On 29 July 2022, the Commercial Court handed down its decision in Al Mana Lifestyle Trading LLC & Ors v United Fidelity Insurance Company PSC & ors1, in which Mrs Justice Cockerill confirmed that the English Commercial Court had jurisdiction to hear claims for COVID-related business interruption losses (in the realm of around US $40 million), made under multi-risk insurance policies issued in the Middle East, in accordance with the policies' jurisdiction clauses. In reaching this decision, Mrs Justice Cockerill noted that "the Court is particularly well-versed in the issues relating to claims for indemnity for COVID-related business interruption losses. It is also highly experienced in dealing with issues of foreign law, when they arise."
The decision serves as an important reminder to both insurers and policyholders on the need for careful drafting and consideration of jurisdiction clauses in insurance policies, not only to minimise the risk of a disagreement on jurisdiction should a claim arise, but also to ensure that the policy gives effect to the parties' intentions.
The Claimants all form part of the Al Mana Group, whose business is in the food, beverage and retail sectors operating in the Middle East and Gulf region. In May 2021, the Claimants commenced proceedings in the English Courts, claiming indemnities of around US $40 million for business interruption losses arising from the COVID-19 pandemic, under a suite of seventeen multi-risk insurance policies underwritten by the Defendants (the "Policies").
The Defendants are insurance companies with headquarters in the United Arab Emirates, Qatar and Kuwait respectively, and the Policies were issued in these jurisdictions.
The Defendants challenged the English Court's jurisdiction to hear the claims.
Each of the Policies contained the following wording (the "Applicable Law and Jurisdiction Clause"):
"APPLICABLE LAW AND JURISDICTION:
In accordance with the jurisdiction, local laws and practices of the country in which the policy is issued. Otherwise England and Wales UK Jurisdiction shall be applied,
Under liability jurisdiction will be extended to worldwide excluding USA and Canada."
The Claimants and Defendants agreed on one point relating to construction: that the clause is not a model of drafting.
The Claimants argued that this clause permitted proceedings to be brought in either:
(a) the country where each of the Policies was issued (in this case, the UAE, Qatar or Kuwait); or
(b) in the Courts of England and Wales.
The Defendants, by contrast, argued that the Applicable Law and Jurisdiction Clause should be interpreted as an exclusive jurisdiction clause, where disputes must be submitted to the courts of the countries in which each of the Policies were issued first; the English Courts will only have jurisdiction where the local court does not, for some reason, accept jurisdiction. The Defendants invited the Court, on this basis, to set aside the service of the claim form, which they contended was wrongly served outside of the jurisdiction without permission.
In the alternative, the Defendants argued that, in the event that the Court concluded that the Applicable Law and Jurisdiction Clause was a non-exclusive jurisdiction clause, the Court ought to decline jurisdiction on the grounds of forum non conveniens (i.e. on the basis that the local courts would be better suited to hear the Claimants' claims). The Defendants submitted various points, including, inter alia, that (a) none of the Claimants or Defendants was located in England; (b) none of the losses were sustained in England; and (c) the Policies were governed by the local laws in the countries they were issued in.
The central question
The question for the Court was whether or not the Applicable Law and Jurisdiction Clause in the Policies constituted an agreement between the parties which gave the English Courts jurisdiction over claims brought by the Claimants.
The Court found that the Applicable Law and Jurisdiction Clause was not exclusive; in fact, it permitted proceedings to be brought either in the country where the policy was issued (in this case UAE, Qatar or Kuwait), or in the courts of England and Wales. This construction of the clause, Mrs Justice Cockerill found, struck the right balance of the "wording and commercialities of the clause in the context of the wider factual matrix".
In reaching this conclusion, Mrs Justice Cockerill conducted an analysis of the language used, reiterating the importance of ensuring that each word is properly analysed and viewed in its place in the clause, rather than in the wider context of the submissions made by both parties to the dispute.
In particular, Mrs Justice Cockerill agreed with the Claimants that:
(a) the words "In accordance with" were less mandatory and imperative than the words "subject to", and it was “wishful thinking” of the Defendants to submit that the phrases were synonymous; and
(b) the word "Otherwise" was more synonymous to the words "or" or "alternatively", rather than "If notwithstanding the foregoing".
The judge considered that this interpretation made commercial sense: the Policies were issued in conjunction with each other as part of a suite, in order to provide comprehensive coverage for the Claimants' operations in a number of jurisdictions. Where claims could arise across multiple jurisdictions, it made sense for there to be an option for disputes to be determined in a single neutral venue, such as England and Wales, where the courts have particular expertise on issues of business interruption losses, and insurance law more generally.
Forum non conveniens
Mrs Justice Cockerill also rejected the Defendants' arguments that the Court should decline jurisdiction on the grounds that England was not the most convenient forum for the dispute. The existence of the non-exclusive jurisdiction clause in favour of the English courts strongly indicated it was a convenient forum. In order to succeed on this point, the Defendants would have had to show a "strong reason" why the English court should not exercise its jurisdiction, which they failed to do.
Although this decision focuses on the specific wording contained in the Applicable Law and Jurisdiction Clause in the Policies, where the drafting was, as Mrs Justice Cockerill puts, "to some extent odd", the decision serves as a useful reminder to both insurers and policyholders on the way in which the Courts will analyse and interpret jurisdiction clauses in insurance policies.
Indeed, the Courts will aim to take a "user friendly" approach when analysing policy wording. This was also made clear in the recent high profile Supreme Court decision in FCA v Arch2, which reiterated the importance, when carrying out an analysis of the words of an insurance policy, of considering what the words would be understood to mean by an "ordinary policyholder", as opposed to a "pedantic lawyer".
Mrs Justice Cockerill also acknowledged that the wording did not need to undergo "microscopic analysis", and that there was "little to be gained" from focusing too heavily on the punctuation used in a clause when interpreting its meaning.
This approach of the Court demonstrates how nuances in the wording used can lead to very different outcomes, and therefore that parties need to be alive to this when negotiating policy wording, to choose wording carefully to ensure it reflects their true intentions, and to consider the jurisdictional position closely before commencing proceedings in a particular forum.