Airbus S.A.S. v Generali Italia S.P.A. & Ors

An exclusive jurisdiction clause in a warranties agreement may govern substantive warranty disputes and connected non-contractual claims, notwithstanding an arbitration clause in an earlier purchase agreement. The related contracts must be construed commercially as a whole, while giving effect to the breadth and subject matter of each dispute resolution clause.

A subrogated insurer is bound by an English jurisdiction clause to the same extent as its insured. Proceedings inconsistent with the clause breach an equivalent equitable obligation, even though the insurer is neither a contracting party nor liable for breach of contract. The English court may protect that obligation by granting an appropriate declaration.

Aircraft insurers pursued Italian tort proceedings against the manufacturer after indemnifying an airline for damage caused during an emergency landing. The airline enjoyed aircraft warranties under a warranties agreement containing an exclusive English jurisdiction clause. An earlier purchase agreement contained an ICC arbitration clause with a Geneva seat.

Moulder J held that the English court had jurisdiction and granted declarations concerning the Italian proceedings: [2018] EWHC 2737 (Comm). The insurers appealed. The principal questions were whether the English clause covered substantive warranty disputes and the Italian claims, and whether a declaration could be made against insurers who were not parties to the warranties agreement.

1. Appeal dismissed as to jurisdiction, but allowed to the extent necessary to set aside premature final declarations. Clause 13.2 of the warranties agreement applied to all disputes arising out of or connected with that agreement, connected non-contractual obligations, and substantive claims connected with the incorporated warranties. A final declaration was granted as to that construction.

2. The jurisdiction clause was extremely wide. The warranties agreement was the only contract to which all persons interested in the warranties were parties, and it conferred direct contractual rights rather than merely transferred assigned rights. References to the purchase agreement’s terms and conditions were capable of referring to the substantive warranty terms. They did not incorporate its arbitration clause. A professionally drafted agreement containing its own broad jurisdiction clause would be expected to say clearly if substantive warranty disputes remained subject to arbitration.

3. Airbus had the better of the argument that the Italian tort proceedings were sufficiently connected with the warranties agreement to fall within the clause. The alleged duty to recall, redesign or overhaul aircraft components depended on Airbus’s position as manufacturer and on the alleged defect in a supplied component. It was therefore connected with the post-delivery obligations addressed by the warranties.

4. The applicability of the clause to the Italian proceedings was determined by the nature of the claim when those proceedings were issued, rather than by defences later advanced. At this interlocutory stage, however, only the good arguable case standard applied. The lower court should not have made final declarations that the Italian proceedings fell within the clause and had been commenced in breach of it.

5. Insurers exercising subrogated rights to make a non-contractual claim are bound by an English arbitration or jurisdiction clause to the same extent as their insured. Their pursuit of inconsistent proceedings breaches an equivalent equitable obligation, rather than the contract itself. That obligation may be protected by a declaration. Whether final declarations should be granted concerning the Italian proceedings was left for trial.

• Court of Appeal (Civil Division): In [2019] EWCA Civ 805, upheld the construction of the exclusive English jurisdiction clause and the decision that the English court had jurisdiction. It set aside the final declarations that the Italian proceedings fell within and breached the clause, leaving those matters for trial.
• Commercial Court: Moulder J held in [2018] EWHC 2737 (Comm) that Airbus had the better argument on jurisdiction and granted declarations that the Italian proceedings were within and breached the exclusive jurisdiction clause.