BP Plc v National Union Fire Insurance Co & Ors [2004] EWHC 1132 (Comm)

Case No 2003 FOLIO NO. 429

[2004] EWHC 1132 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 17/05/2004

Before

THE HONOURABLE MR JUSTICE COLMAN

Between

BP plcClaimant

National Union Fire Insurance Co and OthersDefendant

Sir Sydney Kentridge QC and Ms H Davies

(instructed by Messrs Herbert Smith) for Claimant

Mr V Veeder QC and Mr M Templeman QC

(instructed by Messrs Kennedys) for 1 st and 3 rd Defendants

Hearing Hearing dates: 23 to 26 February 2004

Judgment

Colman J:

[1]This is an application by the first defendant (“AIG”) and the third defendant (“AEGIS”) to set aside an order made by Moore-Bick J. on 6 May 2003 giving to BP permission to serve English proceedings on AIG and AEGIS outside the jurisdiction.

[2]BP’s claim is brought under a Global construction All Risks Open Cover (“the Open Cover”) which provided a facility for the insurance against certain risks of Amoco Corporation, which later merged with BP and changed its name to BP Amoco plc and later to BP plc. AIG was co-leading underwriter with the second defendants, Swiss Re. The purpose of the Open Cover was to provide for the insurance of the construction of oil and gas extraction projects throughout the world. The Open Cover was to be operated by means of declarations of particular projects to be insured. There were altogether some 26 separate declarations and four others subsequently withdrawn. Issues have arisen amongst other matters as to whether those declarations were effective under the terms of the Open Cover. In outline, it is said that they were not because they were made before any of the projects to which the declarations related had sufficiently crystallised. The defendant insurers contend that a project was only capable of being validly declared if it had actually started physical construction during the period of the Open Cover (18 months with effect from 12.01 am 1 January 1999 GMT to 1 July 2000 GMT) and if the declaration was made no later than 30 days after commencement of physical construction or alternatively if the project were bona fide estimated to commence physical construction prior to expiry of the Open Cover. BP refers to the decision of Cresswell J. in respect of the same contract, but involving BP’s claims against other members of the following market (BP plc v. G E Frankona Reinsurance Ltd

[2003] 1 Lloyd’s Rep 537

) to the effect that, contrary to the insurers’ case, BP was entitled to declare any offshore construction project in which it or any other assured had an insurable interest at the time of the declaration or had a reasonable expectation of acquiring such an interest and provided that the project had at that time reached one of the stages set out in the Open Cover (including engineering, design, manufacture, procurement, storage, pre-fabrication, fabrication, assembly and construction). Cresswell J. also held that, even if a declaration were made to the leading underwriters, no member of the following market would be bound unless a separate declaration were made to it. BP bases its claim in these proceedings on that judgment and seeks summary judgment under CPR 24.2(a) for a declaration that it is entitled to recover from the defendants in these proceedings on the basis of the analysis in that judgment.

[3]BP obtained permission to serve AIG in New York and AEGIS in New Jersey on the basis of two provisions of the Open Cover. By General Condition 16 it was provided:

“At the Principal Insured(s) discretion this insurance shall be subject to English law and practice or USA law and practice.”

[4]By a Condition of the Binder it was provided:

“Service of Suit in the United States or the United Kingdom at the Insured’s discretion.”

[5]It was submitted that the English Courts had jurisdiction in as much as the contract was governed by English Law (CPR 6.20(5)(c)) or contained an English jurisdiction clause (CPR 6.20(5)(d).

The Submissions as to Jurisdiction

[6]It is submitted by Mr Veeder QC on behalf of AIG and AEGIS that permission to serve should not have been given because the contract was not subject to an effective English jurisdiction clause. In any event, discretion should have been exercised against jurisdiction. Assuming, as the insurers contend, that the service of suit clause was not an enforceable jurisdiction clause, it is submitted that BP cannot establish that England as distinct from New York is clearly the appropriate forum and that in addition to matters of convenience the interests of justice demanded that there be proceedings in England. In this connection BP submitted that the existence of proceedings in New York commenced by AIG and AEGIS against BP and 126 other assureds on 9 December 2002 – raising issues with which those in the English proceedings substantially overlapped - was a key factor material to the forum non conveniens submissions which I consider in more detail later in this judgment.

[7]As to General Condition 16, the insurers’ submissions may be summarised as follows:

[8]That provision is said to be void for uncertainty. There is no indication as to the steps to be taken or the circumstances in which they could be taken to give effect to the words “at the Principal Insured(s) discretion”. Further, that clause does not indicate what proper law is to operate as long as the “discretion” is not exercised. Accordingly, there is created a floating proper law. This is impermissible as a matter of English conflicts of laws rules: Armar Shipping v. Caisse Algerienne D’Assurance

[1981] 1 WLR 207

; Du Pont v. Agnew

[1987] 2 Lloyd’s Rep 585

, per Bingham LJ. at 592. The defendants also rely on Sonatrach Petroleum v. Ferrell International [2002] 1 All ER (Comm) 627 and on The Frank Pais

[1986] 1 Lloyd’s Rep 529

[9]Article 4(1) of the Rome Convention could not be deployed to save the ineffectiveness of General Condition 16. It provides as follows:

“To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected.”

[10]The effect of that Article and Article 3(1) was to bring Article 4(1) into play only where the contract had no choice of law provision identifying a law “chosen by the parties” by means which were “express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case” within Article 3(1). Here General Condition 16 had not been operated. The only suggestion put forward by BP that it had was the brief passage in a witness statement signed by BP’s solicitor, Mr Oddy of Herbert Smith, in support of the application to serve the proceedings outside the jurisdiction in which he stated at paragraph 27:

“To the extent that any doubt remains as to whether BP has exercised its contractual option, I understand that BP now chooses English law as the proper law of the Open Cover.”

[11]That had not been communicated to AIG or AEGIS until long after the end of the cover period and after the order for service out of the jurisdiction. Nor could

Article 3(2) of the Convention

operate to give effect to General Condition 16. It provides as follows:

“The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice under this Article or of other provisions of this Convention. Any variation by the parties of the law to be applied made after the conclusion of the contract shall not prejudice its formal validity under Article 9 or adversely affect the rights of third parties.”

[12]A discretion to be exercised unilaterally was not an agreement within that Article and it was outside the concept considered by Bingham LJ. in Du Pont v. Agnew, supra, at page 592, of an agreed variation of the original proper law.

[13]Even if General Condition 16 were an effective floating proper law clause by virtue of Articles 4(1) and 3(2) of the Convention, the purported exercise of BP’s discretion in favour of English Law would be ineffective. This was because the application of Article 4 would lead to the conclusion that, as regards AIG, the State of New York was the law of the country with which the Open Cover was most closely connected being the principal place of business of the insurer and, as regards AEGIS, the law of the State of New Jersey similarly applied. These were the countries where AIG and AEGIS respectively had their principal places of business. This was the result of Article 4(2) which provides:

“Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporated, its central administration. However, if the contract is entered into in the course of that party’s trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated.”

[14]Consequently, the issue whether it was open to BP to select English Law as the proper law and, if so, whether it had effectively done so, would fall to be determined by the conflicts rules of the State of New York and the State of New Jersey respectively as being the respective original proper law of the contracts. By the application of those bodies of law BP’s selection of English Law would not be effective and the law of New York and New Jersey would be left in place. However, although there was before the court evidence of New York Law in the form of statements by Mr Carcich adduced by AIG and AEGIS and by Ms Silberman and Mr Goodwin adduced by BP, Mr Veeder QC on behalf of the defendant insurers quite properly accepted that there was no decision of the New York courts directly in point and, that being so, any New York court would naturally look to English Common Law as it was before the Rome Convention to resolve the question of the applicability of the unilateral power of selection of the proper law in General Condition 16. There is no admissible evidence that the New Jersey courts would do otherwise. I therefore infer that there is no material difference between New York and New Jersey conflicts rules and English conflicts rules as to the efficiency and applicability of General Condition 16. If therefore it is right that, as submitted by AIG and AEGIS, one looks to the original proper law to ascertain whether that proper law was subsequently varied, and that original proper law is the law of New York for AIG and of New Jersey for AEGIS, it is to the English pre-Rome Convention conflicts rules that one must look.

[15]As to the Service of Suit clause the following submissions were made on behalf of AIG and AEGIS.

[16]The clause is found in the slip and not in the extended wording of the Open Cover. It makes no express reference to jurisdiction nor does it refer by implication to jurisdiction. General Condition 29 provides as follows:

“The conditions contained in this form shall supersede those of the basic policy to which this form is attached wherever the same may conflict. Where there is a conflict between the specific sections and general conditions of this policy, the conditions of the specific section shall prevail.”

[17]It is submitted that, having regard to this wording, given that there is nothing about service of suit in the Open Cover, the mutual intention, reflected in the brokers’ wording, must have been to replace the service of suit clause by General Condition 16 which was concerned only with proper law and not with jurisdiction.

[18]Alternatively, the two provisions are to be read together to the effect that an election as to English law under General Condition 16 would automatically involve an election as to English service of suit. Since General Condition 16 was, as submitted, unenforceable, so also would be the service of suit clause.

[19]On behalf of BP, Sir Sydney Kentridge QC submitted that the effect of General Condition 16 was to provide BP with a right unilaterally to select English law and practice or USA law and practice and that, by Mr Oddy’s witness statement to which I have referred at 10 above, it had effectively selected English law and practice. That result emerged whether one applied the Rome Convention regime, in particular Article 3(1) and (2) on the basis that the Open Cover was not a contract of insurance which covered risks situated in the territories of the member states of the European Union (Article 1(3)), or the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 on the basis that the relevant proper law for the purposes of this application was that of the contracts of insurance made by each declaration under the Open Cover, as held in BP plc v. G E Frankona Reinsurance, supra, and some at least of those declarations related to risks inside the European Union.

[20]As to the service of suit clause, the clear mutual intention derived from the slip and General Condition 16 was to give BP a right to select English Law and jurisdiction. This was supported by the obvious need for some mechanism in the context of the wide territorial scope of the Open Cover to select the jurisdictional venue for the determination of disputes which might arise in respect of projects declared in many different locations around the world. In as much as English jurisdiction is normally to be derived from service in England, so if it is agreed that service may be effected in England it is to be inferred that, BP having been given the right to select service in England or USA, were thereby given the right to select jurisdiction in England or USA.

Analysis: Proper Law

[21]It is first necessary to identify the issues raised by the claims in respect of which the order of Moore-Bick J. directed English jurisdiction over these defendants.

[22]As appears from the Particulars of Claim, BP advances a claim for a declaration that the contracts of insurance the subject of 26 declarations under the Open Cover were valid and subsisting contracts of insurance and that the defendant insurers are obliged to indemnify BP and its co-insureds in respect of claims under those separate contracts subject to their terms and conditions and/or for damages – “in respect of the losses of the Claimant and the co-insureds (including costs) in respect of the said policy claims to the extent of their respective participations in the contracts of insurance and, as against AIG and AEGIS only, the costs of defending the New York Proceedings commenced wrongfully and in breach of the terms and conditions of the Policy.”

[23]Accordingly, the essential question is whether these proceedings as to which permission to serve out was given raise within the meaning of CPR 6.20(5)(c) a claim or claims in respect of a contract having either the characteristic that it is governed by English law or the characteristic that it contains a term to the effect that the English court shall have jurisdiction to determine any claim and in respect of the contract.

[24]The Open Cover, although not itself a contract, was by the custom and practice of the London insurance market treated as an irrevocable standing offer by insurers: see Citadel Insurance Co v. Atlantic Union Insurance Co

[1982] 2 Lloyd’s Rep 543

where at page 546 L Kerr LJ. with whose judgment Oliver LJ. agreed, said this of a similar open cover:

“By initialling the slip, wherever this may have happened, the defendants, Atlantic Union, bound themselves to accept by way of reinsurance any declarations of original risks which might be made by International Excess within the terms of the slip. When I say that Atlantic Union bound themselves, I am using the language of the market, because everyone concerned would regard this as a binding commitment, even though it might be said that the arrangement was not binding, because there was no consideration moving from International Excess. They accepted no obligation and suffered no detriment. They had an open option or standing offer available to them. However, in this respect the arrangement is similar, for instance, to that of a bank confirming a letter of credit to a beneficiary, which is always regarded as binding on the bank. Much has been written as to how these ordinary commercial transactions fit in with our doctrine of consideration; but for present purposes it is quite unnecessary to consider these academic problems, since no one suggests that the initialling of the slip did not create any commitment which was binding on the defendants. If any such suggestion were made, let alone litigated, by any reinsurer, he would never again be acceptable to anyone in the market; and no such suggestion is made here.”

[25]Kerr LJ. developed his analysis further at page 546 L:

“The initialling of the original slip, which established the open cover, did not at that stage constitute any contract between the plaintiffs and the defendants. However, whenever any declaration was made thereunder on behalf of the plaintiffs to Austen in London, whether directly by CIMU or via International Excess, a contractually binding obligation was created between the plaintiffs and the defendants. This obligation arose in London on receipt by Austen of every such declaration. In this connection, I am not saying that each declaration gave rise to a new contract of reinsurance for the purposes of – for instance – any relevant duty of disclosure, but merely that each gave rise to a new obligation of the defendants under the umbrella of the open cover.”

[26]In BP v. Frankona Reinsurance, supra, at page 555 L, paragraph 114, Cresswell J. similarly analysed the working of the Open Cover in this case.

[27]Broadly stated, the claims put forward in these proceedings involve the assertion that valid declarations were made under the open cover, that binding contracts of insurance were thereby created and that on the facts BP is entitled to an indemnity under those contracts. These were claims “in respect of” those contracts derived from the declarations. The umbrella effect of the Open Cover was not only to engender a separate contract of insurance whenever a valid declaration was made to a party to the Open Cover but also to impress each such contract with the terms of the Open Cover. Consequently, for example, a claim by BP against any one of the insurers participating in the Open Cover would be separately subject to General Condition 16, were it valid, and to the Service of Suit clause.

[28]It is against that background that it is necessary to consider what was the proper law of the relevant contracts of insurance.

[29]It was not argued that there would be any differentiation in the proper law, depending upon the insurer to whom the declaration was made or the nature of the risk insured. This Open Cover was written by leading underwriters who must have been experienced in this market and it was placed by brokers – Aon – on behalf of BP who were no less experienced. I infer without hesitation that had it been suggested to either that there could be any such differentiation in proper law, they would have rejected the suggestion at once. The obvious purpose in inserting General Condition 16 was to provide for the introduction of an overriding proper law applicable to all participants.

[30]Was that provision a valid means of selecting the proper law?

[31]It is clear that English conflicts of laws rules do not permit the creation of a contract which when made has no proper law even if that proper law might be identified at a later stage: see Armar Shipping v. Caisse Algerienne d’Assurance

[1981] 1 WLR 207

. However, there may be contracts where an express agreement identifying the proper law is provided for at some point after the contract has become binding: see Du Pont v. Agnew

[1987] 2 Lloyd’s Rep 585

per Bingham LJ. at page 592. Such agreement may operate prospectively or retrospectively. In either event the effect will be a variation of the contract in as much as there will be a variation of the proper law.

[32]That such agreement may operate retrospectively is not only foreshadowed by Bingham LJ. at page 592 but is also reflected in Article 3(2) of the Rome Convention, second sentence. The reference to adversely affecting the rights of third parties presupposes retrospective variation. This reflects the general principle that the proper law is that chosen expressly or inferentially by the parties and is expressly supported by Giuliano and Lagarde in paragraph 7 of their Report on Article 3. If the parties enter into a contract which provides with sufficient clarity and certainty for variation of the proper law there is no reason in principle why the courts should not give effect to it. The decision in Sonatrach Petroleum, supra, is an example of a case where the contractual method of subsequently identifying the proper law was too uncertain to be effective. Whether it was English Law or Japanese Law depended on whether a dispute which had ex hypothesi already occurred was one which was confined to the charterer and disponent owner or whether it related to or involved a dispute between the disponent owner and the head owner. This delay in definition of the body of law under which there were to be tested the rights and obligations which would determine the nature of the dispute which was the very means of identifying the proper law produced so great an imprecision as to render the choice of law term unenforceable. I would only add that no reference was made in argument to the Rome Convention and, accordingly, I gave no consideration in the course of my judgment to whether the result would have been different by application of Article 3.

[33]General Condition 16 on its proper construction provides to BP an option exercisable without reference to the insurers to select whether “this insurance” should be subject to English Law and Practice or the Law and Practice of the USA. The phrase “this insurance” must, in my judgment, be taken to mean the entire operation of the Open Cover on an umbrella basis. If the parties had intended that it was open to BP to select different bodies of proper law for different projects or participating insurers, they would have made express provision to that effect.

[34]The position at the time when the Open Cover was entered into was therefore that its current proper law, not having been expressly chosen, was to be inferred from the terms of that transaction, but if and when BP indicated that it was selecting a body of law under General Condition 16, that implied proper law which had hitherto prevailed would be retrospectively replaced by either English law or that body of law, presumably USA Federal Law, which had been selected. Accordingly, the validity of declarations made up to that time would be determined by reference to that selected body of law.

[35]I have considered whether the Open Cover and therefore the contracts of insurance already made by supposedly valid declarations could be unilaterally varied in this way by substitution of a replacement proper law. There can be no doubt that parties to a contract can effectively agree to empower one of them to vary it without agreement of the other party or parties, although terms may be implied to limit the scope of the variation or the circumstances in which the option may be exercised: see Paragon Finance plc v. Nash

[2002] 1 WLR 685

. There can be no doubt, however, that if an option to vary the proper law is exercised in good faith in the commercial interests of an insured such as BP and if it is exercised with sufficient clarity, such a variation would be effective. In particular, it would not be infected by the character of uncertainty which invalidated the choice of law clause in Sonatrach Petroleum, supra.

[36]In the present case, it is said that the option was exercised by BP upon the application for permission to serve out. It is true that this was after the dispute as to the validity of the declarations had already arisen and after the New York proceedings had commenced. Nevertheless, it is not shown that the exercise of this option was in bad faith or otherwise such as to preclude its exercise.

[37]In this quest for the relevant proper law this court should proceed to test the effect of General Condition 16 by reference to English conflicts rules as the lex fori and not by reference to the conflicts rules of the antecedent proper law of the transaction. In this connection, I have considered the Guiliano and Lagarde Report on Article 3 at paragraph 6, as well as Sir Peter North’s illuminating article which rehearses the arguments either way in Multum Non Multa, Festschrift fur Kurt Lipstein, 1980, p205. A similar view was expressed in Dicey & Morris, Conflicts of Laws, 11 Edn, p1168. In my judgment, the efficacy of any choice of law clause must be determined by the conflicts rules of the forum seized of the issues as to the correct proper law.

[38]Accordingly, whether under the lex fori one applies the Rome Convention or the Common Law conflicts rules or the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001, regulation 4, the first relevant question is whether the contract in question contains an express choice of law. In my judgment a unilateral option which provides for the selection of a substitute proper law is, when exercised, an agreed choice of law for the purposes of all relevant conflicts regimes. In the present case, I have no doubt that there was an agreed express option to substitute the proper law and that it was effectively exercised. Accordingly, that is enough to conclude that the validity of all the declarations in dispute is to be determined by English law. It follows that the claims in these proceedings are claims “in respect of contracts” governed by English Law within CPR 6.20.

Analysis: The Service of Suit Clause

[39]Service of suit clauses are commonplace in international primary insurance contracts. They are given that name because, as it suggests, they usually include a provision to the effect that insurers agree to accept service of proceedings to enforce the policy in an agreed jurisdiction. They normally operate on the basis it is in that same jurisdiction that the insurer consents to be sued, as distinct from consenting to be served with proceedings wherever they may be brought.

[40]Whereas there could in theory clearly be a selection only of the place in which insurers consented to accept proceedings commenced in any jurisdiction, this would not be the usual content or effect of such a clause when used in London. Even without specific designation of the venue for the exercise of jurisdiction, there must therefore be a strong inference that, if the service is permitted in a given country, it is agreed that it will be service of proceedings in the courts of that country. This reflects the approach of the English courts to adventitious service of English proceedings on foreign defendants while briefly visiting England: see Maharanee of Baroda v. Wildenstein

[1972] 2 QB 283

. Such service is an effective commencement of proceedings in the English courts: see Lord Denning MR at page 292.

[41]There is evidence in the form of a witness statement of Mr Thomas, a solicitor and partner in Kennedys, the solicitors for AIG and AEGIS, in which it is stated that service of suit clauses in the American market do not normally include any express provision as to which state is to have jurisdiction. If a defendant is sued in the state in which it has agreed to be served, it remains to be determined by the courts in the United States whether jurisdiction can be established on other grounds. He draws attention to the fact that this Open Cover was placed by Aon on behalf of Amoco, an American Corporation, with AIG and AEGIS in the United States. Therefore, it could not be inferred that the service of suit clause did more than cater for the venue in which the insurers agreed that service of proceedings wherever commenced could be effected.

[42]Since, as I have held, the Open Cover is to be construed by reference to English Law, this court is entitled to construe the clause as an English law contract. As the agreement of an insurer to accept Service of Suit in England where it did not have any presence would ordinarily connote agreement that proceedings could be started here, this clause would also properly be construed as having that same meaning as regards Service of Suit in both the United States and this country, whatever might be the content of service of suit clauses in contracts internal to the United States. Moreover, the presence of the dual option for service of suit strongly suggests that more than mere service of proceedings is involved. The right also to select the jurisdiction is much more likely to be intended where the insured is given an option. In the field of insurance the contract is more likely to be catering for the insured’s jurisdictional advantage rather than merely its administrative convenience.

[43]I am unable to accept that General Condition 29 has the effect of displacing the service of suit clause. There is no conflict between General Condition 16 and the service of suit clause when construed to mean that BP has a dual option as to jurisdiction.

[44]I conclude that the sense of the service of suit clause is to provide for a jurisdictional option. That General Condition 16 provided for a proper law option is consistent with a mutual intention to dovetail the proper law with the selected jurisdiction.

[45]The Open Cover thus provided BP with an option to require AIG and AEGIS to submit to “United Kingdom” jurisdiction. This court always construes such references as being to English jurisdiction, whatever may be thought of this in Edinburgh.

[46]It follows that the English courts did have jurisdiction under CPR 6.20 on the basis both of the governing law and of a term to that effect. The fact that the term provided for an option to be exercised is nothing to the point.

Forum non Conveniens

(d) Forum non Conveniens

[47]One starts from the foundation that the service of suit clause is a jurisdiction clause. It is common ground that it would take more than a balance of convenience in favour of New York for this court to fail to give effect to the parties’ agreement as to jurisdiction. In Sabah Shipyard (Pakistan) Ltd v. Islamic Republic of Pakistan

[2003] 2 Lloyd’s Rep 571

, the jurisdictional dispute was closely similar to that which arises in the present case. There was a guarantee by Pakistan for the benefit of Sabah which contained a non-exclusive English jurisdiction clause as well as a waiver of argument that England was an inconvenient forum. Sabah claimed to have become entitled to make demand under the guarantee in respect of an arbitration award in its favour. The defendant challenged Sabah’s entitlement to make demand and commenced proceedings in Islamabad under which it claimed that the arbitration award had been obtained by fraud, that the award was not binding on the guarantor, that the guarantee was invalid due to want of consideration and that Sabah should be permanently restrained from making any demand under the guarantee. Sabah applied to the English court restraining the defendant from continuing the Islamabad proceedings. It was held by David Steel J. that an injunction should be granted. In the Court of Appeal Waller LJ., with whom Sir Martin Nourse and Pill LJ. agreed, said this at p 579, references to GOP being to Pakistan:

“36. In the instant case, on any view, the GOP agreed to submit to the jurisdiction of the English Court. Furthermore, it appointed agents for the purpose of service in England, and it agreed to waive any objection that any action brought in England was being brought in an inconvenient forum. It seems to me that it cannot have been the intention of the parties that if proceedings were commenced in England, parallel proceedings could be pursued elsewhere unless there was some exceptional reason for doing so. It certainly cannot have been contemplated that convenience could count as a reason for pursuing proceedings in a country other than England. In particular, where England has been chosen as a neutral jurisdiction by an entity, Sabah a Pakistan company with Malaysian shareholders, and the state of Pakistan, it cannot have been contemplated that parallel proceedings would be pursued in the Courts of Pakistan simply on the basis that that forum is a convenient forum. 37. It was thus, in my view, clearly a breach of contract to seek to prevent Sabah commencing proceedings in the agreed jurisdiction. Furthermore, if Sabah had already commenced proceedings in England before commencement of the proceedings in Pakistan, it would in the context of this particular clause clearly have been vexatious for those proceedings in Pakistan to have been commenced if the only basis for bringing the same was on the ground of forum conveniens. It also seems to me that if proceedings were commenced in Pakistan simply to attempt to frustrate the jurisdiction clause, such conduct would be contrary to the spirit of the jurisdiction clause and vexatious.”

[48]At page 581 Waller LJ. further observed:

“42. As already indicated, it seems to me that if proceedings had been commenced in England before the GOP commenced their proceedings in Pakistan, then the commencement of such proceedings in Pakistan would be vexatious and oppressive unless the GOP could show some exceptional reason why parallel proceedings were justified. The GOP could not show any exceptional reasons. They rely simply on matters of convenience all of which would have been in the contemplation of the parties when they agreed the clause that they did. To have sought an injunction to seek to prevent English proceedings being the parallel proceedings in those circumstances would have demonstrated even more clearly that the GOP’s conduct was oppressive and vexatious. Does the fact that the GOP commenced their proceedings first change the position? In my view it does not. The proceedings were commenced, it is plain, as a pre-emptive strike, and in the hope of preventing Sabah starting proceedings in the country to which both parties had agreed. The only basis for suggesting that the proceedings should be allowed to continue is that Pakistan is a convenient forum. It simply cannot have been contemplated that if proceedings were commenced in the forum each had agreed as convenient, parallel proceedings would still take place in Pakistan. 43. Mr Young at one stage suggested that the only matter about which Sabah had any right to complain was the seeking of the injunction. I do not accept that point. Parallel proceedings in England and Pakistan simply on the basis that both were convenient was contrary to the spirit of the jurisdiction clause agreed. The seeking of the injunction to prevent proceedings in England tried to deal with that obvious point. But the seeking of the injunction was impermissible, and once it disappears, it is clear also that parallel proceedings should not be entitled to continue.”

[49]In Ace Insurance SA-NV v. Zurich Insurance Co

[2001] 1 Lloyd’s Rep 618

, Rix LJ. made these observations as to a non-exclusive jurisdiction clause:

“If a party agrees to submit to the jurisdiction of the Courts of a state, it does not easily lie in its mouth to complain that it is inconvenient to conduct its litigation there (ie. to assert that the agreed forum is a forum non conveniens). Mr Justice Waller pointed out in British Aerospace Plc v. Dee Howard Co [1993] 1 Lloyd’s Rep 368 at p376, speaking of matters of convenience in the context of a non-exclusive jurisdiction clause, it is necessary to point to some factor which could not have been foreseen in order to displace the bargain which has been agreed. In such a case that party must show some good reason or special cause why it should not be held to its agreement to submit to the agreed jurisdiction, and if it cannot do so, there seems no reason why the English Court should entertain parallel proceedings here, with their attendant evils – duplication of expense and the danger of inconsistent decisions. In the present case, however, there is no reliance by Mr Layton on anything unforeseen, no suggestion of any strong or special cause, no identification of some matter which lies beyond considerations of convenience and goes to a matter of justice.”

[50]In view of this approach, I do not consider that Sabah Shipyard v. Pakistan can be regarded as a case which turned on the waiver of argument as to the forum non conveniens.

[51]In my judgment, the effect of these authorities is this: i) If a contract contains a non-exclusive jurisdiction clause the parties are taken mutually to have agreed that the country in which jurisdiction may be exercised pursuant to the clause is a convenient forum. ii) Only in exceptional circumstances unforeseeable when the contract was made would it be open to one party to ignore such a jurisdiction clause and to start proceedings for negative relief elsewhere on the basis of a balance of convenience. iii) The commencement in a forum other than that to which the jurisdiction clause refers of proceedings for negative or any other relief before the commencement by the other party of proceedings in the agreed forum can normally contribute nothing to ascertaining such balance of convenience, which has to be tested on the assumption that neither party had yet started proceedings in any forum. iv) In cases where it cannot be said that there are any exceptional circumstances unforeseeable at the time when the agreement was made which render an unagreed forum materially more convenient than the agreed forum, subject to (v) below, it will be procedurally oppressive for one party to commence proceedings in an unagreed forum either before or after the other party has commenced proceedings in the agreed forum. v) There may be exceptional cases where, in spite of there being no unforeseen circumstances giving rise to a balance of convenience in favour of some other forum, the justice of the case and the interests of all parties so strongly point to the desirability of a trial in an unagreed forum that they outweigh what would otherwise be the oppressive character of a party’s conduct in ignoring the agreed forum.

[52]In the present case there is nothing which comes anywhere near displacing the prima facie position that AIG and AEGIS acted oppressively in commencing the New York proceedings. There are no exceptional circumstances regarding the substantive disputes nor any circumstances which were unforeseeable when the Open Cover was entered into.

[53]In the course of his oral submissions, Mr Veeder QC frankly accepted that if, contrary to his submissions, the service of suit clause was indeed a jurisdiction clause, his submissions on the court’s discretion would not detain it very long. He was right to do so. On that assumption, there are no effective arguments against the court’s discretion being exercised in favour of jurisdiction in this case.

[54]It is unnecessary to decide what the position would have been if the only basis for English jurisdiction had been that the contracts were governed by English law. Suffice to say that, in that case I should have held that England was an equally convenient forum to that of New York, that proceedings both here and in New York would go forward on the assumption that one trial would come on before the other and that if that were to happen, the determination of the issues in the first trial would be sufficiently comprehensive to achieve finality and to ensure that a second trial never took place. There would inevitably come a time when the perception of all parties concerned gave more weight to maximising the cost effectiveness of their route to dispute resolution than to maximising their payments of legal fees.

[55]These are the reasons for which this application was dismissed.