Lord Justice Longmore :

Introduction

1. This appeal is, as far as I am aware, the first time that this court has had the opportunity to consider the Bermuda Form which has emerged in the last 15 years or so, partly as a response to the problem of diminution in liability insurance capacity in the United States in the later part of the 20th century. The striking feature of the form is that it requires the parties to arbitrate in London but provides for the proper law of the insurance contract to be the internal laws of New York. No doubt this represents a balancing of the conflicting interests of the insured on the one hand and liability insurers on the other. The authors of the standard work on the topic put the matter rather starkly when they say:-

“The liability insurance crisis of the mid-1980’s was viewed by many insurance people at the time as largely attributable to decisions by American judges and juries which expanded tort liabilities and broadened insurance coverage, both beyond what insurers believed was contemplated when they wrote and sold the policies. To address this problem, the decision-making process on disputes with policyholders was moved from the United States court system to London arbitration.” See Liability Insurance, The Bermuda Form by Jacobs, Masters and Stanley (2004) para 1.25.

It may be true that the impetus for London arbitration may have arisen from a certain disenchantment with the expansionist scope of American jury and judicial decisionmaking but it might equally be true that the selection of New York law as the proper law of the contract may show a certain disenchantment with the substantive law of insurance in England, a matter which the Law Commission is currently addressing, see Joint Consultation Paper LCCP No. 182.