Allianz Insurance Plc & Anor v Tonicstar Ltd

A standard-form arbitration clause requiring arbitrators to have at least 10 years’ experience of insurance or reinsurance is not confined to experience gained by working within the insurance industry. It may include substantial experience acquired through specialised legal practice. The practical and legal aspects of insurance and reinsurance are closely connected, and a specialist barrister may satisfy the requirement. Contractual context and commercial certainty may inform interpretation, but cannot impose a meaning which the language cannot reasonably bear. An unreported first-instance decision adopting an industry-only interpretation was plainly wrong and was overruled.

An excess of loss reinsurance contract incorporated the 1997 JELC Clauses. The respondent commenced arbitration concerning a disputed reinsurance claim and appointed a former underwriter. The appellants appointed Mr Schaff QC, who had more than 10 years’ experience as counsel in insurance and reinsurance matters.

The respondent applied under section 24(1)(b) of the Arbitration Act 1996 to remove Mr Schaff on the ground that he lacked the qualification required by clause 15.5. Teare J granted the application, following the unreported decision in Company X v Company Y, although he indicated that he might otherwise have reached the opposite conclusion. The central issue on appeal was whether specialist insurance and reinsurance counsel satisfied the requirement of experience of insurance or reinsurance.

1. Appeal allowed. Clause 15.5 required arbitrators to have at least 10 years’ experience of insurance or reinsurance. Its natural wording did not restrict the source of that experience to employment within the insurance or reinsurance industry.
2. The expression did not draw a meaningful distinction between insurance or reinsurance and the law governing those activities. The practical and legal aspects of the business were intertwined. A barrister specialising in insurance and reinsurance cases for more than 10 years would naturally be regarded as having the requisite experience, provided that the experience was of sufficient quality to equip the person to act as an arbitrator. Any intention to exclude lawyers required clear words.
3. The matters relied on in Company X v Company Y did not justify implying an industry-only restriction. The trade-body origin of the clauses, the tribunal’s evidential discretion and the default appointment mechanism did not establish an intention to create a trade arbitration. Clause 15.9, requiring application of English law, pointed against excluding lawyers. The reasoning in Company X v Company Y was not defensible and that decision was overruled.
4. The Court of Appeal was not subject to the same constraint as a first-instance judge following a coordinate decision: Willers v Joyce [2016] UKSC 44. Although prior interpretations of standard terms may form part of the legal background and commercial certainty is important, context cannot give contractual language a meaning it cannot reasonably bear. The meaning of the contract was fixed when it was made in 2001, so the unchanged wording in the 2003 JELC Clauses was irrelevant. The unreported decision was not shown to have formed part of the parties’ background, and no significant reliance-based injustice justified preserving an untenable interpretation.
5. The reasoning was consistent with the approach to standard terms discussed in Sunport Shipping Ltd v Tryg Baltica International (UK) Ltd (The Kleovoulos of Rhodes) [2003] EWCA Civ 12, The Annefield [1971] P 168, Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) (No 2) [1982] AC 724, Vallejo v Wheeler (1774) 1 Cowp 143 and Re Spectrum Plus Ltd [2005] UKHL 41. Clause 15.6 did not assist the respondent because the tribunal would in any event have evidential discretion under section 34 of the Arbitration Act 1996.

1. Court of Appeal (Civil Division) — The appeal was allowed: [2018] EWCA Civ 434.
2. High Court of Justice, Commercial Court — Teare J ordered removal of the appointed arbitrator under section 24(1)(b) of the Arbitration Act 1996, following Company X v Company Y: [2017] EWHC 2753 (Comm).