Summary
The dispute was between the lead underwriter, a French company, and a following underwriter, an English company, in respect of a settlement paid by the lead underwriter. The English claimant denied that the French company had authority to settle on its behalf. Court proceedings were initiated in England where the claimant sought a non-liability declaration.
The French company challenged the jurisdiction of the English court. In this context, Section 3 of the Regulation and Article 1(2)(d) were both invoked by the defendant.
The English High Court dismissed the jurisdictional challenge, holding that the English court had jurisdiction under Article 5(1) of Brussels I. It went to state that section 3 was not applicable because no weaker party protection could be invoked in a dispute between two insurers. Mr Justice Tomlinson held:
“25 […] I conclude that the court has jurisdiction to entertain the claim of the London market for a declaration of non-liability to the French market. It is open to the French market to apply for a stay of the proceedings pursuant to section 9 of the Arbitration Act 1996 , which application may or may not succeed. It is of course unfortunate that there should be concurrent proceedings in arbitration in Paris and in this court. However the remedy for that ill lies in the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards, to which all the Member States of the European Community are party, and which relevantly finds expression in English domestic law in section 9 of the 1996 Act. There is of course the possibility that divergent conclusions might be reached by the English court and by the arbitrators or by the French court, as the relevant supervisory court. As the English court would in relation to an arbitration having its seat in England and Wales, section 67 of the 1996 Act, so the French court has jurisdiction to determine whether arbitrators sitting in France have reached a correct conclusion as to their own jurisdiction. However as Advocate General Kokott points out in her Opinion in The Front Comor , such a possibility only arises where there is doubt as to the existence of an agreement to arbitrate. […].” [25]
An appeal, challenging the jurisdiction, was made before the English Court of Appeal. On 5th March 2009, the appeal was dismissed. Lord Collins held:
“40 Contrary to the French market's contention, the London market does not distort the nature of the French market's claim. All that the London market is saying is that the French market is wrongly asserting the existence of an obligation to pay under a contract between the French market and the London market (and also in the subsidiary claim, an obligation to Turbomeca which has, allegedly, been assigned to the French market). The English market is not guilty of a distortion simply because it does not rely on an arbitration agreement, the existence of which it also denies. At best the French market's reliance on the arbitration agreement is merely incidentally raised in the English proceedings (because the French market has raised it, and the English market has disputed its relevance), but I do not consider that the French market has even shown that it is incidentally raised.
41 The subject-matter or the substance of the English market's claim is the claim that it is not liable under the alleged contract. The rights which the English market seeks to protect are its rights not to be sued on a claim which it denies. It does not matter that the French market pursues that claim in an arbitration.” [2009] EWCA Civ 175 [40-41]