BP Plc v National Union Fire Insurance Co & Ors

A contractual option allowing an insured unilaterally to select a substitute governing law can be effective if expressed with sufficient clarity and exercised in good faith. The selected law may apply retrospectively to contracts formed under an open cover. A service of suit clause which gives the insured a choice between jurisdictions ordinarily confers a corresponding jurisdictional option, not merely a place for service. Where parties have agreed a jurisdiction, the court should give effect to that bargain. Parallel proceedings in an unagreed forum will ordinarily be oppressive unless exceptional, unforeseeable circumstances or the strong interests of justice justify them.

BP sought to pursue claims under a global construction all risks open cover against AIG and AEGIS, who had been served outside the jurisdiction pursuant to an order of Moore-Bick J. The insurers applied to set that order aside.

The dispute concerned whether General Condition 16 effectively enabled BP to select English law, whether a service of suit clause provided an English jurisdiction clause, and whether England was an appropriate forum despite related proceedings brought by the insurers in New York. BP also relied on the analysis in BP plc v GE Frankona Reinsurance Ltd, concerning the operation of the same open cover.

1. Proper law. The open cover operated as a standing offer under which each valid declaration created a separate contract of insurance impressed with the cover’s terms. General Condition 16 gave BP an option, exercisable without reference to the insurers, to select English law and practice or USA law and practice for the entire operation of the open cover.
2. An agreement may provide for a later variation of the governing law, operating prospectively or retrospectively. The option was sufficiently clear and certain, and its exercise was not shown to have been in bad faith. It therefore operated as an agreed express choice of English law for the purposes of the applicable conflicts regimes. The validity of the disputed declarations was consequently to be determined by English law, bringing the claims within CPR 6.20(5)(c).
3. Service of suit. In an international insurance contract, an agreement to accept service in a stated country ordinarily connotes consent to proceedings being brought in that country. The insured’s express choice between United Kingdom and United States service strongly supported the inference that the clause conferred a choice of jurisdiction. General Condition 29 did not displace that clause. The claims therefore also fell within CPR 6.20(5)(d).
4. Forum. A jurisdiction clause establishes that the selected country is a convenient forum. Only exceptional circumstances, unforeseeable when the contract was made, will ordinarily justify disregarding it on the basis of convenience. Prior commencement of proceedings elsewhere does not determine the balance of convenience. In the absence of such circumstances, commencing parallel proceedings in an unagreed forum is procedurally oppressive, subject only to the possibility that the interests of justice may exceptionally outweigh that oppression.
5. No circumstances came close to displacing the agreed English jurisdiction. The application to set aside permission to serve out was dismissed.

First-instance decision. The judgment itself records that Moore-Bick J had granted permission on 6 May 2003 to serve the proceedings outside the jurisdiction.