v. People’s Insurance Ltd., [1998] 1Lloyd’s Rep. 90, where Akai brought an action inEngland under a credit insurance policy whichcontained both a choice of English law and jurisdiction clause and a clause barring any action arisingout of the policy unless commenced within 12months of the relevant events. The action wasbrought after the expiry of the 12 months and theinsurer counterclaimed for a declaration that theaction was time barred. Akai also commencedproceedings in Australia, where the High Court ofAustralia held that, by reason of s. 8 of theAustralian Insurance Contracts Act, 1984, theclause providing for English law and jurisdictionwas void.

75. As a result, the position was that, if the actionwas tried in England the claim would be time

barred, whereas if it was tried in Australia the timebar would be ineffective as a matter of Australianlaw and policy. Mr. Justice Thomas held that thecourt should give effect to the parties’ choice of lawand jurisdiction clause unless it would be contraryto public policy to do so. He held that considerations of comity did not require the courts of thiscountry to give effect to the decisions of a foreigncourt that would override the parties’ choice of lawand jurisdiction. He therefore allowed the counterclaim to proceed.

76. All the cases to which the Judge referred (andto which we have been referred) are cases in whichthe parties to the litigation or their privies hadagreed the jurisdiction or arbitration clause. Thatincludes the Akai case. Mr. Smith submitted to theJudge that this case is different but the Judge saidthis in par. 39:

In reaching that conclusion the Judge [i.e. Mr.Justice Thomas] relied heavily on the fact thatthe terms of the policy had been freely agreedbetween the parties. Mr. Smith submitted that thepresent case is different because New India wasnot an original party to the contract and had noopportunity to influence its terms. I accept thatthe two cases differ in this respect, but thisground of distinction does not undermine theconclusion that New India should be held to theclause. There is a strong presumption that incommercial contracts of this kind parties shouldbe free to make their own bargains and havingdone so should be held to them. By parity ofreasoning those who by agreement or operationof law become entitled to enforce the bargainshould equally be bound by all the terms of thecontract.

The Judge thus rejected the distinction between thiscase and the decided cases identified above on thefooting that “by parity of reasoning” the sameconsiderations apply to both.

77. Finally the Judge rejected a submission basedon the evidence that the Finnish courts would notrecognize or give effect to an injunction. He did soon the basis that the injunction would not beaddressed to the Finnish court but to New India.

78. Mr. Smith submitted to us that the Judge waswrong not to distinguish the ordinary case where aparty to a contract brings proceedings in breach ofcontract and this case in two key respects. First, hesubmitted that, even in a case where such proceedings are a breach of contract, an anti-suit injunctionshould not be granted to restrain proceedings in thecourts of a country to which the Regulation applies.It is in this regard that he relied upon the decision ofthe ECJ in Turner v. Grovit. Second, he submittedthat this case is markedly different from any of theprevious cases and submitted that, whatever the



state of English law, there was no good reason torestrain New India from using a Finnish statute inFinland for the purposes for which it was intended,namely to provide third parties with rights againstliability insurers free of artificial shackles such aspay to be paid clauses. We will consider each ofthose submissions in turn.

79. As to the first submission, the Judge in effectleft the point open. He noted in par. 26 that inTurner v. Grovit (which had been referred to theECJ by the House of Lords [2001] UKHL 65,[2002] 1 W.L.R. 107) Advocate General RuizJarabo Colomer expressed the view that it wasinconsistent with the Brussels Convention for thejudicial authorities of one contracting state torestrain litigants from commencing or continuingproceedings before the judicial authorities ofanother contracting state. However, the Judge saidthat until the ECJ itself delivered a ruling heconsidered that he had no alternative but to regardhimself as bound by the existing law and practice inthis country.

80. In Turner v. Grovit the Court of Appealgranted an injunction restraining the defendantfrom continuing proceedings in Spain or commencing proceedings there or elsewhere against Mr.Turner on the ground that such proceedings were orwould be vexatious and oppressive and brought inbad faith in order to vex Mr. Turner in the pursuit ofhis application in England before an EmploymentTribunal. The question referred by the House ofLords was answered in this way by the ECJ atpar. 31:

Consequently, the answer to be given to thenational court must be that the Brussels Convention is to be interpreted as precluding the grant ofan injunction whereby a court of a contractingstate prohibits a party to proceedings pendingbefore it from commencing or continuing legalproceedings before a court of another contractingstate, even where that party is acting in badfaith with a view to frustrating the existingproceedings.

81. Before answering the question in that way theECJ emphasized in pars. 24 and 25 the mutual trustwhich contracting states accord to one another’slegal systems and judicial institutions and said thatit was implicit in that principle that the rules onjurisdiction, which are common to all, may beinterpreted and applied with the same authority byeach of them. The court also stressed in par. 26 that,save in a few cases, the Convention does not permitthe jurisdiction of a court to be reviewed by a courtin another contracting state. The court then saidthis:

27. However, a prohibition imposed by thecourt, backed by a penalty, restraining a party

from commencing or continuing proceedingsbefore a foreign court undermines the lattercourt’s jurisdiction to determine the dispute. Anyinjunction prohibiting a claimant from bringingsuch an action must be seen as constitutinginterference with the jurisdiction of the foreigncourt which, as such, is incompatible with thesystem of the Brussels Convention.

28. Notwithstanding the explanations given bythe referring court and contrary to the view putforward by Mr. Turner and the United Kingdomgovernment, such interference cannot be justifiedby the fact that it is only indirect and is intendedto prevent an abuse of process by the defendantin the proceedings in the forum state. In so far asthe conduct for which the defendant is criticisedconsists in recourse to the jurisdiction of thecourt of another member state, the judgmentmade as to the abusive nature of that conductimplies an assessment of the appropriateness ofbringing proceedings before a court of anothermember state. Such an assessment runs counterto the principle of mutual trust which, as pointedout in pars. 24 to 26 of this judgment, underpinsthe Brussels Convention and prohibits a court,except in special circumstances which are notapplicable in this case, from reviewing the jurisdiction of the court of another member state.

29. Even if it were assumed, as has beencontended, that an injunction could be regardedas a measure of a procedural nature intended tosafeguard the integrity of the proceedings pending before the court which issues it, and thereforeas being a matter of national law alone, it needmerely be borne in mind that the application ofnational procedural rules may not impair theeffectiveness of the Brussels Convention (seeKongress Agentur Hagen G.m.b.H. v. ZeehagheB.V Case C-365/88 [1990] ECR 1-1845 (par. 20).However, that result would follow from the grantof an injunction of the kind at issue which, as hasbeen established in par. 27 of this judgment, hasthe effect of limiting the application of the ruleson jurisdiction laid down by the BrusselsConvention.

30. The argument that the grant of injunctionsmay contribute to attainment of the objective ofthe convention, which is to minimize the risk ofconflicting decisions and to avoid a multiplicityof proceedings, cannot be accepted. First,recourse to such measures renders ineffective thespecific mechanisms provided for by the convention for cases of us alibi pendens and of relatedactions. Second, it is liable to give rise tosituations involving conflicts for which the convention contains no rules. The possibility cannotbe excluded that, even if an injunction had beenissued in one contracting state, a decision might



nevertheless be given by a court of anothercontracting state. Similarly, the possibility cannotbe excluded that the courts of two contractingstates that allowed such measures might issuecontradictory injunctions.82. Mr. Smith submitted that this case is stronger

than that because in Turner v. Grovit the defendantwas guilty of abusing the process of the court andacting in bad faith, whereas no such suggestion is orcan be made against New India. That is so but, aswe see it, this case is different from Turner v. Grovitand indeed (kisser in a very important respect. Inboth Turner v. Grovit and Gasser both sets ofproceedings were what may be called Conventionproceedings. Thus in Gasser the proceedings inboth Italy and Austria were within the Convention,just as they were in England and Spain in Turner v.Grovit. Each court had or potentially had jurisdiction under the Convention.

83. In the exclusive jurisdiction clause type ofcase like Gasser, there is as we see it no room foran anti-suit injunction because the court first seisedmust decide issues of jurisdiction including thejurisdiction of the court second seised. Although itwas not said that art. 27 or 28 applied, Turner v.Grovit was also a case in which both sets ofproceedings were within the Convention. The position is different in a case where one set of proceedings is outside the Convention, as here. In a casewhere two parties to a contract which includes anarbitration clause bring proceedings in differentcontracting states and there is an issue as to whetherone of those sets of proceedings is within thearbitration exception and thus outside the Convention, we have already expressed our view that thecourt in which that dispute arises has jurisdiction todetermine that dispute and that arts. 27 and 28 donot apply to them. If that were wrong, the sameprinciples would apply as in Gasser and no injunction could be granted.

84. However, if that view is correct, the underlying rationale of Gasser does not apply directly tosuch a case. Moreover, the considerations in pars.26 to 30 of the judgment in Turner v. Grovit quotedabove do not seem to us to apply directly. Thus, aswe see it, there is nothing in the Convention toprevent the courts of a contracting state fromgranting an injunction to restrain a claimant frombeginning proceedings in a contracting state whichwould be in breach of an arbitration clause. As theECJ put it in par. 18 of its judgment in The AtlanticEmperor (quoted in par. 45 above), the contractingparties “intended to exclude arbitration in itsentirety”, so that arbitration must be treated asentirely outside the Convention.

85. Once it is held (as it was for example in TheIvan Zagubanski) that proceedings in the court of a

contracting state for (i) a declaration that arbitrationclauses bound the defendants and (ii) an injunctionto restrain proceedings in the court of anothercontracting state in breach (or threatened breach) ofbinding arbitration agreements fall within theexception in art. 1.2(d) of the Regulation and arethus outside the Convention so that arts. 27 and 28do not apply to them, the question arises whether, inthe light of the underlying reasoning in Turner v.Grovit, an injunction should not be granted restraining the person in breach from bringing suchproceedings.

86. The competing considerations seem to us tobe these. It might be said in the light of thereasoning in Turner v. Grovit that an injunctionshould never be granted to restrain a claimant fromproceeding in the courts of a contracting state inbreach of an English arbitration clause because todo so interferes with the exercise by that court ofthe jurisdiction conferred on it by the Regulation.There is certainly some support for that view inTurner v. Grovit, with its emphasis on mutual trustand the opinion expressed in pars. 27 and 28(quoted above) that such an injunction interfereswith the jurisdiction of the foreign court and thatsuch interference cannot be justified by the fact thatit is only indirect and is intended to prevent anabuse of process by the defendant in the proceedings in the forum state.

87. The question is whether that view should bepreferred in this context to what has come to be thesettled approach in England to proceedings broughtin breach of an arbitration clause in a contractbetween the parties which was set out by the Judgeand is referred to above. In this regard the approachto actions in breach of contracts containing arbitration clauses is most clearly stated in the judgmentsof Mr. Justice Rix at first instance and in thejudgments of Lord Justices Leggatt, MilieU andNeill in this court in The Angelic Grace, [1994] 1Lloyd’s Rep. 168 and [1995] 1 Lloyd’s Rep. 87. Itmay be recalled that, although The Angelic Gracewas itself concerned with an arbitration clause, bythe time the case reached this court, the court hadrecently considered the correct approach to thegrant of anti-suit injunctions in cases where proceedings were brought in breach of an exclusivejurisdiction clause in Continental Bank N.A. v.Aeakos Compania Naviera S.A., [1994] 1 W.L.R.588. It was in those circumstances that in TheAngelic Grace the court discussed both arbitrationclauses and exclusive jurisdiction clauses.

88. The essential reasoning of the all judgments,expressed in robust form, can be seen in thesepars. in the judgment of Lord Justice Millett atpage 96:



In my judgment, the time has come to layaside the ritual incantation that. this is a jurisdiction which should only be exercised sparinglyand with great caution There have been manystatements of great authority- warning of thedanger of giving an appearance of undue: interference with the proceedings of a’ foreign court:Such sensitivity to the feelings of a foreign courthas much to commend it where the injunction issought on the ground of forum non conveniens oron the’ general ground. that the foreign proceedings are vexatious or oppressive but where nobreach of contract is involved. In the former case,great care may be neèded,to avoid casting doubton the fairnes or adequacy. of the procedures ofthe fóreigi côuit In the latter case, the questio’nwhether pràceedihgs are vexátióus. or öppresiveis primarily a. mãttèr for the Court bcfore. whichthey are pending. But in my judgment there is ‘nogood reason for diffidence in granting ah: injunction to restrain foreign proceedings on the.clearand simple ground that the defendant has promised not to bring them. . . . -

The courts in countries like Italy, which is aparty to the Brussels and Lugano Conventions aswell as the New York Convention, are accustomed to the concept that they may be under aduty to decline jurisdiction in a particular casebecause of the existence of an exclusive jurisdiction or arbitration clause. I cannot accept theproposition that any court would be offended bythe grant of an injunction to restrain a party frominvoking a jurisdiction which he had promisednot to invoke and which it was its own duty todecline.

In my judgment, where an injunction is soughtto restrain a party, from proceeding in a foreigncourt in breach of an arbitration agreement governedby English law, the. English Càurt need feelno diffidence in granting the injunction, provided,that it is sought promptly and before the foreignproceedings are too far . advanced.. I see nodifference in principle between an injunction torestrain proceedings in breach of an arbitrationclause and. ónè to restrain proceedings in breachof an exclusive jurisdiction clause as in Cöntinental Bank N.A. v. AeakOs C’ompania NavieraS.A., [1994] .lW.L.R. 588. The justification forthe grant of the injunction in either case is thatwithout it the plaintiff will, be: deprived of itscontractual rights in a situation in which damagesare manifestly an inadequate remedy. The jurisdiction,. is, of course, discretionary -and’ is notexercised as a matter of course, but good reasonneeds to be’ shOwn why it should’not be exercised

89. In considering the propositions advanced byLord Justice Millett in those paragraphs, it isimportant to note that, as we have seen from thedecision of the ECJ in Gasser, so far as proceedingswithin the Regulation are concerned, the approachto contracts containing exclusive jurisdictionclauses is not now the same as that advocated bythe English Courts. That is because the court firstseised must decide whether any relevant court,including the court second seised, has jurisdictionunder an exclusive jurisdiction clause within art.23, so that there is no room for an anti-suitinjunction. However, we see no reason why theprinciples in The Angelic Grace should not continue to apply to the circumstances in which claimants may be restrained from bringing proceedingsin courts of non-contracting states in breach ofagreements to arbitrate.

90. As to proceedings brought in the courts of acontracting state, in the first of the paragraphsquoted above Lord Justice Millett in our view drewan important distinction between proceedingsbrought in breach of an arbitration clause andproceedings said to be vexatious or oppressive butwhere no breach of contract is involved. He saidthat the question whether proceedings are vexatiousor oppressive was primarily for the court beforewhich it was pending, whereas in the case ofproceedings brought in breach of contract there wasno good reason for diffidence in granting an injunction on the clear and simple ground that theclaimant had promised not to bring them.

91. It appears to us that that distinction isconsistent with the reasoning in Turner v. Grovit,which was of course a case in which the ground onwhich the injunction had been granted was that theproceedings in Spain were vexatious and oppressive. There is nothing in Turner v. Grovit which inour opinion contradicts the reasoning in the secondor third of the paragraphs quoted from the judgmentof Lord Justice Millett, in so far as it relates toarbitration clauses. As to the second paragraph,there is no reason why any court should be offendedby an injunction granted to restrain a party frominvoking a jurisdiction in breach of a contractualpromise that the dispute would be referred toarbitration in England. The English Court wouldnot be offended if a claimant were enjoined fromcommencing or continuing proceedings in Englandin breach of an agreement to arbitrate in anothercontracting state. As to the third paragraph, itremains the position that damages would be aninadequate remedy.

92. For these reasons we agree with the conclusions expressed by the Judge in par. 34 of hisjudgment (quoted in par. 72 above) which seem tous to remain applicable in a case of this kind. We donot accept Mr. Smith’s submission that the Courtin any given case.


.A.] Through Transport Mutual v. New India Assurance Co. Ltd. [CLARKE, L.J.

;hould not grant an anti-suit injunction in a casevhere a party to an arbitration agreement begins)roceedings in the courts of a contracting state in)reach of an arbitration clause in a contract.

93. That is not, however, this case. We thereforeurn finally to Mr. Smith’s submission that theFudge should not have granted an injunction in this:ase, where the highest that it can be put against4ew India is that the only reason that it can be saidin England that New India should not be permitted:0 proceed in Finland is that, because of Englishprinciples of conflict of laws, the claim is classifiedas a claim under the contract so that New India isbound to bring any claim against the Club inarbitration in London. Mr. Smith submitted that inthese circumstances there is no parity of reasoningbetween this case and the principles relied upon bythe Judge and set out above.

94. We accept that submission. This claim isbrought in Finland under a Finnish statute conferring rights on third parties against liability insurersin circumstances in which the insured is insolvent.The statute was no doubt passed because, as amatter of public policy in Finland, it was thoughtthat liability insurers should be directly liable tothird parties who had suffered loss in respect ofwhich the insured was liable. The public policybehind the Finnish Act was the same as or verysimilar to the public policy behind the Third Parties(Rights Against Insurers) Act, 1930. It appears thatthe only difference of importance between them isthat in England the anti-avoidance provision doesnot defeat the pay to be paid clause, whereas it maybe that s. 3 of the Finnish Act will do so, althoughit is right to say that that is a matter yet to bedetermined by the Finnish courts. It may also beobserved that by s. 3(3) s. 3(1) and (2) do not applyto “marine or transport insurance taken out bybusinesses”. There is, as we understand it, an issuebetween the parties as to whether the liabilityinsurance provided by the Club is within theexception. The court in Kotka appears to have beenof the view that it was not, but was liabilityinsurance outside the exception. However, it is notentirely clear to us whether the court has made afinal decision to that effect in its decision onjurisdiction.

95. The question is whether in all the circumstances the English Court should grant an injunction restraining New India from bringing its claimunder the Finnish Act in Finland. It is always astrong step to take to prevent a person fromcommencing proceedings in the courts of a contracting state which has jurisdiction to entertainthem. The ECJ has either held or in effect held thatno such injunction should be granted in the case ofan exclusive jurisdiction clause (Gasser) or on theground that the proceedings are vexatious and

oppressive (Turner v. Grovit). New India is not inbreach of contract in bringing these proceedings inFinland, so that the principles in cases like TheAngelic Grace do not apply directly. In this regardwe accept Mr. Smith’s submission that, while suchcases may provide some assistance by analogy, theydo not apply by parity of reasoning, as the Judgethought. None of the cases to which we werereferred, including Akai, was considering a casequite like this.

96. Further, this is not a case in which it canfairly be said that the proceedings in Finland arevexatious or oppressive. New India is simply proceeding in Finland under a Finnish statute whichgives it the right to do so. The question is whetherthe English Court should restrain it from doingso.

97. Given our view that the principles in thedecided cases cannot be applied by parity of reasoning and given the further fact that the Judge did nothave the assistance of either Gasser or Turner v.Grovit, both of which have made an importantcontribution to the jurisprudence in this area, thisCourt is in our opinion free to form its ownconclusion on the question whether to grant an anti-suit injunction on the facts of this case. We havereached the conclusion that, having regard to all thecircumstances of the case, including those set outabove and the reasoning underlying the approach ofthe ECJ in Turner v. Grovit, this was not a case inwhich, in the language of s. 37(1) of the SupremeCourt Act, 1981, it was or would be just andconvenient to grant an injunction restraining NewIndia from pursuing a claim under the Finnish Actin Finland.

Conclusions

98. For the reasons set out above, we answer thequestions posed in par. 21 above as follows:

(i) No, the Court should not decline jurisdiction or stay the proceedings under the Regulation(see pars. 22 to 51). In particular, the questionwhether the claim in England was within thearbitration exception was not a matter for theFinnish court as the court first seised (pars. 22 to37) and the Judge was right to hold that the claimin England was within the arbitration exceptionand thus outside the Regulation (pars. 38 to51).

(ii) Yes, the Judge was right to hold that, underEnglish principles of conflicts of laws, New Indiawas bound to pursue its claim under the FinnishAct by arbitration in England (pars. 52 to 60).

(iii) No, the permission to serve the claim formshould not be set aside and the proceedings



should not be stayed as a matter of discretion(pars. 61 and 62).

(iv) The Judge was right to grant the firstdeclaration, namely that New India was bound torefer any claims against the Club in respect of theconsignment to arbitration in England. However,the second declaration, namely that the Kotkaproceedings, were and are in breach of thearbitration clause should be set aside becauseNew India was not in breach of contract inbringing them (pars. 63 to 65).

(v) No, the Judge should not have granted theanti-suit injunction, which should be set aside(pars. 66 to 97).

It follows that the appeal is allowed in part. If thereshould be questions as to the recognition orenforcement of judgments under art. 32 to 36 of theRegulation, they must be determined when and ifthey arise.

99. Finally we would like to thank counsel for alltheir assistance in this interesting case.

lloyd’s law reports - kpmg...2005] vol. 1 lloyd’s law reports 67 ‘.a.] through transport...

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