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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> ACE Insurance SA-NV v Zurich Insurance Company & Anor [2001] EWCA Civ 173 (2 February 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/173.html Cite as: [2001] ILPr 41, [2001] 1 Lloyd's Rep 618, [2001] CLC 526, [2001] Lloyd's Rep IR 504, [2001] Lloyds Rep IR 504, [2001] 1 LLR 618, [2001] EWCA Civ 173, [2001] 1 All ER (Comm) 802

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Longmore)

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 2nd February 2001

LORD JUSTICE RIX :

1. The claimant, Ace Insurance SA-NV (formerly Cigna Insurance Company of Europe SA-NV, "Ace"), has commenced these proceedings for a declaration of non-liability under a contract of reinsurance made with the first defendant, Zurich Insurance Company ("ZIC"). When subsequently it learned of ZIC's assignment of all rights and liabilities under the contract, as part of an overall carving out of the business of ZIC's US branch, to the newly formed Zurich American Insurance Company ("ZAIC"), Ace joined the latter as second defendant. ZIC, which is a Swiss company, and ZAIC, which is a New York company, have applied to have these proceedings stayed on the ground of forum non conveniens in favour of proceedings in Texas. This is an appeal from the judgment of Longmore J, who acceded to that application [2000] 2 Lloyd's Rep 423.
2. There are two main issues. Logically, the first is whether the power to stay proceedings on the ground of forum non conveniens is consistent with the Lugano Convention, of which both the UK and Switzerland are signatories. On behalf of Ace, Mr Layton QC submits that it is not. If that were the case, then jurisdiction in England against at least ZIC would be maintained, and it is not seriously disputed by Mr Milligan QC on behalf of the defendants that there is no virtue in separate proceedings concerning ZIC and ZAIC respectively. Their cases, it might be said, stand or fall together. The second issue is whether the proceedings should be stayed in favour of Texan jurisdiction. On both issues Longmore J decided in favour of the defendants.
3. The original insured is a Texan company by the name of Nabors Industries Inc ("Nabors"). It and its associated companies were insured by a fronting insurance company called Sol Insurance Ltd ("Sol") and Sol reinsured with ZIC. ZIC's policy ran for 36 months from 1 April 1996 and covered physical damage and business interruption on a worldwide basis. It contained (in condition 32) a Texan jurisdiction clause under which ZIC and Sol waived any objection to the state or federal courts of Texas on the ground of improper venue or forum non conveniens. Other terms relevant to the present dispute are conditions 24 and 36 and the blow out preventer ("BOP") warranty. Condition 24 ("Assignment of Insurance") stated that "This insurance shall be void if assigned or transferred without the prior written consent of Underwriters". Condition 36 (the "Claims Co-operation Clause") provided inter alia that it was a "condition precedent to any liability hereunder that the Reinsured/Original Insured shall as soon as practicable…give written notice" of any claim to ZIC and should "cooperate with [ZIC] in the appointing of adjusters, assessors and surveyors and the negotiating and/or adjusting and/or settling of all claims…" The BOP warranty stated that "A blowout preventer of standard make will be set on the surface casing per usual industry practice, same to be installed and tested in accordance with usual practices…"
4. The reinsurance slip contract by which ZIC was reinsured by Ace (strictly speaking a retrocession, but I shall call it reinsurance) covered only part of what ZIC's policy had covered. Thus it was for a shorter period (from 4 May 1998 to 1 April 1999), excluded USA and Canada, and was limited to 60% of a sum insured of $10 million any one occurrence. Its "Conditions" read as follows:

"As original and/or as original following the original in all respects including claims settlement. Full R/I clause (LM 1) NMA 1735…Service of Suit Clause NMA 1998…"

The Reinsurance Clause provided inter alia that –

"…this Contract reinsures the Reinsured's interest in payments made within the terms and conditions of the Original Policy…"

5. The Service of Suit Clause provided inter alia that –

"It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured), will submit to the Jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Underwriters' rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States."

6. The clause went on to make provision for service either upon a specific name, which had to be inserted, or upon the officers designated by any statute in any state or district of the United States for the service of such process.
7. On 26 May 1998 one of Nabors' associated companies, Nadrico Saudi Ltd ("Nadrico"), suffered a loss when a well blew out in Saudi Arabia. The blow out preventer was in the process of being installed. There is now a dispute as to whether this was being done in accordance with usual practice. For present purposes, it is accepted (as sufficiently arguable) that ZIC did not give immediate written notice of Nabors' claim to Ace and gave no notice until January 1999. In the meantime ZIC had appointed loss adjusters and investigated the claim for itself, but without Ace's input, and had settled the claim for some $11 million. $7,624,000 was paid in November 1998 in respect of the physical damage, $3,667,947 in December 1998 in respect of business interruption, and in June 1999 a further $1,138,023 in respect of additional physical damage.
8. Ace disputed the claim, raising issues under the claims co-operation clause and the BOP warranty. On 8 September 1999 Ace was first into the field of litigation, claiming a declaration in these proceedings that it had no liability to ZIC because of breaches of both those terms, which it said were incorporated into its contract.
9. ZIC's response was (wholly mistakenly) to assert that it was not a party to the contract of reinsurance, that the contract was made instead with a company called Zurich Illinois, and that the Zurich Illinois contract contained an arbitration clause. On 19 January 2000 ZIC therefore applied to set aside service of Ace's claim form on these grounds.
10. In the course of further investigation into these issues ZIC for the first time, in April 2000, brought to Ace's attention the fact that and documentation under which the contract of reinsurance in question had been transferred with all the rest of ZIC's US branch's business to ZAIC. This transfer had been achieved by means of a Domestication Agreement made on 17 December and taking effect on 31 December 1998. Clause 1 of that Agreement provided for the transfer of "all of the business, assets and liabilities of the United States Branch". The transfer appears to have taken place subject to and in accordance with the Insurance Law of New York and seems to resemble some form of statutorily endorsed universal succession by ZAIC to ZIC's American business. News of this development led to the further allegation by Ace that its reinsurance is void under the prohibition of assignment or transfer without prior written consent contained in condition 24 of the underlying policy, also said to be incorporated into the reinsurance contract.
11. On 28 April 2000, shortly before the hearing of ZIC's challenge to the jurisdiction in England, ZIC and ZAIC commenced their own proceedings in Texas, in the district court of Harris county, pursuant to the service of suit clause, claiming an indemnity under the contract of reinsurance.
12. On 3 May 2000 ZIC's challenge to the jurisdiction in England came before Thomas J. The parties had already agreed an order in the following terms, which was then made by the judge:

"1. Subject to the following provisions of this order, there be no order on the application of [ZIC]…save that…[ZIC] be at liberty to make such further application pursuant to CPR Part 11…as it may be advised to make and as it may be entitled to make on grounds other than those set out in the said Application…

"2. The Claimant have permission to add [ZAIC] as Second Defendant to this action;

"3. Without prejudice to the right of the [ZAIC] to apply…to have such permission revoked, the Claimant do have permission on a without notice basis…to serve [ZAIC] out of the jurisdiction…"

13. Pursuant to that order ZIC and ZAIC applied on 14 June 2000 for a declaration that the English court would not exercise its jurisdiction against them and for a stay of these proceedings, on the ground of forum non conveniens and the existence of a distinctly more appropriate forum in the district court of Harris, Texas.
14. That application came before Longmore J on 18 July 2000. On the same day ZIC entered a new acknowledgment of service. ZIC there stated that it intended to defend the claim and left the box, which was there to indicate that it intended to contest the jurisdiction, unticked. However, Mr Layton does not submit that this prevented ZIC from arguing before Longmore J that "the court should not exercise its jurisdiction" (see CPR 11(1)(b)).
15. Longmore J acceded to the defendants' application to stay the proceedings; he also set aside the leave granted to serve ZAIC out of the jurisdiction. On the question of whether the court had power to stay a claim on the ground of forum non conveniens brought against a domiciliary of a contracting state under the Brussels-Lugano Conventions in a jurisdiction sanctioned by those Conventions, he held that he was bound by the decision of this court in In Re Harrods (Buenos Aires) Ltd [1992] Ch 72 to say that he did have that power. He did not regard Mr Layton's submission, that the fact that the defendant in that case was domiciled in England whereas the defendant here, ZIC, is domiciled in another contracting state, viz Switzerland, enabled the Harrods decision to be distinguished, was valid. Therefore, he was entitled to consider the forum non conveniens argument on the application of ZIC as well as ZAIC. On the merits of that argument, he found in favour of the defendants: although he expressed the view that the proper law of the reinsurance contract was English law, he thought that the significance of that was counterbalanced by the relevancy of Texan law to issues under the underlying contract; as to issues of fact, witnesses and other such matters, he thought that there was little to choose between the convenience of London and Texas; and he concluded that in these, otherwise evenly weighted circumstances, the decisive factor or critical feature was the service of suit clause, which as a matter both of commercial principle and of legal authority (he referred to Excess Insurance v. Allendale Mutual Insurance Co (CA, 8 March 1995) pointed to Texas.
16. In this court Mr Layton challenges both those conclusions. I will consider the Convention point first.

Is a stay of Ace's claim against ZIC on grounds of forum non conveniens consistent with the Lugano Convention?

17. ZIC is domiciled in Switzerland, a signatory, like the UK, to the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil Matters (the Lugano Convention, which was given the force of law in England by the Civil Jurisdiction and Judgments Act 1991 (the "1991 Act")). The Lugano Convention is of course closely modelled on the 1968 Brussels Convention, save that it is not possible to refer questions to the European Court of Justice. Subject to a reservation under which it is permitted to argue its point on forum non conveniens, ZIC has submitted to the jurisdiction of the English court. It is common ground, therefore, that the English court has jurisdiction in this case over ZIC under article 18 of the Lugano Convention, which provides –

"Apart from jurisdiction derived from other provisions of this Convention, a court of a Contracting State before whom a defendant enters an appearance shall have jurisdiction."

18. Ace also asserts that it has jurisdiction over ZIC under article 5(1), but by common assent it has not been necessary to debate that question because of the common ground on article 18.
19. However, section 49 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act), as amended by the 1991 Act, provides –

"Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any proceedings before it, on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention [the Brussels Convention] or, as the case may be, the Lugano Convention."

The question therefore arises whether the staying of these proceedings as against ZIC would be "inconsistent" with the Lugano Convention.

20. I will deal with this point more briefly than its interest and the erudite submissions of Mr Layton and Mr Milligan deserve, because in my judgment this court is bound by previous authority to say that the staying of these proceedings against ZIC would not be inconsistent with the Lugano Convention.
21. In In Re Harrods (Buenos Aires) a company incorporated in England, but doing business exclusively in Argentina, was at any rate nominally defendant to a petition brought by the minority shareholder against the majority shareholder (both of whom were Swiss companies) pursuant to section 459(1) of the Companies Act 1985 on the ground that it was being unfairly prejudiced by the latter's conduct of the company's affairs. At that time, prior to the Lugano Convention, the UK was a signatory to the Brussels Convention, but Switzerland was not. Jurisdiction against the English company existed under article 2 of the Brussels Convention. Nevertheless, the court of appeal decided that it had an inherent power, preserved by section 49 of the 1982 Act, to stay proceedings in England in favour of the natural forum in Argentina.
22. Dillon LJ said (at 93D/E):

"It is implicit in [section 49], in my judgment, that the court cannot stay or strike out or dismiss any proceedings on the ground of forum non conveniens or otherwise where to do so would be inconsistent with the Convention, and that covers all cases where the defendant in proceedings in England is domiciled in England and the conflict of jurisdiction is between the jurisdiction of the English court and jurisdiction of the courts of some other contracting state.

"The crucial question in the present case is whether the English court can stay, strike out or dismiss proceedings on the ground of forum non conveniens, where the defendant in the English proceedings is domiciled in England, but the conflict of jurisdiction is between the jurisdiction of the English court and the jurisdiction of the courts of a state which is not a contracting state, no other contracting state being involved."

23. Dillon LJ sought to answer that question by considering first, article 220 of the Treaty of Rome, and then the case of a defendant domiciled in a non-contracting state. He said (at 96C/G):

"As I see it the starting point in approaching the construction of the Convention must be article 220 of the E.E.C. Treaty, since the Preamble to the Convention shows as the starting point the desire of the parties to implement that article. The object of article 220 was to secure the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals between the member states of the Community.

"To achieve such recognition and enforcement it was evidently decided that the contracting states should have a common basis of international jurisdiction - or jurisdiction in the international order - in the matters which fall within the scope of the Convention. But the common basis of jurisdiction envisaged does not apply worldwide since under article 4, if a defendant is not domiciled in a contracting state the jurisdiction of the courts of each contracting state is to be determined by the national law. The desideratum expressed in Professor Schlosser's report, Official Journal 1979 No. C. 59/71. p/97, para. 78, that

"A plaintiff must be sure which court has jurisdiction. He should not have to waste his time and money risking that the court may consider itself less competent than another."

is thus very obviously not met where the defendant is not domiciled in a contracting state. Indeed the following passages in paragraph 78 appear to show that the Professor was only concerned in the paragraph with the protection of persons domiciled in the contracting states and with choices, which should not be on the ground of forum conveniens, between the courts of several contracting states having jurisdiction."

24. Thus the case of the defendant domiciled in a non-contracting state was used to illustrate, with the assistance of article 4 ("If the defendant is not domiciled in a Contracting State, the jurisdiction of the courts of each Contracting State shall, subject to the provisions of Article 16, be determined by the law of that State"), the limitations of the interests and purposes of the Convention.
25. Dillon LJ next drew attention to various anomalies which in his judgment would arise if the English court lacked a power to stay on the ground of forum non conveniens. Thus despite the provisions found in articles 21/22 for dealing with lis alibi pendens in the courts of contracting states, the English court would be powerless to refuse to entertain an action in England founded on the Convention where a lis was pending in the courts of a non-contracting state. Similarly, despite article 17, the English court would be unable to give effect to an exclusive jurisdiction clause in favour of the courts of a non-contracting state. He concluded (at 97H/98A) –

"Such results would, in my judgment, be contrary to the intentions of the Convention. Since the Convention is merely an agreement between the contracting states among themselves, I do not agree with Hobhouse J. that the framework of the Convention would be destroyed if there were available to the English court a discretion to refuse jurisdiction, on the ground that the courts of a non-contracting state were the appropriate forum, in a case with which no other contracting state is in any way concerned. I do not accept that article 2 has a very wide mandatory effect which Hobhouse J. would ascribe to it where the only conflict is between the courts of a single contracting state and the courts of a non-contracting state."

26. Bingham LJ agreed (at 103E) but also developed his own judgment. He set himself to adopt "an international and communautaire, not a national and chauvinistic approach" (at 99B). He too drew on article 220, the preamble to the Convention, and the case of the defendant domiciled in a non-contracting state. In that respect he referred to the Jenard report (Official Journal 1979 No C 59/1) at p13 where it is said –

"Everything possible must therefore be done not only to eliminate any obstacles to the functioning of this market, but also to promote its development. From this point of view, the territory of the contracting states may be regarded as forming a single entity: it follows, for the purpose of laying down rules on jurisdiction, that a very clear distinction can be drawn between litigants who are domiciled within the Community and those who are not."

27. Bingham LJ then considered a range of wider argument (at 101) and two first instance decisions to the effect that the power to stay on the ground of forum non conveniens was inconsistent with the Convention's mandatory jurisdiction under article 2. Both those cases (S & W Berisford Plc v. New Hampshire Insurance Co [1990] 2 QB 631 (Hobhouse J) and Arkwright Mutual Insurance Co v. Bryanston Insurance Co Ltd [1990] 2 QB 649 (Potter J)) were concerned with defendants domiciled (or treated under article 8 as being domiciled) in England. Bingham LJ then continued and concluded (at 103A/D) as follows:

"[Those cases] have, however, provoked a critical note bearing the very considerable authority of Mr. Lawrence Collins in (1990) 106 L.Q.R. 535. I would for my part adopt his conclusion, at pp. 538-539:

"When the European Court comes to consider the application of the Convention to non-contracting states, it should seek the answer in treaty interpretation, and ultimately in public international law. The Convention was intended to regulate jurisdiction as between the contracting states. Thus the Convention provides that in principle domiciliaries of a contracting state should be sued in that state, subject to important and far-reaching exceptions, and not in other contracting states. Once a court in a contracting state has jurisdiction it is entitled vis-à-vis other states, to exercise that jurisdiction and other courts cannot. But the states which were parties to the Convention had no interest in requiring a contracting state to exercise a jurisdiction where the competing jurisdiction was in a non-contracting state. The contracting states were setting up an intra-Convention mandatory system of jurisdiction. They were not regulating relations with non-contracting states."

Section 49 of the Act preserves the power of the English court to stay or dismiss any proceedings before it , on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the Convention of 1968. The ultimate question, therefore, is whether the exercise of the discretionary power here in issue in the present situation, where the only alternative forum is in a non-contracting state, is inconsistent with the Convention of 1968. I conclude that it is not and accordingly accept the argument of Intercomfinanz on this point."

Stocker LJ agreed with the judgments of both Dillon LJ and Bingham LJ.

28. That this decision is a controversial one is not in dispute. The House of Lords gave leave to appeal, and after hearing argument for a number of days referred six questions to the European Court of Justice. The questions can be found stated in the Official Journal of the European Communities (1992) OJ C219/4 (26.8.92). They included two questions as to whether the petition in the Harrods case fell within the terms of article 16(2), which grants exclusive jurisdiction to the courts of the contracting state where a company has its seat in proceedings which have as their object (inter alia) the dissolution of companies or the decisions of their organs. Article 16(2) had not been raised in the court of appeal. Ultimately, however, the reference to the European Court of Justice did not proceed as the appeal to the House of Lords was compromised. Lord Bingham of Cornhill CJ (as he then was) himself referred to the controversy in the subsequent case of Haji-Ioannou v. Frangos [1999] 2 Lloyd's Rep 337 at 346, where he said, speaking for the court –

"The decision has excited considerable controversy and may no doubt be overruled or varied hereafter. But it is at present authority binding upon us for whatever the case decided. The case must be taken to have decided that, where the choice is between the exercise of jurisdiction properly conferred on the English Court and the exercise of jurisdiction by a foreign Court in a non-Contracting State, the power to stay on grounds of forum non conveniens is not excluded by the Convention."

29. The point was reargued before the House of Lords in Lubbe v. Cape Plc [2000] 1 WLR 1545, where again the defendant was domiciled in England, but their Lordships did not consider it necessary to resolve it. If they had, they would again have referred it to the European Court of Justice (at 1562B).
30. Mr Layton was prepared to submit in this court, as he had done before Longmore J, that the present case, where the defendant is domiciled not in England but in another contracting state could be distinguished from In re Harrods. For these purposes he emphasised those passages in the judgments of both Dillon LJ and Bingham LJ where the case of the defendant domiciled in a non-contracting state was distinguished from that of the defendant domiciled in a contracting state. And he emphasised in particular those passages in the judgment of Dillon LJ which in his submission were deliberately inserted to guard against the extension of the decision in that case to a different situation where another contracting state was involved – see at 93E ("no other contracting state being involved"), at 97H ("in a case with which no other contracting state is in any way concerned") and at 98A ("where the only conflict is between the courts of a single contracting state and the courts of a non-contracting state"). He also referred to Bingham LJ's remark at 102A concerning "the absence of any conflict or potential conflict of jurisdiction between contracting states" (emphasis added).
31. That distinction did not appeal to Longmore J (see paragraphs 20/21 of his judgment), and is inconsistent both with Bingham LJ's adoption of the analysis of Mr Lawrence Collins (as he then was) at 103B/C and with Lord Bingham's statement in Haji-Ioannou v. Frangos as to what In re Harrods (Buenos Aires) had decided (albeit that statement was in an obiter part of the court's judgment).
32. Be that as it may, Mr Layton's difficulties were redoubled when the further court of appeal authority of Eli Lilly and Company v. Novo Nordisk A/S [2000] 1 L Pr 73, which was not cited below, surfaced on this hearing. For in that case the defendant was Danish and therefore a domicilary of another contracting state, and even so this court held both that In re Harrods had decided that "the Brussels Convention does not apply so as to regulate the jurisdictional issues between the courts of Contracting States and the courts of non-Contracting States" (at 78), and that it was not inconsistent with the Convention in that case to conclude that the courts of New Jersey were the appropriate forum for the resolution of the disputes between the parties (at 79).
33. Mr Layton was driven therefore to submit (i) that In re Harrods was wrongly decided; (ii) that it was decided per incuriam; and (iii) that Eli Lilly was also decided per incuriam.
34. His first submission is only relevant if his second and third submissions were to bear fruit. As to In re Harrods, Mr Layton submitted that it was decided per incuriam because article 16(2) was overlooked in the court of appeal, which would have given exclusive jurisdiction to the English courts in any event. Mr Milligan was prepared to submit, and made a powerful argument, that the claim in In re Harrods was not within article 16(2) in any event. In my judgment, however, it is unnecessary to decide that point since, even if article 16(2) did apply, that might merely mean that the result was wrong, but would not in itself impugn the reasoning of the court in the absence of article 16(2).
35. It is possible that Mr Layton also intended to submit that In re Harrods was decided per incuriam because the result did not follow from the reasoning, ie that the case of a competing jurisdiction in a non-contracting state was not analogous to the case of a defendant domiciled in a non-contracting state at any rate where the defendant was domiciled in a contracting state other than the UK. But quite apart from the fact that in my judgment that submission would not do justice to the reasoning of the court, the point is in any event bad, since it is merely another way of saying that the reasoning is flawed and wrong, not that the decision was per incuriam.
36. That applies equally to Mr Layton's submission that Eli Lilly was decided per incuriam. In effect Mr Layton was saying that the court of appeal in Eli Lilly was wrong to read In re Harrods in the way that it did, and wrong to apply the reasoning of that case to the situation of a defendant in a contracting state other than the UK. That, however, does not make the decision per incuriam. The situation is quite unlike the examples of decisions reached per incuriam discussed in Young v. Bristol Aeroplane Company Limited [1944] 1 KB 718.
37. There, in the famous judgment of this court given by Lord Greene MR, the following is found at 729:

"Where the court has construed a statute or a rule having the force of a statute its decision stands on the same footing as any other decision on a question of law, but where the court is satisfied that an earlier decision was given in ignorance of the terms of a statute or a rule having the force of a statute the position is very different. In cannot, in our opinion, be right to say that in such a case the court is entitled to disregard the statutory provision and is bound to follow a decision of its own given when that provision was not present to its mind Cases of this description are examples of decisions given per incuriam. We do not think that it would be right to say that there may not be other cases of decisions given per incuriam in which this court might properly consider itself entitled not to follow an earlier decision of its own. Such cases would obviously be of the rarest occurrence and must be dealt with in accordance with their special facts. Two classes of decisions per incuriam fall outside the scope of our enquiry, namely, those where the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covers the case before it - in such a case a subsequent court must decide which of the two decisions it ought to follow; and those where it has acted in ignorance of a decision of the House of Lords which covers the point - in such a case a subsequent court is bound by the decision of the House of Lords."

38. That was not intended to be an exhaustive categorisation of decisions given per incuriam, but it is still clear that the present cases of In re Harrods and Eli Lilly fall outside the rationale of any such rule. The terms of the Convention were before the court of appeal in both cases; no binding or authoritative decisions have been identified or even suggested as having been overlooked. It is simply that the decisions are said to have been wrong, that in In re Harrods the court misinterpreted the Convention, and that in Eli Lilly the court misinterpreted In re Harrods.
39. In my judgment In re Harrods and Eli Lilly cannot be said to have been decided per incuriam but are binding on this court, and therefore Mr Layton's submissions on the merits of those decisions do not arise. I can record, however, that those submissions embraced what in Haji-Ioannou v. Frangos at 347 Lord Bingham himself recognised to be "the erudite and judicious consideration of the subject" by Briggs & Rees in Civil Jurisdiction and Judgments, 2^nd ed, 1997, particularly at paras 2.225/231. Even so, Lord Bingham went on to say (ibid) -

"Having reviewed the arguments both ways, in a manner which calls for careful reading but cannot be fairly summarized, the authors incline to the opinion that there is in the present situation no discretion to stay on the grounds of forum non conveniens. It does not, however, appear to us that the exercise of jurisdiction to stay on grounds of forum non conveniens is subversive of the Convention regime, and in appropriate circumstances we consider that recognition of a power to stay or dismiss may promote that due administration of justice which must be the ultimate and paramount concern of all Contracting States."

40. Mr Layton also submitted that the problem of articles 17, 21 and 22 which had exercised Dillon LJ in the Harrods case (because they were confined to lis alibi pendens in the courts of a contracting state (articles 21/22) or to jurisdiction agreements in favour of contracting states (article 17)) was to be overcome by applying those articles by analogy (or in what is termed "reflexive" mode) in the case of non-contracting states. This would be to find a solution to the problem within the terms of the Convention itself, rather than by a doctrine of forum non conveniens which is foreign to the Convention. The matter is discussed in Briggs & Rees at paras 2.233/5, Dicey & Morris, The Conflict of Laws, 13th ed, 2000, at para 12.019. Mr Milligan was inclined to agree that, as an alternative to his primary submission, such articles of the Convention should at the very least be applied by analogy in such situations. Thus he categorised as absurd the possibility that the English courts could not stay a late invocation of Convention jurisdiction in England, after a foreign trial to which the English claimant was a party had been proceeding a long way.
41. There was therefore a degree of unanimity that exclusive jurisdiction clauses of the kind countenanced by article 17 should be applied even where the clause in question was in favour of a non-contracting state. The difficulty was that Mr Layton and Mr Milligan were not agreed as to whether the service of suit clause in the present case would or would not have fallen within article 17 if it had provided for jurisdiction in a contracting state rather than in Texas. Mr Milligan, relying on Kurz v. Stella Musical GmbH [1992] Ch 196 at 203/4, characterised the service of suit clause as one that would have been within article 17 if it had provided for jurisdiction in Paris. Mr Layton, however, submitted that, because the service of suit clause did not have what he called preclusive effect, in the sense that it did not preclude either party from commencing litigation in courts which would otherwise have jurisdiction under the Convention, therefore it was not supported by the reasoning of Hoffmann J in Kurz v. Stella Musical nor did it come within the terms of article 17. Longmore J did not feel it necessary to resolve this issue, merely remarking at para 21 of his judgment that:

"It would be even odder if an agreement to submit to the jurisdiction of the courts of a non-contracting State had to be treated as ineffective in any Convention country. That is, however, the effect of Mr Layton's argument if, as he argued, article 17 has no application because pursuant to Excess v. Allendale the Service of Suit clause was not an exclusive clause."

42. In the light of my acceptance of the argument that this court is bound by its previous decisions to give effect to applications based on forum non conveniens, I need not resolve this issue either, and would be reluctant to do so on the basis of the brief arguments addressed on it. However, this issue does indicate how narrow, in one sense, is the divide between the parties. In another sense, of course, they are divided by different conceptions of the nature of the Convention.
43. I would record that there was no submission that the argument which divided the parties was affected in any way by the fact that (not only was the defendant domiciled in Switzerland but) the claimant, Ace, was also domiciled in yet a third contracting state, namely Belgium. Although the contract in question was made in London through Ace's office here, article 8, which would have deemed its domicile to be in England had the contract been one of insurance rather than reinsurance, has no application to the case of reinsurance: see Agnew v. Länsförsäkringsbolagens AB [2000] 2 WLR 497 and Group Josi Reinsurance Company SA v. Universal General Insurance Company (Case C-412/98) [2000] 3 WLR 1625.
44. For these reasons, as a matter of authority binding on this court, it is permissible to consider ZIC's application to stay these proceedings on the ground of forum non conveniens on its merits.

Forum non conveniens

45. In the judgment below and in Mr Layton's submissions on appeal the issue of forum non conveniens was considered first. I have reversed the order, because it seems to me that logically the Convention question takes priority. In taking this course, I have been struck by the thought that, even though the Convention may not preclude the application of the doctrine of forum non conveniens where the competing forum lies in a non-contracting state, nevertheless it may be relevant to consider, as part of the question of forum non conveniens, the presence and nature of jurisdiction in England under the Convention. In the event, however, this approach has been bypassed in the submissions in this court by a combination of dealing with the forum non conveniens argument first and by ZIC's (contingent) submission to the jurisdiction of the English court. The latter has obscured the question whether any special jurisdiction under the Convention such as jurisdiction under article 5(1), as distinct from jurisdiction by way of submission, applies in this case. I say this because, as between Ace and ZIC, who are both domiciliaries of separate contracting states, it might perhaps have been said that the fact that England is bound (albeit where a competing jurisdiction in a non-contracting state is concerned, subject to considerations of forum non conveniens) to recognise the special jurisdictions of the Convention, should play some role, and possibly not an insignificant role, in the exercise of its discretion to stay on the basis of forum non conveniens. However, the Convention factor was only brought into play on the Convention issue above. It is true that Mr Layton did at times rely in the context of forum non conveniens on the establishment of jurisdiction in England by consent (in circumstances where it was common ground that that provided Convention jurisdiction under article 18). However, no special Convention point was being made at this stage of the argument, and it seems to me that, subject to the different question as to whether ZIC's willingness to enter an appearance before the English court can be said to have waived reliance on the service of suit clause, in all other respects ZIC's appearance here under a reservation of forum non conveniens takes the argument, for the purposes of that doctrine, no further. I therefore leave the Convention out of account for present purposes.
46. Mr Layton's approach on this part of the case was rather as follows: first, to attempt to show that Longmore J had erred in principle and not merely as a matter of degree in failing to find in the English proper law of the reinsurance contract a reason for concluding that England was a more convenient forum than Texas; and secondly, to discount the significance of the service of suit clause (which it will be recalled that Longmore J had treated as the critical factor) on the basis inter alia that ZIC had waived it by submitting to the jurisdiction in London.

The significance of English proper law

47. I turn therefore to the first prong of Mr Layton's attack, which was to seek to promote the importance of English law in Ace's claim under the reinsurance contract and thus to undermine Longmore J's view that its significance was counterbalanced by the relevancy of Texan law to issues under the underlying contract of insurance. Longmore J, dealt with this issue briefly. He said (at para 9):

"I will say, however, that, in my view, the proper law of the reinsurance contract is English law…That does not mean that an English Court will not have regard to the law of Texas; that is because the liability reinsured is a liability under Texas law. Texas law will therefore be relevant and which ever Court decides the case will have to know or be informed of Texas law. The fact, therefore, that the proper law of the reinsurance contract is English is not of any significant weight in concluding where the case is to be tried."

48. Longmore J had already referred (at paras 5(3) and 6(1)) to the competing submissions before him: on the part of Mr Milligan that Texan law would have to be looked at, as the law of the underlying insurance, pursuant to the teaching of Forsikringsaktieselskapet Vesta v. Butcher [1989] AC 852; and on the part of Mr Layton that questions of Texan law could not arise under an English law contract. On that issue, the judge had preferred the submission of Mr Milligan.
49. In Vesta v. Butcher the House of Lords had to consider an original policy, under which a Norwegian insurer had insured a fish farm in Norway, and a reinsurance policy made in the London market which was treated as incorporating all the provisions of the underlying contract and also contained a "follow the settlements" clause. The Norwegian policy was governed by Norwegian law and the London policy was governed by English law. The original assured suffered a loss while in breach of two warranties, one requiring the keeping of detailed stock records, the other promising continuous surveillance. However, the breaches of warranty were not causative of the loss. In those circumstances Norwegian law provided no defence, although English law did. The reinsured settled with the original assured without reference to the reinsurer. The reinsurer declined liability in reliance on a claims control clause, also treated as incorporated into the reinsurance policy, which provided that failure to comply with any of the warranties would render the policy null and void. Under Norwegian law the latter provision did not bite on a failure which was not causatively relevant. Was English law or Norwegian law to prevail? The effect of their Lordships' judgment was that Norwegian law was to prevail, essentially on the basis that where a reinsurance contract was intended to provide back to back indemnity for any liability under the underlying contract, English law would construe identical clauses in the two contracts in the same way as they were construed under the underlying policy (at 892C and 911E).
50. It has been suggested (in Kluwer's reinsurance law, at B.1.2-06/16) that the concession in Vesta v. Butcher that the warranties and claims control clause were incorporated into the reinsurance contract unnecessarily complicated the reasoning in that case, and that the problem might have been more easily resolved if permission had been granted at first instance to amend to plead no incorporation of such terms: in that case the reinsurers' liability would simply have been to follow the settlement. A distinction is made (at B1.2.06), on the basis of decided cases, between the incorporation of insuring wording, which presents no problems, and the incorporation of terms and conditions applicable to the original policy, such as obligations of the assured during the currency of the policy or on making a claim, which may be irrelevant or even repugnant to the reinsurance policy: it is suggested that the incorporation of such terms should require clear wording. In Vesta v. Butcher Lord Griffiths (at 894/7) went a certain distance to consider what arguments might have arisen if permission to amend had been granted; and Lord Lowry referred more briefly and cautiously to the issue (at 912F). Similar arguments would arise in the present case, but are not for resolution at this stage. Mr Layton's starting position, however, is that the three terms he relies on, ie the assignment of insurance clause (condition 24), the claims cooperation clause (condition 36) and the BOP warranty, are all incorporated.
51. In this court Mr Layton has sought to maintain his submission below that Texan law nevertheless has no relevance, but he has faced a difficult task. He was inclined to concede that the BOP warranty would, on Vesta v. Butcher principles, receive the same construction under English and Texan law, but in the case of that term he submitted that there was unlikely to be any difference as a matter of law, and that the real controversy lay in narrow issues of fact, based on the existing evidence as to what occurred, as to whether what was being done was in accordance with usual industry practice, a matter essentially for expert opinion. It must follow in my judgment that as to that term at any rate Mr Layton can derive no advantage out of English law.
52. As to condition 24 and the prohibition on assignment, Mr Layton submits that this term is incorporated into the reinsurance contract and renders it void on the basis that ZIC assigned or transferred its US business, including its liability under its policy and its rights under the reinsurance policy, to ZAIC without Ace's prior consent. He submits that the effect of the condition, once an assignment prohibited by it is proved, is a pure matter of English law – and a straightforward one at that. He seeks to avoid the effect of Vesta v. Butcher by submitting that since condition 24 refers to a different "insurance" and different "Underwriters" when read in the underlying policy and in the reinsurance contract respectively, the doctrine of that case cannot apply.
53. ZIC/ZAIC for their part deny that condition 24 is so incorporated into the reinsurance contract, but, on the assumption that it is, say, on the basis of the evidence of their US law expert, that under New York law, being the law governing the assignment and the proper law of the Domestication Agreement, a transfer of an insured's business and assets by operation of law (under the Insurance Law of New York) having no effect on the risk or hazard of loss does not violate a non-assignment provision such as condition 24. Copious authority is cited for this proposition, and it is said that it would be followed by a Texan court. The expert adds: "This rule effectuates the intent of the parties to the insurance contract, that is, to prohibit only those assignments that increase the risk of loss to the insurer." In this connection it was to be noted that the risk had materialised in May 1998 (and been almost entirely paid by December 1998), whereas the transfer only took effect on 31 December 1998: New York law also held that a non-assignment provision did not prohibit assignment after the date of loss. Finally, New York law (and a Texan court) would, if necessary, give effect to a clause in the Domestication Agreement whereby nothing done was intended to impair ZIC's or ZAIC's rights: so that even if, for the sake of argument, a court were to be minded otherwise to forfeit their rights under the reinsurance contract, it would instead "reform or rectify" the Domestication Agreement so as to carve out the reinsurance contract from the transfer so as to effectuate the intent of the parties not to impair their rights. Mr Layton was prepared to concede that the effect of the transfer, including the issue of rectification, would be a matter for New York law, even under an English law contract.
54. In the circumstances, I do not see how condition 24 is of much assistance to Mr Layton for the purposes of his submission that English law has a qualitatively superior significance in this litigation. Even if the condition is incorporated, and even if it is to be given a construction different from and wider than New York law would give it or Texan law or a Texan court would recognise, it would be impossible to avoid looking to New York law both for the effect of the transfer and for the issue of rectification. As it is, with the issues of incorporation and of the effect of Vesta v. Butcher both in contention, it would be impossible at trial in England to avoid looking to evidence of New York law for the whole gamut of submission relevant to the condition.
55. Thirdly, Mr Layton relies on condition 36 as providing the context for the importance of English law. He again submits that it is incorporated and that the doctrine of Vesta v. Butcher is avoided since under the reinsurance contract the claims cooperation clause has a content different from that which it would have under the original insurance: under the reinsurance contract it would impose an obligation on ZIC for Ace's benefit, not an obligation on the original assured for ZIC's benefit. Again, however, both issues are in dispute (as well as the factual issue as to whether prompt notice was actually given). Mr Milligan submits that condition 36 is not incorporated and that it is a simple question of Ace's obligation to follow the settlement; but that even if that were not so, because condition 36 was incorporated, either condition 36 would have no effect because under Texan law it provided no defence in the absence of prejudice, or it would still be open to the respondents to prove that they had made a reasonable settlement. In that last respect, he has some support from what Lord Lowry (citing Hobhouse J at first instance) said in Vesta v. Butcher at 912H/913F for a submission that it would always be open for the respondents to seek to prove that they were liable under ZIC's policy and thus to enforce liability under the reinsurance contract. In this connection, the respondents had pointed out to Ace in the course of correspondence in May 1999 that they could hardly have left the claim to go to trial in Texas, where Nabors was domiciled, with the endemic risk of facing punitive damages: "To deny this loss on that basis [the BOP warranty] would certainly be considered arbitrary, in the least." But quite apart from those considerations, Mr Milligan is able to point to evidence of Texan law to the effect that untimely notice will not defeat a reinsurance claim in the absence of prejudice to the reinsurer, and that a "settlement-without-consent exclusion" would only be construed to operate in favour of a reinsurer who has suffered prejudice.
56. Mr Layton is able to say, correctly, that all issues of incorporation or as to the extent of the doctrine in Vesta v. Butcher would be matters of English law. Nevertheless, he remains at any rate prima facie under the difficulty that either the claims cooperation clause is incorporated, in which case one has to look at least arguably to Texan law, or it is not incorporated, in which case cadit quaestio.
57. These considerations, which, in deference to Mr Layton's argument, I have taken at greater length than the judge, who was perhaps faced with briefer submissions below, have left me utterly unconvinced that English law has a qualitatively more significant role to play than Texan and/or New York law, or that the judge was wrong to find that the fact that the proper law of the reinsurance contract might be English "is not of any significant weight in concluding where the case is to be tried".

The significance of the service of suit clause

58. I therefore turn to the second main plank in Mr Layton's attack on the judgment below on this part of the case, which is to seek to discount the significance of the service of suit clause, which Longmore J had treated as a critical factor. The relevant part of the clause is set out above (at para 5). The critical wording is that "the Underwriters hereon, at the request of the Insured (or Reinsured) will submit to the Jurisdiction of a Court of competent jurisdiction within the United States…"
59. Longmore J treated the clause as critical in large part under the influence of what this court had said in Excess Insurance v. Allendale. There, as here, the reinsurer sought to bring proceedings against his reassured in England and was first into the field. The reinsurance contract contained a service of suit clause in materially identical terms. The judge at first instance Saville J, who refused to maintain leave to serve out under RSC Order 11 at the inter partes hearing, was interpreted as having decided in effect that, even though at that time there had been no request to submit to the jurisdiction of a US court, the reinsurer had broken his contract by starting his proceedings in England. On that basis, the clause would be viewed as an exclusive jurisdiction clause. On appeal, Hobhouse LJ, who gave the leading judgment with which the other members of this court agreed, said that that was mistaken. The clause is not an exclusive jurisdiction clause: either party may sue the other wherever it has the right to do so. However, by the time that case had reached the court of appeal, the reassured had commenced suit in the courts of Rhode Island and had requested the reinsurer pursuant to the clause to submit to the Rhode Island court's jurisdiction. In the result, the appeal failed. Hobhouse J said:

"In my judgment, on the facts which now exist, it is inevitable that the discretion should be exercised in the same way as Saville J exercised it. This is not a suitable case in which, on the facts as they presently exist, to give leave to serve out of the jurisdiction. The writ was one which appears to raise bona fide arguable claims and to raise an arguable basis under Order 11 r1. But it is an action which will now be proceeding in parallel with the proceedings that have been started in the Rhode Island court. The proceedings in the Rhode Island court have been properly started as a matter of jurisdiction. That is the effect of the Service of Suit clause and no one has argued before us to the contrary. The Rhode Island court will have to consider whether in the exercise of its own jurisdiction it should stay the proceedings before it. It is suggested that it may be persuaded to do so on the basis that the United Kingdom courts are a more convenient forum than the courts of Rhode Island. It is for the judge in the Rhode Island court to determine whether he considers that is the case. If he decides that it is not the case, then the proceedings will continue in Rhode Island. The question of liability will have to be determined in Rhode Island. It is not proper or appropriate that the courts of this country should at the same time try to determine, on an Order 11 basis, the matters which, within the jurisdiction of the Rhode Island court, are being determined by that court. There, on that hypothesis, this is not a suitable case to give leave to serve out of the jurisdiction."

60. Mr Layton submits, however, that the present case is distinguishable. First, by submitting to the jurisdiction of the English court, ZIC has waived its right to enforce the clause. Secondly, because ZIC has submitted to the jurisdiction in England, the burden is on ZIC to justify a stay, rather than on the reinsurer to justify service out. Thirdly, a service of suit clause is never decisive, and may be outweighed by the obvious convenience of having the substantive issues tried in England.
61. In my judgment, however, none of these submissions prevails. As to the first of them, ZIC's acceptance of English jurisdiction (a) came only after it (and ZAIC) had already filed its action in Texas on 28 April 2000 and (b) was subject to their application for a stay of the proceedings here on the ground of forum non conveniens. That application invoked the Texas action and the service of suit clause as among the grounds why the English court should not exercise its jurisdiction over them. In such circumstances it is impossible to say that there has been any waiver of any rights under the service of suit clause.
62. As for Mr Layton's second and third submissions, I can take them together. It is of course true that, by reason of the acceptance of jurisdiction in England, ZIC faces a burden which, in Excess Insurance v. Allendale, fell entirely, under RSC Order 11, on the claimant. Nevertheless, Ace's agreement in the service of suit clause to submit itself to the jurisdiction of a court of competent jurisdiction within the United States effectively reverses the burden of persuasion once again. If a party agrees to submit to the jurisdiction of the courts of a state, it does not easily lie in its mouth to complain that it is inconvenient to conduct its litigation there (ie to assert that the agreed forum is a forum non conveniens). As Waller J pointed out in British Aerospace Plc v. Dee Howard Co [1993] 1 Lloyd's Rep 368 at 376, speaking of matters of convenience in the context of a non-exclusive jurisdiction clause, it is necessary to point to some factor which could not have been foreseen in order to displace the bargain which has been agreed. In such a case that party must show some good reason or special cause why it should not be held to its agreement to submit to the agreed jurisdiction; and if it cannot do so, there seems no reason why the English court should entertain parallel proceedings here, with their attendant evils - duplication of expense and the danger of inconsistent decisions. In the present case, however, there is no reliance by Mr Layton on anything unforeseen, no suggestion of any strong or special cause, no identification of some matter which lies beyond considerations of convenience and goes to a matter of justice. On the contrary, what this court has been pressed with, like Longmore J below, are the usual and straightforward factors of an argument on convenience – the nature of the issues, the relevance of English as against Texan or New York law, the whereabouts and nationality of witnesses of fact or expertise, cost and delay, and such like. The balancing of such factors, however, are essentially a matter for the judge's discretion, and there has been no suggestion, other than the arguments which I have dealt with above, as to why Longmore J's disposal of his discretion was in some way at fault such as to render it susceptible to review or to call for the exercise of a fresh discretion in this court.
63. Therefore I see nothing different or special about this case to distinguish it from the approach taken by this court to the service of suit clause in Excess Insurance v. Allendale. In reaching this conclusion, however, I would briefly mention two factors which arise from the language of the clause, but which have not been made the subject of particular submission or evidence. I refer to the wording from the clause: "at the request of the Insured (or Reinsured)"; and "a Court of competent jurisdiction". There is I believe no evidence before the court, or none at any rate which has been brought to its attention, to the effect that Ace was requested to submit to the jurisdiction of the Texan state court in Harris County. However, no point has been made as to this requirement, perhaps because it is common ground that it has been fulfilled, or perhaps because the mere service of the Texan proceedings amounts to such a request within the meaning of the clause. I therefore say nothing more about it, other than this. Until ZIC's request pursuant to the clause, there could be no complaint, based on the clause, about Ace proceeding in this court. Therefore, on my understanding of the evidence, there could have been no challenge to the English action prior to the commencement of the Texan action on 28 April 2000 and communication of that fact to Ace. By that time this action had been in being for nearly 9 months, albeit it had made little progress. Clearly, the longer that an English action had been in progress, and the more advanced it had become, before the service of suit clause should have been invoked, the weaker, potentially, is the case for staying the earlier case in favour of the later. However, no special feature has been made of this point in this case.
64. The second requirement, of a court of competent jurisdiction, is perhaps an unusual feature of the clause. Frequently a jurisdiction clause will simply seek to render the agreed forum competent by means of its own stipulation. Thus in English law there is generally no difficulty about an English jurisdiction clause being given its effect, even if the parties and their dispute have no other connection with England. Of course, the English court has a residual discretion even so to stay proceedings brought pursuant to such a clause, on the grounds of forum non conveniens. That, however, is not to say that the court was not competent to hear the matter.
65. In the present case there is neither submission nor evidence from Ace that the Texan state court is not a court of competent jurisdiction. The respondents' evidence reveals that at one stage Ace had removed the Texan state court action into the federal district court for the Southern District of Texas, on the basis of diversity of citizenship. ZIC and ZAIC had responded by applying to remand their action back into the state court on the basis of lack of subject matter jurisdiction in the federal court. That application went unopposed by Ace and the motion to remand was granted, on 27 June 2000. Reference is made in the papers in the federal court to some intention on the part of Ace to challenge in personam jurisdiction in the state court after the case was remanded. However, nothing whatsoever is known about the basis of that challenge, or its progress. There is no reason therefore to think that the Texan state court is not a court of competent jurisdiction. In Excess Insurance v. Allendale Hobhouse LJ made a similar point when he said that the proceedings in the Rhode Island court had been properly started as a matter of jurisdiction and that no one had argued to the contrary. Even so, the court of appeal in that case had been told that within the last twenty-four hours the reinsurer there had filed a motion in the Rhode Island court to stay the claim there on the ground of forum non conveniens. As to that, Hobhouse LJ said that it was for the judge in Rhode Island to determine that application. Whatever may be the status of any challenge to the jurisdiction of the Texan state court in the present case must similarly be a matter for that court. That issue has simply not entered into the debate on this appeal. What the position might be if a reinsurer sought in England to dispute the effectiveness of the service of suit clause by raising a challenge to the competency of a court in the United States must await that argument. Similarly, what might happen if ultimately the Texan state court should decline jurisdiction over Ace would lie in the future: a possibility is that Ace might then apply for the stay of these proceedings to be lifted.
66. For these reasons, I would reject the second limb of Mr Layton's attack on Longmore J's conclusion that these proceedings should be stayed on the ground of forum non conveniens.

Conclusion

67. It follows that this appeal should in my judgment be dismissed.

MR JUSTICE JACOB:

68. I agree.

LORD JUSTICE KENNEDY:

69. I also agree.
Order:
70. Subject to the following provisions of this order the appeal be dismissed:
71. Paragraphs (1), (2) and (3) of the order of Mr Justice Longmore be replaced by an order that the action be stayed as against the First Defendant and service of the amended Claim Form on the Second Defendant be set aside;
72. The Appellant to pay the costs of this appeal, to be the subject of a detailed assessment;
73. The Appellants' application to appeal to the House of Lords be dismissed.
(This order does not form part of approved judgment)