Starr Excess Liability Insurance Company Ltd v General Reinsurance Corporation

• Jurisdiction: Bermuda
• Judgment Date: 03 May 2007
• Date: 03 May 2007
• Docket Number: Civil Jurisdiction 2007 No. 76
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Bell, J

Civil Jurisdiction 2007 No. 76

BETWEEN:

Starr Excess liability Insurance Company, Ltd

and

Starr Excess Liability Insurance International, Ltd

Plaintiffs

and

General Reinsurance Corporation

Defendant

Mr R Attride-Stirling for the Plaintiffs

Mr P Harshaw for the Defendant

The following cases were referred to in the judgment:

Union of India v McDonnell DouglasUNK [1993] 2 Lloyds Rep 48

Glencore International v Exeter Shipping [2002] CLC 1090

IPOC International Growth Fund Ltd v OAO CT-Mobile LV Finance GroupBDLR [2007] Bda LR 43

The Angelic GraceUNK [1995] 1 Lloyds Rep 87

Inter partes summons — Insurance company — Arbitration treaty — New York proceedings — Reinsurance — Natural forum — Model law — Anti-suit injunction — Misrepresentation

RULING of Bell, J

Introduction

1. This ruling arises from the hearing of an inter partes summons on 26 and 27 April 2007, when the defendant (‘Gen Re’) made application to set aside an ex parte order which I had made on 16 March 2007. That order granted the plaintiffs an anti-suit injunction against Gen Re, restraining it from taking any further steps in proceedings which Gen Re had issued in the Supreme Court of the State of New York or bringing other similar proceedings. The New York proceedings concerned an arbitration agreement between the parties, on which I will set out the necessary detail shortly. I will refer to the first plaintiff as ‘Starr Excess (Delaware)’, the second plaintiff as ‘Starr International’ and the two together, where necessary, as ‘Starr’ or ‘both Starr companies’. I recognise that there is an issue between the parties as to the extent to which the contractual arrangements between the parties are between Starr and Gen Re, as contended for by Starr, or between Starr Excess (Delaware) and Gen Re, as contended for by Gen Re.

2. Starr Excess (Delaware) is a licensed insurance company which is registered in Delaware. Starr International is similarly a licensed insurance company registered in Dublin, Ireland. Of the two, only Starr International is licensed to operate and conduct insurance and reinsurance business in Bermuda. In his affidavit sworn on 15 March 2007 in support of Starr's application for an ex parte injunction, William Goldsmith averred that Starr's principal place of business was in Bermuda, albeit that its registered offices were in Delaware and Dublin, Ireland respectively. He indicated that Starr's principal place of business is Bermuda, its business and underwriting operations are carried out in Bermuda, and Bermuda is the principal location of the majority of its employees. There was no countervailing evidence in regard to this aspect of matters.

3. For Gen Re, an affidavit dated 23 April 2007 was sworn by Peter Clauson. Mr. Clauson averred that Gen Re is a Delaware incorporated business with offices in Stamford Connecticut and New York, and maintains no office or personnel in Bermuda. He set out the background to the negotiations of the reinsurance contract governing the underlying arbitration, where the loss arose by reason of Starr having agreed to provide excess liability cover to a company named Warner Lambert Company (‘Warner Lambert’) a manufacturer of pharmaceutical products. One of these products led to wide claims, which were settled between Warner Lambert on the one hand and Starr and other insurers on the other. Starr's share of the settlement amounted to $75 million, in respect of which Starr claims a 16.66 % portion from Gen Re, amounting to $12,495,000.

4. One of the issues between the parties relates to the particular Starr company on risk in relation to the arbitration. Although the treaty containing the arbitration clause is between both Starr companies and Gen Re, Gen Re contends that only Starr Excess (Delaware) is on risk in the arbitration, that Mr. Goldsmith's affidavit failed to mention that fact, and that this constituted a material omission.

The Arbitration Agreement

5. The arbitration agreement is contained in Article 25 of a Casualty Quota Share Reinsurance Contract between Starr and Gen Re (‘the 1999 Contract’). Clause A of Article 25 deals with the appointment of arbitrators and an umpire, and contains a mechanism for the appointment of such arbitrator or umpire by a Justice of the Supreme Court of the State of New York in the event of default of either the parties or the arbitrators. Gen Re relies upon that provision. Clause B provides at the outset that

‘The arbitration proceeding shall take place in Hamilton, Bermuda’

and the clause then carries on to deal with procedural matters. Article 27 provides that the contract shall be governed by and construed in accordance with the laws of New York. Mr. Clauson in his affidavit referred to a number of other clauses to show connections between the contract and the jurisdiction of New York. Included in these references was a reference to Article 24, a service of suit clause, which does not appear to be applicable to Gen Re, insofar as it applies only to reinsurers domiciled outside the United States, into which category Gen Re does not fit. Mr. Harshaw conceded as much during argument.

The New York Proceedings

6. Let me next turn to the events which led to the ex parte application and to the grant of an anti-suit injunction. On 1 February 2007, Starr's Bermuda attorneys served notice of arbitration on Gen Re. There followed correspondence in relation to the appointment of arbitrators, and there quickly became an issue between the parties as to the scope of the arbitration clause. The notice of arbitration referred in terms to an arbitration under the Bermuda International Conciliation and Arbitration Act 1993 (‘the 1993 Act’), and Gen Re immediately took the position that the 1993 Act did not govern the dispute between the parties and reserved the right to challenge its application. Although both parties did appoint their arbitrator, there next arose an issue as to the appropriate level of communication between the parties and their appointed arbitrator in relation, in the first instance, to the appointment of the umpire, although no doubt that dispute would have covered a wider range of communications subsequently.

7. On 9 March 2007, Gen Re commenced proceedings in the Supreme Court of the State of New York. In his affidavit, Mr. Goldsmith characterised the proceedings as seeking an order to compel arbitration under New York law and pursuant to New York procedural rules and practice. There is of course no issue as to the law governing the substantive dispute between the parties; that is the law of New York. The dispute is in regard to the procedural law governing the arbitration. Mr. Goldsmith referred to the issue of the New York proceedings as an attempt to pre-empt the Supreme Court of Bermuda from exercising supervisory jurisdiction over the arbitration which it has by virtue of the 1993 Act, and the consequent application of the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’). Gen Re says that all it has done is to ask the New York court (which it identifies as the only court expressly referenced in the arbitration clause) to interpret the 1999 Contract under New York law, which Gen Re describes as the only body of law expressly adopted by the parties in the 1999 Contract.

8. However, it is somewhat disingenuous of Gen Re to say, as Mr. Clauson did in his affidavit, that all that it has done in New York is to ask the New York court to interpret the 1999 Contract. Indeed, Mr. Harshaw went further in his submissions, and said that all that Gen Re was doing was asking the New York court to determine the appropriate procedural law, as if to suggest that Gen Re merely wanted to clarify whether the procedural law of New York or the procedural law of Bermuda applies. In fact, the petition filed on behalf of Gen Re in New York makes it clear, as foreshadowed in the correspondence between the...