C v D

Factual and Procedural Background

This appeal concerns a dispute arising under a liability insurance policy issued under the Bermuda Form, a standard form developed to address diminished liability insurance capacity in the United States by providing for arbitration in London while applying New York law as the governing substantive law of the contract. The Defendant was the liability insurer of the Plaintiff, a New Jersey Company, for a three-year period with a policy limit of US$100 million excess of $190 million. The policy covered worldwide subsidiaries and affiliates and contained arbitration and governing law clauses specifying London as the seat of arbitration under English law and New York law as the proper law of the insurance contract.

Claims were made against the Plaintiff and a subsidiary, leading to payments exceeding policy limits. The Plaintiff initiated arbitration in London, where the Tribunal confirmed its jurisdiction and applied New York law to the insurance policy and English law to the arbitration procedure.

The Defendant raised four defences: the scope of an endorsement, late notice, misrepresentation/non-disclosure, and a "paediatric defence" alleging breach of good faith under New York law. The Tribunal bifurcated the issues, hearing the first three defences first and deferring the paediatric defence. The Tribunal issued a Partial Award dismissing the first three defences and awarding the Plaintiff recovery, interest, and costs, leaving the paediatric defence for later consideration if needed.

The Defendant sought to "correct" the Partial Award, alleging manifest disregard of New York law and contending the award was reviewable under U.S. federal law. The Plaintiff obtained an interim anti-suit injunction preventing the Defendant from challenging the award in the U.S. The Defendant appealed the injunction.

Legal Issues Presented

1. Whether the arbitration agreement is governed by English law as the law of the seat of arbitration or by New York law as the proper law of the insurance contract.
2. Whether the Defendant may challenge the Partial Award in the United States based on New York law grounds, including manifest disregard of law.
3. The scope of permissible judicial review of the arbitration award under the English Arbitration Act 1996 versus U.S. Federal Arbitration Act and the New York Convention.
4. The appropriateness of an anti-suit injunction restraining the Defendant from pursuing proceedings in the U.S. contrary to the arbitration agreement.
5. The proper basis for costs relating to breach or threatened breach of arbitration or jurisdiction clauses.

Arguments of the Parties

Appellant's Arguments

• The arbitration agreement itself is silent as to its governing law and should be governed by New York law, consistent with the governing law of the insurance contract.
• The proper law of the arbitration agreement is the law with the closest and most real connection, here New York law, not English law merely because London is the seat of arbitration.
• New York law entitles the Defendant to a minimum standard of judicial review of arbitration awards, including the ability to challenge for manifest disregard of law.
• The Defendant should be permitted to challenge the Partial Award in the U.S. courts under New York law and U.S. Federal Arbitration Act provisions.
• The judge erred in holding that English law exclusively governs post-award challenges and in granting an anti-suit injunction.

Respondent's Arguments

• The choice of London as the seat of arbitration determines that English law governs the arbitration agreement and any challenges to the award.
• Only the limited grounds for challenge under the English Arbitration Act 1996 apply, excluding wider challenges based on New York law or U.S. arbitration law.
• Allowing challenges in multiple jurisdictions would cause confusion, conflict, and undermine the balance struck by the Bermuda Form.
• The arbitration agreement is a separate and distinct agreement governed by English law, and the parties agreed to finality subject only to English statutory exceptions.
• The anti-suit injunction is appropriate to uphold the parties' agreement and prevent multiplicity of proceedings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
A v B [2007] 1 Lloyds Rep 237 and (No. 2) [2007] 1 Lloyds Rep 358	An agreement as to the seat of arbitration is analogous to an exclusive jurisdiction clause; challenges to awards are to be made only in courts of the seat.	The court relied on these to hold that challenges to the award must be under English law as the seat is London.
Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221	Choice of proper law clause is not an "agreement to the contrary" for purposes of overriding non-mandatory provisions of the Arbitration Act 1996.	Used to reject argument that New York law could override English arbitration procedural rules.
Harbour Assurance Co. (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701	Arbitration agreement is separable and distinct from the underlying contract.	Supported the distinction between the governing law of the insurance contract and the arbitration agreement.
Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] UKHL 40	Confirmed separability of arbitration agreements post-1996 Act.	Reinforced the separability principle relevant to governing law analysis.
Tzortzis v Monark Line [1968] 1 WLR 406	Historical principle that choice of arbitration seat implied choice of law of that place.	Discussed as a starting point but distinguished by later authority.
Compagnie Tunisienne De Navigation S.A. v Compagnie D'Armement Maritime S.A [1971] AC 572	The proper law of the contract is the law with the closest and most real connection, not necessarily the law of the arbitration seat.	Supported the view that the governing law of the contract can differ from the law of the arbitration seat.
Black-Clawson v Papierwerke [1981] 2 Lloyds Rep 446	Identified three potentially relevant laws: substantive contract law, arbitration agreement law, and lex fori (law of the seat).	Guided the court in analyzing the proper law of the arbitration agreement versus the seat and underlying contract.
Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583	Example where arbitration agreement law differed from lex fori.	Considered but distinguished based on facts and principle that the seat governs remedies.
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334	Where no explicit choice of curial law, the law of the seat is presumed to govern the arbitration process.	Supported presumption that the arbitration agreement is governed by the law of the seat absent strong indication otherwise.
Kyrgyz Mobil v Fellowes International [2005] EWHC 1314 (Comm.)	General approach to awarding indemnity costs for breach of jurisdiction or arbitration clauses.	Referenced in discussion on costs but no final determination made on indemnity basis here.
National Westminster Bank v Rabobank Nederland RV [2007] EWHC 1742 (Comm)	Costs for breach of jurisdiction or anti-suit clauses should be assessed on indemnity basis.	Considered in costs discussion; not applied here due to novel issues and absence of actual breach.

Court's Reasoning and Analysis

The court began by acknowledging the novelty of the Bermuda Form arbitration structure, which combines London arbitration with New York substantive law. The primary legal question was whether the arbitration agreement is governed by English law as the law of the seat or by New York law as the law of the insurance contract.

The court accepted, for argument's sake, that the Defendant might have an arguable case that the Tribunal manifestly disregarded New York law and that the award might be non-Convention under the New York Convention. However, the court held that the choice of London as the seat of arbitration was determinative, meaning that English law governs the arbitration agreement and any challenges to the award. This was supported by established authority equating choice of seat with an exclusive jurisdiction clause for challenges to awards.

The court rejected the Defendant's argument that the arbitration agreement was governed by New York law, explaining that the arbitration agreement is separable from the underlying contract and that it is rare for the law of the arbitration agreement to differ from the law of the seat of arbitration. The court emphasized the need for certainty and finality, warning that allowing challenges in multiple jurisdictions would lead to confusion and undermine the balance struck by the Bermuda Form.

The court further noted that non-mandatory provisions of the English Arbitration Act cannot be overridden by a choice of proper law clause in the underlying contract. The provision in the policy that the arbitral decision shall be final and binding, and a complete defense to appeal or litigation except for fraud or collusion, supported the conclusion that English law governs challenges.

Accordingly, the court upheld the judge's grant of an anti-suit injunction preventing the Defendant from pursuing challenges in New York courts based on New York law. The court recognized the caution required in granting such injunctions but found it necessary to uphold the parties' legitimate expectations and the integrity of the Bermuda Form arbitration framework.

On costs, the court declined to order indemnity costs, reasoning that no actual breach of the arbitration agreement had occurred and that the issues raised were novel and arguable, warranting a more cautious approach to costs.

Finally, the court addressed privacy and anonymisation, deciding to rescind the order for a private hearing but to maintain anonymity temporarily, emphasizing that future requests for privacy or anonymity must be supported by written evidence.

Holding and Implications

The court DISMISSED THE APPEAL save as to costs, thereby upholding the injunction preventing the Defendant from challenging the arbitration award in the United States on grounds of New York law manifest disregard or otherwise.

The direct effect is that challenges to the arbitration award must be brought solely under English law pursuant to the Arbitration Act 1996, consistent with the parties' agreement to London as the seat of arbitration. The decision reinforces the principle that the law of the seat governs post-award remedies, even where the substantive contract is governed by a different law.

No broader precedent was established beyond affirming existing principles regarding the separability of arbitration agreements and the primacy of the seat's law in determining remedies against awards. The court’s refusal to award indemnity costs reflects a recognition of the novel and complex issues raised without actual breach of the arbitration agreement.