Facts
Decision
Comment

Agreements that contain conflicting court jurisdiction and arbitration provisions are not uncommon, but inSulamerica Cia Nacional de Seguros SA V Enesa Engenharia SA1.The judge was faced with an agreement that not only contained competing jurisdiction and arbitration provisions, but also threw mediation into the mix. To complicate matters further, the agreement in question - an insurance policy - was governed by Brazilian law

Facts

The claimant insurers sought the continuation of an anti-suit injunction preventing the defendant insureds from pursuing proceedings that had been commenced in the courts in Brazil. Those court proceedings had been commenced after the insurer had commenced arbitration in London pursuant to the arbitration agreement in the insurance policy. The Brazilian courts had issued an injunction to prevent the insurers from pursuing their claim in arbitration until the Brazilian courts had determined whether the claim should be heard in arbitration, but that decision was made after the initial anti-suit injunction was issued by the English court

The insurance policy was between Brazilian parties. It related to one of the world's largest hydroelectric facilities located in Brazil. The events in question took place in Brazil. The insurance policy included an exclusive jurisdiction clause (referring disputes to the Brazilian courts), a mediation provision and a London arbitration agreement

Decision

Law of the arbitration agreement
The first issue to be addressed was the law governing the arbitration agreement. The insurance policy was governed by Brazilian law. The seat of the arbitration was London. As there was no express choice of law governing the arbitration agreement English conflict of law, rules required the judge to ascertain the law with which the arbitration agreement had the closest and most real

Following earlier decisions, the judge confirmed that the applicable law was generally the law of the seat of the arbitration, and hence was English law, not Brazilian law. In reaching that decision, the judge emphasised that the English court's supervisory jurisdiction over the arbitration process established a strong connection between the arbitration agreement and the law of England

Mediation clause not binding
The judge then turned to the mediation provision skirting the issue of whether it was part of the arbitration agreement and therefore governed by English law, or was governed by Brazilian law. He concluded that an agreement to mediate would be binding if

• The mediation process was sufficiently certain and did not require further agreement to allow matters to proceed;
• The administrative processes for choosing and paying the mediator were defined; and
• The mediation process (or a sufficient model thereof) was set out so that the details of the process were sufficiently certain

The judge decided that the clause before him did not provide sufficient certainty and was therefore not binding. The parties had not bound themselves to mediation in clear terms; rather, they would only "seek to have the Dispute resolved amicably by mediation. Moreover no process was," set out and no provision was made for the selection of a mediator

Scope of Arbitration Agreement included questions of liability
It was argued that the scope of the arbitration agreement was limited to the determination of quantum only and did not extend to issues of liability. Questions of liability, it was argued, were to be referred to the Brazilian courts pursuant to the exclusive jurisdiction clause. Reference was made to differences in the wording of the exclusive jurisdiction clause, the mediation provision and the arbitration agreement

The judge rejected this argument on the basis that a dispute about quantum relates to matters of liability. He also concluded that it was unlikely that the parties intended different issues to be referred to different forums, this being a "a recipe for confusion"

Arbitration AGREEMENT prevails over exclusive jurisdiction clause
The final issue was whether the arbitration agreement prevailed over the exclusive jurisdiction clause. The agreement stated that all disputes were subject to the jurisdiction of the Brazilian courts, but went on to provide that if the parties failed to resolve a dispute by mediation, it would be referred to arbitration in London

Relying on the "strong legal policy" of the English courts in favour of arbitration, the judge proceeded on the basis of a presumption that the parties, "as rational businessmen", were likely to have intended any dispute arising out of their relationship to be referred to and decided by the same tribunal. Unless there was any indication to the contrary, priority would be given to the arbitration clause over the exclusive jurisdiction clause. Allowing both the right to litigate in Brazil and the right to arbitrate in London to run in tandem would lead to a "race to judgment between the two" was unlikely to have. That been the parties'intention. On this basis, the judge continued the anti-suit injunction, preventing the insured from pursuing the proceedings commenced in the Brazilian courts

Comment

The judge's decision confirms the English judicial policy of strongly favouring arbitration. The presumption is that a reference to arbitration must be upheld unless there is a strong indication that that was not the parties'intention. As with other recent decisions, the judge was keenly aware of the importance of the court's role in supervising arbitrations taking place in London. That supervisory role formed the basis for the related presumption that the law with the closest and most real connection with an arbitration agreement is the law of the seat, which was English law in this case

For further information on this topic please contact Robert LambertOr Jo Delaney At Clifford Chance LLP by telephone (+44 2070061000), fax (+44 2070065555) email ( orRobert.lambert@cliffordchance.comOrJo.delaney@cliffordchance.com)

Endnotes

1.[2012] EWHC 42 (Comm), Justice Cooke