Arabian American Insurance Company (Bahrain) E.C. v Al Amana Insurance and Reinsurance Company Ltd

• Jurisdiction: Bermuda
• Judgment Date: 04 January 1994
• Date: 04 January 1994
• Docket Number: Civil Jurisdiction 1993 No. 38
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Civil Jurisdiction 1993 No. 38

BETWEEN-

Arabian American Insurance Company (Bahrain) E.C.

Plaintiff

-and-

Al Amana Insurance and Reinsurance Company Limited

Defendant

Mr. M. Beloff QC and Mr. N. Hargun for the applicant; and

Mr. S. Kentridge QC and Mr. G. Bell QC for the respondent.

Spiliada Maritime Corp v Cansulex LtdELR [1987] 1 AC 460

National Iranian Oil Co v Ashland Overseas Trading Ltd 1987 Civil Appeal No. 15

Amin Rasheed Shipping Corp v Kuwait Insurance Co.ELR [1984] 1 AC 50

Henry v Geoprosco International LtdELR [1976] QB 726

Banco Atlantico v BBMEUNK [1990] 2 Lloyds Rep. 504

The Volvox HollandiaUNK [1988] 2 Lloyds Rep. 361

Booker v BellUNK [1989] 1 Lloyds Rep. 516

Charman v WOCUNK [1993] 1 Lloyds Rep. 378

The Abidin DaverELR [1984] AC 398

Conflict of laws — Lis alibi pendens and negative declaration — Stay of proceedings — Forum non conveniens — Whether foreign court is court of competent jurisdiction — Voluntary submission to jurisdiction of foreign court — Foreign court clearly and distinctly more appropriate — Insurance and reinsurance agreement — Putative proper law of contract

RULING (In Chambers)

INTRODUCTION

In this matter the plaintiff claims a negative declaration that it is not the reinsurer of or liable to the defendant in respect of a certain specified reinsurance contract or any other reinsurance for the year 1990. The defendant, by the summons before me, seeks an order that all further proceedings in this action be stayed under the inherent jurisdiction on the grounds that Bermuda is an inappropriate forum for the determination of the issues, and on the basis that these proceedings constitute an abuse of process. The defendant contends that the appropriate forum is the state of Kuwait, where an action between the parties concerning the same subject matter is already pending.

The dispute in this matter arises out of the insurance arrangements made for 1990 by a substantial Kuwaiti commercial concern, Alghanim Industries Inc. (‘Alghanim’), who own a wide range of companies at more than 40 different locations in Kuwait. The companies deal primarily in the supply and maintenance of vehicles, consumer goods, building materials and travel services. 1990 was the year in which the sovereign state of Iraq invaded its neighbour, Kuwait, triggering the Gulf War. During the period of the Iraqi occupation the Alghanim companies suffered considerable loss to buildings, stocks, cars and equipment, as well as business interruption, estimated at US $241,129,147.

The defendant in this action, Al Amana, is a captive insurance company wholly owned by Alghanim. It is incorporated and registered in Bermuda, although it has no real operation or presence here other than the minimum required to comply with Bermuda's Companies and Insurance legislation, and in fact operates from the Alghanim Insurance Office (‘AIO’) in Kuwait. Al Amana insured Alghanim, but not directly, because it was not authorised to write direct business in Kuwait. Instead, at all material times, it operated through fronting companies who were so authorised, although the risk, or the majority of it, was always ceded by the fronting company to Al Amana. For a variety of reasons which do not directly concern this action the fronting company was changed from time to time, so that in 1988 and 1989 it was Al Ittihad Al Watani (‘AIAW’); in January 1990 it was Northern Assurance Co. Ltd (‘Northern’); for February, March and April it was AIAW; and for the crucial period from 1st May 1990 to the end of the year it was Arabia Insurance Co. Ltd. (‘Arabia’).

Al Amana, apart from having the risk ceded to it, also maintained control over claims administration and arranged cover with retrocessionaires. The greater share of the risk was ceded by Al Amana under its obligatory treaties, but the balance was placed on a facultative basis. In 1990 Al Amana maintains that it ceded 23.7% of the risk to the plaintiff, AAICO. AAICO deny any contract with Al Amana. That is the dispute in the Bermuda action.

Al Amana placed the facultative share which ended up with AAICO through an intermediary in Saudi Arabia, Alexander and Alexander Middle East, who traded in Saudi Arabia as Al Salamah Arabian Agencies Co. Ltd. (‘Al Salamah’—I am thoughout going to refer to the intermediary as Al Salamah, although the evidence sometimes uses that name and at others refer to them as Alexander and Alexander, apparently indiscriminately). The correct characterisation of Al Salamah's role lies at the heart of the dispute between the parties. The plaintiff contends that they were simply brokers, and therefore to be regarded in the normal way as the agents of the reinsured, Al Amana. The defendant contends that, when the intermediary's role is viewed in the context of a past course of dealings over the preceding several years, it can be seen that they were the agents of the reinsurer, AAICO.

The question of whose agent Al Salamah was is fundamental to the disputed question of when the contract of reinsurance was made, if one was made at all. The defendant says the contract was constituted in correspondence between themselves and the intermediary culminating in a fax from a Mr. Baroudy, the general manager of Al Amana, of 21st December 1989, and a reply of 30th December from Mr. Gordon Lamb of Al Salamah. Mr Baroudy's fax read—

‘Further to our fax … of 14/12/89 giving you firm order to place 100% of facultative share offered by us, we now enclose the list showing revised Sum Insured as at 11111990 also showing against each risk the shares offered to you.

Kindly arrange Facultative Reinsurance by 28/12/89 and advise us the progress on a day to day basis.’

Mr. Lamb's reply simply said—

‘We are pleased to confirm our 100% placement on your Facultative requirement based on your Fax dated 21/12/89.

Our documents to follow.’

There was then a formal closing document from Al Amana, attaching the policy, signed for and on behalf of Al Amana and dated 31st January 1990.

On the other hand the plaintiffs say that the only contract to which they could have been a party was constituted by a closing slip of 7th March 1990 from Al Salamah which they accepted by placing their company stamp and an authorised signature upon it on 10th March 1990. That, of course, is well into the year, and the plaintiff accepts that the formal exchange of documents was preceded by an informal agreement, constituted by a fax (reference 8947) from Al Salamah of 21st December 1989, passing on the list attached to Mi-. Baroudy's fax of the same date quoted above, and AAICO's response of 28th December, which read in part—

‘… in view of our business relationship with you, we confirm our acceptance of the 1990 offer as per details of your fax of December 21st 1989 at the price and acquisition cost per our fax of November 30th 1989.

Please arrange to let us have the closing as soon as possible.’

The point that arises if the plaintiff's analysis is correct is that the earlier documents do not specify the identity of the reinsured (although I note in passing that the list enclosed with Mr. Baroudy's fax does contain a column specifying Al Amana's share), while the closing slip, when it was eventually prepared and forwarded to AAICO, showed Northern and AIAW, two of the fronting companies, as the reinsured. Moreover, there was a later amendment to the closing slip, initiated by letter of 9th June 1990 from Al Amana to Al Salamah, and effected by a fax of 24th June 1990 from Al Salamah to AAICO, substituting Arabia, who took over as the fronting company on 1st May 1990, as the named reinsured.

The problem was not picked up by Al Amana as they did not receive a copy of AAICO's policy until Al Salamah forwarded it under cover of their letter of 3rd October 1991—after the end of the year in question and after the loss.

AAICO therefore maintain that their contract could only have been with the respective fronting company, which at the time of the loss was Arabia. Moreover, AAICO say that they were relieved from any liability by that route when, in separate proceedings commenced by AAICO in London to avoid the contract they maintained was with Arabia on the grounds of material non-disclosure, Arabia denied that they had any contract with AAICO. If the closing slip was wrong AAICO say that that is not their fault but the fault of Al Salamah, who they maintain is Al Amana's agent.

It is not necessary for me to attempt to decide this question for the purposes of this application. I will, however, have to consider what evidence Will be necessary to make that determination as that has a bearing on the question of convenience. As I understand Al Amana's case it is, in part at least, that they had done business with AAICO in preceding years. AAICO is, in some way which was not made clear to me, affiliated with American International Group Inc., which is based in the USA. A division of that entity is American International Underwriters of New York (‘AIU’), and they authorised AAICO to accept reinsurance in respect of Alghanim. In 1985 Al Amana were, after an initial contact in the USA, interested in doing business with AIU, and were approached in Kuwait by a representative of Al Salamah. Thereafter the defendant says that Al Salamah arranged reinsurance for Al Amana's cover of a part of the Alghanim business, and in the following year this was expanded, on each occasion Al Salamah placing part of the risk with AIU, and this pattern was repeated in 1987, and 1988. In 1989 this pattern was not repeated as the facultative insurance was placed with other reinsurers who offered a better rate. For 1990 Al Amana says that it sought to revive the previous arrangements through Al Salamah.

Alghanim have taken steps in Kuwait to enforce the primary policy against Arabia. They commenced proceedings in Kuwait against Arabia and Al Amana two...