Are P&I insurers subject to the jurisdiction of the Danish courts when met with third party direct claims?

Transcription

1 14 July 2015 Newsletter Are P&I insurers subject to the jurisdiction of the Danish courts when met with third party direct claims? Extract from presentation on 11 June 2015 by Peter Appel at AIDA 2015 European Conference in Copenhagen 1. Introduction A recent case from December 2014 from the Copenhagen Maritime and Commercial Court has determined important jurisdictional questions relating to direct actions against a P&I insurer. Is the P&I insurer entitled to invoke the jurisdiction clause in the policy with its insured against the third party claimant? Below is an examination of this question, including review of the general Danish rules regarding direct claims and jurisdiction. A comparison will also be made with the legal position in subrogation matters. 2. Danish law and direct actions Since 1929 Danish law has had a regime which allows direct actions from an injured party against the insurer. Direct actions are established under section 95 in the Danish Insurance Contract Act which gives the injured party a right to direct action against the insurer, when the insured party s obligation to pay compensation and the amount of compensation has been determined. For some years it was uncertain whether the injured party would be able to make a claim against the insurer in the event the insured party became insolvent. Danish case law gave the injured party the right to make such claims against the insurer, and in 2003 section 95 was amended with a sub-section 2 which entitled the injured party to claim compensation from the insurer when the insured party went into insolvency proceedings. The wording of the law text is that the injured party steps into the insured s rights against the insurance company.

2 Page 2 Danish legislation contains other areas of law where direct actions may be made, for instance automobile accidents and accidents caused by dogs. Lately, direct actions have also been introduced in the Danish implementation of a number of maritime conventions. In April 2015 the Wreck Removal Convention entered into force in Denmark and like the 1992 Civil Liability Convention, HNS and Bunkers Convention, the Wreck Removal Convention contains a right for the injured party to make direct actions against the insurer or other persons who has provided financial security for the registered owner s liability. Denmark has interesting case law that determines what is meant by stepping into the shoes of the insured. In a case from F1 the High Court Western Division found that the injured party obtained better rights than the insured party when the injured party raised claims against the insurer. The question in the case was whether a deductible in the insured party, Aarhus Shipyard s liability insurance with the Danish insurance company Tryg Forsikring A/S would apply when an injured party raised a claim directly against the insurance company. Aarhus Shipyard went into bankruptcy and the claim was raised on basis of section 95 (2). The High Court found that since the text of the section in the law allowed for full compensation when such direct claim was made, then the deductible of DKK 10,000 should not be deducted in the injured party s compensation from the insurance company. This was indeed a surprising judgment and the Danish Supreme Court 1F2 decided in a judgment from June 2013 that the insurance company was entitled to apply the deductible. It was generally stated by the Supreme Court that the insurance company was entitled to make the same objections towards the injured party as it would have been against the insured party. 3. Jurisdiction of the Danish courts One thing is the rules of Danish law regarding the injured party s rights to make direct claims against an insurance company and the insurance company s objections. The next question is, when do Danish courts have jurisdiction for such claims? In maritime insurance cases the relevant rules are the Brussels I Regulation, articles 8-14, as implemented in Danish law by act of 20 December In respect of direct actions article 11.2 gives jurisdiction for a direct claim against the insurer provided such claims can be validly made. According to article 13 the jurisdiction rules in articles 9-12 can be derogated from in the event of an agreement on jurisdiction which according to article 13 no. 5 includes an insurance agreement which covers maritime risks as described in article U V 2 U H

3 Page 3 So an agreement for insurance of maritime risks may contain a jurisdiction clause which will be upheld despite the jurisdiction rules in the Brussels I Regulation. And now we come to the interesting jurisdictional question relating to direct actions. Do articles 13 and 14 have the effect that when an injured party makes a direct claim against the insurer, then the insurer may invoke the jurisdiction clause in its insurance agreement with the insured party? This has been discussed in length in Danish theory. What does it mean to step into the insured party s rights? Obviously, an agreement on insurance is an agreement between the insured party and the insurance company. Can the injured party step into the insured party s position with the effect that the injured party is bound by the jurisdiction clause? 4. The decision from the Maritime and Commercial Court This question was determined by the Maritime and Commercial Court decision of 22 December 20142F3. It should be noted that the judgment is under appeal to the High Court. First of all, the facts of the case: The company Skåne Entreprenad Service AB had entered into a P&I insurance with Navigators Management UK Ltd. This was a syndicate at Lloyd s of London. Skåne Entreprenad Service AB was bareboat charterer of the tugboat Sea Endeavour I which caused damage to port facilities in the Port of Assens. The Port of Assens was thus the injured party. Skåne Entreprenerad Service AB went into bankruptcy. The port arrested the vessel that had caused the damage (the arrest was deemed to be founded on a maritime lien for the claim), but the value of the vessel was not sufficient to cover the loss. Consequently, the Port of Assens raised a claim against Navigators Management UK Ltd. Navigators Management UK Ltd. on its side referred to the choice of law and jurisdiction clause in the P&I policy according to which the Court of England and Wales had exclusive jurisdiction. The Port of Assens sued Navigators Management UK Ltd. at the Maritime and Commercial Court in Denmark with reference to the Danish Insurance Contracts Act section 95 (2). The parties agreed to separate the question of competence for the Danish court, and the Maritime and Commercial Court judgment dealt only with the jurisdictional issue, i.e. did the court have jurisdiction for the claim? Obviously, Navigators Management UK Ltd. rejected such jurisdiction on the basis of the English jurisdiction clause, while the Port of Assens argued that the jurisdiction clause had effect between the insurer Skåne Entreprenad Service AB and Navigators Management UK Ltd. but did not have effect towards the Port of Assens as a third party. The Maritime and Commercial Court found that the insurance covered maritime risks within the meaning of article 14 in the Brussels I Regulation with the effect that the jurisdictional rules in articles 9-12 could be derogated from by an agreement on jurisdiction. It followed from the Danish Insurance Contracts Act section 95 (2) that the Port of Assens did step into the position of the insured party. According to the wording and intention of the section, this meant that the injured party stepped into the agreed terms and conditions under the 3 Maritime and Commercial Court judgment of 22 December 2014, case S-15-11

4 Page 4 insurance policy, including the jurisdiction clause. Consequently, the Maritime and Commercial Court rejected jurisdiction. The Supreme Court judgement from F4 (mentioned above), where the Supreme Court stated that a deductible in the insurance policy would also apply towards the injured party, seems to support that the terms and conditions of the insurance policy are valid also towards the injured party. The Supreme Court stated in the said judgment that the insurance company could make the same objections towards the injured party as towards the insured party. This seems to imply that also a jurisdiction clause would be binding towards the injured party. One must, however, admit that there is a difference from this legal position to the requirement for an agreement having been entered into as it is required in respect of jurisdictional agreements pursuant to article 13 in the Brussels I Regulation. 5. Parallels to subrogation Some guidance for the interpretation of the Brussels I Regulation may be found in cases regarding subrogation. Such cases are often seen where a party has taken out insurance and the insurance company pays compensation and steps into the insured party s claim against its contracting party. If the insured party has a jurisdiction clause in its contract with its contract party it is generally assumed that the insurance company will be bound by such jurisdiction clause. This is covered in Enforcement of International Contracts in the European Union by Johan Meeusen, Marta Pertegás, Gert Straetmans4F5, section 14.10: Within the scope of the Brussels I the decision can probably be extended to the general statement that the party to whom a claim is subrogated is bound by the jurisdiction clause between the parties to the original contract.5f6 /6F7 The same position is taken under Danish law, cf. Jesper Windahl in article Direkte krav og forumklausuler 7F8 /8F9. Case law is ambiguous. In English law it was decided in Von Appen v. Voest Alpine, 19969F10 subrogated rights to sue derived from the transferred rights under the contract and were governed by that contract The effect of subrogation was to transfer Voest s right to make claims under the subcharter party to their insurers. Those rights were limited by the terms of the sub-charter and were accordingly subject to the arbitration clause. This principle should be the same for a clause with jurisdiction at the ordinary courts, and not arbitration. 4 U H Intersentia, Antwerp-Oxford-New York, ISBN , D/2004/7849/21 6 Based on review of the French court case: Cass. Civ. 25 November R.C.D.I.P (note H Gandemet Tallon) 7 Gert Straetmans regarding choice of law: The question whether the claim is subrogated is determined by the law governing the third party s duty to satisfy the creditor, article 13(1) Rome Convention 8 U.2001B Disse tilfælde- hvor der foreligger en transport, en subrogation eller et andet særligt retsgrundlag for A s direkte krav mod C- har for så vidt ikke givet anledning til særlige problemer i retspraksis eller i den juridiske teori: Det er her den almindelige opfattelse, at A er forpligtet til at respektere og dermed berettiget til at anvende forumklausulen I retsforholdet mellem B og C.: A overtager eller indtræder i B s rettigheder i både processuel og materiel henseende, [4] medmindre der konkret er holdepunkter for at fortolke forumklausulen. 244 Som en personlig klausul, der alene har tilknytning til og kan anvendes af parterne B og C. 10 Queen s Bench Division, 10 May 1996, C.L.C. 1807

5 Page 5 Contrary hereto see a decision from 2003 from the European Court of Justice, Refcomp SpA v Axa Corporate Solutions Assurance S.A. and others 10F11 : It follows that the jurisdiction clause incorporated in a contract may, in principle, produce effects only in the relations between the parties who have given their agreement to the conclusion of that contract. In order for a third party to rely on the clause it is, in principle, necessary that the third party has given his consent to that effect. 6. Maritime conventions In the world of maritime insurance the right to make direct actions has developed through of number of recent maritime conventions. As mentioned in the beginning, in Denmark the Wreck Removal Convention has just taken effect, and this convention contains in article a right to make direct actions against the insurance company. Similar provisions can be found in the Bunkers Convention article 7.10, HNS Convention article 12(8) and 1992 Civil Liability Convention article VII(8). In respect of these convention based rules the national enactments of the conventions will normally include specific mandatory jurisdiction clauses. For instance in Danish law direct claims under the Bunker Convention are given jurisdiction at Danish courts pursuant to section 189 in the Danish Maritime Act1F12. In the above-mentioned case from the Maritime and Commercial Court case the jurisdictional issue was covered by the Brussels I Regulation. In cases governed by the mentioned conventions the jurisdiction will normally be based on separate national jurisdiction rules (and not the Basel I Regulation). 7. Where are we? We are in an area of law where the law is being developed right now, not only in Denmark but certainly also in other EU countries, note the different opinions by the courts in the subrogation cases mentioned above. An interim conclusion appears to be that the insurer of maritime risks needs to accept that the insurer may be held liable at various European courts despite the jurisdiction clause in the policy. It may probably also be concluded that a right to direct action in international matters does not give the claimant the envisaged legal rights unless it establishes jurisdiction for the direct claim the same place as for the claim against the tortfeasor. This is the position under the abovementioned maritime conventions but not necessarily when the direct action is linked to other types of claims. 11 C.-543/10 12 The 1992 Civil Liability Convention is implemented and in effect in Danish law and jurisdiction for direct claims follows from section 203 of the Danish Maritime Act. The HNS Convention is implemented but not yet in force in Denmark. When given effect section 225 of the Danish Maritime Act will allow Danish jurisdiction for direct claims thereunder. The Wreck Removal Convention is implemented and in effect under Danish law and jurisdiction at Danish courts for direct claims follows indirectly from the Danish Maritime Act section 169.

6 Page 6 Peter Appel Shipping / Offshore / Transportation D M pa@gorrissenfederspiel.com Jens V. Mathiasen Shipping / Offshore / Transportation D M jvm@gorrissenfederspiel.com This information does not constitute and cannot replace legal advice. Gorrissen Federspiel does not assume any liability for damage or losses which directly or indirectly are related to the use of the information.