UK Commercial Court Rules that Arbitration Panel’s Decision in Which it Did Not Reference The Period Clause Is Not Flawed and Will Be Enforced
QUEEN BENCH DIVISION, COMMERCIAL COURT
IRB BRASIL RESSEGUROS V. CX REINSURANCE CO.
(2010 EWHC 974 (COMM) MAY 7, 2010)
In this action, the reinsurer, IRB Brasil Reseguros (“IRB”) participated in an excess of loss reinsurance program. The goal of the program was to protect CX Reinsurance Co.’s (“CX”) casualty book of business from 1976 to 1983. During the period in which the program was in effect, CX was one of a number of insurers that settled claims occurring in the United States. CX submitted the claim for reimbursement to IBR pursuant to the program in question but IRB refused to pay the claim. Specifically, IRB questions whether certain claims were within the scope of the reinsurance program’s cover. The issue went to arbitration in which CX was awarded $665,055.51. IRB appealed the decision claiming that the arbitration panel applied the incorrect law. IRB further argued that the panel made no reference regarding the scope of cover and, therefore, the decision is flawed
The court determined that based on the facts presented in this action, the arbitration panel applied proper calculations in issuing its determination. The court noted that specific references regarding the period clause or the well-known legal principles are not needed and clearly not a basis to set aside the arbitration award.
IMPACT (REINSURANCE): This is not a surprising decision by the UK Commercial Court. More often than not, arbitration awards are not reasoned awards and therefore any justifications and/or the legal principles behind the awards are sometimes unknown. Such is the case with referencing various clauses within the reinsurance contract, including the period of cover.