In Allianz, a slightly different approach was taken by the applicants. They emphasised that no mention of experience of insurance ‘law’ is made in clause 15, only insurance and simply because a lawyer may have experience of insurance law does not mean they also know how to set an underwriting rate for a risk, what endorsements to include or what reinsurance cover to buy. In the same way, a construction lawyer’s experience and knowledge would be quite different to an engineer’s and a sports lawyer’s experience could not on its own satisfy a requirement for 10 years’ experience of sports.
The CA would not accept this approach saying that no similar distinction could be drawn between experience of (re)insurance law and (re)insurance. The practical and legal aspects of (re)insurance are so intertwined that both market professionals and lawyers who have specialised in the field are commonly appointed. (Re)insurance contracts create legal rights and obligations and competent market professionals need some understanding of the law, whether in terms of the duty to disclose facts, how losses may occur years after the period of cover may have expired or the handling of claims. By the same token, lawyers need to have an understanding of the practical aspects of the business and this is gained from taking instructions from clients, working with expert witnesses and reviewing (re)insurance contracts.
In short, the AC held that no reason relied upon in the High Court in either X Co or Allianz provided any legitimate basis for restricting appointments to members of the insurance industry.
As for concerns raised regarding the status of the judgment in X Co as representing a long-settled meaning of clause 15 which the market has relied upon for 17 years, the CA was sceptical and concluded that in any event, it was not possible to defend that meaning on any rational basis. The CA acknowledged the importance of certainty in commercial law and the role it plays in informing parties’ negotiations and decisions in relation to (re)insurance coverage. However, in this instance, the X Co judgment was not reported, did not appear to have been mentioned in any textbook and was decided only seven months before the contract with Tonicstar was made. It was therefore unlikely that the parties would have been aware of it and had it in mind when considering arbitrator qualifications or when incorporating clause 15 into their contract. Moreover, even if this analysis was wrong, the CA could not see any significant detriment arising if the range of persons eligible for appointment was wider than expected and included senior lawyers with over a decade’s worth of experience.
So far as the CA was concerned, the High Court decisions in both cases were plainly wrong and ought not to be upheld.
In concluding and although not relevant to the contract in question, the CA also noted that clause 15 was in any event revised as of 1 January 2018 and the new clause 27.4 of the JELC terms now states:
“The Arbitrators shall be persons (including those who have retired) with not less than 10 years’ of experience of insurance or reinsurance within the industry or as lawyers or other professional advisors serving the industry.” (emphasis added)