Key Facts
- •Contractual interpretation of a non-assignment clause (Article 15) in a sale contract for aircraft governed by English law.
- •Dassault Aviation SA (Dassault) challenged the jurisdiction of arbitrators in an ICC arbitration initiated by Mitsui Sumitomo Insurance Co Ltd (MSI).
- •MSI insured Mitsui Bussan Aerospace Co Ltd (MBA) against liability for late delivery of aircraft to the Japanese Coast Guard.
- •Due to late delivery, MSI paid the Japanese Coast Guard, and MBA's claims against Dassault were transferred to MSI by operation of Japanese law (Article 25 of the Insurance Act).
- •The arbitrators ruled that the transfer by operation of law did not require Dassault's consent under Article 15, granting them jurisdiction.
- •The High Court overturned the arbitrators' decision, finding that the transfer was prohibited by Article 15.
- •MSI appealed the High Court's decision to the Court of Appeal.
Legal Principles
Contractual interpretation is a unitary exercise considering language used and the reasonable person's understanding, with regard to all relevant circumstances. If two possible constructions exist, the court may prefer one consistent with business common sense.
Rainy Sky SA v. Kookmin Bank [2011] UKSC 50
Contractual interpretation considers the contract as a whole and gives weight to the wider context. It's not solely a literalist exercise, though the quality of drafting influences the weight given to the context.
Wood v. Capita Insurance Services Limited [2017] UKSC 24
Old insolvency cases on non-assignment clauses don't establish a general principle applicable to commercial contracts; they often turn on the nature of the insolvency.
Cohen v. Popular Restaurants [1917] KB 480 (discussed)
Outcomes
The Court of Appeal allowed MSI's appeal.
The Court of Appeal held that Article 15's wording was unambiguous. It prevents transfers 'by any Party,' but not transfers by operation of law. The transfer of MBA's claims to MSI was by operation of Japanese law, not 'by any Party' to the sale contract. The court found the transfer was not the consequence of voluntary action by MBA, rather by operation of law.