The Court of Appeal reinstates an arbitrator following a re-examination of the arbitration clause, overturning a first instance precedent set 17 years earlier

(1) Allianz Insurance Plc (Formerly Cornhill Insurance Plc) (2) Sirius International Insurance Corp (Publ) (London Branch) v Tonicstar Ltd (on its own behalf & behalf of other corporate members of Lloyd’s Syndicates 62, 1861 & 2255) [2018] EWCA Civ 434

Further to our article in November 2017, the Court of Appeal has reversed a decision of the High Court regarding the interpretation of an arbitration clause which required the arbitrator to have “experience of insurance or reinsurance”. Mr Justice Teare in the High Court had considered himself bound by the “settled meaning” given to the clause in issue by an unreported decision in 2000 which stood unchallenged. That earlier case had distinguished between arbitrators with experience of insurance business and insurance law, leading to the result in this case that the eminent insurance QC chosen by the respondent was removed as arbitrator. Recognising that the Court of Appeal would not be bound by the earlier first instance decision, Mr Justice Teare granted permission to appeal.

As a reminder, the wording of the arbitration agreement was:

Unless the parties otherwise agree the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance.

Lord Justice Leggatt in the Court of Appeal held that the wording in the arbitration agreement was clear and that neither did the wording, nor its context, impose any requirement for how the experience of insurance or reinsurance of the prospective arbitrator had been developed – in other words it could include an insurance lawyer.

The Court of Appeal also addressed the issue of overturning a first instance decision, finding that “the fact…that [the precedent] has stood for 17 years should not…dissuade this court from holding that it was wrongly decided”. Lord Justice Leggatt continued to say “whilst certainty is an important value in commerce, so too is the ability of the legal system to correct error”.

As we commented at the time of the first instance decision, this judgment reinforces the need for careful drafting of arbitration clauses, including  who  the parties want as arbitrator. Here, Lord Justice Leggatt recognised that some activities (sports, engineering and telecommunications) are distinct from the law behind those activities. In those industries, having a trade expert as arbitrator, rather than a lawyer in that field, might make sense.  But Lord Justice Leggatt found that in this case, there was no distinction between insurance ‘itself’ and the law of insurance and as such, if the parties wanted lawyers to be excluded from the potential pool of arbitrator-candidates, they ought to have expressly said so.

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