Grasping the Nettle on International Risks
Recent decisions of the English courts show enthusiasm for boldly tackling the largest and most complex cases, including those involving international risks, with significant implications for commercial policyholders.
In Municipao de Mariana v BHP Group (UK) Ltd [2022] EWCA Civ 951, the Court of Appeal has allowed claims to proceed against the Anglo-Australian mining company BHP in respect of losses caused by the Fundão Dam collapse in 2015, overturning the first instance decision to strike out the case as an abuse of process. Millions of tonnes of toxic mining waste were released along the Doce River resulting in mass claims from individuals, businesses and municipalities seeking at least £5 billion in damages. Over 200,000 claimants can now seek redress through the English legal system in respect of Brazil’s worst ever environmental disaster.
The High Court previously concluded that the case would be “irredeemably unmanageable” and “akin to trying to build a house of cards in a wind tunnel”, in view of concurrent claims and compensation schemes in Brazil. The Court of Appeal disagreed, noting that case management complexity could not of itself justify a finding of abuse, and there was a real risk that full redress could not otherwise be obtained. In a striking statement of the English courts’ approach, their Lordships observed (at paragraph 211):
“In principle, claimants are entitled to choose whom to sue. There may be diverse and legitimate reasons why a claimant may choose to sue a particular defendant or defendants and it is not part of the court’s function to interfere with that process. … A claimant’s unhindered right of access to justice in respect of properly arguable claims is a core constitutional right inherent in the rule of law.”
In Al Mana Lifestyle Trading LLC & others v United Fidelity Insurance Co PSC & others [2022] EWHC 2049, the Commercial Court decided that an ambiguously worded jurisdiction clause allowed COVID-19 business interruption insurance claims to be brought in the English courts, having regard to the good commercial sense of facilitating resolution of disputes through a single neutral venue with extensive insurance law expertise.
The claimants operate in the food, beverage and retail sectors and sought recovery of around $40 million pandemic related losses under multi-risk insurance policies issued in the Middle East. The defendant insurers, located in the UAE, Qatar and Kuwait, challenged the English court’s jurisdiction, with reference to the following policy provision:
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.
This was construed as a non-exclusive jurisdiction clause allowing proceedings to be issued either in the UK or the country where the policy was issued. Reference was made to the relevant factual matrix in reaching this decision, including the policies having been issued as part of a suite of insurances intended to provide comprehensive cover for group operations in numerous jurisdictions and reinsured in the international market. The option for policy disputes to be determined in one place was advantageous and presumed to accord with the parties’ intentions, with the English courts being: “particularly well-versed in the issues relating to claims for indemnity for Covid-related business interruption losses [and] highly experienced in dealing with issues of foreign law, where they arise.”
The English legal system’s independence and flexibility inspire business confidence, underpinning international trade and investment. As one of the leading financial, (re)insurance and commercial centres in the world, the UK offers unrivalled access to high quality legal services, and specialty underwriting through Lloyd’s of London. These factors are important for multi-national businesses considering a choice of jurisdiction, as well as potential claimants affected by the actions of their foreign subsidiaries. The UK courts remain at the forefront of jurisprudence on recovery of pandemic related losses, alongside growing trends for human rights and environmental litigation.
Amy Lacey is a Partner at Fenchurch Law
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