The European Court of Justice strikes a blow for the London insurance and reinsurance market

London's standing as a centre for international arbitration may be threatened by a recent ruling of the European Court of Justice.

It means that parties who commonly contract to settle any disputes through arbitration in London may instead be dragged into expensive litigation in other, unfamiliar EU jurisdictions.

On 10 February 2009, the ECJ ruled that the English courts may not prevent a party starting or continuing court proceedings in another EU Member State, even if such proceedings are in breach of an arbitration agreement. It is for the courts of the Member State in which the proceedings have been issued to decide if they have jurisdiction, the ECJ said.

The ruling, in the case of West Tankers Inc v RAS Riunione Adriatica Sicurta Spa, limits the use of the remedy of the "anti-suit" injunction. This has historically been used by the English courts to prevent a party starting or continuing proceedings in a forum other than that to which it had contractually agreed.

The ruling can be exploited for tactical purposes. Insurers and reinsurers need to be alert and proactive. If a dispute with a party not based in the UK is likely to lead to formal action they should strongly consider "getting in first" by commencing arbitration proceedings in London in accordance with the contract.