Tonicstar Ltd & ors v Allianz Insurance Plc & Anor

A first-instance judge should generally follow an earlier first-instance decision on the same question unless there is a powerful reason to depart from it. The passage of time, subsequent circulation of the decision in the relevant professional community, and the failure to amend standard contractual wording may reinforce adherence to the earlier construction. Under sections 24 and 30 of the Arbitration Act 1996, a tribunal’s power to rule on its jurisdiction does not prevent the court from removing an arbitrator where the statutory conditions for removal are satisfied. A contractual procedure for appointing an arbitrator may be adapted and applied to fill a vacancy, consistently with party autonomy.

The claimant sought the removal of the respondents’ appointed arbitrator in an arbitration concerning reinsurance liabilities arising from the September 2001 attack on the World Trade Centre. The arbitration clause required arbitrators to have at least ten years’ experience of insurance or reinsurance.

Morison J had previously construed materially identical wording as requiring experience gained in the insurance or reinsurance business, rather than experience acquired as a lawyer. The claimant invited the court to follow that decision. The respondents argued that it was wrong, that legal experience satisfied the wording, and that the court lacked power to grant relief before the tribunal ruled on its jurisdiction. The court also had to determine the appropriate procedure for filling the resulting vacancy.

1. The application was granted. The appointed arbitrator was not qualified under clause 15.5 because his experience, although extensive, had been acquired as counsel rather than through working in the insurance or reinsurance business. The claimant could invoke the contractual default appointment procedure.
2. The court followed Company X v Company Y, Morison J’s unreported decision of 17 July 2000. A first-instance judge should generally follow an earlier first-instance decision unless there is a powerful reason to depart from it, as stated in Willers v Joyce [2016] UKSC 44. The respondents’ submissions gave the court some pause, and the judge indicated that, unconstrained by precedent, he might have preferred the broader construction. However, the earlier decision was not shown to be obviously wrong.
3. The circumstances reinforced adherence to the earlier decision. The wording had remained substantially unchanged when the standard clauses were reissued in 2003; the decision was fairly well known in the reinsurance market; and it had stood unchallenged for 17 years. The 2003 reissue was not relevant to the construction of the 2001 contract, but was relevant to the weight of precedent.
4. Sections 24 and 30 of the Arbitration Act 1996 were distinct. The tribunal could rule on its own jurisdiction, including whether it was properly constituted, under section 30(1)(b). But the two party-appointed arbitrators had no power to remove one of their number. The court could therefore exercise its removal power under section 24(1), and section 24(2) did not require exhaustion of a remedy that did not exist.
5. Following Federal Insurance v Transamerica Insurance [1999] 2 Lloyd's Reports 286, the contractual appointment procedure should be adapted to the reappointment required by the vacancy. The respondents were entitled to 30 days from the court’s decision to appoint a replacement arbitrator.