In The London Steam-Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain [2020] EWHC 1920 (Comm), Butcher J considered four related Part 11 applications arising in four related sets of court proceedings.
The factual background involved claims against the states of Spain and France for failures to honour arbitral awards or to abide by judgments of the courts of England and Wales.
The points of interest for the purposes of this blog are these:
- Confirmation that the Service Regulation – and not the regime set out in s. 12 of the State Immunity Act 1978 – applies to claims against EU Member States, save where the claim concerns acts of state authority.
- A useful summary of the authorities concerning whether there is a “serious issue to be tried” for the purpose of applications to serve out of the jurisdiction.
- Distillation of the principles concerning what qualifies as a “matter relating to insurance” following the recent decision of the Supreme Court in Aspen Underwriting Ltd & Ors v Credit Europe Bank NV [2020] UKSC 11.
- Consideration of key terms in Section III of Brussels I (Recast) – in particular, “beneficiary” and “injured party” – plus a determination of whether a state bringing a subrograted claim in respect of sums paid out under state compensation schemes can properly be characterised as a “weaker party” for the purposes of Section III.
Service Regulation
Butcher J considered an argument raised by the state of France that service against it was covered by the State Immunity Act 1978. It contended that service in accordance with the Service Regulation had not been validly effected against it because the Service Regulation had no application to claims against states.
Butcher J rejected this argument. The Service Regulation did apply to claims against states where the claim was not based on the exercise of state authority. His reasoning, set out at [45], was in essence that the Service Regulation imposed an exhaustive and mandatory regime which did not make an exception for proceedings which would otherwise fall within the State Immunity Act 1978.
Serious Issue to be Tried
There was a dispute as to whether there was a “serious issue to be tried” for the purposes of the three-stage assessment of whether permission should be given for service out of the jurisdiction (considered in a separate blog post here). Of interest for the purposes of this blog is the summary of the authorities on this issue at [85]–[87].
In Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 further guidance was provided in relation to what is involved. At paragraphs [84]-[85] Lord Collins, giving the judgment of the Board, said this:
‘[84] The general rule is that it is not normally appropriate in a summary procedure (such as an application to strike out or for summary judgment) to decide a controversial question of law in a developing area, particularly because it is desirable that the facts should be found so that any further development of the law should be on the basis of actual and not hypothetical facts: eg Lonrho Plc v Fayed [1992] 1 AC 448, 469 (approving Dyson v Attorney General [1911] 1 KB 410, 414: summary procedure ‘ought not to be applied to an action involving serious investigation of ancient law and questions of general importance …’); X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 740-741 (‘Where the law is not settled but is in a state of development … it is normally inappropriate to decide novel questions of law on hypothetical facts’); Barrett v Enfield London Borough Council [2001] 2 AC 550, 557 (strikeout cases); Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd [1990] 1 WLR 153 (summary judgment). In the context of interlocutory injunctions, in the famous case of American Cyanamid Co v Ethicon Ltd [1975] AC 396, 407 it was held that the court must be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried. It was no part of the court’s function ‘to decide difficult questions of law which call for detailed argument and mature consideration’.
[85] In Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438, 452, Lord Goff said that if, at the end of the day, there remained a substantial question of fact or law or both, arising on the facts disclosed by the affidavits, which the plaintiff bona fide desired to try, the court should, as a rule, allow the service of the writ. The standard of proof in respect of the cause of action could broadly be stated to be whether, on the affidavit evidence before the court, there was a serious question to be tried.’
The court also needs to bear in mind what was said in Lungowe v Vedanta Resources plc [2019] UKSC 20, [2019] 2 WLR 1051, in particular at paragraphs [9]-[14], per Lord Briggs JSC. What Lord Briggs said included the following:
‘[9] Jurisdiction challenges frequently raise questions about whether the claim against one or more of the defendants raises a triable issue. As is now common ground, this broadly replicates the summary judgment test. Issues of this kind are, regardless whether contained within jurisdiction disputes, subject to a similar requirement of proportionality, the avoidance of mini-trials and the exercise of judicial restraint, in particular in complex cases [citation of Three Rivers District Council v Governor and Company of the Bank of England (No. 3) [2003] 2 AC 1 paragraphs [94]-[96]].
[10] The extent to which these well known warnings have been ignored in this litigation can be measured by the following statistics about the material before this court. The parties’ two written cases (ignoring annexes) ran to 294 pages. The electronic bundles included 8,945 pages. No less than 142 authorities were deployed, spread over 13 bundles, in relation to an appeal which, on final analysis, involved only one difficult point of law.
[11] A particular reason for the requirement to exercise proportionality in jurisdiction disputes of this kind is that, in most cases, they involve a contest between two competing jurisdictions in either of which the parties could obtain substantial justice. …
[13] … Within every jurisdiction dispute, or embedded question whether there is a triable issue, the first instance judge faces a typical quandary: how to balance the requirement for proportionality against the need to ensure that resources are not wasted on an unnecessary trial. The choice, at how deep a level of detail to conduct that analysis and then in how much detail to express conclusions in a judgment, are matters for the experienced first instance judge, with which an appellate court should be slow to interfere.’
“Matters Relating to Insurance”
A dispute arose as to whether certain claims fell within Section III of Brussels I (Recast). The question was whether they were “matters relating to insurance”. Butcher J was required – apparently for the first time – to apply the recent Supreme Court decision in Aspen Underwriting Ltd & Ors v Credit Europe Bank NV [2020] UKSC 11 (considered in an earlier blog post here). He distilled the following guidance at [122]:
(1) Section 3 is not to be restrictively construed.
(2) ‘Matters relating to insurance’ are not confined to “matters relating to insurance contracts”.
(3) ‘Matters relating to insurance’ can extend to determinations of rights of persons who were not parties to an insurance contract, including beneficiaries and, in the context of liability insurance, injured parties.
(4) The question of whether particular proceedings are or involve a ‘matter relating to insurance’ calls for an evaluative judgment. It will not generally be enough that insurance forms part of the history or ‘pathology’ of a claim for it to be a ‘matter relating to insurance’. On the other hand, a claim is not prevented from being a ‘matter relating to insurance’ by the intervention of some other legal connexion between the parties (such as the settlement agreements in The ‘Atlantik Confidence’).
(5) In making the evaluation, the court is concerned to see whether, as a matter of ‘substance and reality’, and applying common sense, the proceedings can be said ‘fairly and sensibly’ to be matters relating to insurance.
In his view, the relevant claims did qualify as “matters relating to insurance”:
The essential purpose of the Judgment Claims is to seek to ensure compliance with, or redress for non-compliance with, obligations which derive from an insurance policy, including its ‘pay to be paid’ provision. The States are sued in the Judgment Claims because they proceeded with their civil claims in Spain and have obtained, and are relying, on the Spanish judgment which finds the Club liable by reason of the insurance policy which it issued, up to the amount of the limit of cover under that policy. As a matter of substance, I consider that the proceedings can be said fairly and sensibly to be matters relating to insurance for the purposes of the Recast Regulation.
The Weaker Party
There was also a dispute as to whether France and Spain were “the weaker parties” and therefore entitled to the protections of Section III of Brussels I (Recast). At [129], Butcher J considered what was meant by the term “beneficiaries” in Articles 11 and 13 of Brussels I (Recast):
Section 3 of the Recast Regulation appears to draw a clear distinction between ‘beneficiaries’ and persons who are strangers to the insurance but who, because they have sustained loss, are ‘injured parties’. Such injured parties, as Article 13(2) envisages, may have a direct claim on the insurer. The fact, however, that such injured parties may have a direct claim on the insurer, and thus be in that sense a beneficiary of the policy, does not stop them being ‘injured parties’ for the purposes of the Section. I regard this analysis as supported by the treatment of ‘injured parties’ and ‘beneficiaries’ by the CJEU in FBTO Schadeverzekeringen NV v Odenbreit [2008] IL Pr 12, especially at paragraphs [26]-[27].
He was not satisfied that states met this definition on the facts. However, he went on to consider a secondary argument that the states were also not “injured parties” for the purpose of Articles 11 and 13 because they had not been sued in this capacity. He rejected this argument and found that they were injured parties at [131]:
In my judgment this argument is ill-founded. By Article 10, if the matter is one which relates to insurance, as I have held it is, then jurisdiction is to be determined in accordance with the Section 3 provisions. Those provisions include Article 14, under which an insurer may bring proceedings only in the courts of the Member State in which the defendant is domiciled. It does not provide that the insurer may bring proceedings only in the courts of the Member State in which the policyholder, insured, beneficiary or injured party is domiciled. In other words, the jurisdictional allocation depends on whether the party concerned is or is not a defendant, and is not tied to the capacity in which it is sued. In any event, I consider that if a person or entity which has suffered loss as a result of the acts or omissions of an insured has made a direct claim on liability insurers, then that person will ordinarily count as an ‘injured party’ for the purposes of the Section 3 provisions, even if in the particular action it can be said that that person or entity is being sued in some other capacity, provided that it can still be said that the action is one which ‘relates to’ the liability insurance and that person’s claim on it.
Finally, Butcher J considered whether a state bringing a subrograted claim in respect of sums paid out under state compensation schemes could properly be characterised as a “weaker party” for the purposes of Section III. At [136]–[137], Butcher J said that it could not:
If one considers Spain as a claimant in respect of its subrogated claims in isolation, then I regard it as in a position more similar to that of the claimant in Vorarlberger than in KABEG. The distinction between the two cases, as I understand the reasoning of the CJEU, is that in KABEG, it was an employer which had succeeded to the rights of its employee. Given that employers may vary considerably in terms of their economic position, and given that the CJEU considered that it was inappropriate to conduct a case-by-case examination of whether a particular employer is the economically weaker party because that would give rise to legal uncertainty (paragraph [34]), all employers to whom an employee’s rights to compensation have passed are regarded as ‘injured parties’ ‘whatever their size and legal form’ (paragraph [35]). By contrast, in Vorarlberger the claimant was a social security institution which provided insurance pursuant to the Austrian General Law on Social Security (the Allgemeines Sozialversicherungsgesetz), and which was the statutory assignee of the claims against third parties of those it indemnified. A social security institution was, of its nature, not an economically weaker party, and indeed was a professional in the insurance sector (paragraph [42]). In the circumstances, the protections of Section were not to be extended to such institutions.
Applying that distinction, it appears to me that States (or other public bodies) which may set up statutory compensation schemes would fall within the type of entity which of its nature is not a weaker party.