UK Court of Appeal offers guidance in interpreting choice of law and jurisdiction clauses in insurance contracts

Speed Read

On 10 June 2022, in AIG Europe SA and others v John Wood Group plc and another [2022] EWCA Civ 781, the UK Court of Appeal (the Court) upheld a Commercial Court decision maintaining an anti-suit injunction granted to insurers, preventing the continuation of proceedings in Canada. The judgment offers insight into the interpretation of conflicting choice of law and jurisdiction clauses, with a focus on insurance contracts, and will be of interest to practitioners seeking to incorporate such clauses into contracts. It also demonstrates the danger of incorporating standard terms into contracts which may not be consistent with other terms agreed by the parties.

Background

The respondents issued an 'insurance tower', comprising a primary liability and various excess liability policies. The excess policies contained potentially conflicting terms in relation to choice of law and jurisdiction. 

A Primary Policy Jurisdiction Clause (PPJC) in the 'Risk Details' section of the excess policies provided that disputes were 'subject to the same law and jurisdiction as the primary policy'. Furthermore, the standard terms and conditions located further down each excess policy, provided for English law and jurisdiction (except for one policy, which provided for Scottish law).

However, the primary policy did not contain a choice of law and jurisdiction clause. 

The Court was tasked with interpreting the PPJC in light of the provisions in the standard terms.

The Court agreed with the Commercial Court that the PPJC could not displace the clear provisions of the law and jurisdiction clauses contained within the standard terms. It held that the excess policies provided for the exclusive jurisdiction of the English Court. It followed that the continuation of proceedings in Canada would be a breach of contract. 

Interpreting Conflicting Clauses 

Lord Justice Male's decision provides insight into the Court's approach to conflicting choice of law and jurisdiction clauses, including:-

• The location of a clause can be determinative of one clause's precedence over another, but the plain meaning of the words used is also important and where a later clause clearly dictates the choice of law and jurisdiction, it takes precedence;
• A jurisdiction clause does not need to contain the word 'exclusive' to be considered so. Regard can also be had to imperative wording within the clause (such as 'shall have jurisdiction'); 
• The Court will look through the lens of a reasonable policyholder in interpreting jurisdiction and choice of law clauses; and
• The Court values certainty and will not seek to apply an interpretation which is 'hopelessly uncertain'.

Key Takeaway

Whilst this is a UK decision, it reiterates that practitioners ought to carefully draft choice of law and jurisdiction clauses as this decision makes clear that imprecise language could lead to a conclusion that is ultimately contrary to the intention of the parties. Indeed, the decision arguably has wider implications, demonstrating the difficulty of incorporating standard terms which may contain specific provisions which conflict with other agreed provisions – clear drafting is required to make clear which provision should prevail.

Lord Justice Males stated that judicial comity is best served by giving effect to the parties' agreed exclusive jurisdiction clauses and the grant of an anti-suit injunction is an appropriate means of doing so, unless there ha been culpable delay on the part of the applicant.

For further information or advice on the above decision or otherwise, please contact Linda Duffy, Associate, Litigation & Dispute Resolution; Liam Kennedy, Partner, Litigation & Dispute Resolution; or any member of A&L Goodbody's Disputes team.  

Date published: 26 July 2022