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The article discusses the issue concerning the award of punitive damages in arbitration. It criticizes and analyzes the position in Great Britain and in the U.S. in relation to punitive damages. It concludes that punitive damages should be awarded to prevent breaches of contract in cases of the unavailability of compensatory damages.

The article discusses the court cases Wasa International Insurance Co. Ltd. versus Lexington Insurance Co. and AGF Insurance Ltd. versus Lexington Insurance Co. involving issues of back to back insurance coverage, deductible and defence costs in Great Britain. The claimants argued that they were not liable to indemnify Lexington under a contributing facultative reinsurance contract. The Court of Appeal judge held that a reinsurer has no obligation to indemnify the reinsured under English law.