DISPUTES
“Plane” English: High Court
CHRISTOPHER CARDONA
PARTNER, LONDON
SIMON BANNER
SENIOR ASSOCIATE, LONDON
“After careful consideration,
the Court held that the
clause did apply although
the decision considered
and raised various complex
questions which are
likely to require further
scrutiny from the higher
English courts. ”
upholds no-assignment clause
to prevent transfer to insurer
In the recent important case of
Dassault Aviation SA v Mitsui
Sumitomo Insurance Co Ltd1 the
English Commercial Court had
to consider the thorny issue of
whether a no-assignment clause
in a sale contract for two aircraft
applied when the insured’s rights
had been assigned to its insurer
under an insurance policy. After
careful consideration, the Court
held that the clause did apply
although the decision considered
and raised various complex
questions which are likely to
require further scrutiny from the
higher English Courts.
Dassault Aviation SA as seller
(Dassault) entered into a sale
contract dated 6 March 2015 with a
buyer (the Sale Contract). The Sale
Contract was subject to English
law and provided that Dassault
would construct and supply two
Dassault Falcon surveillance aircraft
and associated parts and services
to the buyer. Separately, the buyer
contracted with the Japanese Coast
Guard to supply the aircraft to them.
Clause 15 of the Sale Contract was
headed “Assignment-Transfer”.
Clause 15 provided, with limited
express exceptions, that the parties
were prohibited from transferring or
assigning rights, as follows:
“.. this Contract shall not be assigned
or transferred in whole or in part by
any Party to any third party, for any
reason whatsoever, without the prior
written consent of the other Party
and any such assignment, transfer
or attempt to assign or transfer any
interest or right hereunder shall
be null and void without the prior
written consent of the other Party....”.
The buyer obtained an insurance
policy (the Policy) from Mitsui
Sumitomo Insurance Co Ltd (the
insurer) (without informing Dassault)
covering its liability to pay damages
to the Coast Guard if the aircraft were
1 [2022] EWHC 3287 (Comm),
delivered late. The Policy was subject
to Japanese law.
Delivery of both aircraft was
considerably delayed and the
Japanese Coast Guard did claim
damages from the buyer, which
then claimed an indemnity for those
damages under the Policy. The insurer
accepted and paid the indemnity.
Under insurance policies subject to
English law (and the law of many
other jurisdictions), the principle of
subrogation enables an insurer to
“step into the shoes” of its insured
when an insurer pays an indemnity
to an insured and allows the insurer
to pursue any third party which was
responsible for the insured loss. The
recovery action then proceeds in
the name of the insured, although
in practice it is usually directed by
insurers, given that the insured is
already indemnified. However, in
this case, the Policy was subject to
Japanese law. Under Article 25 of
the Japanese Insurance Law, the
insured’s rights are automatically
assigned to the insurer by operation
of law, when an insurer indemnifies
its insured.
The insurer sought to pursue
Dassault for damages for late delivery
in its capacity as assignee of the
buyer’s rights. The Sale Contract
provided for ICC arbitration. Dassault
argued that the arbitral tribunal
had no jurisdiction to hear the
matter on the ground that the buyer
had breached the Sale Contract,
which prohibited assignment.
However, Dassault’s argument
was unsuccessful and the majority
of the tribunal held (with Simon
Crookenden KC dissenting) that it
did have jurisdiction over the matter.
Dassault then made an application to
the English Commercial Court under
section 67 of the Arbitration Act
1996 to set aside the partial award.
Section 67 allows parties to challenge
an award on the ground that an
arbitral tribunal lacked “substantive
jurisdiction”.
 Judgment is thereby treated in the relevant
jurisdiction). Such a governing law
The case was heard by Mrs Justice
clause could be merely one sentence
Cockerill in the Commercial
in a long policy document. For liability
Court. The Court was required to
insurers, it reiterates the need for
decide whether the contractual
careful consideration where possible
no-assignment clause applied
of commercial contracts entered
to automatic or involuntary
into by its insureds regarding issues
assignments.
such as assignment, governing
The Court considered a series of law and any contractual provisions
previous English decisions, many about obtaining insurance and
somewhat historic and dealing risk allocation. Insurers must also
principally with bankruptcy scenarios, consider the implications of the
which had traditionally been choice of a different governing law for
regarded as meaning that contractual their policy to that of the underlying
prohibitions on assignment do not contract, including in relation to
apply to transfers “by operation of subrogation.
law”. However, the Court held that
For policyholders, it demonstrates
no such general principle exists and
that no-assignment clauses should
the real question is rather whether
be drafted as clearly as possible and
the transfer truly occurs outside the
favour express provision as to what
voluntary control of the transferring
is permitted over general and broad
party. In this regard, the Court said
language. The Court commented
that it was apt to consider whether
that “while the wording is broad,
there was a sufficient “degree” or
it is not the broadness of sketchy
“taint” of voluntariness in the transfer.
drafting. It has clear wording
Considering the particular facts of
covering consequences (voidness)
this case, the Court held that the
and it has limited exceptions”.
assignment of the buyer’s rights to
Policyholders should therefore take
the insurer was a consequence of
appropriate legal advice to ensure
voluntary acts by the buyer because
that the wording of such provisions
the buyer had deliberately taken out
adequately reflects their intentions.
the insurance policy and submitted
an insurance claim. The case is also another example
of how the English Courts will, as
The Court therefore found in favour
far as possible, try to give effect to
of Dassault that the contractual
the contractual wording agreed
no-assignment clause was effective.
between commercial parties. Whilst
Accordingly, the Court held that the
also considering the factual matrix
insurer was not entitled to bring its
and commercial common sense
arbitration claim against Dassault
surrounding the Sale Contract,
and the arbitral tribunal had erred
the Court considered in detail the
in deciding that it had jurisdiction
wording of the clause and noted that
to hear the dispute when it had
it had been drafted so as to provide
none. However, the Court accepted
a broad prohibition on assignment
that the questions before it were
“for any reason whatsoever”. The
not straightforward and Mrs Justice
Court was therefore anxious not to
Cockerill commented that she had
stray into the territory of public policy
“reached this conclusion with an
considerations, but to uphold the
unusual degree of hesitation”.
contractual bargain which the parties
Insurers have been granted have struck. It would not “strain to
permission to appeal. The appeal is reach a result which is essentially one
expected to be heard during 2023. of public policy and which does in
truth rewrite the parties’ agreement”.
Discussion
FEBRUARY 2023

CHRISTOPHER CARDONA
The case raises important issues for
Partner, London
both insurers and policyholders.
T +44 (0)20 7264 8554
For insurers, the case demonstrates E christopher.cardona@hfw.com
that the prospects of insurers
INSURANCE BULLETIN

SIMON BANNER
recovering potentially large sums
Senior Associate, London
from third parties responsible for
T +44 (0)20 7264 8289
the loss could stand or fall on what
E simon.banner@hfw.com
the governing law clause of the
policy says (and how subrogation