Your are here: Home >> Decisions

Reinsurance: Jurisdiction

Konkola Copper Mines Plc -v- Coromin

May 2005

On 8th April 2001 an avalanche of mud and rock severely damaged an open pit mine in Zambia owned by Konkola Copper Mines plc ("KCM"), a Zambian corporation whose parent company in Luxembourg was a wholly owned subsidiary of an English registered company, Anglo-American plc. The losses sustained by KCM as a result of the accident totalled some US$50 million. As part of the Anglo-American group KCM was insured under a global all risks policy ("the Group Policy") issued by Coromin, a Bermudan insurance company, which was reinsured with Lloyd's underwriters and companies domiciled in the European Union or Switzerland ("the Reinsurers").

In order to comply with Zambian law KCM was also insured under a policy issued by a group of Zambian insurers ("the Local Insurers"). However, the Zambian policy differed from the Group Policy in two important respects. Firstly, the Zambian policy was a specified perils cover and not an all risks insurance. Secondly, whilst the Group Policy was subject to English law and jurisdiction, the Zambian policy included a Zambian law and jurisdiction clause. Significantly, Coromin reinsured the Local Insurers to the extent of 90% of their exposure.

Whilst making it clear that it only sought to recover its losses once, KCM made alternative claims under each of these policies. The claim under the Group Policy was declined by Coromin, which claimed that it was not KCM's primary insurer and was only liable as the reinsurer of the Local Insurers. Coromin pleaded that case when sued by KCM. However, it also commenced third party proceedings against the Reinsurers ("the Part 20 proceedings"), claiming an indemnity whether as primary insurer under the Group Policy or as reinsurer of the Local Insurers. The position adopted by the Reinsurers was that their reinsurance of Coromin.s liabilities was not on an all risks basis and would respond only if KCM's losses were recoverable under the specified perils cover placed with the Local Insurers.

The Local Insurers were not willing to accept that KCM's losses were caused by "collapse" or, indeed, any of the perils specified in their cover. KCM had attempted to join the Local Insurers as parties to the English proceedings, but had ultimately conceded that any claim against the Local Insurers had to be pursued in the Zambian courts in accordance with the exclusive jurisdiction clause in their policy. By consent KCM's action had therefore been stayed as against the Local Insurers pending the outcome of proceedings to be commenced by KCM in Zambia.

In those circumstances the Reinsurers applied for a stay of the Part 20 proceedings against them on the basis that, if the key issue regarding the Local Insurers' liability to KCM was to be determined by the Zambian courts rather than the English courts, it would be sensible for the English proceedings to be stayed and all the disputes determined in Zambia. Coromin opposed the application.

The crucial issue was whether the Reinsurers were correct in their assertion that their agreement to cover Coromin's liabilities included the Zambian law and jurisdiction clause. At this stage of the proceedings and on the limited evidence so far available it appeared to Mr Justice Colman that Coromin's case that the Reinsurers reinsured Coromin's liability as primary insurer under the Group Policy was stronger than the Reinsurers' case that they reinsured Coromin as reinsurer of the Local Insurers. He did not therefore consider that the Reinsurers had shown a good arguable case that such reinsurance of Coromin as they underwrote was subject to Zambian law and jurisdiction so as to engage the court's jurisdiction to stay the Part 20 proceedings.

In challenging the court's jurisdiction to grant a stay Coromin had relied on the recent decision of the European Court of Justice in Owusu -v- Jackson (previously summarized on this website), in which it was held that the English courts could not decline to exercise jurisdiction over a claim for breach of contract against a defendant domiciled in England on the ground that it would be more appropriate for the action to be tried in another jurisdiction. Given that it would not be open to the court in this case to stay the part 20 proceedings in favour of the Zambian courts on forum non conveniens grounds, Coromin submitted that the court was similarly powerless to grant a stay on the grounds of a foreign jurisdiction clause, bearing in mind that Zambia was neither a member of the EU nor a party to the Lugano Convention. The judge was satisfied, however, that cases that involved the effect of a foreign jurisdiction clause were distinguishable from forum non conveniens cases, like Owusu. He cited authority in support of the proposition that the courts of an EU Member State could give effect to a jurisdiction clause in favour of the courts of a non-Member State, provided that the clause was valid so as to deprive the Member State of jurisdiction in accordance with that State's own conflicts rules. The judge concluded, therefore, that a jurisdiction clause conferring jurisdiction on the courts of a non-Member State could be effective as against a defendant domiciled in a Member State, and that the Owusu decision had not altered the approach that should be adopted to the applicability of foreign jurisdiction clauses as explained in The "El Amria" (1981).

In the light of his decision that Reinsurers had not shown a good arguable case that the reinsurance was subject to Zambian jurisdiction, it was not necessary for the judge to decide the application as a matter of discretion. Nevertheless, in case of an appeal, he proceeded to consider the factors, which had to be taken into account. This led him to the conclusion that there were good reasons why a stay of the Part 20 proceedings against the Reinsurers should not be granted. Firstly, it was in the general interests of justice that conflicting decisions of different courts on key issues should be avoided. Secondly, since it was almost certain that the reinsurance brokers involved would be joined to the English proceedings, it was desirable that all the issues between KCM, Coromin, the Reinsurers and the brokers should be decided by one tribunal and in proceedings in which they were all entitled to participate.

The Reinsurers' application for a stay of the Part 20 proceedings was dismissed.

Return to Decisions