When slips and certificates collide: Jurisdiction clauses and document hierarchy in the London reinsurance market

Tyson International Company Ltd ('TICL'), a Bermudan captive insurer, reinsured its US property book with various reinsurers including GIC Re, India, Corporate Member Ltd ('GIC'). The placement included a dual-document structure common in the London market. 

On 30 June 2021, GIC signed two Market Reform Contracts ('MRCs'), referred to as slips or MRCs, which stated that the governing law would be English law and had an English jurisdiction clause. On 9 July 2021 the parties also agreed a “facultative certificate” using the MURA form, for each policy ('the certificates'), which is used by the US property insurance market. The certificates contained an arbitration agreement which provided for New York arbitration. 

Critically, the certificates contained a 'confusion clause': “RI slip to take precedence over reinsurance certificate in case of confusion.” Here “RI slip” was a reference to the MRCs. 

Following a fire at a Tyson Foods plant on 30 July 2021, GIC purported to rescind cover on the basis of alleged misrepresentation and refused to indemnify TICL for the losses which TICL had agreed to cover. TICL issued proceedings in England and at first instance, the Judge rejected GIC’s argument that the English court lacked jurisdiction and held that the effect of the 'confusion clause' was that where there was “confusion” between the terms of the MRCs and the certificates, the MRCs’ terms would prevail. As a result, it was held that jurisdiction clauses were irreconcilable, and that the MRCs’ English jurisdiction clauses applied and therefore granted TICL an anti-suit injunction.

The Court of Appeal’s decision

The Court of Appeal upheld the Judge’s decision that the confusion clause gave precedence to the MRCs, in circumstances where there were two sets of documents which were inconsistent with each other, and the dispute should be resolved before the English courts who had jurisdiction.

The construction of the confusion clause

GIC’s primary argument was that the confusion clause only operated where the certificates themselves contained contradictory provisions, and not where the provisions of the certificates differed from those of the MRCs. If this argument did not succeed, GIC sought to argue that the jurisdiction clauses in the MRCs and the certificates could be reconciled, to the effect that the MRCs’ English jurisdiction clause gave the English court supervisory jurisdiction over the New York arbitration.

On appeal, it was held that the clause’s evident purpose was to establish precedence of one document over another. It was therefore far more natural to construe “in case of confusion” as denoting a conflict between the Certificates and the MRCs, than as a reference to internal inconsistency within the Certificates alone. As Lord Justice Nugee observed, the words “take precedence over” import a comparison between the two instruments, and the structure of the clause therefore indicated that the “confusion” contemplated was an inter-document conflict.

The Court identified further commercial support for this construction. It would be improbable that parties would make provision for the remote contingency that certificates, based on a widely used standard form might contain internally contradictory terms, whereas the prospect that two contracts, one developed for the London market and one for the US property reinsurance market, might diverge in their terms was a more plausible risk against which the parties might sensibly wish to protect against.

Irreconcilability of the two clauses

GIC’s alternative argument was that the English jurisdiction clause and the New York arbitration agreement were reconcilable, and that contracts had to be read as a whole, giving effect to all of its clauses. GIC relied on Ace Capital Ltd v CMS Energy Corp [2008] EWHC 1843 (Comm), to support this argument. 

Whilst the Court accepted the Ace Capital principle, there was a material difference in this case, since the clauses appeared in separate documents executed at different times and the parties had agreed an express hierarchy clause between the Certificates and MRCs. Instead, applying Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565, the Court held that where the parties have included a hierarchy clause, the proper approach is to determine objectively whether inconsistency exists and, if so, to give effect to the hierarchy as agreed.

The MRCs provided for English governing law and conferred exclusive jurisdiction on the English courts in respect of all matters relating to the reinsurance, containing no arbitration provision. To accept GIC’s submission would have accorded precedence to the Certificates over the MRCs, the very converse of what the hierarchy clause stipulated.

Implications for the London insurance market

Three practical lessons emerge for London market participants.

• Document hierarchy must be expressly agreed at placement: Where an MRC and a MURA Certificate cover the same risk, they will frequently contain different dispute resolution provisions. The hierarchy must be stated clearly; and even briefly worded precedence language may assist in showing the parties’ intentions. This should be contrasted with Tyson International Co Ltd v Partner Reinsurance Europe SE [2024] EWCA Civ 363, where no such provisions existed and the Certificate superseded the MRC, which highlights what can potentially be at stake. 

• “Confusion” means inter-document conflict, not internal inconsistency: A precedence clause favouring the MRC will operate wherever the two documents differ. If parties intend for New York arbitration to govern the contracts, the Certificate will need to contain a clear supersession clause. 

• Review at placement, not at the point of loss: The dispute resolution regime should be settled before any risk attaches, and it is recommended that brokers and underwriters carry out an audit of precedence clauses as a matter of routine prior to inception.