British- American Insurance (Kenya) Ltd v Matelec Sal & Anor

Where an insurance document incorporates insurance and reinsurance arrangements, an arbitration provision may apply to both contracts even though the same clause confers exclusive jurisdiction on foreign courts. The court must identify what a reasonable person, equipped with the relevant background, would understand the parties to have meant. Rival constructions must be tested against the document as a whole and their commercial consequences. Apparent inconsistencies should be reconciled where this can fairly be done. A clause conferring court jurisdiction may operate as a forum provision for court proceedings without preventing arbitration on the merits. Where linked insurance and reinsurance contracts are intended to operate together, a common dispute-resolution mechanism may be commercially preferable.

British-American Insurance (Kenya) Ltd brought two related arbitration claims against Matelec SAL and Thika Power Ltd. It sought the appointment of an arbitrator under section 18(3)(d) of the Arbitration Act 1996 and an injunction restraining proceedings other than arbitration in London. An interim injunction had been granted by Cooke J and replaced by a consent order.

The dispute concerned an endorsement changing the governing law to English law, providing for the exclusive jurisdiction of the Kenyan courts, and specifying London as the arbitral seat with ARIAS (UK) appointors. The central questions were whether the arbitration provision applied to the insurance contract as well as the reinsurance contract, and, if not, whether rectification or estoppel prevented reliance on that construction.

1. Construction. The court adopted the reasonable-person approach, considering the relevant background and the policy as a whole. Interpretation was iterative. Rival meanings had to be tested against the contractual scheme and commercial consequences. Apparent inconsistencies had to be reconciled where that could conscientiously and fairly be done.
2. The endorsement was intended to operate coherently in relation to both the insurance and reinsurance contracts. The amended governing-law provision necessarily applied to both. There was no sufficient basis for treating the arbitration provision differently. The commercial purpose favoured a single method of resolving linked disputes and avoided the risk of inconsistent decisions.
3. The references to the exclusive jurisdiction of the Kenyan courts could be given substantial effect by treating them as governing the forum for court proceedings concerning the merits. They did not prevent the London arbitration provision from operating. The arbitration agreement therefore applied to disputes between BAIC and the insured parties as well as disputes between BAIC and the reinsurers.
4. Rectification. The evidence showed that the endorsement, properly construed, reflected the position understood by the parties when it was agreed. There was therefore no basis for rectification. The court declined to decide other requirements which did not arise.
5. Estoppel. The contractors had not established the essential factual requirements of an estoppel. They did not assume that arbitration was excluded from the insurance contract, and no such assumption was shared or acquiesced in by BAIC.
6. Both consent-order issues were answered yes. BAIC was entitled in principle to declarations, injunctive relief and relief under section 18 of the Arbitration Act 1996. The contractors were allowed seven days to appoint an arbitrator, running from the earliest specified event relating to any appeal.

The judgment records that Cooke J granted an interim injunction on 26 February 2013. That injunction was replaced by a consent order made by Andrew Smith J on 15 March 2013. The present court determined the substantive construction, rectification and estoppel issues.