In Amlin Corporate Member Ltd v Oriental Assurance Corp (“The Princess of the Stars”)  EWCA Civ 1341, the Court of Appeal upheld the High Court’s decision to refuse a stay of English proceedings brought by reinsurers pending the outcome of proceedings against the insurers in the Philippines.
Owners of cargo which had been lost during a typhoon off the coast of the Philippines brought claims against the Appellant, the vessel’s cargo liability insurer, in the Philippines. The Appellant Insurer had entered into a reinsurance contract with the Respondent Reinsurer, by which the latter would be indemnified in respect of its insurance of the vessel. The reinsurance contract, which was subject to English law, contained a clause stating that all terms, conditions and settlements of the original insurance policy would be followed.
The Reinsurers issued a claim in England for declarations that they were not liable to indemnify the Insurers because the typhoon warranties in the reinsurance contract had been breached, and that the Insurers were not liable under the original policy for the same reason. The Insurers applied for a stay pending the outcome of the actions in the Philippines.
The stay was refused at first instance. The judge stated that such a stay should only be granted in rare and compelling circumstances, of which there were none in this case.
On appeal, the Insurers argued that in a normal reinsurance case, the starting point had to be that the reinsurers should wait for the reinsured to settle a claim before addressing the question of their own liability. They also said that there was a risk of inconsistent decisions in the English and Philippine courts.
The appeal was dismissed. The Court of Appeal held that reinsurance did not constitute a general exception to the normal rule that a stay would only be granted in rare and compelling circumstances. If it did, a stay would be normal in reinsurance cases, which could not be correct. The assessment of the risk of inconsistent decisions was within the first instance judge’s discretion, which he had exercised appropriately.
This case reinforces the principle that the courts will only stay proceedings in exceptional circumstances, and that what amounts to such circumstances is within the judge’s discretion. From a reinsurance perspective, the Court of Appeal’s judgment makes it clear that the usual features of a reinsurance claim do not, without more, amount to the rare and compelling circumstances required to grant a stay. This is the case even though one party may appear to be disadvantaged by the continuation of the proceedings, for example due to a risk of inconsistent judgments.