Dassault Aviation has prevailed in a s.67 challenge before the Commercial Court in London against a partial award on jurisdiction issued by an ICC tribunal composed of Lord Collins of Mapesbury, Joe Smouha KC and Simon Crookenden KC (dissenting). On 20 December 2022, Mrs Justice Cockerill handed down judgment upholding Dassault’s objection to the tribunal’s jurisdiction and setting aside the partial award issued by the majority. The judgment confirms that contractual no-transfer provisions cannot be circumvented through separate commercial arrangements—whether for insurance or otherwise—entered into voluntarily.
The dispute arose out of an insurance policy entered into between Dassault’s local distributor, Mitsui Bussan Aerospace (“MBA”), and a Japanese insurer, Mitsui Sumitomo Insurance (“MSI”), in breach of contractual no-transfer and confidentiality provisions in the main contract between Dassault and MBA. MSI sought to rely on its contractual arrangements with MBA to pursue subrogated proceedings against Dassault in a London-seated ICC arbitration. MSI’s position was that the contractual no-transfer provisions had not been triggered because the relevant transfers took place by operation of Japanese law or, in the alternative, because the transfers took place in the context of insurance arrangements. Dassault objected to the Tribunal’s jurisdiction in reliance on the well-established principle under English law that “an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights” (Lord Browne- Wilkinson in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd  1 AC 85, 108).
It was common ground that the relevant insurance arrangements had been entered into voluntarily. The majority in the arbitration decided that voluntary arrangements would not offend a contractual no-transfer provision if they took effect by operation of law (e.g., by incorporating default rules of law to give effect to the contractual arrangements). The majority’s reasoning was premised on the assertion that there was a general rule of English law that a prohibition on assignment will not generally be interpreted to apply to an assignment by operation of law. Mr Crookenden KC disagreed and took the view—subsequently upheld by the Commercial Court—that any transfer that was the product of voluntary arrangements would breach a prior contractual no-transfer undertaking.
In a well-reasoned decision, Mrs Justice Cockerill undertook a careful review of the authorities that had been put before the tribunal and concluded (correctly) that “the authorities do not by any means justify a conclusion that prohibitions on assignment should not be taken to carve out transfers which occur ‘by operation of law’ in a broad sense. The focus is not on the mechanism. Rather the question is whether the transfer occurs truly outside the voluntary control of the transferring party.”
The Commercial Court’s decision provides welcome clarification on a point previously without direct authority. From a practical perspective, the decision means that insurers must take care to ensure that their insurance arrangements are consistent with the terms of the contracts they seek to insure. Where a contract indicates that consent is required either for potential subrogation arrangements or for access to confidential information, insurers should make sure that such consent is in fact obtained before seeking to interpose themselves in otherwise exclusive contractual relationships.
Dassault was represented by a team from Gaillard Banifatemi Shelbaya Disputes comprising Dr. Yas Banifatemi, Thomas Parigot, James Herbert, Mikaël Schinazi and Sukriti Rai. In the court proceedings, Dassault was also represented by Paul Stanley KC, Nico Leslie, Daniel Carall-Green and Addleshaw Goddard (Jon Tweedale and Tom Walmsley).