#5111 - Amin Rasheed Shipping Corporation V. Kuwait Insurance - Conflict of Laws BCL

Amin Rasheed Shipping Corporation v. Kuwait Insurance

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. 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 judge held that Kuwaiti law was the proper law of the contract and, accordingly, there was no jurisdiction to serve notice of the writ out of the jurisdiction.

Holding

Lord Diplock

Two step process of determining proper law of contract – Intention or close connection

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.

There is no conflict between this and Lord Simonds's pithy definition of the “proper law” of the contract to be found in Bonython v. Commonwealth of Australia [1951] A.C. 201, which is so often quoted, i.e., "the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connection." It may be worth while pointing out that the "or" in this quotation is disjunctive, as is apparent from the fact that Lord Simonds goes on immediately to speak of "the consideration of the latter question." 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.

Exclusion of Renvoi in proper law of contract

One final comment upon what under English conflict rules is meant by the "proper law" of a contract may be appropriate. It is the substantive law of the country which the parties have chosen as that by which their mutual legally enforceable rights are to be ascertained, but excluding any renvoi, whether of remission or transmission, that the courts of that country might themselves apply if the matter were litigated before them. For example, if a contract made in England were expressed to be governed by French law, the English court would apply French substantive law to it notwithstanding that a French court applying its own conflict rules might accept a renvoi to English law as the lex loci contractus if the matter were litigated before it.

Proper law of the Contract is English law

No Indigenous law of marine insurance 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.

Use of the Lloyd’s Standard Form: 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...