Aioi Nissay Dowa Insurance Company Ltd v. Heraldglen Limited and Others [2013] EWHC 154 (Comm)
This case is an appeal under section 69 of the Arbitration Act 1996 (appeal on a point of law) of an arbitral award dated January 26, 2012 concerning the aggregation of losses sustained by original reinsurers (the respondents in this case) arising out of the September 11, 2001 attacks on the World Trade Center (WTC).
The appellant provided retrocession excess of loss reinsurances to the respondents, who, in turn, subscribed to ten inwards reinsurance contracts. The outwards retrocessions were subject to English law.
The respondents settled the claims on the basis that the attacks on each of the Twin Towers were separate events. However, when the respondents presented their inwards claims to the appellant, the appellant asserted that, under the outwards retrocessions, the attacks amounted to one event. The parties arbitrated.
Arbitral Decision
To reach their decision, the arbitral tribunal relied on the “unities” doctrine laid out in the Dawson’s Field arbitration and in the case of Kuwait Airways Corporation v. Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664 (KAC v KIC).
The Dawson’s Field arbitration held that, when evaluating the degree of unity between various happenings, one must put oneself in the position of an informed observer, who would approach the question subjectively. In KAC v KIC the court declared that, in assessing the degree of unity, one must look at cause, locality, time and intention of the human agents.
The arbitral tribunal, in their award, said that they were applying the above doctrine to the facts concerning the attacks on both Twin Towers and concluded that there had been two hijackings, which caused two separate loss and damage, and that the tribunal could not find any factor concerning the issue of unity which could override their conclusion. Further, according to the authorities, it was clear that a conspiracy or plan could not constitute an occurrence or an event.
The Court Decision
The appellant appealed the award under section 69 of the Arbitration Act 1996. The appellant raised a number of contentions in its appeal, which were all rejected by the court. The Court held that the arbitral tribunal made no error of law as they accurately identified the relevant law (the law relating to the unities) to which they undertook an exercise of judgment. Further, the tribunal proceeded accurately and fairly when applying the matrix of the law to the facts. As such, the tribunal were entitled to find that the losses arising from the attacks on WTC amounted to two separate events because there were two successful hijackings.
Conclusion
These two decisions, the award and the court’s, may surprise some as many have formed the view that, under English law, the attacks on WTC constituted a single occurrence. However, this decision has as its focus issues of arbitration rather than aggregation. Indeed, what the Court is doing here, as with the decision in IRB Brasil Resseguros SA v. CX Reinsurance Co. Ltd [2010] EWHC 974 (Comm), is giving flexibility to the arbitral tribunal to reach its own decision, provided the tribunal accurately identified the law which should be used to reach its decision. This decision does not set out a legal precedent concerning aggregation, which future arbitral tribunals will be bound to follow. On the contrary, it reaffirms the freedom given to arbitral tribunals to reach different decisions on similar sets of facts, provided such decisions are not reached due to an error of law. In other words, this decision gives freedom to other arbitral tribunals to give the opposite award on the very same question, i.e. that the attacks on WTC was a single occurrence, provided always that they identify the law and make their decision based upon it.