BP Plc v National Union Fire Insurance Co & Ors

The court dismissed the defendants' application to set aside Moore-Bick J's order permitting BP to serve proceedings outside the jurisdiction. The judge held that General Condition 16 of the Open Cover, although permitting a unilateral selection by the Principal Insured, was an effective contractual mechanism: when validly exercised it operated as an express choice of the proper law. The court applied the lex fori to test the efficacy of the choice and concluded that BP had validly elected English law. The service of suit provision in the slip was construed as a jurisdiction clause permitting BP to require proceedings in the United Kingdom (read as England). CPR 6.20(5)(c) and (d) therefore applied and English courts had jurisdiction. On forum non conveniens the court held that a party cannot lightly ignore an agreed forum; having found a valid jurisdiction clause and no exceptional unforeseen circumstances, the defendants' commencement of proceedings in New York was oppressive and did not displace the parties' agreed English forum.

Background and parties:

• BP brought claims under a Global Construction All Risks Open Cover against a number of insurers. AIG (first defendant) and AEGIS (third defendant) were participating insurers. Disputes arose about whether 26 declarations made under the Open Cover had created valid insurances.
• BP relied on an earlier decision (Cresswell J in BP plc v GE Frankona Reinsurance Ltd) to argue that declarations were effective at certain preparatory stages and sought summary relief under CPR 24.2(a) by reference to that analysis.

Procedural posture and relief sought:

• The present application was by AIG and AEGIS to set aside Moore-Bick J's order of 6 May 2003 which granted BP permission to serve English proceedings on those defendants outside the jurisdiction.
• BP had relied on two contract provisions: General Condition 16 (an option permitting the Principal Insured to choose English law and practice or USA law and practice) and a Service of Suit provision in the binder permitting service in the United States or the United Kingdom at the Insured's discretion.

Issues for decision:

(i) Whether General Condition 16 was void for uncertainty or otherwise ineffective to select English law;

(ii) Whether the Service of Suit clause was an effective jurisdiction clause entitling BP to sue in England; and

(iii) If jurisdiction existed, whether the court should decline jurisdiction on forum non conveniens grounds given parallel proceedings in New York.

Court’s reasoning and conclusions:

• The Open Cover operated as an umbrella arrangement creating separate insurance obligations upon valid declarations. Those contracts were therefore "contracts" for the purposes of CPR 6.20.
• On construction General Condition 16 gave the Principal Insured a unilateral option over the proper law of the Open Cover as a whole. The court held that English conflicts rules permit parties to provide for subsequent identification of proper law by contractual mechanism and that such an option, when validly exercised, amounted to an express choice of law under the applicable conflicts regimes.
• The judge applied the lex fori approach to test efficacy of the clause and concluded that BP had validly chosen English law.
• The Service of Suit clause, read against market practice and the Open Cover, was construed as conferring a jurisdictional option enabling BP to require insurers to submit to United Kingdom (read English) jurisdiction rather than merely agreeing an administrative venue for service.
• Accordingly, jurisdiction under CPR 6.20(5)(c) and (d) was established and the court had power to entertain BP's claims against AIG and AEGIS.
• On forum non conveniens the court held that parties who have agreed a (non-exclusive) jurisdiction should not lightly be permitted to ignore that bargain; absent exceptional unforeseen circumstances the agreed forum will be upheld. The defendants' commencement of New York proceedings was oppressive and did not provide a reason to displace the English forum.

Outcome: The defendants’ application to set aside the order permitting service out of the jurisdiction was dismissed, leaving Moore-Bick J’s permission intact.

The application by AIG and AEGIS to set aside Moore-Bick J's order permitting BP to serve proceedings outside the jurisdiction was dismissed. The court held that General Condition 16 constituted an effective unilateral option which, when validly exercised, operated as an express choice of English law; the Service of Suit clause was properly construed as a jurisdiction clause permitting English jurisdiction; and there were no exceptional circumstances to displace the agreed forum, so the court exercised its discretion in favour of jurisdiction.