Sulamerica CIA Nacional De Seguros SA & Ors v Enesa Engenharia SA & Ors

The proper law of a separable arbitration agreement is determined by the law with which it has its closest and most real connection. Where the parties choose a seat, that choice normally creates a strong connection with the law of the seat and its supervisory courts, even where the underlying contract is governed by another law.

A mediation clause is not an enforceable condition precedent unless its terms establish a sufficiently certain process, including the necessary administrative machinery. An arbitration clause should be construed broadly and, where possible, reconciled with an exclusive jurisdiction clause. Once a valid arbitration agreement is established, an anti-suit injunction may continue unless the respondent shows strong reason to the contrary.

The claimant insurers sought continuation of an interim anti-suit injunction restraining the insureds from pursuing Brazilian proceedings which impeded arbitration in London. The disputes arose under insurance policies governed by Brazilian law, containing mediation and arbitration provisions and providing that the seat of arbitration was London.

The insureds challenged the validity and scope of the arbitration agreement. They argued that the mediation provisions were a condition precedent to arbitration, that the arbitration clause covered quantum only, and that the exclusive Brazilian jurisdiction clause prevailed. The court also considered the effect of an interim order made by a Brazilian appellate judge.

1. Proper law. The arbitration agreement was separable from the underlying insurance contract. The choice of London as the seat established a strong connection with English law, including the supervisory jurisdiction of the English courts under the Arbitration Act 1996. The arbitration agreement, including any part of the mediation clause forming part of it, was governed by English law. The Brazilian provisions relied upon by the insureds therefore did not affect the English court’s decision.
2. Mediation. Condition 11 did not create an enforceable obligation or a condition precedent to arbitration. It lacked an unequivocal commitment, a sufficiently defined mediation process, and machinery for selecting the mediator. Agreement would have been needed on essential matters before the process could proceed. The insureds had not refused to participate in mediation, but the absence of a binding obligation did not prevent arbitration.
3. Scope. Conditions 11 and 12 had to be read together. The reference to a failure to agree the amount payable included disputes about whether anything was payable. The arbitration therefore covered liability, coverage and material alteration issues, not merely quantum.
4. Jurisdiction clauses. The arbitration and exclusive Brazilian jurisdiction clauses could be reconciled by giving priority to arbitration for disputes falling within Condition 12. The Brazilian jurisdiction clause retained a meaningful role in matters such as compelling arbitration, validating or enforcing an award, and proceedings where the parties agreed to dispense with arbitration.
5. Anti-suit relief. The insurers established the arbitration agreement to the required standard. Under The Angelic Grace [1995] 1 LLR 87 (CA), the burden then lay on the insureds to show strong reason against enforcement. The Brazilian interim order did not constitute such a reason. The anti-suit injunction was continued, subject to further submissions on its precise form. Costs were to follow the event.

This was a first-instance application concerning continuation of an interim anti-suit injunction. The judgment records an earlier interim injunction granted by Stadlen J and an interim order made by a single Brazilian appellate judge, but no appeal from the present decision.