Forum Conveniens and Governing Law in Reinsurance Contracts

Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange [2010] Commercial Court, 10 September 2010

This case was a dispute about forum. However, as with many such disputes it also involved determination of important threshold questions as to governing law.

The Defendant (OMIE) was a Canadian mutual insurance carrier, whose business was reinsured under excess of loss contracts underwritten in the London market by the Claimant reinsurer, Stonebridge, a member of the XL Group (XL).

The reinsurance was arranged by Canadian brokers via their London operation, in the form of a typical London market slip, incorporating a number of standard London market terms. There was, however, no express choice of law.

A dispute arose under the excess of loss contracts, specifically as to compliance (or not) with notification requirements, and the operation of the aggregate annual deductible. OMIE launched proceedings on the claim against XL in Canada, asserting that the contract was subject to the laws of Ontario. XL retaliated with the commencement of English proceedings, seeking various heads of declaratory relief from the English court, and asserting that English law governed the contracts.

Initially, XL obtained the permission of the English court to serve the proceedings on OMIE, that is outside the jurisdiction, on the interim grounds that the reinsurance contract was made in England, through an English placing broker and was governed by English law, thereby satisfying one or more of the grounds specified for service out of the jurisdiction under the Civil Procedure Rules.

OMIE applied for an order setting aside service of the Claim Form on it in Ontario on the ground that England was not, in fact, the proper forum (the forum conveniens) for the dispute between the parties.

In deciding questions of forum conveniens, the court is required to determine the forum where the claim can most suitably be tried in the interests of all the parties and the ends of justice. It is necessary for the party seeking to invoke the English jurisdiction, in this case XL, to show that England is clearly and distinctly the most appropriate forum, a question that will take into account a number of factors including:

1. which is the natural forum, that is to say the place with which the dispute has it most real and substantial connection;

2. the nature of the dispute and the law by reference to which the dispute is to be determined;

3. the location of the parties and...