A case between ACE Bermuda Limited and the Christian Mutual Insurance Company and two of its subsidiaries last week edged closer to being decided.

After more than a year and a half of legal wrangling involving Arbitration Tribunal hearings, numerous Supreme Court filings and an Appeal Court hearing, the matter of jurisdiction is still being contested.

However last week the Court of Appeal for Bermuda handed down its ruling granting leave to appeal and in particular ruled that it will itself decide the matter of jurisdiction.

The underlying dispute concerns:

three indemnification agreements between ACE and Christian Mutual, its parent company, Connecticut Reassurance and an affiliate, Central United; and

a reinsurance contract between ACE and Christian Mutual on the one hand and Penn Mutual Life Insurance Company (Penn Mutual).

ACE claims that it agreed to reinsure Penn Mutual on condition that it was indemnified by Christian Mutual. They now allege that Christian Mutual failed to indemnify them under the indemnification contracts.

The case concerns the right of the Arbitration Tribunal to rule on its own jurisdiction.

While ACE was prepared to have the whole dispute heard by the arbitration tribunal in Bermuda, Christian Mutual challenged Bermuda jurisdiction on the grounds that the Penn Mutual reinsurance contract, subject to New York arbitration, is invalid.

In June, 2001, Christian Mutual filed challenges to Bermuda jurisdiction first with the Supreme Court and later with the Appeal Court.

However the Arbitration Tribunal went ahead and ruled in an interim judgment that it had jurisdiction and also made an award in favour of ACE.

Christian Mutual challenged that award with the Appeal Court which has now ruled that although the Arbitration Tribunal can decide whether it has jurisdiction, and a challenge to such a ruling should be appealed to the Supreme Court, in this particular case, the Appeal Court will stay all the existing Supreme Court filings and will itself decide the matter in a future hearing.

The Appeal Court said that it was "unfortunate" that the Arbitration Tribunal did not stay their deliberations until the jurisdiction issue could be decided by the Supreme Court.