Court of Appeal refuses to allow service out of the jurisdiction in claim for declaratory relief

We previously reported on the decisions of the High Court and Court of Appeal in Faraday Reinsurance Co Limited v Howden North America Inc & anor (the "Faraday Proceedings") (see post) in which the court allowed service out of the jurisdiction of a claim by insurers against their insured seeking, in effect, a declaration of non-liability. These decisions arose in the context of a broader dispute between Howden and its insurers regarding coverage for significant asbestos-related personal injury claims.

In a further development in this dispute, the Court of Appeal has recently handed down judgment refusing to allow service out of the jurisdiction of a claim for similar relief by other insurers of Howden: Howden North America Inc & Anor v ACE European Group Ltd & Ors [2012] EWCA Civ 1624 (the "ACE Proceedings").  Tony Dempster and Christopher Charlton comment further on the case below.  

	Tony Dempster Partner +44 20 7466 2340
	Christopher Charlton Associate +44 20 7466 2972

The ACE Proceedings raised substantially similar issues and proceeded on a very similar basis to the Faraday Proceedings. In the ACE Proceedings, other insurers of Howden (namely ACE, Gerling, New Hampshire, Portman, QBE and Swiss Re) sought declarations that excess layer policies they had written, which potentially covered the asbestos claims, were governed by English law and that the scope of their liability was consequently limited. Again, as in the Faraday Proceedings, the insurers sought permission to serve Howden out of the jurisdiction, which was granted by Field J. Howden appealed and on this occasion the Court of Appeal (differently constituted to the Court of Appeal in the Faraday Proceedings) set aside the order allowing service.

The Court of Appeal noted that the situation it faced in the ACE Proceedings was different from that faced in the Faraday Proceedings. In particular:

• Faraday had commenced the Faraday Proceedings prior to Howden's application to join it to the Pennsylvania proceedings. The ACE Proceedings were not commenced until after the insurers were joined to the Pennsylvania proceedings.
• The insurers did not argue (as Faraday had done in the Faraday Proceedings) that a decision of the English court would establish issue preclusion in the Pennsylvania proceedings. Rather, it was argued in the ACE Proceedings that an English decision would merely be of assistance in to the Pennsylvania court.
• The position in the Pennsylvania proceedings had moved on and a written judgment had been given holding that, in accordance with Pennsylvania's conflict of laws rules, English law was unlikely to apply to the policies the subject of the litigation. Further, a tight procedural timetable had been set out for the Pennsylvania proceedings.
• Faraday was an English company (albeit a subsidiary of an American corporation), whereas the insurers in the ACE Proceedings were either based in the USA or did significant business there.

In the ACE Proceedings, Aikens LJ (giving the only reasoned judgment) held that the insurers had not shown that a declaration of the English court would be useful. He particularly noted that given the statements made by the Pennsylvania court, it appeared unlikely that the relevant policies would be found to be governed by English law. Even if they were, the Pennsylvania court could hear evidence as to English law; it had not requested the assistance of the English court on what he considered to be matters of basic insurance law. In the circumstances, he did not consider that there was utility in the ACE Proceedings going ahead. Moreover, if there was otherwise no proper utility in the English proceedings, Aikens LJ considered that in the context of possible enforcement of any Pennsylvania judgment in England they would be, in circumstances where the Pennsylvania court had competent jurisdiction, an illegitimate pre-emptive strike against any judgment properly given in accordance with Pennsylvania law.

This further decision of the Court of Appeal highlights the importance of moving quickly when attempting to establish jurisdiction before the English courts. As litigation progresses in other forums, the course of those proceedings may limit the arguments available to be deployed to secure jurisdiction in England and Wales.