Commercial Court rejects jurisdiction challenge, holding that an English declaratory judgment might assist US court hearing related substantive proceedings

22/10/12

The Commercial Court has offered important guidance on the approach of the English Courts to claims for declaratory relief where it is alleged that a declaration as to the choice of law is of utility to a party and a declaration as to the proper interpretation of a contract governed by English law might assist a foreign court hearing a substantive claim on that contract.

In ACE European Ltd v. Howden Group Ltd, the Claimant insurers sought declarations as to the applicable law and proper interpretation of a number of excess casualty insurance policies which had been underwritten in the London Market as part of a programme of liability insurance cover for the Second Defendant, whose business was in the USA. All six of the Claimants were engaged in ongoing coverage litigation with the Second Defendant in Pennsylvania, where the Second Defendant has claimed coverage under the policies in respect of asbestos related injuries.

The Claimants' express purpose in seeking the declarations from the English Court as to the construction of the policies in relation to the trigger for liability was to assist the Pennsylvanian Court by obtaining a clear ruling on the proper interpretation of the policies as a matter of English law. In addition, the Claimants sought a declaration that the policies were governed by English law. The Second Defendant sought to set aside service of the claim on the grounds that England was not a proper forum for such a claim (inter alia, on the basis that two of the Claimants had been party to the Pennsylvanian litigation for two years before the English claim was issued) and/or that the English claims did not have any "utility", since the Pennsylvania Court would reach its own conclusion on governing law and interpretation of the policies.

Mr. Justice Field rejected the challenge to the jurisdiction of the English Court. He held that, notwithstanding the existence of ongoing coverage proceedings in Pennsylvania:

(a) England was clearly the most appropriate forum for the claim for declaratory relief as to the construction of the policies as a matter of English law. The general principle that a court applies its own law more reliably than does a foreign court pointed strongly in favour of England as the appropriate forum. Although there was a risk of inconsistent decisions as between the English and Pennslyvania Court, as the Court of Appeal held in Faraday Reinsurance Co. Ltd. v Howden Group Ltd. [2012] EWCA Civ 980, "this is a position which the court in each country must accept''.

(b) The English proceedings had utility. There was a real prospect that the Pennsylvanian Court would find that English law governed the polices, in which case the English Court's judgment would (at the very least) be of considerable assistance to the Pennsylvanian Court. Alternatively, if the Pennsylvanian Court held that English law did not govern the policies, a declaration of the English Court as to choice of law would have utility in assisting the Claimants to resist enforcement of any Pennsylvanian judgment that ignored the parties' choice of English law in any jurisdiction where the judgment of the English Court would be recognised.

The judgment is here.