Reinsurance treaty dispute: Where and how should it be resolved?

Did the English proceedings trump the American action or vice versa in the case of Tyson International Co Ltd v Partner Reinsurance Europe SE [2024] EWCA Civ 363 (Court of Appeal) and how should disputes be determined?

Background

The parties entered into a reinsurance contract – a Market Reform Contract (MRC) – stating that English law would apply and that only the English Courts would have jurisdiction to deal with any disputes.

Eight days later, at the claimant’s request, the defendant reinsurer issued another contract of reinsurance – a Market Uniform Reinsurance Agreement (MURA) – which covered the same risks but provided for New York law and arbitration.

The dispute

A dispute arose and the claimant issued a claim in the English court.

The following day, the defendant commenced arbitration in New York.

Issues

In this case, the defendant applied to the English courts to stay the English proceedings. It submitted that it was contrary to business common sense for the parties to agree a contract and choose English law and then to replace it only eight days later with New York proceedings.

The claimant cross-applied for an injunction to stop the defendant’s New York action.

The decision

The case was considered by the High Court and the Court of Appeal.

Both courts came to the same conclusion – the MURA, or second agreement, replaced the first, the MRC. Thus, the parties had agreed to arbitration in New York and the English proceedings were stayed.

The Court said it was equally contrary to business common sense if the parties intended their relationship to be governed by English law but then agreed the terms of a document providing for New York law.

There are unacceptable consequences of allowing two sets of proceedings to continue in different jurisdictions, including a duplication of effort and expense, a race to judgment and a risk of conflicting decisions.

As Lord Justice Lewis said: “The parties began by playing cricket but then switched to baseball”.

In this case, ultimately, baseball trumped cricket.

What does this mean?

Dispute resolution clauses matter and it is important that the parties’ choices about how, where and by whom disputes are to be resolved is clearly specified.

These clauses usually appear at the end of an agreement – it is important to read them and understand how disputes will be dealt with. Being clear should avoid a dispute about how disputes are to be dealt with.

In this case, the parties were committed to arbitration in New York because of the decision. That method of dispute resolution will be infinitely more costly than English court proceedings.

There are various factors to think about when considering which type of dispute resolution would be best – cost and privacy being amongst them.