Originally from Dispute Resolution Journal

What happens when one court issues a decision that could directly affect the jurisdiction and independence of another, especially a foreign court? David Bristow and Reva Seth tackle this thorny question by analyzing a Canadian case involving two insurance carriers. They note that forum selection provisions are “generally valid and enforceable as long as they are reasonable and do not violate public policy.”

Generally, the autonomy of courts within their particular jurisdiction and the enforcement of forum selection provisions are fundamental legal principles. What happens, however, when one court issues a decision that could directly affect or undermine the jurisdiction and independence of another? And how is this situation exacerbated if it involves courts in other countries?

Two recent cases are currently considering how to approach and address the ramifications of these questions. The first is the Canadian case of Lincoln General Insurance Co. v. Insurance Company of British Columbia.1 Here, the problem arose when the Ontario Superior Court of Justice issued an injunction prohibiting the Insurance Company of British Columbia (ICBC) from continuing with an action that it had commenced on the Supreme Court of British Columbia.

The second case follows the Sept. 11, 2001, attack in New York. Larry Silverstein, the landlord of the World Trade Centre Twin Towers, sued the two Bermuda insurance companies that covered the complex. The purpose of this suit was to compel the companies to litigate their dispute over payments in a Manhattan federal court. In contrast, the insurance companies, relying on the language of their contract, wished to have the dispute over the amount they owe decided by a private arbitration panel in London rather than by a United States court. However, Silverstein contends that the recent and hastily passed federal legislation—specifically, Public Law No. 107-42 as contained in the Air Transportation Safety and System Stabilization Act—dictates that Manhattan’s federal courthouse is the exclusive forum for resolving disputes related to Sept. 11th irrespective of the language of any contract.

Settlement negotiations were recently successfully concluded between Silverstein Properties, ACE Bermuda Insurance Ltd. and XL Insurance Ltd.2 Therefore, to fully explore the impact of these issues will require another case to arise on this point. However, a review and an analysis of the deciding principles of Lincoln may provide some insight of what might be expected.