Ace Capital Ltd v CMS Energy Corporation

Ace Capital Ltd v CMS Energy Corporation

The Service of Suit clause does not entitle CMS to litigate the merits of its claim in the US courts in the face of a mandatory arbitration agreement. The arbitration clause covers all disputes and is not overridden by the Service of Suit clause, which is intended to facilitate enforcement and personal jurisdiction, not to provide an alternative forum for merits litigation. CMS is contractually bound to arbitrate its claims, and its commencement and continuation of US proceedings is a breach of that obligation. ACE is entitled to a permanent injunction restraining CMS from continuing the Michigan proceedings.

Parties
Claimant: ACE Capital Ltd; Defendant: CMS Energy Corporation
Jurisdiction
England and Wales
Judgment Date
30 July 2008
Procedural Posture
Commercial Insurance Dispute / Judgment on Application for Permanent Anti Suit Injunction
Outcome
Permanent injunction granted restraining CMS from continuing US proceedings in breach of the arbitration agreement.
Legal Topics
Anti Suit Injunctions, Arbitration Agreements, Interpretation of Insurance Contracts, Service of Suit Clauses
Commercial Law Insurance Law Arbitration Anti Suit Injunctions Arbitration Agreements Interpretation of Insurance Contracts Service of Suit Clauses

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Parties

ACE Capital Ltd

Claimant

CMS Energy Corporation

Defendant

Procedural Posture

Commercial Insurance Dispute / Judgment on Application for Permanent Anti Suit Injunction

Legal Issues

  1. 1 Whether the Service of Suit clause entitles the insured to litigate on the merits in the US despite an arbitration agreement
  2. 2 Whether the claimant is entitled to a permanent injunction restraining US proceedings in breach of the arbitration agreement

Ratio Decidendi

The Service of Suit clause does not entitle CMS to litigate the merits of its claim in the US courts in the face of a mandatory arbitration agreement. The arbitration clause covers all disputes and is not overridden by the Service of Suit clause, which is intended to facilitate enforcement and personal jurisdiction, not to provide an alternative forum for merits litigation. CMS is contractually bound to arbitrate its claims, and its commencement and continuation of US proceedings is a breach of that obligation. ACE is entitled to a permanent injunction restraining CMS from continuing the Michigan proceedings.

Court Disposition

Permanent injunction granted restraining CMS from continuing US proceedings in breach of the arbitration agreement.

Orders

  • CMS is restrained by permanent injunction from continuing proceedings in Michigan against ACE and the Underwriters in respect of claims under the policies.
  • Precise terms of the injunction to be settled with counsel.