#5000 - Amin Rasheed Shipping Corp V. Kuwaiti Insurance Co. - Conflict of Laws BCL

Amin Rasheed Shipping Corporation v. Kuwaiti Insurance Company

Facts

The plaintiffs, a Liberian corporation, whose business was carried on from Dubai, owned a small cargo vessel which they insured against war and marine risks under a policy issued by the defendants, a Kuwaiti insurance company. The form of the policy was based upon the Lloyd's standard form of marine policy with modifications but gave Kuwait as the place of issue and provided for claims to be payable there. The policy was on the insurers' standard printed form of hull policy. It was in the English language only. The wording followed meticulously (with minor and in my view immaterial omissions of express references to London) that of the Lloyd's S.G. policy scheduled to the Marine Insurance Act 1906. There was no provision in the policy as to the law which was to govern the contract. The vessel was detained by Saudi Arabian authorities and the master and crew were imprisoned for some months apparently in connection with a claim, denied by the plaintiffs, that the vessel had been engaged in an attempt to smuggle oil. The plaintiffs claimed for the total constructive loss of the vessel under the Institute War and Strike Clauses which formed part of the policy. Bingham J. set aside leave which had been granted to the plaintiffs under R.S.C., Ord. 11, r. 1 (1) (f) (iii) 1 on their ex parte application to issue a writ and serve notice of it on the defendants in Kuwait.

RSC Rule 11(1)(f): “if the action begun by the writ is brought against a defendant not domiciled or ordinarily resident in Scotland to enforce… a contract … being… a contract which… (iii) is by its terms, or by implication, governed by English law…"

RSC Rule 4(2): “No such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order.”

Holding

Lord Diplock

Law applicable to determine applicable law: My Lords, the jurisdiction point is one that falls to be determined by English law and by English law alone. The relevant rules to be applied to its determination are the English rules of conflict of laws, not the conflict rules of any other country - which may or may not be the same as those of England. In particular, so far as the jurisdiction point itself is concerned, it is immaterial whether the courts of the only obvious rival forum, a Kuwaiti court, would take the same view as an English court as to what was the proper law of the policy. The relevance of this only arises if and when one reaches the discretion point.

What is the proper law?

My Lords, R.S.C., Ord. 11, r. 1 (1) (f) (iii), states as the test that is relevant to the jurisdiction point in the instant case that the policy "is by its terms, or by implication, governed by English law." English conflict rules accord to the parties to a contract a wide liberty to choose the law by which their contract is to be governed. So the first step in the determination of the jurisdiction point is to examine the policy in order to see whether the parties have, by its express terms or by necessary implication from the language used, evinced a common intention as to the system of law by reference to which their mutual rights and obligations under it are to be ascertained.

If it is apparent from the terms of the contract itself that the parties intended it to be interpreted by reference to a particular system of law, their intention will prevail and the latter question as to the system of law with which, in the view of the court, the transaction to which the contract relates would, but for such intention of the parties have had the closest and most real connection, does not arise.

…since although the policy contains no express provision choosing English law as the proper law of the contract, nevertheless its provisions taken as a whole, in my opinion, by necessary implication point ineluctably to the conclusion that the intention of the parties was that their mutual rights and obligations under it should be determined in accordance with the English law of marine insurance.

No Relevant Marine Law in Kuwait: The crucial surrounding circumstance, however, is that it was common ground between the expert witnesses on Kuwaiti law that at the time the policy was entered into there was no indigenous law of marine insurance in Kuwait… The general law of contract is able to throw but little light upon the rights and obligations under a policy of marine insurance in the multifarious contingencies that may occur while the contract is in force. The lacuna in the Kuwaiti commercial law has since been filled in 1980 by the promulgation for the first time of a code of marine insurance law. This code does not simply adopt the English law of marine insurance; there are significant differences. However, it did not come into operation until August 15, 1980, and it is without retrospective effect. It does not therefore apply to the policy which was entered into at a time before there was any indigenous law of marine insurance in Kuwait.

Policy Scheduled to Marine Insurance Act: Turning now to the terms of the policy itself, the adoption of the obsolete language of the Lloyd's S.G. policy as scheduled to the Marine Insurance Act 1906 makes it impossible to discover what are the legal incidents of the mutual rights and obligations accepted by the insurers and the assured as having been brought into existence by the contract, unless recourse is had not only to the rules for construction of the policy contained in the first schedule, but also to many of the substantive provisions of the Act which is (accurately) described in its long title as: "An Act to codify the law relating to marine insurance."… These are but a few examples of the more esoteric provisions of the policy of which the legal effect is undiscoverable except by reference to the Marine Insurance Act 1906; but the whole of the provisions of the statute are directed to determining what are the mutual rights and obligations of parties to a contract of marine insurance, whether the clauses of the contract are in the obsolete language of the Lloyd's S.G. policy (which, with the F.C. & S. clause added, is referred to in the Institute War and Strikes Clauses Hull-Time, as "the Standard Form of English Marine Policy"), or whether they are in the up-to-date language of the Institute War and Strike Clauses that were attached to the policy.

My Lords, contracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect unless they were made by reference to some system of private law which defines the obligations assumed by the parties to the contract by their use of particular forms of words and prescribes the remedies enforceable in a court of justice for failure to perform any of those obligations; and this must be so however widespread geographically the use of a contract employing a particular form of words to express the obligations assumed by the parties may be. To speak of English law and practice providing a useful source of persuasive authority on the construction of the policy wherever it may be used, begs the whole question: why is recourse to English law needed at all? The necessity to do so is common ground between the experts on Kuwaiti law on either side; it is because in the absence of an indigenous law of marine insurance in Kuwait English law was the only system of private law by reference to which it was possible for a Kuwaiti court to give a sensible and precise meaning to the language that the parties had chosen to use in the policy. As the authorities that I have cited earlier show, under English conflict rules, which are those your Lordships must apply in determining the jurisdiction point, that makes English law the proper law of the contract.

Discretion to grant permission to serve outside jurisdiction

My Lords, the jurisdiction exercised by an English court over a foreign corporation which has no place of business in this country, as a result of granting leave under R.S.C., Ord. 11, r. 1 (1) (f) for service out of the jurisdiction of a writ on that corporation, is an exorbitant jurisdiction, i.e., it is one which, under general English conflict rules, an English court would not recognise as possessed by any foreign court in the absence of some treaty providing for such recognition.

In order to decide whether a Kuwaiti court, as well as having jurisdiction, is also a forum conveniens for the dispute, one must start by seeing what are likely to be the issues between the parties in the proposed action. The assured's claim is for a constructive total loss of the vessel.

Factual Dispute: The central issue in the litigation, as the judge points out, would appear to be one of fact: was the vessel engaged in smuggling when she was seized by the Saudi Arabian authorities? If she was, the loss was excluded by the exception in clause 4 (1) (e) of the Institute War and Strikes Clauses attached to the policy: "arrest, restraint or detainment… by reason of infringement of any customs regulations." Whether she was or not is a question of fact, which involves Saudi Arabian law. The principal witnesses as to what the vessel was doing and as to whether what happened after it was seized amounted to a constructive total loss, would be those who were the master and crew of the vessel at the time of her seizure. They are Indian and Bangladesh nationals and upon release by the Saudi Arabian authorities they were repatriated to their native countries where, it...