## Facts

- XL Insurance Ltd (XL) provided excess insurance coverage to Toyota Motor Sales U.S.A. Inc. (Toyota) for liabilities arising in the United States.
- The insurance contract contained an arbitration clause requiring disputes to be arbitrated in London under the English Arbitration Act, while stating that New York law governed the contract’s substantive issues.
- The clause required each party to nominate one arbitrator, and required those two arbitrators to nominate a third arbitrator.
- The clause further provided that if the two arbitrators failed to agree on the third arbitrator, the parties could apply to a judge of the High Court of England to name the third arbitrator.
- In September 1998, Toyota demanded arbitration and nominated an arbitrator described in summaries as an American insurance lawyer.
- In October 1998, XL nominated an arbitrator described in summaries as a British lawyer with experience in insurance law and arbitration.
- After these nominations, the parties could not agree on any of the proposed candidates for the third arbitrator.
- XL’s American attorneys wrote to Toyota suggesting that any third arbitrator selected by the two arbitrators should be subject to the parties’ approval.
- The parties also differed over the background they wanted in the third arbitrator: XL wanted someone with knowledge of English arbitration law and London arbitral practice, while Toyota wanted someone with knowledge of U.S. tort law and practice and New York insurance law.
- XL applied to the High Court of England for appointment of the third arbitrator under the clause.

## Issues

1. Whether, under the parties’ arbitration clause, the High Court of England should appoint the third arbitrator when the two party-nominated arbitrators failed to agree on the appointment.
2. Whether a proposal in counsel correspondence that the third arbitrator be “subject to the parties’ approval” could alter or add to the appointment procedure set out in the arbitration clause.
3. In making (or considering) an appointment for a London-seated arbitration governed procedurally by English arbitration law but substantively by New York law, what type of legal background the third arbitrator should have.

## Decision

- The High Court of Justice (Queen’s Bench Division, Commercial Court) issued an unreported judgment dated 14 July 1999, attributed in secondary references to Aikens J, arising from XL’s application for appointment of a third arbitrator.
- The proceeding concerned court involvement in constituting the tribunal where the contractual method (agreement between the two party-nominated arbitrators) had not produced a third arbitrator.
- Freely accessible sources do not provide the full judgment text, do not identify any appointed third arbitrator (if one was appointed), and do not provide a detailed account of the court’s reasoning.

## Legal Principles

- Where an arbitration agreement provides a defined method for appointing arbitrators and allows an application to the High Court if that method fails, the court may be asked to complete the appointment process when the agreed method breaks down.
- In a London-seated arbitration under English arbitration legislation, the seat and procedural law inform the context for any court-assisted appointment, even where the contract’s substantive governing law is foreign.
- Communications between lawyers suggesting additional steps for appointment (such as requiring party approval) do not necessarily change the agreed procedure unless they amount to a binding variation of the parties’ contract.

## Conclusion

XL Insurance Ltd v. Toyota Motor Sales U.S.A. Inc. is an unreported Commercial Court judgment (Aikens J, 14 July 1999) arising from a London-seated insurance arbitration under English arbitration law with New York substantive law, in which the parties’ party-nominated arbitrators could not agree on a third arbitrator and XL applied to the High Court to make the appointment; open-access sources provide the factual setting and the nature of the appointment dispute but do not provide the judgment’s full reasoning or the identity of any appointee.


XL Insurance Ltd v. Toyota Motor Sales U.S.A. Inc., Unreported judgment of 14 July 1999 (1999)