Court of Appeal rules that COVID BI claim cannot be fought in England

3 February, 2023

Reversing a decision by the Commercial Court, the Court of Appeal recently held (by a 2:1 majority) that claims on a suite of business interruption insurance policies of around US$40m cannot be tried in England and has today refused permission to appeal to the Supreme Court in Al Mana Lifestyle Trading LLC & Ors v United Fidelity Insurance Company PSC & Ors [2023] EWCA Civ 61.

The multi-risk insurance policies were issued in various jurisdictions in the Middle East, and each contained a law and jurisdiction clause in the following terms:

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.

Insurers argued that the first sentence amounted to an exclusive choice of jurisdiction in favour of the courts in the (Middle Eastern) country in which the policy was issued and that disputes must be submitted to those courts first. The second sentence only applied if, for whatever reason, the local court would not accept jurisdiction. It was in fact common ground that the courts of each of the Middle Eastern countries concerned would have accepted jurisdiction in respect of the BI claims which were the subject of the dispute.

The policyholders contended that the jurisdiction clause was non-exclusive and permitted proceedings to be brought either in the country where the policy was issued or in the courts of England and Wales.

The policyholders’ argument was accepted by Mrs Justice Cockerill ([2022] EWHC 2049 (Comm)) but a majority of the Court of Appeal reached the opposite view, siding with insurers.

Males LJ, with whom Nugee LJ agreed, held that his “strong” initial impression as to the meaning of the law and jurisdiction clause (to the effect that the policyholders did not have a free choice to bring proceedings in England but could do so only if the jurisdiction of the local courts was not available) was confirmed by the insurers’ analytical submissions.

Andrews LJ, dissenting, held that her equally “strong” initial impression of the same law and jurisdiction clause was that the policyholders did have a free choice to bring proceedings in England, and that impression was confirmed by the reasoning of Cockerill J.

The decision illustrates the force of Leo Tolstoy’s observation that “in difficult circumstances, always act on first impressions.”

A copy of the judgment of the Court of Appeal can be found here.

John Lockey KC and David Walsh acted for the insurers, instructed by Patrick Foss and Imogen Lowe of Kennedys LLP.