2.77 The international workings of the marine insurance market and the fact that most contracts are made between well informed commercial interests suggest that the parties‘ freedom to contract should be preserved.
2.78 On the other hand, the benefit of reforms to the MIA may be lost, especially to those insured parties who may have most need of such reforms, if contracts of marine insurance written in Australia come to be routinely governed by English or other foreign law.
2.79 There may be a national interest in maintaining and promoting Australian courts and arbitration as dispute resolution forums in marine insurance and other international commercial matters.146 It is the policy of the Maritime Law Association of Australia and New Zealand (MLAANZ) that Australasian marine disputes should be resolved in Australasian forums.147 The Department of Transport and Regional Services has submitted that consideration should be given to enacting provisions in the MIA similar to those in the COGSA.
‗A clause that ensured Australian courts had jurisdiction to hear matters arising out of marine insurance contracts would make it easier for Australian shippers to recover under marine insurance policies.‘148
2.80 Some insured parties prefer English law to apply to the contracts of insurance they enter and for marine insurance disputes to be resolved by English courts or arbitration. In particular, multinational corporations with global interests in ships or cargo may prefer English law and courts or arbitration because, among other reasons, London is an important centre for international marine insurance and dispute resolution, the English law of marine insurance is relatively certain and well developed, and the English court system is seen to be reliable and impartial.149 It also provides a measure of consistency across a corporation‘s international dealings. 2.81 Consultations suggest that some parties, particularly in a specialised area of law such as marine insurance, value the expertise built up among lawyers and judges in particular countries and courts, which makes those forums desirable venues for
145 id 297. The Trade Practices Act 1974 (Cth) s 67 uses a mechanism similar to the ICA s 8.
146 The Commission‘s recent report Managing justice (ALRC 89) highlighted the pivotal role of the federal civil justice system to the working economy: See ALRC 89 para 1.105–1.107.
147 M White Correspondence 13 June 2000.
148 Department of Transport and Regional Services Submission 2. 149 Insurers and brokers Consultation Sydney 27 March 2000.
dispute resolution.150 Many marine insurance policies, including some issued by Australian insurers, provide for the application of English law or for the jurisdiction of the English courts or arbitration in London.151 This has obvious attraction where disputes might otherwise have to be resolved in countries where judicial and legal expertise and expert witnesses are not readily available.
2.82 Restricting the scope for parties to exercise choice of law may adversely affect the availability and competitiveness of insurance in Australia. Some Australian insured parties choose to insure partly with both Australian insurers and co-insurers in London or other overseas markets. By maintaining contact with more than one market, the insured may be able to obtain more competitive rates. If party choice of law is constrained, this may have some adverse effect on the availability of overseas insurance for Australian risks if some overseas insurers prefer that English law, for example, governs their contract.
2.83 Australian insurers may be commercially disadvantaged in the international marine insurance market if they are not able to offer insurance subject to English law (or Dutch or Norwegian or other law, if that is the preference of a prospective insured). In addition, if marine insurance contracts were subject to s 8 of the ICA or an equivalent provision, where Australian insurers are co-insurers of insurance contracts entered into by leading underwriters overseas, there may be uncertainty as to the proper law of the contract entered by the Australian company.152 Such uncertainty might also disadvantage Australian insurers.
2.84 It is difficult to predict whether or to what extent insurers might choose foreign law to circumvent changes to the MIA. Brokers would be likely to argue against contractual choice of law clauses that might work against the interest of the insured parties they act for. In practice, the level of premiums and terms of the cover, rather than the choice of law, are of more concern to insureds and their brokers at the time of entering into the contract.
2.85 At present, the Commission proposes that the MIA not restrict the right of parties to choose some other body of law as the governing law of the contract or to agree that disputes are to be resolved by a foreign court or arbitration. However, the Commission is interested in comments on alternative approaches that might provide a ‗middle road‘ between the provisions found in the ICA or COGSA and full
150 Singapore judges and practitioners Consultation Singapore 13 April 2000.
151 National Bulk Commodities Group Correspondence to AG’s Dept 6 May 1997. As noted above, when the intention of the parties as to the governing law is not expressed and cannot be inferred, the contract is governed by the system of law with the closest and most real connection. Arbitration provisions in contracts of insurance have been held to be the most important factor in this determination: John Kaldor
Fabricmaker Pty Ltd v Mitchell Cotts Freight (Aust) Pty Ltd (1989) 18 NSWLR 172.
152 Co-insurance gives rise to separate and distinct contracts, although in practice each underwriter will generally enter on the terms agreed between the insurer and the leading underwriter (see para 8.21).
freedom of contract in choice of law and jurisdiction. For example, should the MIA provide that where both parties to the contract are domiciled in Australia, the application of Australian law and the jurisdiction of Australian courts may not be circumvented?
Draft proposal 1. The law of marine insurance in Australia should not restrict
the right of parties to choose some other body of law as the governing law of the contract or to decide that disputes be resolved by a foreign court or other forum.
Question 9. Should the MIA provide that, where both parties to a contract of
marine insurance are domiciled in Australia, the application of Australian law and the jurisdiction of Australian courts may not be circumvented
contractually?