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Insurance Law Monthly
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Anti-suit injunctions
Preventing the reopening of reinsurance arbitrations
Professor R M Merkin
LL.B, LL.M
Lloyd's Law Reports
Professor of Commercial Law Southampton University
The decision of the House of Lords in West Tankers Inc v RAS Riunione Adriatica di Sicurta SpA, The Front Comor [2007] UKHL 4 to refer to the European Court of Justice the question whether an anti-suit injunction can be granted to protect arbitral proceedings against parallel judicial proceedings elsewhere in the European Economic Area and European Free Trade Area throws considerable doubt on the efficacy of this remedy within the relevant European countries. The ability of the courts to grant an anti-suit injunction to restrain proceedings elsewhere is, of course, unaffected by the West Tankers litigation. Noble Assurance Co v Gerling-Konzern General Insurance Co (UK) [2007] EWHC 253 (Comm) is a High Court decision which involved an application for anti-suit injunction to restrain reinsurers from bringing proceedings in the US which were designed to undermine an arbitration award in favour of insurers.
INSURANCE
Noble Assurance: the facts
Noble, the captive insurer of Shell, insured Shell against liability risks for the period 1 July 1997 to 1 July 2000. The policy covered Shell itself and, by an endorsement, also covered any limited liability entities (LLEs) in which Shell owned an equity interest of 5% or more. The cover for any LLE was, however, limited to that proportion of loss which reflected the proportion of Shell's equity interest in the LLE. Endorsement 13 to the policy provided the cover for identified LLEs, and also stated that there was cover for an LLE 'to whom the reinsured hereon [meaning Shell] issues a Policy'. The policy was governed by the law of New York, but any dispute under the policy was to be determined by arbitration in London. In January 1998 Shell obtained a 56% shareholding in Equilon, which thereupon became a party to the insurance for 56% of any liability incurred by it. Equilon was specifically identified as an insured LLE in the policy. In April 1999 Equilon obtained a 37.45% shareholding in another LLE, OPL, which operated an oil pipeline which transported gasoline products.
Noble reinsured a part of its liability with Gerling under a http://www.ukassignment.org/ policy which provided for cover of US$50m in excess of Noble's retention of US$100m. The reinsurance provided that Gerling would follow all the terms and conditions of the direct policy, and endorsement 13 appeared in the reinsurance as endorsement 18.
The loss and the arbitraton
On 10 June 1999 OPL's pipeline ruptured, resulting in a fire and an explosion. Substantial damage was suffered by a third party, ARCO, which recovered from its own property and business interruption insurers. Proceedings were then commenced in Washington against Equilon and OPL, resulting in a settlement under which Equilon paid US$200m. OPL, being insolvent, paid nothing. Some 15 months after the accident, on 5 October 2000, Noble issued a certificate policy extending to Equilon and OPL covering the period 1 January 1999 to 31 December 1999.#p#分页标题#e#
Equilon's claim against Noble for 56% of the loss was settled by Noble for US$112m. However, Gerling refused to pay its share of US$28m. Gerling accepted that Equilon was covered by both the insurance and the reinsurance, but rejected the argument that any cover had been extended to OPL. Gerling asserted that the liability incurred to ARCO was to be shared equally between Equilon and OPL, and accordingly that Gerling's liability was limited to US$14m, the amount of Equilon's liability.
The contested coverage of OPL was referred to arbitration in London under an ad hoc arrangement between Gerling and Noble. The issues to be resolved were whether the Gerling contract provided coverage for OPL and, if it did not, whether Equilon was jointly and severally liable with OPL so that Gerling was on that ground liable to pay the full US$28m.A three-arbitrator tribunal was duly appointed, and a hearing was held in London in January 2006. In the event, the arbitrators found it necessary to deal with only the first question. Gerling contended that the issue of a certificate policy by Shell was a necessary precondition of coverage for an LLE, but that a certificate policy issued after loss was invalid. Noble argued that the requirement of an issue of a certificate policy was meaningless in the policy issued by Noble to Shell and and that in any event a certificate policy was perfectly valid even if issued after loss. The arbitrators ruled in their award dated 14 April 2006 that OPL was indeed covered by the insurance and by the reinsurance. The arbitrators' award was perhaps not as clear as it might have been, but it stated that there was coverage for OPL under the terms of the LLE endorsement whether or not a certificate policy had been issued, in that the requirement was an empty formality, and in any event there was coverage for OPL under the terms of the certificate policy in that it was perfectly legitimate for a retrospective certificate policy to be issued by Shell. Gerling was required under the reinsurance to cover Noble's own liability.
Challenging the award
Following the issue of the award, Gerling commenced an action against Noble and Shell in Vermont. Gerling sought an interim order preventing the award from being confirmed or enforced, and permanent relief in the form of avoidance of the reinsurance contract. Gerling argued that the arbitrators' award decided that while coverage had been extended to OPL under the endorsement and under the certificate policy, Gerling's own liability depended upon a valid certificate policy. The attacks were directed solely to the certificate policy. Gerling alleged that Noble had fraudulently or negligently represented that policies in the name of Equilon would not be issued by Noble, that the certificate policy covered known losses, and that Shell and Noble had failed to disclose the intent to and the actual issue of the certificate policy extending coverage to OPL. Interim relief, although initially granted, was ultimately refused, with the Vermont court expressing the view that Gerling had not shown that it was likely to succeed on the merits on the grounds of res judicata and collateral estoppels. In essence, the court's view was that the matters raised before it had been raised and dealt with in the arbitration and could not be relitigated. Noble thereafter commenced an action in England, seeking an anti-suit injunction preventing Gerling from continuing with the Vermont action. Noble's argument was that the arbitrators had decided that OPL was covered both under the endorsement 13 of the policy (endorsement 18 of the reinsurance) and under the certificate policy, and that Gerling was bound to indemnify Noble on both grounds, so that the attack on the validity of the certificate policy could not affect the validity of the award. Noble also argued that the challenges to the validity of the certificate policy on the grounds of misrepresentation and non-disclosure could have been made in the arbitration but were not, so that Gerling was estopped from raising those arguments in later proceedings. Gerling's response was that until the arbitrators had ruled that the certificate policy was the basis of cover, they could not have made any attack on it.#p#分页标题#e#
The ruling
The initial question for Toulson LJ was the meaning of the award itself. The learned judge ruled on this point that the arbitrators had held that Noble was entitled to recover US$28m either under the reinsurance endorsement (which matched that in the direct policy) in that the issue of a certificate policy issued to OPL was not required, and alternatively (if it was necessary) that the certificate policy did cover OPL. Given that finding, the challenge by Gerling to the award ceased to have any substance: if Gerling was liable with or without the certificate policy, it did not matter whether it could be set aside for non-disclosure or misrepresentation or if it was otherwise void. Toulson LJ regarded Gerling's conduct in commencing the Vermont proceedings as crossing the threshold for the issue of an anti-suit injunction, in that it was 'vexatious, oppressive, and an abuse of process and/or unconscionable' and amounted to an attempt to nullify an arbitration award on grounds contrary to the matters decided by the arbitrators. Toulson LJ also felt that Gerling could easily have raised its case on rescission of the certificate policy in the arbitration; the evidence showed that Gerling had considered doing so, and, had this happened, the arbitration clause was sufficiently wide to give the arbitrators jurisdiction to deal with the point.
Toulson LJ, having found on every point in favour of Noble, nevertheless felt that the award of an anti-suit injunction was not necessary. The learned judge was reluctant to interfere with the proceedings in Vermont, which had been in place since April 2006 and on which both parties had spent considerable time and money, and Toulson LJ felt that there was no need to do so. By issuing a declaratory judgment which declared that the arbitrators had ruled that OPL was covered by the Gerling policy regardless of the certificate policy as well as under the certificate policy, the Vermont court was entitled to rely upon the terms of the declaration as giving rise to res judicata and collateral estoppel against the parties, in that the issues before the Vermont court had been disposed of in other proceedings and could not be relitigated there. Once the English court had found that there was liability irrespective of the certificate policy so that the arguments giving rise to the claim for rescission in Vermont had been rejected, then the Vermont court could simply dismiss Gerling's action.
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