Court of Appeal finds reinsurance dispute must be resolved in arbitration not court

Court of Appeal finds reinsurance dispute must be resolved in arbitration not court

Tyson International Company Ltd -v- Partner Reinsurance Europe SE [2024] EWCA Civ 363

“The parties began by playing cricket but then switched to baseball.”

The parties reached agreement on two documents eight days apart. There was no dispute that the first document was a reinsurance contract containing an English law and exclusive jurisdiction clause. The issue was whether the second document, that contained a New York law and arbitration agreement, replaced the previous contract or whether it was merely an administrative document of no contractual effect.

The Court of Appeal agreed with the Commercial Court that it was a replacement reinsurance contract and that the court proceedings should be stayed in favour of New York arbitration.

The contractual background

The standard form of insurance and reinsurance contract in the London market is known as the Market Reform Contract (MRC). 

The Market Uniform Reinsurance Agreement (MURA) is a standard form of reinsurance policy commonly used in the property reinsurance market in the United States.

Tyson, a Bermudan company, is a subsidiary of a US company, Tyson Foods Inc. Tyson Foods Inc owns a large property portfolio. Prior to 2020, Tyson Foods reinsured its property through a direct insurance programme in which Partner Re participated.

From 2020 onwards, Tyson Foods used Tyson as a captive insurer, with Tyson reinsuring these risks across the reinsurance market. The reinsurance was a large programme providing cover of up to US $1.1 billion across 35 reinsurers, one of which was Partner Re. The insurance policy by which Tyson insured Tyson Foods’ property risks (the direct policy) was governed by the law of Arkansas.

The reinsurance policy for the 2020 year was concluded via Tyson’s broker on the MRC form with Partner Re’s Zurich branch. The contract provided for English law and the exclusive jurisdiction of the English courts. Its unique market reference was B0713PRPNA2003490.

While the facultative certificate sent subsequently by the broker to Partner Re appeared to be a contract of reinsurance for the same risks on the MURA form, the covering email attached an endorsement to the MRC form and made it clear that the MRC and not the MURA remained the governing contractual document for the 2020 policy year.

The 2021 policy was not simply a renewal of the 2020 policy. Various changes were made and agreement was reached on 30 June 2021, with the broker stating to Partner Re that “fac certs will come through at some stage”. The policy was issued on the MRC form, with facultative certificates to follow, and it contained the unique market reference B0713PRPNA2103490.

However, on 7 July 2021, the broker sent a facultative certificate to Partner Re that was a MURA document and that contained the reference ‘AGREEMENT No: PRPNA2103490’. This document listed terms and conditions that included New York choice of law, a New York arbitration clause and an entire agreement clause. Unlike the 2020 policy, there was no endorsement providing for the MURA to be subject to the MRC.

The dispute

Tyson sought to make a claim in respect of a fire on 30 July 2021 at a Tyson Foods facility. Tyson had accepted liability under the direct policy. It was envisaged that the loss was likely to exhaust the insurance tower (i.e. the level of cover provided by Tyson) which provided cover up to US$500 million. Partner Re sought to avoid the contract of reinsurance on the ground that the statements of value affecting multiple facilities of Tyson Foods had been understated. 

Tyson commenced English Court proceedings. Partner Re then commenced New York arbitration proceedings and sought a stay of the English Court proceedings under s.9 Arbitration Act 1996. The arbitral tribunal declined to stay the arbitration proceedings, pending the hearing of the stay application. Tyson, therefore, participated in the arbitration subject to its reservation that the tribunal did not have jurisdiction. However, it sought an anti-suit injunction from the English Court to restrain the New York arbitration proceedings.

The Commercial Court decision

The Court recognised that the MRC and the MURA covered precisely the same risk, period and parties, and that each of them could or would be a self-standing and self-sufficient contract if viewed in isolation from the other. As to whether the later contract varied or superseded the earlier contract, the Court held that it did. 

As a matter of English law, the English jurisdiction clause and the English choice of law in the MRC were replaced by the New York arbitration agreement and New York choice of law in the MURA. The latter contract was expressly contemplated by the parties through their brokers at the time of execution of the former contract. The MURA was proffered for consideration and agreement, and separately signed and agreed on both sides. It described itself and defined itself as an “Agreement”. It contained all the operative terms to be a contract of reinsurance, albeit one governed by New York law.

The Court added that even if the MRC had remained the governing contract, it would not have granted an anti-suit injunction because Tyson had delayed in issuing its application for an injunction. The stay application was granted.

The Court of Appeal decision

The Court of Appeal has dismissed the appeal. It highlighted the following:

1. From the outset of their negotiations for the 2021 policy, the parties contemplated that what were described as ‘reinsurance certificates and the updated policy form’ would be provided by Tyson’s broker. This was a reference to the MURA.
    
2. The parties must be taken to have been familiar with the nature and terms of the MURA, a widely used form of reinsurance contract in the US market which, on its face, makes it abundantly clear what the document is for. They would therefore have known that the MURA was an appropriate document to be used in order to record the terms of a contract, governed by New York law and subject to New York arbitration. Conversely, they must have understood that it was an inappropriate, indeed misleading, document to use if the parties intended their relationship to be governed by an MRC subject to English law and jurisdiction.
    
3. There was no indication that the issue of the MURA was merely part of some administrative process. The broker expressly sent the MURA to Partner Re “for agreement” and requested Partner Re to consider it “and agree as soon as possible”. That was the language of contract formation.
    
4. Partner Re duly signed and stamped the MURA on every page and returned it to the broker. The obvious inference, therefore, was that Partner Re did agree the terms of the document and accepted it for what it purported to be, namely the contract of reinsurance for the 2021 policy year.
    
5. The entire agreement clause made it clear that the MURA superseded all previous agreements.
    
6. In contrast to the previous year, there was no endorsement making clear that the MURA was subject to the MRC. In the equivalent document for the 2020 policy year, the Service of Suit clause had been left blank. That was consistent with the fact that, as indicated in the endorsement, the 2020 MURA was not intended to have contractual force. In 2021, however, the ‘Service of Suit’ clause was completed to provide for service on a New York law firm. That must have been a deliberate change, reflecting the contractual status of the 2021 MURA and the recognition that any dispute would be determined in New York. The change suggested that the absence of an endorsement in similar terms to the endorsement for the 2020 policy year was no oversight.

All this led to the conclusion that the 2021 MURA was intended to be the final contract of reinsurance for the 2021 policy year. Certainly, it looked like a contract and contained everything needed to be a valid and binding contract of reinsurance. The Commercial Court was, therefore, correct in having granted a stay of the English Court proceedings.

The Court of Appeal did, however, state that had the issue arisen, it would have been minded to grant an anti-suit injunction to avoid duplication of proceedings and expense, a race to judgment and a real risk of conflicting decisions.

Comment

While the decision will have specific relevance to the particular contracts identified in the insurance and reinsurance markets, it also generally relevant because it highlights the importance of contracting parties being alert to what version of a contract is being agreed and on what terms.

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