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Craft Enterprises (International) Ltd -v- AXA Insurance and Others

March 2004

The issue which the court had to resolve in these proceedings was whether the English courts had jurisdiction to determine claims made by Craft Enterprises (International) Ltd ("Craft") under an open cover policy of marine cargo insurance ("the Cover") which Craft had effected with the defendant insurers in Switzerland. Craft were obliged to declare certain types of business to the Cover and the insurers were obliged to accept the same. As was to be expected, Craft were authorised to issue and supply certificates of insurance for the benefit of those who were buying goods from Craft on terms that Craft would arrange insurance. Such certificates were to be subject to the terms and conditions of the Cover which included, at clause 27, a governing law and jurisdiction clause. This read as follows:

"This policy is subject to Swiss law and practice.

However, the party who has the title of the goods has the right to require that claims, if any, will be settled in accordance with English law and practice, as if the relative policy or certificate had been signed in London on the S.G. Policy Form or the MAR Policy.

All disputes arising out of this policy or the separate certificates issued under this policy shall be submitted to the competent court at the place where this policy was issued."

Craft had commenced proceedings in England, seeking an indemnity from underwriters in respect of losses claimed under three certificates which, it was said, remained in Craft's possession and related to goods to which Craft still had title. However, in reliance on clause 27 of the Cover, the underwriters contended that only the Swiss courts had jurisdiction to resolve the dispute. On underwriters' application, in January 2004, the Commercial Court in London agreed and granted a declaration that the English courts had no jurisdiction in the matter. Craft appealed.

The first and main issue for the Court of Appeal was the effect of the second paragraph of clause 27. Craft argued that, because they still had title to the goods and had exercised the right to require underwriters to settle the claims by reference to English law and practice, they were entitled to invoke English jurisdiction. They submitted that the Commercial Court had been wrong to conclude that the second paragraph of the clause was intended only to apply to claims made by a third party under or through a certificate issued under the Cover and was not intended to apply to claims made by Craft.

However, the Court of Appeal agreed with the Commercial Court and accepted the submissions made on behalf of the underwriters. In the Court's view, Craft could not be claimants under or through the certificates, whether or not they retained the originals. When Craft made a claim of their own under the Cover they did so as the direct assured and not as the holder of a certificate. Craft were not, therefore, amongst the class of persons who were able to take advantage of the option to have their claims dealt with by reference to English law and practice rather than Swiss law and practice. That class of persons was confined to third parties who, without a certificate, could not proceed with any claim against the underwriters who subscribed to the Cover. The exception made in favour of such third parties reflected the fact that, unlike Craft, they would have had no opportunity to negotiate the cover terms. The Court was persuaded that this factor provided the only apparent commercial explanation for the exception.

Moreover, the Court of Appeal went on to point out that, even had Craft succeeded in demonstrating that English law and practice applied to their claims, it did not follow that the English courts would have had jurisdiction. On the contrary, it was the Court's view that the third paragraph of clause 27 would still have taken effect as a Swiss jurisdiction clause. This was because the Cover had been "issued" in Switzerland. The third paragraph of the clause expressly provided that all disputes arising out of the certificates issued under the policy were to be submitted to the court where the Cover was issued. As a matter of construction, it did not appear to the Court that the inclusion of the option in paragraph two of clause 27 (to require that claims be settled in accordance with English law and practice) was intended to affect the jurisdiction provision in the following paragraph.

The Court of Appeal therefore concluded that the question of underwriters' liability to Craft would have to be resolved in the Swisscourts.

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