Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co. Ltd.

A foreign statutory right of direct recovery against an insolvent insured does not necessarily displace the terms of the underlying insurance contract. The English court must characterise the particular issue under the lex fori, looking to the substance of the issue rather than the form of the foreign cause of action. Where the statutory right is essentially a means of enforcing contractual insurance rights, the proper law of the contract governs and the claimant is bound by its arbitration clause. An anti-suit injunction may restrain proceedings brought abroad in breach of that clause. The injunction is directed against the party, not the foreign court, and comity does not ordinarily require the English court to permit evasion of the parties’ contractual bargain.

The claimant, a mutual insurance association, insured a Finnish associated carrier under rules containing English governing-law and London arbitration clauses. After goods carried from Finland to Russia were lost, the defendant insurer paid the cargo claim and obtained an assignment of rights against the carrier.

After the carrier became insolvent, the defendant commenced proceedings against the claimant in Finland under section 67 of the Finnish Insurance Contracts Act 1994, which permits a claimant to proceed directly against an insurer of an insolvent insured. The claimant challenged the Finnish proceedings and sought an anti-suit injunction in England. The defendant sought to set aside service out of the jurisdiction or stay the English proceedings.

The central issues were whether the Finnish claim was subject to the arbitration clause, whether the English court could grant an injunction, and whether the proceedings should be stayed under the E.C. Judgments Regulation.

1. Service out and characterisation. The applications were determined in favour of the claimant. Characterisation was governed by English law. The court had to identify the individual issue underlying the claim, rather than merely characterise the foreign cause of action.
2. The relevant issue was whether the defendant was bound by the arbitration clause. Section 67 of the Finnish Insurance Contracts Act 1994 gave an injured person a direct right of action, but the extent of the insurer’s liability remained regulated by the insurance contract, subject to the Act’s mandatory protections. In substance, the defendant sought to enforce contractual insurance rights available to the insolvent insured. The issue was therefore one of contractual obligation governed by English law.
3. The defendant was consequently bound by the arbitration clause. Finnish legislation would not be recognised in England as modifying the English-law contractual obligations. Permission to serve out was available under rules 6.20(5)(c) and 62.5(1)(c).
4. Stay. Article 2(d) of the E.C. Judgments Regulation excluded arbitration from the Regulation. Following Navigation Maritime Bulgare v Rustal Trading Ltd (The ‘Ivan Zagubanski’), article 27 had no application.
5. Anti-suit injunction. The ordinary rule was that a party seeking to litigate in a non-contractual forum must show strong reasons for doing so. That principle applied to arbitration clauses. The defendant’s claim in Finland was substantially dependent on avoiding contractual provisions which would have defeated recovery in an English arbitration. The foreign proceedings’ earlier commencement, the defendant’s jurisdictional challenge, and the involvement of a fellow European Union state did not provide sufficient reasons to refuse relief.
6. Judicial comity was respected because the order operated against the defendant, not against the Finnish court. The injunction was granted restraining the defendant from pursuing its Finnish claim.

This was a first-instance decision. The judgment records that the District Court of Kotka had rejected the claimant’s jurisdictional challenge on 22 October 2003 and that an appeal from that decision was pending.