Dassault Aviation SA v Mitsui Sumitomo Insurance Co Ltd

Factual and Procedural Background

This appeal concerns the interpretation of a non-assignment clause within a contract dated 6 March 2015 for the sale of two maritime surveillance aircraft and spares (the aircraft) from Company A in France to Company B in Japan (the sale contract), governed by English law. Company B was to resell the aircraft to the Japanese Coast Guard under a separate purchase contract governed by Japanese law (the sub-sale contract).

Article 15 of the sale contract prohibited assignment or transfer by any party without prior written consent, but allowed subcontracting by the seller with prior notice. The dispute arose when Company B had insured its liability for late delivery under an insurance contract with Company C. After a late delivery, Company C paid damages to the Japanese Coast Guard and, by operation of Japanese law (article 25 of the Insurance Act), subrogated Company B’s claims against Company A to itself.

Company A challenged the jurisdiction of arbitrators in an ICC arbitration in London initiated by Company C against Company A, arguing that the non-assignment clause barred the transfer of claims to Company C. The arbitrators held that the transfer occurred by operation of law and did not require Company A’s consent, thus upholding jurisdiction. The High Court judge allowed Company A’s appeal, ruling the transfer was prohibited by the non-assignment clause. This appeal concerns the proper interpretation of article 15 and whether it prohibits transfers by operation of law.

Legal Issues Presented

1. Whether the non-assignment clause in article 15 of the sale contract prohibits the transfer of claims by operation of law under article 25 of the Japanese Insurance Act.
2. Whether a transfer by operation of law constitutes a transfer "by any Party" under the terms of article 15.
3. The extent to which the commercial context and confidentiality provisions affect the interpretation of article 15.
4. The jurisdiction of the arbitral tribunal to hear claims by Company C against Company A following the transfer of rights.

Arguments of the Parties

Appellant's Arguments (Company C)

• Article 15 prohibits assignment or transfer only when effected "by any Party" to the contract.
• The transfer of claims to Company C occurred by operation of law under article 25 of the Japanese Insurance Act, not by any voluntary act of Company B.
• Authorities support that assignments by operation of law do not breach non-assignment clauses.
• Therefore, Company A’s consent was not required and the arbitral tribunal had jurisdiction.

Appellee's Arguments (Company A)

• Article 15 is a broad prohibition intended to prevent all transfers without consent, including those caused by a party's voluntary actions.
• Commercial confidentiality and the military nature of the contract justify a rigid interpretation.
• The phrase "by any Party" includes transfers caused or agreed to by that party, such as Company B’s voluntary insurance contract and acceptance of payment.
• The High Court judge’s approach, distinguishing voluntary and involuntary transfers, was correct.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the precise wording of article 15, focusing on the phrase "by any Party" as the key determinant. It distinguished between transfers effected voluntarily by a party and those occurring by operation of law. The arbitrators had unanimously found that the transfer of claims from Company B to Company C was by operation of law under article 25 of the Japanese Insurance Act, not by a voluntary act of Company B.

The court rejected the argument that voluntary actions by Company B leading to the transfer (such as entering into the insurance contract and accepting payment) amounted to a transfer "by any Party." Instead, the transfer was legally mandated and automatic, thus outside the scope of the non-assignment clause.

The court considered the commercial background, including confidentiality provisions and the military nature of the contract, but found these factors did not compel a different interpretation. It noted that the parties did not explicitly contemplate insurance-based transfers but had provisions for insurance generally.

The court applied established principles of contractual interpretation from leading Supreme Court authorities, emphasizing an objective approach considering language, context, and business common sense. It concluded that article 15 was clear and unambiguous in excluding transfers made "by any Party," and did not extend to transfers by operation of law.

Consequently, the court disagreed with the High Court judge’s reasoning, who had held that the non-assignment clause caught the transfer under article 25. The court found no need to engage in an iterative interpretative process given the clarity of the language.

Holding and Implications

DISPOSED OF: The court allowed the appeal and reinstated the arbitral award, holding that the transfer of claims by operation of law under article 25 of the Japanese Insurance Act was not prohibited by the non-assignment clause in article 15 of the sale contract.

The direct effect is that the arbitral tribunal has jurisdiction to hear Company C’s claims against Company A. No new legal precedent was established beyond the application of established principles of contractual interpretation to the facts. The decision clarifies that non-assignment clauses prohibiting transfers "by any Party" do not extend to involuntary transfers effected by operation of law.