Insurance & Reinsurance- Finland On April 24 2007 the Finnish Supreme Court handed down judgment in a complex case relating to:
Background
In 1994 a passenger vessel allegedly caused a heavy swell that damaged a pleasure craft and seriously injured the owner of that craft. The owner brought an action for damages before the Helsinki District Court against the shipowner, an Estonian company, which subsequently went bankrupt. Thereafter, the owner summoned the bankruptcy estate and the protection and indemnity (P&I) underwriter, which was based in Norway, before the same district court. After some time the main action became the direct claim against the P&I underwriter. However, the forum was wrong as the case related to a marine insurance dispute, which, according to Finnish law, must be judged in the first instance by the Average Adjuster of Finland. In Finland, the Average Adjuster is an official institution and the first-instance court in marine insurance disputes; appeals are heard by the Helsinki District Court and then the Supreme Court.
The P&I underwriter argued that the Average Adjuster had no jurisdiction in this case as, pursuant to the rules of the P&I club, any claim against the club were to be resolved by arbitrators in Oslo (ie, outside Finland and under Norwegian law).
Thus, the issue was not the substantive content of the club rules, which were not disputed by the claimant, but rather the validity of the arbitration clause against the claimant, a private individual, as well as the applicable law.
Decision
The Supreme Court confirmed the findings of the two previous instances. The court held that the laws of Norway should govern the applicability of the arbitration clause against the claimant as the place of the arbitration was stipulated in the rules as Norway. However, in obiter dictum the court stated that other alternatives could be possible.
The court also considered whether the arbitration clause was valid against the claimant pursuant to Norwegian law. The court found that both the former and the existing Norwegian insurance contracts acts recognise the concept of direct action in cases where the assured is bankrupt. This principle cannot be set aside by contract. The court held that, according to Norwegian practice, in general the direct claimant is bound by the same rules and conditions applicable to the contract between the underwriter and the assured, although it did cite arguments (as stated in Norwegian government Bill NOU 1987:24) against the view that the injured person would be bound by the arbitration clause. However, Chapter 7, Section 6(4) of the existing Norwegian Insurance Contracts Act clearly entitles the insurer to invoke the same pleas against the third-party direct claimant as against the assured. As no Norwegian court practice was available on the issue, the court found that Norwegian practice on the validity of arbitration clauses in connection with the assignment of rights should be referred to.
In addition, the court held that, in both Norwegian and international textbooks on the topic, the starting point is that any third party acquiring contractual rights by assignment or by law is bound by an arbitration clause in the relevant contract. According to the court, this principle is also explicitly referred to in the Norwegian Act on Arbitration Proceedings (LOV om Voldgift May 14 2004, Section 10(2)), and this principle is in line with the Norwegian principle that a claimant pursuing a direct action cannot achieve better rights than the insured or assured.
In this case, the court concluded that Norwegian law had been agreed upon, and therefore the arbitration clause in the P&I club rules was valid.
International Law Office
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