Skandia International Insurance Company and Others v Al Amana Insurance and Reinsurance Company Ltd 1993 Civil Jur. No. 381

• Jurisdiction: Bermuda
• Judgment Date: 21 January 1994
• Date: 21 January 1994
• Docket Number: Civil Jurisdiction 1993 No. 381
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Civil Jurisdiction 1993 No. 381

1. Skandia International Insurance Company (‘Skandia’)

and

2. Mercantile and General Reinsurance Company (‘MG Re’)

and

3. Gerling-Konzern Globale Rueckversicherungs-Gesellschaft (‘Gerling’)

and

4. Union Rueckversicherungs-Gesellschaft (*“Union’)

and

5. Assicurazioni Generali Spa (‘Assicurazioni’)

and

6. Hannover Rueckversicherungs-Aktiengesellschaft (‘Hannover’)

and

7. Muenchener Rueckversicherungs-Gesellschaft (‘Munchener’)

Plaintiffs

and

Al Amana Insurance and Reinsurance Company Limited (‘Al Amana’)

Defendant

Mr. V. V. Veeder Q.C. and Mr. J. Woloniecki for the Plaintiffs

Mr. M. Beloff Q.C. and Mr. N. Hargun for the Defendant

Pena Copper Mines Ltd v Rio Tinto Co. Ltd. (1911-13) All ER Rep. 209

Channel TunnelGroup Ltd v Balfour Beatty Ltd.UNK [1993] 1 All ER 664

Castanho v Brown and RootELR [1981] AC 557

British Airways Board v LakerELR [1985] AC 58

South Carolina Insurance v MaatsshappiELR [1987] AC 24

Societe Nationale Industrielle Aerospatiale v LeeELR [1987] 1 AC 871

“The Maria Gorthon”UNK [1976] 2 Lloyds Rep. 720

Tracomin SA v Sudan OilUNK [1983] 2 Lloyds Rep. 624

“The Golden Anne”UNK [1985] 2 Lloyds Rep. 489

World Pride Shipping Ltd v Daiichi Chuo Kisen KaishaUNK [1984] 2 Lloyds Rep. 489

Continental Bank NA v Aeakos Compania Naviera SATLR The Times 26 November 1993

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

Marc Rich & Co AG v Societa Italiana Impianti PA (No.2)UNK [1992] 1 Lloyds Rep. 624

Hayter v NelsonUNK [1990] 2 Lloyds Rep. 265

Ellerine Brothers (Pty) Ltd v KlingerWLR [1982] 1 WLR 1375

Fung Sang Trading Ltd v Kai Sun Sea Products and Food Co. Ltd [1992] 1 HKLR 40

Supreme Court Act 1905, s. 19(c)

Conflict of laws — Interlocutory injunction restraining foreign proceedings — Validity and effect of arbitration clause — Insurance contract — Facultative retrocessions and reinsurance treaties — Property damage — Treaty arbitration agreement — Incorporation of term of contract by reference — Model Law of arbitration

JUDGMENT

This is a summons by the Plaintiffs seeking an interlocutory injunction to restrain the Defendant from continuing with legal proceedings brought by the Defendant against the Plaintiffs in Kuwait on the ground that the Defendant had agreed to submit the disputes to arbitration.

FACTUAL BACKGROUND

Alghanim Industries (“Alghanim”) is a substantial Kuwaiti company, which engages (directly and via associated companies) in a wide range of industrial and service businesses. It and its associated companies have at all times owned extensive property in Kuwait. One such company is the Defendant, Al Amana, a captive insurer.

Al Amana is an exempted company incorporated under the laws of. Bermuda and complies with Bermuda's Companies and Insurance legislation. It is a captive insurance company wholly owned by Alghanim and operates from the Alghanim office in Kuwait.

Although it is Alghanim's captive, Al Amana is not licensed to write direct insurance business in Kuwait. Accordingly, Alghanim's insurance business is written directly by other insurers, which are licensed. In general (and as happened in this case). that direct business is ceded in whole or in part to Al Amana as reinsurer.

Arabia Insurance Company Ltd. is a Lebanese company, with a regional office in Amman, Jordan and a branch office in Kuwait, licensed to write insurance business in Kuwait.

The insurance contract underlying this action is in all risks property and business interruption insurance written by Arabia in favour of Alghanim, covering real and personal property of Alghanim and its associated companies located in Kuwait, for the period 1 May–31 December 1990. The sum insured was KD 96,355,000.

Risk and premium (subject to an overrider commission) were ceded as to 100% by Arabia to Al Amana pursuant to a reinsurance ‘guarantee’ dated 28 May 2990.

By letter dated 31 May 1990, Arabia delegated to Al Amana full authority to administer the underlying policy, including receiving notice of and processing claims and all similar and related actions.

The Plaintiffs are various European insurance and reinsurance companies each of whom at various times between 1987 and 1990 reinsured Al Amana pursuant to Property All Risks Treaty Reinsurance Agreements (‘the Treaty Reinsurances’). Al Amana ceded 55.7% of the business to the Plaintiffs in varying proportions under property quota share/first surplus retrocession treaties. The quota share/first surplus treaties were for all material purposes in similar terms to that signed by the First Plaintiff (‘Skandia’).

Additionally, Al Amana ceded 39.7% of the business under three facultative retrocessions. Two of the facultative retrocessions were respectively with Skandia and the Third Plaintiff (‘Gerling’). Skandia reinsured Al Amana for the period 12 months from 1st January, 1989 and 11 months from 1st February, 1990 and Gerling reinsured Al Amana for the period 11 months from 1st February, 1990 pursuant to Property All Risks Facultative Reinsurance Agreements (‘the Facultative Reinsurances’). No wording was produced.

The Facultative Reinsurance incorporated by reference in respect of cover (‘as per wording attached’) the standard terms and conditions of the underlying policies provided to M/S Alghanim Industries Inc. and/or Yusuf Ahmed Alghanim and Sons W.L.L. and/or Associated Companies (‘Alghanim’) for the periods 1st January to 31st December, 1989 and 1st February to 31st December, 1990 (‘the Underlying Policies’).

Article 10 of the Treaty Reinsurance provides for arbitration of disputes or differences between the parties being ‘arbitration agreements’ within the meaning of the Bermuda International Conciliation and Arbitration Act 1993 (hereinafter referred to as ‘the 1993 Act’).

Condition 4 of the Underlying Policies likewise provides for such arbitration. Skandia and Gerling claim but Al Amana deny, that Condition 4 was incorporated into the Facultative Reinsurance.

Al Amana retained only 4.6% of the risk.

Each of the underlying insurance contract written by Arabia, the reinsurance written by Al Amana (by incorporation of original terms) and the property quota share/first surplus treaties contains a war risks exclusions in similar terms. The facultative retrocession may contain a similar exclusion by incorporation of underlying terms.

In August, 1990 Kuwait was invaded by Iraq. In the aftermath of the Iraqi invasion, Alghanim suffered massive property damage in Kuwait. Alghanim's case is that the major part of (if not all) this damage resulted not from military action by the Iraqi forces, but from looting, arson and destruction by the civilian populace. This is in issue. According to Alghanim's most recently adjusted figure, its losses are of the order of KD68,860,330 (approximately US$230,000,000). The Plaintiffs have disputed the claim by reference to war risks exclusion as hereinafter appears.

On 25 October, 17 December, 1990 Alghanim advised Al Amana of the damage and loss incurred.

By fax dated 28 December 1990, Al Amana notified Skandia of Alghanim's claims and asked for views on how the claim should be handled.

On January 4. 1991 Skandia responded by asserting that the claims were excluded from coverage under the ‘treaty’ (presumably the quota share/first surplus treaty) and refused to comment on the subject of claims handling.

On 24 January, 1991, Al Amana explained its view that the losses were not excluded.

On 31 January 1991, Skandia again responded, repeating that the losses were excluded, and refusing any involvement, even to the extent of offering suggestions, in the claims handling process.

On February 1991 Al Amana sent a fax to Skandia enclosing a letter written on 25 January 1991. Alghanim had written to Al Amana recognising the difficulties in adjusting its loss, but pointing out that quick settlement was essential to resumption of its business operations.

By fax dated 5 March, 1991 Al Amana sought a final indication of Skandia's position.

By letter dated 21 March, 1991, Skandia responded, expanding upon the comments made previously.

Further correspondence to similar effect followed. On 30 July 1991 Alghanim provided Al Amana with a copy of a damage assessment survey, Skandia were informed of this fact by Al Amana and invited to inspect the survey by letter, dated 31 July 1991. On 12th August 1991 Skandia replied by again denying coverage.

Similar responses were received from the Fourth Plaintiff (‘Union Re’) (faxes dated 7 January and 4 February 1991,) and Gerling (letter dated 12 March 1991.

On 18 December 1991, Alghanim sent a letter before action to Al Amana.

By fax dated 19 December 1991, Al Amana passed on Alghanim's letter to Skandia. suggesting a meeting of all reinsurers in Kuwait.

By fax dated 30 December 1991 (Messrs. Barlow Lyde and Gilbert (‘BLG’) sent on behalf of Skandia, Mercantile and General, Hannover Re and Union Re declined a meeting, sought further information, and re-iterated their clients' denial of liability.

KUWAITI PROCEEDINGS

Alghanim issued proceedings against Arabia and Al Amana in the Kuwaiti Commercial Court of First Instance (Fifth Circuit) on 30 December, 1991 (hereinafter referred to as ‘the main action’).

Al Amana applied to join by way of third party proceedings, inter alios, the Plaintiffs pursuant to Article 86 of the Kuwaiti Civil and Commercial Code of Procedure on 3 May, 1992. There is an issue on the extent to which such proceedings are connected with the main action.

A hearing of Al Amana's application took place on 27 June, 1992, which was attended by Alghanim, Arabia, Union Re. Hannover Re and Nasco Karaoglan (‘Nasco’, brokers who placed Al Amana's outward facultative protection). A further hearing was fixed for 24 October 1992 to allow time for service on Al Amana's other...