Facts
- Brazilian insurers issued two “all risks” policies covering construction of the Jirau hydroelectric project in Brazil.
- After March 2011 incidents, the insured claimed under the policies; insurers denied liability, alleging losses were uninsured or excluded and that an unnotified “material alteration” breached the policies.
- The policies included: (i) an express Brazilian governing law clause for the contract, (ii) an exclusive Brazilian court jurisdiction clause, (iii) a London-seated arbitration clause, and (iv) a mediation provision whose effect was disputed.
- The insurers commenced London arbitration seeking declarations of non-liability and material alteration.
- The insured filed proceedings in São Paulo seeking to prevent arbitration and obtained a Brazilian injunction restraining the insurers from continuing the arbitration, relying on a Brazilian-law consent requirement.
- The insurers sought an English anti-suit injunction; the Commercial Court granted and continued interim relief, holding the arbitration agreement governed by English law and was enforceable.
- The insured appealed to the Court of Appeal.
Issues
- What law governed the arbitration agreement: Brazilian law (contract law) or English law (law of the seat)?
- Whether the mediation provision imposed an enforceable obligation and/or a condition precedent to arbitration.
- Whether the arbitration clause covered liability disputes or only disputes about quantum.
- How to reconcile the exclusive Brazilian court jurisdiction clause with the London arbitration clause.
- Whether an English anti-suit injunction restraining the Brazilian proceedings should be maintained.
Decision
- The Court of Appeal dismissed the appeal and upheld continuation of the anti-suit injunction.
- The arbitration agreement was governed by English law, despite the policy’s express choice of Brazilian law for the contract generally.
- The mediation provision was not an enforceable obligation and was not a condition precedent to arbitration.
- The arbitration clause covered disputes about liability as well as quantum.
- The Brazilian jurisdiction clause did not displace the arbitration agreement; it applied to matters outside the arbitration agreement and/or ancillary court proceedings.
Legal Principles
- An arbitration agreement is separable from the main contract; an express governing law clause for the contract does not necessarily constitute an express choice for the arbitration agreement.
- Determining the law of the arbitration agreement follows a structured inquiry: express choice, implied choice, and failing those, the law with the closest and most real connection.
- Selection of a London seat strongly indicates an intention to submit to English curial law and supervisory jurisdiction, supporting English law as the law most closely connected to the arbitration agreement.
- Courts construe arbitration clauses broadly absent clear language to the contrary; references that appear to concern payment issues do not confine arbitration to quantum alone.
- ADR clauses are enforceable only if sufficiently certain; open-ended mediation language without defined process may be too uncertain to compel compliance or delay arbitration.
- Where a party brings foreign proceedings in breach of an arbitration agreement, the court at the seat may restrain that breach by anti-suit injunction, notwithstanding comity concerns, to protect the agreed arbitral process.
Conclusion
The Court of Appeal treated the London-seated arbitration clause as governed by English law, rejected mediation as a precondition to arbitration, construed the clause to include liability disputes, reconciled it with the Brazilian jurisdiction clause as addressing different matters, and upheld an anti-suit injunction to stop Brazilian proceedings brought to obstruct the arbitration.