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The International Comparative Legal Guide to: Insurance & Reinsurance 2019

8th Edition

A practical cross-border insight into insurance and reinsurance law

Published by Global Legal Group, with contributions from:

Advokatfirman Vinge KB Dirkzwager legal & tax RCD Arthur Cox DLA Piper Norway DA R&T Asia () Co., Ltd. Bae, Kim & Lee LLC Esenyel|Partners Lawyers & Consultants SOW & PARTNERS Bech-Bruun Law Firm P/S ESTUDIO ARCA & PAOLI, Abogados S.A.C. Steptoe & Johnson LLP BLACK SEA LAW COMPANY Eversheds Sutherland Ltd. Tavares Advogados Blaney McMurtry LLP GPA –Gouveia Pereira, Costa Freitas & Associados Tuli & Co BSA Ahmad Bin Hezeem & Associates LLP Gross Orad Schlimoff & Co. Vavrovsky Heine Marth Camilleri Preziosi Advocates Hamdan AlShamsi Lawyers and Legal Consultants Christos Chrissanthis & Partners Jurinflot International Law Firm Chuo Sogo Law Office, P.C. Kennedys Chudleigh Ltd. CIS Risk Consultant Company (insurance Lee & Li, Attorneys-At-Law brokers) LLP (CIS) Legance – Avvocati Associati Clyde & Co (Deutschland) LLP Matheson Clyde & Co LLP McMillan LLP Cordero & Cordero Abogados MinterEllison Creel, Garcia - Cuellar, Aiza y Enríquez, S.C. Norton Rose Fulbright DAC Beachcroft Abogados SAS Paul, Weiss, Rifkind, Wharton & Garrison LLP DAC Beachcroft LLP Railas Attorneys Ltd. The International Comparative Legal Guide to: Insurance & Reinsurance 2019

General Chapters: 1 Sensory Overload? Legal Issues Surrounding the Internet of Things (IoT) and Enhanced Risk Management – Nigel Brook & Lee Bacon, Clyde & Co LLP 1 2 Cyber Class Action Exposure in Canada – David R. Mackenzie & Dominic T. Clarke, Blaney McMurtry LLP 6 3 Brexit Relocations: Update – Darren Maher, Matheson 12 Contributing Editors Jon Turnbull & Michelle 4 Latin America – An Overview – Duncan Strachan & Lucy Dyson, DAC Beachcroft LLP 15 Radom, Clyde & Co LLP 5 Insurance Anti-Money Laundering Regime Developments in – María José Pinillos Montaño & Sales Director Eduardo Apaez Dávila, Creel, Garcia-Cuellar, Aiza y Enríquez, S.C. 20 Florjan Osmani 6 Middle East Overview – Michael Kortbawi & Simon Isgar, BSA Ahmad Bin Hezeem & Associates LLP 23 Account Director Camilla Maddison Country Question and Answer Chapters: Senior Editors Caroline Collingwood 7 MinterEllison: Kemsley Brennan & James Stanton 29 Rachel Williams 8 Austria Vavrovsky Heine Marth: Philipp Strasser & Jan Philipp Meyer 36 Group Consulting Editor Alan Falach 9 Azerbaijan CIS Risk Consultant Company (insurance brokers) LLP (CIS): Homi Motamedi & Valentina Pan 42 Publisher Rory Smith 10 Steptoe & Johnson LLP: Philip Woolfson & Alexander Hamels 47 Published by 11 Kennedys Chudleigh Ltd.: Mark Chudleigh & Nick Miles 55 Global Legal Group Ltd. 12 Tavares Advogados: André Tavares & Daniel Chacur de Miranda 62 59 Tanner Street London SE1 3PL, UK 13 Canada McMillan LLP: Carol Lyons & Lindsay Lorimer 68 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 14 Colombia DAC Beachcroft Colombia Abogados SAS: Juan Diego Arango Giraldo & Email: [email protected] Angela Hernández Gómez 77 URL: www.glgroup.co.uk 15 Costa Rica Cordero & Cordero Abogados: Ricardo Cordero B. 83 GLG Cover Design F&F Studio Design 16 Bech-Bruun Law Firm P/S: Anne Buhl Bjelke & Henrik Valdorf 88 GLG Cover Image Source 17 England & Wales Clyde & Co LLP: Jon Turnbull & Michelle Radom 94 iStockphoto 18 Finland Railas Attorneys Ltd.: Dr. Lauri Railas 103 19 Norton Rose Fulbright: Bénédicte Denis & Orsolya Hegedus 109

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28 Korea Bae, Kim & Lee LLC: Jai Young Kim & Dal Jae Park 169

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Country Question and Answer Chapters: 34 GPA – Gouveia Pereira, Costa Freitas & Associados: José Limón Cavaco & Ana Isabel Serra Calmeiro 203

35 Russia Jurinflot International Law Firm: Vadim Ermolaev & Natalia Usanova 209

36 Senegal SOW & PARTNERS: Papa Massal Sow & Codou Sow Seck 214

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44 Hamdan AlShamsi Lawyers and Legal Consultants: Hamdan AlShamsi 261

45 USA Paul, Weiss, Rifkind, Wharton & Garrison LLP: H. Christopher Boehning 266

46 Uzbekistan CIS Risk Consultant Company (insurance brokers) LLP (CIS): Homi Motamedi & Valentina Pan 273

EDITORIAL

Welcome to the eighth edition of The International Comparative Legal Guide to: Insurance & Reinsurance. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the laws and regulations of insurance and reinsurance. It is divided into two main sections: Six general chapters. These chapters are designed to provide readers with an overview of key issues affecting insurance and reinsurance work, particularly from the perspective of a multi-jurisdictional transaction. Country question and answer chapters. These provide a broad overview of common issues in insurance and reinsurance laws and regulations in 40 jurisdictions. All chapters are written by leading insurance and reinsurance lawyers and industry specialists, and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editors Jon Turnbull and Michelle Radom of Clyde & Co LLP for their invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.com.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] chapter 1 sensory overload? legal issues surrounding the internet of things (iot) and nigel Brook enhanced risk management clyde & co llP lee Bacon

The Internet of Things (IoT) is giving rise to novel legal questions The average cost of sensors is continuing to fall (now below 40 for insurers. cents), meaning that their applications are ever-increasing. It is now “Insurtech” represents an important new area for the insurance commonplace to have sensors in cars (telematics), on the body market and insurance lawyers; whether in-house tech teams at the (health/fitness “wearables”), and location-based sensors deployed in big incumbents, or new market entrants hailing from California’s the home and industry, and even (somewhat controversially) in Silicon Valley, London’s Silicon Roundabout, or emerging from children’s toys. industry-led or government-sponsored labs or incubators. Ericsson forecasts that by 2022 there will be 29 billion connected ii The insurance value chain is increasingly disrupted; disintermediation devices of which 18 billion will be related to IoT. enabled by new technology is breaking down traditional regulatory silos and challenging legal categories. It is important for insurers and Insurance and IoT their in-house or external legal counsel to identify and navigate the grey areas in order better to appreciate and manage legal and The ability, through connected sensors, better to understand and regulatory risks. analyse changes in real-world risks presents real opportunities for Technological applications gaining traction in the insurance sector insurers. A more granular, up-to-date and precise understanding include: blockchain; peer-to-peer insurance (P2P); robo-advisors; means that risk can more readily be assessed, managed, priced and gamification; IoT; and big data. This article focusses on the advent transferred. of IoT or “IIoT” (“Industrial Internet of Things”) and the way that Greater precision on risk exposures can create insurance market (I)IoT, often combined with big data, can broaden the value efficiencies by permitting better assessment of reserves and proposition of insurers from risk transfer to risk management. aggregations, thereby potentially freeing up capital. What is perhaps not yet fully appreciated is that the shift will require IoT capabilities can also foster better risk management. Insurers are a profound re-think of some insurance law fundamentals and triggers already offering incentives for adoption of better practices by new and fascinating legal questions – and some creative solutions. consumers through encouraging installation of IoT devices in the home or by customers wearing smart devices. By providing What is IoT? actionable intelligence and just-in-time analysis, insurers can engage with insureds to help them understand their risks and address For the uninitiated, IoT is a wide term encompassing a multitude of risky behaviours. objects located in the physical world that communicate with the Examples already in use include: smart water leak detectors that can internet. avert flood losses; home thermostat systems to warn homeowners of A 2012 RAND Europe research report to the European Commission risks to the building; and sensors on ships to monitor cargo, weather defined IoT as follows: and sea conditions, fuel consumption and condition of cargo. Infrastructure-based sensors can identify wear and tear and analyse “The Internet of Things builds out from today’s internet by creating a pervasive and self-organising network of for future problems long before failure. Sensors can warn of gas, connected, identifiable and addressable physical objects vermin or voltage problems, and allow early intervention to protect enabling application development in and across key vertical against electrical fires or machinery failure. sectors through the use of embedded chips, sensors, actuators and low-cost miniaturisation.” Example 1: Cargo in transit In the simplest terms, an IoT object involves a sensor and a A shipping container fitted with sensors could identify impending connection. or actual damage to its contents during a voyage. A “reefer” container holding high-value frozen food, such as tuna, might There can be multiple sensors in everyday objects. For example, a experience issues with the cooling system and notification via single smartphone can contain the following sensors: proximity; sensors could allow early intervention before spoilage. ambient light; ambient sound; barometer; temperature; humidity; Alternatively, if the system fails and nothing can be done to prevent i accelerometer; gyroscope; motion coprocessor; and magnetometer. or mitigate the loss, early notification via a sensor might trigger The data gathered and transmitted from sensors like these represents automatic claim payment. The insured might use the funds to an astounding array of information about the device user, which as reorder the shipment whilst in transit and thereby mitigate “big data” can only really be analysed fully through the use of disruption to the supply chain. computerised systems and artificial intelligence. iclg to: insurance & reinsurance 2019 www.iclg.com 1 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co llP sensory overload?

IoT can enable segmented underwriting with real-time dynamic of the insurer and the insured, all fundamentals of insurance law. pricing, in turn enabling a broader product offering with on-demand For example, under the English Insurance Act 2015 the insured must or usage-based insurance (UBI). Using IoT, a motor insurer could make a fair presentation of the risk pre-contract, but is not required charge a higher premium for car insurance when driving at night or to disclose any matter that is within the knowledge of the insurer. in winter conditions, or lower premiums for less risky driving. Where an insurer has access to risk data (or the resulting analysis) These pricing signals can incentivise individuals to engage in less that is equivalent to or better than the insured’s own this can raise risky behaviours. In theory, the resulting efficiencies or “de- legal questions regarding knowledge and disclosure. risking” can be passed through the value chain, making insurance English insurance law currently discourages “data dumps”, overall more affordable. circumscribing the volume and quantity of data that can be provided In addition, through sensor-based policy triggers, some aspects of to the insurer. Under the Insurance Act 2015, the duty of fair the claims process can be fully automated, creating further presentation requires the insured to disclose information in a efficiencies. Sensors can be linked to parametric or index-based reasonably clear and accessible manner. With “big data” from IoT insurance, with data on the designated parameter operating as a potentially available to both insurer and insured, disclosure trigger for automatic claims payment. obligations will likely need to involve clarity around the arbiter of knowledge – which potentially could be an artificial intelligence – Example 2: Remote sensing with pre-defined criteria around what elements of information are Photographs and data captured by satellites, aircraft and drones material to the risk and how that information is to be presented or can provide a rapid view of property damage and that data can be accessed. analysed for high-speed claims processing. High-frequency As recently described by the English Supreme Court (see the weather reports gathered by remote sensors can even permit judgment of Lord Sumption in the Versloot Dredgingiii case) the predictive analytics of potential losses, enabling rapid deployment utmost good faith doctrine is predicated on a presumed of loss adjusters and fast and accurate reserving. Weather data – “informational asymmetry” of knowledge between an insured and such as excess heat, lack of sunny days, or excess rainfall – insurer as to a risk. With the use of IoT technology this presumed obtained through remote sensors can even permit automated asymmetry may be inverted or at least become more nuanced. claims payments (and the associated efficiencies) via parametric or index-based weather triggers. Privacy

Real-time Risk Management: Legal Issues IoT can give risk managers deep, real-time insight into potential problems. For example, IoT devices can improve workplace safety IoT is accelerating the move away from insurers acting as passive by detecting unsafe conditions or monitoring workers to avoid over- capital providers in a traditional “black box” transfer of risk. exertion. However, this may give rise to a host of privacy concerns Insurers are developing a more proactive role and participating more where information on tracking employees’ behaviour is shared with directly in their customers’ ongoing risk management. Through IoT, insurers. The UK Information Commissioner’s Office (ICO) cites a insurers can effectively become a partner in the day-to-day study by 25 data protection regulators which found that 59% of IoT operations and risk management of insureds. devices failed to explain adequately to customers how personal information was collected, used and disclosed.iv The application of IoT and real-time risk management is a profound shift in insurers’ business model from paying claims to proactively Despite the efficiencies of gathering data, the risks associated with managing risks and preventing losses occurring in the first place: a holding or processing personal data – particularly in the post- seismic move from protection to prevention. This has the potential General Data Protection Regulation (GDPR) world – can increase to turn insurance on its head and could have wide-ranging legal the regulatory burden on insurers as well as insurers’ potential consequences. liabilities, and drive up operating costs overall. A few of these are as follows: Security

Disclosure IoT devices offer a host of new frontiers for hackers and criminals. Where security systems fail and data breach occurs, who bears legal A contract of insurance is a unique legal construct and is a contract responsibility? of the utmost good faith. The concepts of utmost good faith and fair presentation in insurance are carve-outs from general principles of If IoT devices are provided, required or recommended by insurers to contract law based on the unique situation of one party (the insured) their insureds then potentially insureds or third parties affected by a holding the relevant information and the other party (the insurer) data breach could seek to hold insurers liable. Such claims could holding little or none. create their own insurance issues and themselves create a whole new area of risk and potential market for insurance. Traditionally, the risk insured is effectively fixed at the moment of underwriting. Before that moment, there are obligations on the prospective purchaser to disclose information about the risk being Sensor malfunction transferred such that the insurer can quote coverage terms and price. After terms are agreed, any changes in the risk are borne by the Related to the question of security is the possible issue of sensors insurer (subject of course to any retention and the terms of the failing to sense, analyse, communicate, or share important data. If insurance contract). such failures occur, then is there a back-up system in place? What is The ability to understand the risk in real time and adjust the pricing the fall-back option in the insurance contract if the sensor trigger is and terms accordingly creates potential uncertainty about the point unreliable? What is the arbiter in the absence of the sensor? If there of underwriting, the nature of disclosure, and the state of knowledge is a failure of sensors to warn of impending loss, then who is liable

2 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co llP sensory overload? for that oversight? There may also be real-world property damage risks associated with malfunction of sensors that control physical Notification and proof of loss objects. For example, dams or levees could be compromised if a faulty sensor failed to report the correct water depth. If all or part of the claims process is automated or triggered by sensors, would there still be a requirement for an insured to notify a claim or to furnish proof of loss? In the presence of sensors that Data ownership have recorded the relevant information, when would notification or proof of loss need to be rendered, by whom, and in what form? The Where data is collected from multiple sensors, potentially in ability of an insurer through IoT to know when a loss is imminent or different places and by different parties, there can be questions has occurred may shift the burden of proof and contractual around who owns and may use the data gathered and where that data requirements to notify or prove a loss. is located when it is shared, reprocessed and analysed across jurisdictions. Taxation / regulatory There may be issues about whether an insurer will be able to use the data collected from its insureds for pricing the next risk, or similar Where insurers build in risk management services as part of their risks for different insureds. An insured may not understand how its offering to insureds, this can give rise to tax and regulatory issues. data is being used, and may be uncomfortable with the level of data disclosed or want some share in the value created from the data Are insurers licensed or regulated to provide the enhanced risk collected. Where there is an integrated supply chain, an insurer management services they are offering? Do services or data might gain information about one risk that affects another and collection occurring through IoT fall within the remit of other insureds may have requirements regarding data silo-ing, regulators – such as communications regulators – rather than the anonymisation or destruction. usual insurance industry bodies? Insurers should also consider the tax implications of receiving payment for premium and payment for risk management services; it Failure to warn is important to understand what element of payment from an insured relates to what element of the value proposition. With increased deployment of IoT, insurers will increasingly be privy to direct, objective and unfiltered data about insurance risks and, in many circumstances, insurers might be in a better position Evidence than the insured to understand and interpret that data. Another legal issue can revolve around where the requisite knowledge might lie Real-time tracking and pricing of risks could lead to an evidentiary for decision-making related to the risk. shift in the way coverage disputes are handled. For example, instead What if, from the totality of sensors, there was collective of experts to say what an insurer would have done in certain “knowledge” of an impending loss, but it was not properly circumstances – i.e. charged a higher premium, not underwritten the interpreted or analysed, or sat with a third party who did not have a risk, or written on different terms – it may be easier to determine disclosure obligation to the insured or insurer? What if the “insurer what the insurer actually did in other contexts for similar risks which knows best” and has the requisite knowledge to prevent a loss were affected in a similar way in real time. This could particularly be occurring, but does not do so? For example, if an insurer knew that the case where pricing or policy wordings are automated. a person was at risk of heart attack and could tell from wearables Case study: Coffee beans that that person was undertaking risky behaviours: would there be a duty to warn that individual that he/she was increasing their risk of An example of how legal issues can arise is illustrated by a heart attack? Will consumers and businesses eventually push back fictional example of a shipment of coffee beans. A trader wishes to against the level of scrutiny and oversight that IoT provides to their transport specialty grade green coffee beans from Colombia to insurers? France valued at USD2m. Insurance is placed on the shipment and as part of that package the insurer, or its nominated third party There could conceivably be circumstances in which, even in the supplier, provides additional services via IoT capabilities such as absence of a contractual requirement, an insurer might be monitoring weather risks and the humidity of each container. The considered to have had a duty to warn of risks, or to recommend a pricing of the insurance is then linked dynamically to the course of action, or assist the insured in managing the risk availability of data sources, and updated dynamically. appropriately. These may give rise to new duties of care that disrupt the operation of a traditional insurance contract. The trader is so impressed with the ability to obtain real-time information on the consignment and intervene in case of imminent Where insurers have a contractual duty to warn or advise and are damage, she purchases only USD1m of insurance, even though the also taking some of the risk, there could be “chain of command” consignment is valued at USD2m. issues where the insurer and its insured deviate on what a reasonable response to the risk might be. Such duties may not fall within the The sensors fail to detect that the containers have been punctured definition of indemnity and thus may not be under the protection of and leaked, resulting in damagingly high humidity, which severely the limits clause in a policy. damages the beans. Or, conversely, the sensors successfully triggered a notification of impending damage and either human or systems error meant that the notification was not acted upon by the Reinsurance insurer or not passed on to the insured. The trader does not receive the benefit of the risk management and Costs and liabilities associated with an insurer’s risk management the entire consignment is damaged. activities enabled by IoT would not fall within the scope of Subject to the terms of the policy, insurers will be liable up to the indemnities paid to the insured and so may not be caught by the policy limit of USD1m only and are arguably no worse off than if insurer’s usual reinsurance arrangements, but instead require there had been no sensors at all. separate liability insurance. iclg to: insurance & reinsurance 2019 www.iclg.com 3 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co llP sensory overload?

But would the trader seek to hold insurers liable for the full value of as a whole to make real-time risk management more “mainstream”; the consignment? Have insurers assumed a duty of care beyond the an everyday factor in the lives and working practices of consumers contractual requirement to indemnify? Would insurers in turn be able and companies. to seek costs and expenses from their reinsurers, liability insurers, or Real-time risk management better reflects the real world and, the sensor manufacturers or third party service providers? therefore, is inherently better adapted to the requirements and needs of insurance customers. Risk, after all, is dynamic and changing and can be managed as well as transferred. Risk does not just appear at Key Questions to Consider renewal.

In the future, with smart contracts built on the blockchain and Here is a non-exhaustive list of some questions that an insurer responding to IoT data, automated underwriting may mean that the embarking on an IoT venture might ask: entire concept of “renewal” is rendered otiose. Underwriting would ■ Sensors: Where do the sensors come from? Where are they take place on a daily, ongoing basis, with risk management systems manufactured? What do they do? What do they control? interacting with decision-makers (human or machine) at insurers and Who is liable for maintenance and who will be responsible for failure? What warranties or indemnities exist with insureds to understand in real-time what element of a risk can be manufacturers or service providers? What built-in security tolerated, what is transferrable, and what is uninsurable. For example, measures exist to protect, anonymise or encrypt sensor data? where containers are stacked too high on a vessel or an industrial ■ Knowledge/oracles: Where does data from sensors flow? machine is operating beyond the maximum allowable hours per day, What is the chain of command? Where will the knowledge of this could be identified as a real-time breach of warranty, suspending a risk “sit” at any one time? Who will be deemed to know the insurance over all or part of the risk, which in turn might lead to a what? Who will be responsible for amalgamating, storing, change in behaviour of the insured or an increased premium. analysing and disseminating that knowledge at the point of In a world where data from IoT can have pre-programmed underwriting and on an ongoing basis? consequences for risk transfer, underwriting may eventually become ■ Smart contract design: What are the core underwriting a method of designing a system that can monitor, report on, respond concerns for a dynamic contract and how will it react in to, and price risk, rather than a one-off annual risk assessment and certain circumstances? Have the various contingencies for pricing exercise. Insurance law as it has developed and currently premium adjustment and coming on or off risk in certain stands may not be fit for purpose and will need to adapt in step with circumstances been worked through and is there a fall-back option for decision-making in the absence of an automated the needs of a modern insurance market. response? In addition to the legal questions heralded by new technology- ■ Duty to act/report: Who has duties to advise, act, or report? enabled risk management offerings, there are a host of ethical To whom? And in what time frames? questions, too. ■ Location/jurisdiction: Where are sensors located? Where Where risks are understood with greater granularity it may make for are they going to travel? Where are servers based and where a less risky world. However, as the Geneva Association has flagged is the data flowing? Where does decision-making or in a recent report, a better understanding of the risks of an individual underwriting occur? What jurisdictions are involved and insured could eventually lead to anti-selection of more risky what are the requirements regarding data protection? individuals, potentially reducing the necessary spread of risk ■ Data protection: What is the nature of data being collected? underpinning the very foundation of insurance markets.v What is its risk profile? Is personal data being collected? Are there data protection and data breach protocols in place? If brought to its inevitable conclusion, a sensor-filled world of big data could profoundly change the nature of insurance and the ■ Liabilities: Have the potential liability exposures for insurers structure of insurance markets. been adequately mapped? Are there appropriate limitations of liability in place? Do these coincide with the policy limit? Are the potential exposures proportionate to the premium? Endnotes How are potential liabilities accounted for or reinsured? These concerns can be worked around (or indeed the risks insured i. https://www.aig.com/content/dam/aig/america- elsewhere) but absolute clarity of risk and responsibility between canada/us/documents/insights/aig-white-paper-iot-english- the parties is essential as well as a clear delineation between the digital-brochure.pdf. insured risk itself and any risk management responsibilities. One ii. https://www.ericsson.com/en/mobility-report/internet-of- solution, for example, is for protections to be built in to a wider things-forecast. master agreement governing use of any platform with suitable iii. Versloot Dredging BV v HDI Gerling Industrie Versicherung cross-indemnities and limitations and sensible dispute resolution AG [2016] UKSC 45. processes or protocols for emergency issues related to the insured iv. https://ico.org.uk/about-the-ico/news-and-events/news-and- risk or for possible data breach. blogs/2016/09/privacy-regulators-study-finds-internet-of- things-shortfalls/. Conclusion: Disrupting Insurance v. https://www.genevaassociation.org/sites/default/files /research-topics-document-type/pdf_public/ Fundamentals? insurance_in_the_digital_age_01.pdf.

We are a long way now from the time when the first notification to the insurance “market” of a vessel lost at sea was the ringing of the Acknowledgment Lutine Bell in Lloyd’s of London. The authors would like to thank Wynne Lawrence, Associate at The advent of IoT promises to make insurance and risk management Clyde & Co LLP, for her invaluable assistance in the preparation of much more hands-on and present in the lives and businesses of this chapter. insureds. It can only ultimately be of benefit to the insurance market

4 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co llP sensory overload?

Nigel Brook Lee Bacon Clyde & Co LLP Clyde & Co LLP St. Botolph Building St. Botolph Building 138 Houndsditch 138 Houndsditch London EC3A 7AR London EC3A 7AR United Kingdom

Tel: +44 20 7876 5000 Tel: +44 20 7876 5000 Fax: +44 20 7876 5111 Fax: +44 20 7876 5111 Email: [email protected] Email: [email protected] URL: www.clydeco.com URL: www.clydeco.com

Nigel has been a partner at Clyde & Co since 1985 and heads the Lee has been a partner at Clyde & Co since 2008. His insurance and firm’s reinsurance team. reinsurance work includes policy coverage advice, liability defence and assessment and wordings/policy structures. Nigel is rated in Band 1 by Chambers & Partners and is in The Legal 500 Hall of Fame. Euromoney’s “Best of the Best” Expert Guide ranks Lee has been involved in considering the impact of smart contracts, him among the top 30 insurance lawyers worldwide. blockchain and related technologies since 2015, and has written a series of papers which cover the extensive possibilities of these Nigel has extensive knowledge of emerging technologies and has technologies within legal and regulatory frameworks. Lee is recognised been active in the field of smart contracts, distributed ledger as a leader in this area and is regularly invited to speak at insurance and technology including blockchain and the Internet of Things since 2015. other industry conferences, and to contribute towards initiatives and He is seen by insurance and other clients, as well as legal and other papers. Lee is currently instructed by clients seeking to utilise technical departments in academia, as a leader in this area. He is these emerging technologies on a number of projects to include focused on the impact that technology has on the risk landscape and payment-rail systems, parametric insurance and digital marketing the insurance industry; the opportunities for innovative insurers to initiatives. He is dedicated to finding innovative yet pragmatic ways for prosper; and the legal and regulatory issues that can arise. Nigel is a the new technologies to work within existing frameworks. Lee is a co- co-founder of Clyde Code, the firm’s smart contracts consultancy. founder of Clyde Code, the firm’s smart contracts consultancy.

Clyde & Co is an international law firm with a pioneering heritage and a resolute focus on its core sectors of aviation, energy, healthcare, infrastructure, industrials, insurance, marine, professional practices, shipping and trade. With over 1,800 lawyers operating from over 50 offices and associated offices across six continents, the firm advises corporations, financial institutions, private individuals, and governments on a wide range of contentious and transactional matters. Clyde & Co has a particularly strong track record in complex cross-jurisdictional disputes and an outstanding reputation in international arbitration. We are distinguished by our focus on insurance, with over 200 specialist insurance partners and over 1,000 insurance-focused qualified lawyers. The firm offers insurers and reinsurers the opportunity to source legal advice from one law firm across many jurisdictions and across a wide spectrum of business lines, including: aviation & aerospace; construction & engineering; corporate insurance services; employment practices liability; energy; financial institutions and D&O; marine; mining, industrials & power; personal injury (including disease, EL/PL, motor, clinical negligence, catastrophic loss, and fraud); product liability & recall; professional indemnity; property; reinsurance; and specialty (including accident & health, bloodstock, contingency, cyber, fine art, kidnap & ransom, political risk & trade credit, product recall, specie & jewellers’ block and surety). We are frequently recognised for our leading insurance expertise. For example, we are ranked Band 1 for Insurance: Contentious Claims in Chambers Global, we were named “Insurance Law Firm of the Year” at the Reactions London Market Awards for the years 2011, 2012 and 2013, and we have been recognised as “Insurance & Reinsurance Law Firm of the Year” by Who’s Who Legal for the years 2012, 2013, 2014 and 2015 and “UK Insurance Firm of the Year 2015” by The Legal 500. The firm was named “Firm of the Year” in 2016 by The Lawyer and “Transatlantic Law Firm of the Year” in 2017 by Transatlantic Legal Awards.

iclg to: insurance & reinsurance 2019 www.iclg.com 5 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 2 cyber class

action exposure David r. mackenzie in canada

Blaney mcmurtry llP Dominic t. clarke

The Canadian insurance market is awakening to the need for cyber- of liability. Only three of these, however, have met with a measure insurance against data loss and privacy breach events. Although of success at the certification stage: negligence; breach of contract; there is clearly room for this market to grow, Canadian insurers are and intrusion upon seclusion. routinely issuing cyber coverage to protect against these risks. In Canada, in order for certification to be granted, it must merely not While insurers have developed loss-experience with first party data be “plain and obvious that the cause of action will fail”.4 Provided breach expense, ransomware and business interruption claims in that there is “some basis in fact” for the existence of a common issue recent years, knowledge and understanding of third-party risks to be tried on behalf of all class members, the action can proceed as caused by covered breaches remains limited. This article reviews a class action.5 These are low threshold standards. Judicial the status of emerging third-party claim experience. consideration of each of these at the certification stage, however, has Class actions seeking damages arising out of data loss and privacy highlighted potential weaknesses in each theory and given rise to breaches are becoming increasingly common. However, all of the cautions from the bench with regard to their relative chances of actions to date either remain at the certification stage or have been success at trial. This article focuses on the strengths and weaknesses resolved through settlements. As a result, we have yet to see judicial of each of these causes of action. analysis at a common issues trial of the causes of action being Review of these decisions also highlights the increased importance advanced and a final determination of damages. Nevertheless, three of “nominal damages” in the context of data/privacy breach class recent cases are instructive about the potential indemnity actions. As is outlined below, it is apparent that class counsel will in obligations of Canadian insurers under the cyber policies they have many, but not all, cases have difficulty in proving class-wide 1 issued: Condon v. Canada ( Condon); Tucci v. Peoples Trust compensatory damages. While success at trial is far from assured, 2 Company ( Tucci); and Broutzas v. Rouge Valley Health System certain causes of action, if proved, can result in awards of nominal 3 (Broutzas). damages even in the absence of proven compensable injury. To better understand the exposure facing defendants and their insurers, 1. Litigation and Causes of Action we will also examine the meaning of “nominal damages” in the Canadian context. The decisions in Condon, Tucci, and Broutzas provide insight into various potential causes of action, because each arises out of a 2. Negligence distinct set of circumstances. Condon pertains to the loss of a hard drive on which personal and financial information of hundreds of In each of the proceedings the putative class alleged that the thousands of Canadian student loan recipients was stored. Tucci defendants were negligent, arguing that they owed a duty of care to arose out of the hacking of a bank by a malicious third party. class members and failed to meet that duty by falling below the Broutzas concerns alleged misappropriation of personal health standard of care owed. More particularly, they failed to have information by hospital employees and the subsequent sale of that adequate safeguards in place to protect the information of class information to vendors of certain financial services (particularly members. Each of the actions asserted that the class members had Registered Educational Savings Plans, or “RESPs”). suffered actual damages as a result. Each of these claims was made the subject of a putative class action There are three primary pitfalls with respect to the allegations (Broutzas was the subject of two distinct class actions). As a result, advanced. First, the theory of liability being advanced against many Canadian courts have been asked to certify causes of action in each defendants is novel, in that it is not well established in Canada that set of circumstances. Condon is the subject of a negotiated a plaintiff can sue many defendants for what amounts to pure settlement, which the Federal Court of Canada has approved. The economic loss in the circumstances of a data/privacy breach. consideration given to the various causes of action in the course of Second, proving actual damages on a class wide basis, as is required certification – and in the case of Condon, appeal and settlement as in negligence, may be an insurmountable challenge, particularly well – provides insight into the difficulties that class counsel and where the risks involved are primarily prospective identity theft. defence counsel (together with their instructing insurers) face in Finally, even if a negligence cause of action is certified, class prosecuting and defending privacy and data breach class actions. counsel must still prove the claim. The putative class actions advanced many theories of liability: In Broutzas, the RESP dealer defendants were allegedly negligent for negligence; breach of contract; Intrusion upon Seclusion; Breach of not properly supervising their employees who were allegedly buying Confidence; waiver of tort/unjust enrichment; and statutory theories confidential personal information of new mothers from hospital

6 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Blaney mcmurtry llP cyber class action exposure in canada employees. That information was used to market RESP investments themselves of any credit monitoring services offered by the to those mothers. While the hospital acknowledged that it was in a credit monitoring agencies nor have they availed themselves of relationship of proximity to its patients, the RESP dealers argued that the Credit Flag service offered by the Defendant. the relationship between them and the class members was not The certification court held that damages cannot be awarded for sufficiently proximate to give rise to a duty of care. Perell J. merely speculative injuries and declined to certify the negligence characterised that element of the claim as novel and undertook the issue for trial. Class counsel appealed that decision and it was three-step analysis established in Anns v. Merton London Borough overturned by the Federal Court of Appeal on the basis that “costs Council6 – foreseeability, proximity, and policy considerations. He incurred in preventing identity theft” and “out of pocket expenses” determined that there was no duty of care on the part of the RESP could satisfy the damages requirement. While such damages may defendants as the privacy breach was perpetrated by hospital be capable of proof, actually marshalling this evidence on a class- employees. In the Court’s view it was nonsensical to suggest that the wide basis appears to require judicial approval of some form of RESP dealers could have supervised hospital employees. aggregate model. Whether this is possible or will be accepted by the While commenting primarily on the breach of contract claim, courts is unclear. Perrell J. also expressed concerns that the negligence cause of action Finally, in many circumstances, actually proving negligence may be as proposed, merely mirrored existing statutory obligations and the difficult. Attacks by hackers, theft of large amounts of data by emerging tort of intrusion on seclusion. He was reluctant to certify employees, and even lost laptops are relatively new phenomena. any novel negligence action in circumstances where a statute The fact that courts are still grappling with the law of negligence in already spoke to the issue. He also expressed concern that the this context is not surprising. When a person slips and falls, when negligence theory was being used as a “backstop” to the intrusion on one car hits another or when professional services fall below the seclusion claim that was also being advanced. He refused to certify expected standard, the act, error or omission is relatively the negligence claim against the RESP dealers and their employees straightforward and the resulting damages are reasonably and, as seen below, the entirety of the claim. identifiable. In data breach cases, numerous questions arise that are Standing in contrast to that analysis is the decision in Tucci. There, not so easily answered. If an organisation has handling and security the defendants provided financial services to members of the putative protocols and an employee breaches those protocols, has the class and required those members to provide sensitive personal and organisation fallen below the required standard? If that same financial information. The information at issue could clearly be used organisation suffers a criminal attack that defeats the cyber-security to harm the class members if lost (foreseeability) and those people in place, has it failed to fulfil its obligations? If a stolen laptop is were in a direct commercial relationship with the defendants password protected and the data encrypted, has the organisation (proximity). Masuhara J. did express concerns regarding the public been negligent? These are all considerable hurdles. policy stage of the Anns test, providing: 1) negligence ought not to step in where statutes already govern; and 2) a duty of care should not 3. Breach of Contract be imposed that creates indeterminate liability. He found that the theory of liability advanced did not arise because of statutory Breach of Contract allegations have met with some success, being obligations but out of privacy and security policies the defendant itself certified in both Condon and Tucci. Condon involved contracts in the had created. Similarly, liability was not indeterminate because it form of Student Loan Agreements. Multiple sections expressly could only be owned to those who were customers of the Defendant pertained to the Minister’s collection, protection and use of the and whose information was stolen. This latter conclusion appears information provided. The certification court acknowledged that these controversial, as liability could still be regarded as temporally terms could potentially be relied upon to establish a breach of contract indeterminate, in that damages for the future risk of identity theft such that it was not plain and obvious that the claim would fail. clearly seek to compensate for an indeterminate period of time and amount. While this risk may be real, the law of negligence has rarely Similarly, in Tucci there were express contractual terms between the been used to impose damages for a potentially perpetual risk. bank and its customers. The exact terms of the contract, however, needed to be determined, as the pleadings asserted that the contract The novel nature of the negligence claims is not the only issue included the defendant’s “Website Terms & Conditions” and other standing in the way of succeeding on a negligence claim. A plaintiff terms. Those included statements that the defendant would comply must prove actual loss resulting from the negligence of the with Federal and provincial privacy legislation, as well as express or defendant. The fact that the claim is being advanced through a class implied terms that the defendant would keep information action only complicates matters, as actual damage must be confidential and secure from loss and theft and would not use it demonstrated on a class-wide basis. except for purposes expressly authorised. Tucci and Condon considered the loss of control over financial The defendant disputed that the contract included all such terms. It information, not personal health information as was the case in further argued that there was no allegation that those terms had been Broutzas. This is a critical distinction. In Tucci, it was not plain and breached; it had promised to take reasonable steps to protect the obvious that damage to credit reputation cannot constitute a information and had done so. The fact that a security breach had compensable harm. Similarly, out of pocket expenses including occurred did not mean that reasonable steps to protect the credit monitoring and wasted time and inconvenience related to information had not been taken. Masuhara J. acknowledged these preventing identity theft could constitute a class-wide harm. arguments but held that they should be determined at trial. The These concerns were raised at the certification stage in Condon . Court did not accept the defendant’s argument that all forms of There the court acknowledged that the allegations advanced against damages claimed were too remote, on the basis that, even if no the government could support findings of a duty of care and of a actual damages were proved, nominal damages could be awarded if breach of the standard of care, but questioned whether claims for a breach of contract had occurred. compensable damages were advanced. It concluded they were not:7 An interesting discussion pertained to a limitation of liability clause … The Plaintiffs have not been victims of fraud or identity which the defendant said precluded the claim. The Court found that theft, they have spent at most some four hours over the phone the limitation of liability clause did not preclude the claims per se; seeking status updates from the Minister, they have not availed and that its effect was an issue for trial. iclg to: insurance & reinsurance 2019 www.iclg.com 7 © Published and reproduced with kind permission by Global Legal Group Ltd, London Blaney mcmurtry llP cyber class action exposure in canada

In Broutzas, the court refused to certify the breach of contract claims awarding aggregate damages, it is open to question whether such advanced. They were premised on the existence of a contract between damages are “nominal” in nature, or simply a form of compensatory the patients and the hospitals, which allegedly included terms damages arising out of economic loss. In short, like negligence governing the protection and use of personal information and claims, it is not clear that breach of contract claims offer a direct path promising peace of mind. Perell J. ruled that it was “plain and obvious to recovery for class members in the data and privacy breach context. that the putative Class Members [did] not have a claim for breach of contract and warranty”. The judge agreed with Rouge Valley’s submission that this claim was an artifice by which to sue for breach of 4. Intrusion Upon Seclusion

statutory obligations. The pleadings simply alleged the duties that the hospitals owed under the Personal Health Information Protection Act, Certification courts have expressed uncertainty about the role of the 2004.8 Moreover, the admission forms and information forms developing intrusion upon seclusion tort in data breach and privacy provided to the incoming patients were not contractual in nature, and cases where information was lost or stolen rather than having been there was no bargaining between patients and the hospital about intentionally misused. While intrusion upon seclusion was certified preserving the confidentiality and privacy of patient information, in both Condon and Tucci , both Courts expressed concerns in which the hospitals were statutorily obliged to do. In short, there was respect of the viability of the cause of action should the matter be no contract into which terms could be implied and if there had been, tried. In Broutzas , Perell J. declined to certify, questioning the those terms were already the subject of non-contractual legal duties. viability of the claim in the circumstances of that case. Where a commercial relationship is present, any contract is likely to Intrusion upon seclusion, like negligence and breach of contract, either be silent on privacy issues or to favour the corporate entity. appears to be problematic in the data/privacy breach context in Commercial contracts, particularly consumer contracts, Canada for a number of reasons. First, the tort does not exist in increasingly feature arbitration, venue and jurisdiction clauses that British Columbia, and likely in other Canadian jurisdictions with may restrict the ability of individuals to bring claims before privacy legislation similar to British Columbia’s Privacy Act. There Canadian courts – especially those claims seeking to enforce are other concerns. express or implied terms of the contract itself. While the Supreme As Perell J. stated in Broutzas, the tort is not simply a backstop for Court of Canada, together with lower courts, has questioned the negligence; it has its own distinct elements. Unlike negligence, validity of onerous terms (see Douez v. Facebook9 and Heller v. intrusion upon seclusion is an intentional tort and requires Uber Technologies Inc.10), reasonable terms may still be enforced. intentional or reckless conduct on the part of the defendant. As Where that existing contract considers the gathering of information Masuhara J. noted in Tucci, it is one thing to plead recklessness, but by the organisation, a contract claim will likely be easier to have another thing to prove it in the commercial context. To date, there certified than a negligence claim because there is no requirement to has been no judgment establishing what “reckless” means in the show actual damages. A breach alone should be sufficient to result context of a data or privacy breach. in nominal damages at minimum. However, a breach of contractual The standard further requires that the defendant invade the plaintiff’s terms must still be shown, and those terms will not necessarily private affairs or concerns without lawful justification. In breach create an obligation to prevent security breaches or misuse of scenarios involving a third party, such as a hacker, this element will be information altogether. As the Defendant in Tucci pointed out, the difficult to prove. Similarly, where a laptop or hard drive is lost, the fact that a security breach has occurred does not mean that risk created is that unknown third parties, not the defendant, will reasonable steps to protect the information have not been taken. intrude the plaintiff’s privacy. It may also be difficult to prove that Like potential class members, organisations that have been hacked intrusion did in fact occur. As the Court in Condon noted in approving are victims of a crime. The standard likely to be imposed by the settlement, “[b]efore there can be an award of damages, however, contract is not strict liability. If express contractual terms drafted by the onus remains on the plaintiffs to establish first that an intrusion the organisation set the standard, that standard is not likely to be actually occurred”.12 The risk of future harm in the form of a high. Again, certification is a low bar, but proving contractual terms prospective privacy breach that has not yet occurred can almost existed and were breached may be a significant challenge. On the certainly not be the basis for an intrusion upon seclusion claim. other hand, there is arguably an important benefit to breach of There are, however, indications from Canadian courts that in contract claims: they can result in an award of nominal damages circumstances where an employee is caught snooping, the claim even if no actual loss is proved. However, a passage in Condon may be easier to advance. In Oliveira v. Aviva Canada Inc., the suggests the availability of an award of nominal damages may not Ontario Court of Appeal considered a case in which a nurse and her be a certainty in the class action context:11 hospital employer were sued for snooping into patient records, and [The Defendant] further argues that nominal damages should sought insurance coverage against the claim. The policy provided never be awarded in a class action as it would not favour the coverage to hospital employees “while acting under the direction of plaintiffs but rather their counsel, since the latter would be the the named insured”.13 The insurer denied coverage because the only ones effectively standing to benefit financially from the nurse was acting outside of the course and scope of her employment outcome. in her unauthorised review of the plaintiff’s medical records. The The Defendant advances an interesting and strong argument Court disagreed and ordered the insurer to defend:14 on this point but the Plaintiffs’ position, although novel in the … In our view this is precisely the sort of conduct the policy context of a class proceeding is supported by sufficient was intended to respond to. The applicant was employed by authorities that this cause of action should be considered on the hospital as a nurse and while on duty, in the course of the the merit of the action. In other words, it is not plain and hospital’s operations, to use the language of the policy (which obvious that the cause of action in contract would fail. As to would include the maintenance of patient’s health records), any disproportionate advantages in favour of the Plaintiffs’ she accessed the records that she had apparently no business counsel, the Court will also be better positioned to rule on doing because she was not involved in J.L.’s care. The that issue when it hears it on the merit. applicant was employed by the hospital, (she was essentially Although it must be acknowledged that the court in Tucci certified an employee 24/7) but was only acting under the direction of the question as to whether wasted time could be the basis for the hospital when she was on duty as such.

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In our view the common sense interpretation of the language problem, class counsel have been asserting a right to nominal damages can only have this meaning. To hold as the appellant argues in respect of proved breach of contract and intrusion upon seclusion that unauthorized access to medical records does not arise out claims. A settlement in which the damages paid were characterised as of the hospital’s operations, or under the direction of the “nominal” was approved in Condon. That settlement was premised on hospital because it would never direct such conduct, would evidence that individuals had spent up to four hours dealing with the negate the coverage intended. It is plain that the policy, in data breach that had occurred and, on an assigned rate of $15 per hour covering invasion of privacy, is intended to cover the type of 16 conduct that is alleged in the Statement of Claim. of time spent, each class member was entitled to a $60 recovery. There are obviously differences between the standard applied to the Is “nominal” a misnomer in that situation? This is important because, duty to defend under an insurance policy and the intentional tort of in breach of data or privacy class actions, class counsel will face intrusion upon seclusion. However, the decision suggests a considerable difficulty in proving actual damages on the part of willingness to hold organisations liable for the privacy breaches of individuals, and even more in proving damages class-wide. The their employees, even if such actions occur outside the course and apparent availability of nominal damages in compensation for breach scope of employment. As such, the tort element requiring that the of contract and inclusion upon seclusion means that those damages invasion of the plaintiff’s privacy by the defendant may not be as may be the most likely avenue of recovery for class members. significant a hurdle where the intrusion is the intentional act of an Policyholders and insurers will need to understand the nature of employee. nominal damages in order properly to assess the risk they face. As is set out below, nominal damages are not intended to compensate for a The third requirement of the tort was critical in the Broutzas loss, but to act as an acknowledgment of a wrong suffered by a decision. In order to succeed, a plaintiff must demonstrate that a plaintiff. In the authors’ view, the award in Condon was not nominal in reasonable person would regard the invasion as highly offensive and nature, but compensatory. As such, that decision does not set a causing distress, humiliation and anguish. In Broutzas , the precedent for the value of nominal awards. Nominal damages are Defendants argued that there may had been intrusion, but no available when the plaintiff has proved a cause of action but not a right seclusion. The Court agreed. There was no seclusion because the to compensatory damages. They may be awarded in all cases of breach contact information that was the objective of the intrusion was not of contract and in torts actionable per se.17 They are not awarded by private. The disclosure of mere contact information did not intrude way of compensation, but in recognition of the existence of some legal on the class members’ significant private affairs and concerns and right vested in the plaintiff and violated by the defendant. In contrast, the disclosure would not be highly offensive to a reasonable person real damages are those which are assessed and awarded as nor cause her distress, humiliation and anguish. This finding compensation for damage actually suffered.18 The practical provides guidance about the kinds of information that must be in significance of a judgment for nominal damages is that the plaintiff issue for an intrusion upon seclusion claim to succeed. The Court establishes a legal right, which may deter future infringements or listed “medical, financial, or sensitive information” as sufficient to enable the plaintiff to obtain an injunction to prevent a repetition of the found a claim. What the court meant by “sensitive information” is wrong.19 It is also a way to record the defendant’s liability20 and to less clear. However, mere contact information will not fall within vindicate the plaintiff’s rights even when no compensation is that category. The Court went on to note that “Generally speaking, necessary.21 In many cases, it will also entitle a plaintiff to costs. there is no privacy in information in the public domain”. Because of their non-compensatory nature, nominal damages are While intrusion upon seclusion claims have been certified in both meant to be “a sum of money that may be spoken of, but that has no Condon and Tucci, both Courts expressed significant concerns as to existence in point of quantity”, and are damages in the name only. the likely success of the claims if they proceeded to trial on the Although nominal awards in Canada do not have a standard size, it merits. This underscores the reluctance that courts have expressed appears early Canadian cases assumed that the proper amount was generally about the tort of intrusion upon seclusion. In creating the $1, an amount which is still being awarded. However, in recent tort in the first place, the Ontario Court of Appeal sought to make years some courts have granted significantly larger awards22; this is 15 clear that it should be rarely used, and even more rarely successful: controversial. In cases where larger sums have been referred to as These elements make it clear that recognizing this cause of “nominal damages”, there is often evidence, as in Condon, that what action will not open the floodgates. A claim for intrusion the court is really doing is providing compensation for a loss that it upon seclusion will arise only for deliberate and significant has found difficult to quantify. In The Law of Damages, Professor invasions of personal privacy. Claims from individuals who Waddams submits that courts should re-establish a conventional are sensitive or unusually concerned about their privacy are excluded: it is only intrusions into matters such as one’s figure of $1 for nominal damages. Although in inflationary times it financial or health records, sexual practices and orientation, might be argued that the amount should perpetually increase, this employment, diary or private correspondence that, viewed ignores the nature of nominal damages, which is to mark objectively on the reasonable person standard, can be symbolically the infringement of a right. An amount of $1 is not so described as highly offensive. low as to be confused with contemptuous damages and appears to be 23 In the rare instances where this tort claim is successful, class counsel the figure having most authoritative support in Canadian cases. In will be able to seek actual, general or nominal damages. Proof of short, nominal damages are not simply small damages awards; they damage, particularly in the absence of significant psychological are qualitatively different from other types of damages because they harm or damage to reputation and embarrassment, may be difficult are not meant to compensate a loss but to symbolically recognise to prove. In many scenarios, nominal damages may be the ultimate that a plaintiff has been wronged. award. However, class member and counsel may be disappointed in what they can actually recover in the way of nominal damages. 6. What Does this Mean for Insurers and Policyholders? 5. Nominal Damages As noted at the outset, while loss history is developing for first party As discussed above, proof of actual damages on a class-wide basis claims in the cyber-insurance context, the scope of third-party may be difficult in the data/privacy breach context. To overcome this liability remains opaque. 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commenced have succeeded in having certain causes of action Endnotes certified for trial: primarily negligence; breach of contract; and intrusion upon seclusion. While more exotic theories of liability 1. Condon v. Canada, 2014 FC 250. have been advanced, they have either been abandoned prior to certification or have not succeeded in meeting even the very low bar 2. Tucci v. Peoples Trust Company, 2017 BCSC 1525. applied to certification in Canada. There is no clear cause of action 3. Broutzas v. Rouge Valley Health System, 2018 ONSC 6315. which will result in recovery for class members in all, or even most, 4. R v. Imperial Tobacco Canada, 2011 SCC 42 at 17. cases of data/privacy breach. 5. Fehr v. Sun Life Assurance Co of Canada, 2018 ONCA 718 With this in mind, absent unique facts which may support one or at 85. more of those “exotic” theories, at present class action claims in 6. Anns v. Merton London Borough Council, [1978] AC 728 Canada for data/privacy breach should be evaluated primarily on the (HL). basis of whether or not they pose viable negligence, breach of 7. Condon at 68. contract or intrusion upon seclusion claims. It seems inevitable that 8. Broutzas at 216–217. one or more of the ongoing privacy class actions in Canada will 9. Douez v. Facebook, Inc, 2017 SCC 33. proceed to trial and judgment. While defence of class action claims, 10. Heller v. Uber Technologies Inc, 2019 ONCA 1. particularly ones in which there are novel theories of liability, can be eye-wateringly expensive, some classes are sufficiently large to 11. Condon at 50–51. warrant such expenditure. Based on the Condon, Tucci and 12. Condon Settlement, 28. Broutzas decisions, it is class counsel, not defence counsel that are 13. Oliveira v. Aviva Canada Inc, 2018 ONCA 321. likely to have the more difficult time in making their case. 14. Oliveira at 3–4. Were they to prove their case, the matter of damages remains thorny. 15. Jones v. Tsige, 2012 ONCA 32 at 72. In the likely event that genuine losses cannot be proved on a class- 16. Condon Settlement at 9, 23. wide basis, it remains uncertain as to whether nominal damages can 17. Harvey McGregor, McGregor on Damages, 17th ed (London, be awarded in the class action context. Some doubt was expressed UK: Sweet & Maxwell, 2003) at 10-001 to 10-002 about this prospect in Condon . Should nominal damages be [McGregor]. awarded, the Condon decision is not precedent for the basis of such 18. Messer v. J Clark & Son Ltd, 27 DLR (2d) 766, 1961 awards, as the settlement was worked out between the parties and CarswellNB 18 (N-B Sup Ct) at 12 [Messer]. merely approved (as opposed to awarded) by the Court. It seems 19. SM Waddams, The Law of Damages (Toronto, ON: Canada more likely to the authors that a nominal award will be more in line Law Book, 1991) (loose-leaf revision: 2017) at 10.10 with the discussion in this article (i.e. a token amount whether it is [Waddams]. one dollar, ten dollars, or some other amount). 20. Ken Cooper-Stephenson and Elizabeth Adjin-Tettey, In short, while third-party data/privacy breach claims are beginning Personal Injury Damages in Canada, 3rd ed (Toronto, ON: to take form, there is little in the way of certainty and predictability Thomson Reuters, 2018) at 141[Cooper-Stephenson]. in respect of actual monetary exposure that can yet be discerned. 21. Jamie Cassels and Elizabeth Adjin-Tettey, Remedies: The The arguments available to class counsel appear poorly designed for Law of Damages, 2nd ed (Toronto, ON: Irwin Law, 2008) at the purpose they are presently being advanced to serve. 310 [Cassels]. Policyholders, insurers and their defence counsel have numerous 22. Lewis N Klar, Allen M. Linden, Earl A. Cherniak & Peter W. defences that may yet succeed notwithstanding recent certification Kryworuk, Remedies in Tort (Toronto, ON: Thomson decisions. At present, and absent legislation that creates a cause of Reuters, 1987) (loose-leaf revision: 2018-10) at §5. action designed and intended to address data/privacy breach liability 23. Waddams at 10.30. and damages issues, it appears that the defence has the upper hand. Acknowledgment The authors would like to acknowledge the assistance of their colleagues Harrison Nemirov and Alex Fernet Brochu in the preparation of this chapter.

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David R. Mackenzie Dominic T. Clarke Blaney McMurtry LLP Blaney McMurtry LLP 2 Queen Street East, Suite 1500 2 Queen Street East, Suite 1500 Toronto, Ontario M5C 3G5 Toronto, Ontario M5C 3G5 Canada Canada

Tel: +1 416 597 4890 Tel: +1 416 593 3968 Fax: +1 416 594 5082 Fax: +1 416 594 2503 Email: [email protected] Email: [email protected] URL: www.blaney.com URL: www.blaney.com

David practises in the area of insurance coverage litigation in respect Dominic practises principally in the area of insurance litigation of commercial liability, technology, information and privacy, encompassing both coverage and defence matters. He specialises in professional indemnity and first-party property claims – David has advising and representing insurers with respect to commercial general extensive dispute resolution experience both as a litigator in trial and liability, directors’ and officers’ liability and commercial property appellate courts as well as in mediation, arbitration and negotiation. policies. Dominic has significant experience in the defence of David frequently advises insurers on policy-drafting matters, and is products liability and sexual abuse litigation. He has appeared as often asked to write on insurance coverage matters, particularly counsel in the Ontario Superior Court of Justice and the Ontario Court involving cyber, technology and information risks. He is the Co-Chair of Appeal. Dominic is a frequent lecturer to professional bodies, and is of the Canadian Defence Lawyers Insurance Coverage Symposium, “very experienced, very agreeable and highly competent” with and is regularly invited to speak on insurance coverage issues. David respondents drawing praise for his superb litigation practice, is called to the Bar in Ontario, British Columbia and Washington State, especially in coverage disputes, according to Who’s Who Legal. He giving him a national and international perspective. has published numerous articles on insurance and is a contributing editor to the leading Canadian insurance text, Annotated Commercial General Liability.

Blaney McMurtry LLP is a prominent, Toronto-based law firm consistently ranked as a top-tier regional firm, delivering top-level expertise in litigation & advocacy, real estate and business law. Recognised as a leader in providing services to the insurance industry, in both coverage and defence work, many of the firm’s insurance clients have worked with them for more than 20 years. The firm’s location in Canada’s financial centre positions Blaney McMurtry to handle complex matters that have scope beyond Toronto and the surrounding area. Canadian experience delivered from one office. Blaney McMurtry is a founding member of Insurance Law Global (ILG), a network of like-minded, independent insurance defence firms committed to providing global service to insurance clients from independent law firms across Europe and North America. In addition, the firm is also a member of the Risk Management Counsel of Canada, a national association of law firms providing services to the risk management industry; and of TAGLaw®, a worldwide network of independent law firms, ranked by Chambers & Partners as an “Elite” legal alliance.

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matheson Darren maher

The UK’s decision to leave the EU has resulted in a number of Central Bank has the requisite capacity and resources to deal with financial services firms engaging with regulatory authorities across the high volume of applications which are being processed in a the EU, including the Central Bank of Ireland (the “Central timely and efficient manner. Notably, the Central Bank has Bank”), to discuss potential moves and authorisation, ranging from committed significant additional resources to deal with the Brexit- UK firms looking to re-establish themselves in advance of the related authorisation queries across banking, insurance, investment Brexit date in a country with guaranteed access to the single market, firms, investment funds and financial markets infrastructures. to a number of branches of UK entities in Ireland considering their The Central Bank strongly encourages any firm considering or future corporate structures post-Brexit. seeking authorisation in Ireland to engage with them at an early The moves come as we face the possibility of a no-deal Brexit stage in their planning process to discuss their post-Brexit proposal. despite a “standstill” transition agreement being struck between the In order to secure continued access to the EU/EEA single market EU and the UK government in March last year which was arguably passporting regime post-Brexit, many companies have actioned designed to avoid any such relocations. their Brexit-related strategies on location following the initial meeting with the Central Bank to discuss authorisation. Based on Brexit Relocations our experience, the initial meeting with the ‘short-listed’ regulator is of upmost importance as it sets the tone which will ultimately determine the potential applicant’s preferred jurisdiction for its EU In the immediate aftermath of Brexit, relocating to Ireland seemed base. These meetings allow both sides to clarify each other’s likely to attract more than others and was identified early on as a expectations, discuss the proposed business plan and confirm if they “natural location of choice” based on its stability within Europe, its could work together on a long-term basis. proximity to the UK, its internationally respected regulatory environment and its established international financial services A consistent theme that has developed from these meetings is that industry. Ultimately, whilst all of these factors are important and any potential applicant must demonstrate a commitment to definitely play into the mix, the most persuasive factor that emerged compliance with all applicable legal and regulatory requirements in was the potential applicant’s perception of the regulator and its order to obtain authorisation from the Central Bank. The Central confidence in whether it could confidently build a long-term Bank expects firms to demonstrate how operations will be based in working relationship with that regulator. To date, there has been a Ireland; with key business decisions being made here – not a mere battle for business across a number of other cities across Europe brass plate. In particular, the Central Bank requires all Brexit- such as , Paris, Frankfurt and Luxembourg, each competing related applications to demonstrate real substance in Ireland in terms directly with Dublin for this Brexit-related relocation activity. of the applicant’s governance structure, personnel and technical resources, distribution of activities, outsourcing arrangements and

reinsurance programmes. The CBI Process In particular, this will include having sufficient senior management personnel in Ireland who are able to dedicate sufficient time and The Central Bank has been engaging with firms that are exploring resources to running the subsidiary. The Central Bank expects the possibility of relocating aspects of their operations to Ireland senior management personnel to display proper knowledge of local post-Brexit. The Central Bank promotes a clear, well-structured and markets, products and risks and of the proposed business plan of the transparent authorisation process and has been closely engaged in applicant. Proposed senior managers must be pre-approved as fit efforts at EU level in developing a consistent and predictable and proper persons by the Central Bank and as part of this process, approach to Brexit-related decision-making and issues across the these senior candidates can be called for interview by the Central sectors. The Central Bank has recently provided guidance in respect Bank where their breadth of knowledge and understanding of their of how it is engaging with EU regulatory authorities in the context role and the proposed business can be assessed in further detail. of “Brexit-related matters”; advising firms “to prepare for the worst and to hope for the best”. The Central Bank’s focus on the issue of substance is further evidence when considering the permitted levels of reinsurance. The Having worked on a number of applications, ranging from Central Bank expects an Irish authorised reinsurer to retain a certain applicants with operations already established in Ireland adopting level of the risks that it writes and typically will expect an insurer to traditional insurance models, to first-time entrants or applicants retain at least 10% of the risk that it writes in the aggregate and adopting a new innovative structure, based on our experience, the potentially more depending on the nature of its business.

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An insurer is permitted under the Solvency II regime to outsource It is a welcomed move by the Irish government in order to provide many of its functions to a third party, provided that a written some certainty for Irish policyholders in relation to the servicing of outsourcing agreement is put in place, the insurer maintains proper contracts – or policies – that were put in place prior to Brexit. oversight and supervision of the outsource service provider, can As the proposed legislation has not yet been passed, firms are resume direct control over an outsourced activity through currently unable to rely on it. The message to the market is to not insourcing or an alternative outsourcing arrangement is in place as wait for the draft legislation to be signed into Irish law and to part of its exit plan and it does not impair the quality of governance, continue to action Brexit plans assuming a hard Brexit. increase operational risk and/or undermine the quality of service to customers. Approval of own funds or the use of an internal model under Lessons Learned

Solvency II is subject to Central Bank approval although any previous internal model approval by other EU/EEA regulators may By and large, what we are seeing in practice is companies investing be taken into account. heavily in firming up their Brexit-related contingency planning for how they will adequately deal with the possible effects of a “hard”

Brexit. Supervisory Convergence In assessing any application, the Central Bank is guided by its

mandate to protect consumers and safeguard financial stability The Central Bank engages with a range of EU authorities including rather than incidentally creating gainful employment in the Irish the European Central Bank (ECB), the European Securities and economy. The Central Bank deals with all enquiries in an open, Markets Authorities (ESMA), the European Banking Authority engaged and constructive manner. (EBA) and the European Insurance and Occupational Pensions The Central Bank has been consistent in its approach when Authority (EIOPA) and is an active participant in their various assessing applications for authorisation, which lends itself to decision-making bodies and plays a role in framing policy positions building and maintaining an international reputation as a well- in the context of EU Directives and guidance. regarded regulatory authority; which plays a pivotal role in the In an attempt to dissuade the development of any regulatory supervision and regulation of financial service providers in Ireland arbitrage between EU/EEA Member States in the battle to attract to ensure compliance with regulatory requirements. Brexit business, ESMA and EIOPA have separately published an

Opinion, setting out principles which have the aim of fostering supervisory convergence and consistency in the authorisation The Future process across the EU Member States related to the relocation of (re)insurance undertakings from the UK. Each opinion is directed Any firm considering or seeking authorisation in Ireland is strongly to Member State supervisory authorities in the “EU27”, i.e. Member advised to engage with the Central Bank as soon as possible to States excluding the UK and assumes that the UK will become a discuss their post-Brexit proposal. In the words of Winston third country post-Brexit. Churchill “I never worry about action, but only about inaction”. Commendably, the Central Bank has refused to engage in such A lack of clarity on future trading links post-Brexit is motivating competitive practices in order to attract business to Ireland and is these relocations. To date, the working assumption has been that the committed to and guided by its mandate which is to protect UK will be treated as a third country or non-EEA member for consumers and safeguard financial stability. market access purposes post-Brexit. The trend to date highlights that no one EU/EEA city is emerging as UK and Gibraltar-based Insurers and a compelling alternative to London. Ireland has exceeded expectations in attracting Brexit relocators and it has much to offer Brokers Continuity of Services the financial services sector as the industry adapts to the future. It remains to be seen if more financial services firms will choose There is no proposed EU or Irish equivalent to the UK’s “temporary Ireland as their EU hub post-Brexit. permissions regime” which permits EU/EEA registered financial services providers to continue carrying on new business in the UK For as long as the UK is still part of the EU, it will be possible for for a temporary period post-Brexit. Irish insurers to operate on a passported basis into the UK. What the position will be following the UK’s exit from the EU is, at this point, To limit the impact on Irish insurance policyholders in the event of unclear and it remains to be seen whether separate authorisations a no-deal Brexit, draft legislation has been prepared by the Irish will be required in the UK to deal with UK business post-Brexit. government which provides for a temporary run-off regime to allow UK and Gibraltar-based insurers and intermediaries, who meet The extent to which any regulatory changes are required to be certain requirements, to continue to service Irish customers’ existing introduced will depend on the outcome of the withdrawal policies for a period of up to three years. Such firms, however, will negotiations initially and the negotiations of the future trading not be permitted to write new business, including the renewal of agreement between the two blocs ultimately. existing policies.

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Darren Maher Matheson 70 Sir John Rogerson’s Quay Dublin 2 Ireland

Tel: +353 1 232 2398 Email: [email protected] URL: www.matheson.com

Darren Maher is a partner and head of the Financial Institutions Group at Matheson. He has advised a wide range of leading domestic and international financial institutions on all aspects of financial services law and regulation including establishment and authorisation, development and distribution of products, compliance, corporate governance and re-organisations including cross-border mergers, schemes of arrangement, portfolio transfers and mergers and acquisitions. Darren is a member of the firm’s Brexit Advisory Group and is advising a significant number of the world’s leading financial services firms on their plans to establish a regulated subsidiary in Ireland in order to maintain access to the EU single market following the United Kingdom’s exit from the EU.

Established in 1825 in Dublin, Ireland and with offices in Cork, London, New York, Palo Alto and San Francisco, more than 700 people work across Matheson’s six offices, including 96 partners and tax principals and over 470 legal and tax professionals. Matheson services the legal needs of internationally focused companies and financial institutions doing business in and from Ireland. Our clients include over half of the world’s 50 largest banks, six of the world’s 10 largest asset managers, seven of the top 10 global technology brands and we have advised the majority of the Fortune 100.

14 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 4 latin america – an overview Duncan strachan

Dac Beachcroft llP lucy Dyson

Introduction increasing their market share. This has come about as the result of increased expertise, as well as due to protectionist regulation in territories such as Brazil and . In recent years, in order to 2018 heralded a new period of political and economic change in provide capacity to insure the large infrastructure projects, it has Latin America, most notably in Mexico and Brazil, the region’s two become more common to see risks being shared between largest economies.1 The middle classes are on the march and there (re)insurers in London, Europe, the US (Miami, in particular) and is a demand for corruption to be stamped out. In reality, it will likely Latin America. take decades for the region to see lasting and widespread economic and political stability. That being said, Latin America has enormous In almost all Latin American jurisdictions, the inclusion of a local potential and its diverse natural resources and manufacturing law and jurisdiction clause is mandatory in both the original and industries continue to attract foreign investment. reinsurance policies. This produces a degree of uncertainty for foreign reinsurers when reinsuring risks in territories with very little The region has recently suffered several catastrophic events, as a insurance or reinsurance case law or expert judges. The inclusion of result of both natural and man-made disasters. These have ranged an arbitration clause can provide some comfort, although there is from tailings dam and bridge collapses, to pipeline ruptures and oil still a long way to go before arbitration is accepted by insureds as spillages, to severe weather events and landslides. Corruption and preferable to the jurisdiction of a local court. poor business practices have also dominated the claims landscape, with D&O scandals continuing to dominate news headlines. This chapter summarises the current political and economic situation, as well as some of the key issues for (re)insurers when it Local insurance markets continue to develop, both in terms of comes to managing risk and exposure, in eight Latin American capacity and expertise, but the legal framework often does not jurisdictions. accommodate the commercial needs at the top end of the market.

Protecting consumers and ensuring victims are compensated remain integral to the drafting of legislation and how Latin American courts Argentina approach insurance claims. This is borne out by the doctrine of (strict) liability for hazardous activities common to most President Mauricio Macri will campaign for re-election in October jurisdictions, mandatory insurance for certain business activities, 2019, following some success in tackling Argentina’s ongoing and in some countries, deleting or amending fundamental economic recession. Argentina has experienced varying degrees of contractual terms. The standards businesses in the region, as well as economic instability and uncertainty since the financial crisis of their directors and officers, are expected to meet look set to increase, 2001. At present, there is a currency freeze which will remain in and the enforcement of these standards is increasing the potential place until June 2019, following concerns over inflation (expected exposure. In turn, combined with continued economic growth and to be 31.7% in 2019) and public spending in proportion to GDP. domestic demand from an expanding middle class, this will drive Droughts between November 2017 and April 2018 notably hindered the continued expansion of insurance. Macri’s efforts to reduce inflation, with damage to exportable crops totalling billions of US dollars. Heavy rains are predicted again for The insurance industry continues to see an increase in regulation, 2019. Such severe weather events (often due to El Niño and La although in the majority of Latin American countries, there is no Niña) are likely to increase in frequency and demonstrate more established body of insurance or reinsurance jurisprudence to assist polarised effects, as global warming worsens. in its interpretation. As a result, the courts’ recognition or understanding of the commercial bargaining behind new and The Argentine insurance regulator (SSN) has relaxed its regulations traditional insurance products, inevitably varies from country to regarding foreign reinsurers who are admitted to reinsure the local country. The timescales for responding to claims are often short, Argentine market. Admitted Reinsurers can currently reinsure 50% with draconian consequences for failing to meet deadlines. Another of risks and this will increase to 75% in 2019. The SSN has been unique factor, is the prevalence of state-owned companies providing focused on ensuring that local reinsurers are reducing their role as public services (e.g. rail and road operators and electricity fronts between local cedants and foreign reinsurers/retrocessionaires. companies), and state-owned insurers. This has a significant effect This has often led to convoluted contractual arrangements. on the claims handling approach locally. The Argentine courts are focused on compensating victims and Whilst the traditional “fronting arrangement” between a foreign protecting consumer rights. This is particularly evident in cases reinsurer and a local cedant remains commonplace (particularly for involving public risks (e.g. railways and roads). Policy deductibles construction risks), Latin American domiciled carriers are now of more than 1% of the policy limit are at risk of being deleted iclg to: insurance & reinsurance 2019 www.iclg.com 15 © Published and reproduced with kind permission by Global Legal Group Ltd, London Dac Beachcroft llP latin america – an overview

entirely or reduced, with no consideration of the commercial defence costs for directors involved in criminal proceedings, during bargain between an insured and its insurer. For example, for some which one of the directors had confessed to fraud and corrupt risks, public liability insurance is mandatory. Therefore, given the activity. This situation is becoming more common in Brazil, where low level of damages typically awarded in personal injury cases, an investigations into alleged corruption are the pre-cursor to a request excessively high deductible would potentially render the cover for defence costs, and it seems (re)insurers may be able to argue that worthless. a confession is sufficient evidence of fraudulent, criminal or willful There is no established reinsurance law in Argentina. As a result, a misconduct. court is unlikely to view the purpose and operation of a reinsurance contract as distinct from the original policy. Concepts such as “follow the settlements” and the circumstances in which the response of a reinsurance contract could be distinguished, are not Chile remains one of the most politically stable Latin American typically recognised. countries, with Sebastián Piñera, being re-elected for a second term at the end of 2017. However, the Chilean economy is dependent on Brazil both foreign investment (notably by China) and copper prices. Growth for 2019 is anticipated at over 4%. The election of Jair Bolsonaro to the Brazilian presidency signifies The insurance market is competitive and strives to provide a shift to the far right of the political spectrum. Although his social innovative solutions for customers. This includes insurance views have led to him being described as the “Trump of the products which are tailored to the user with reduced premiums (e.g. Tropics”, Bolsonaro is expected to concentrate on Brazil’s economy, motor insurance). The establishment of a new regulator is intended including improving employment and pensions, and privatising to increase the credibility and attractiveness of the market to foreign infrastructure to bolster public finances. investors, and to build on the new insurance law that came into force 3 Brazil has become synonymous with both environmental disasters on 1 December May 2013. and corruption scandals in the past five years. This includes the Chilean insurance and reinsurance jurisprudence is arguably the bribery and corruption-related securities class action brought in most developed in the region. Protection of the insured is the New York against Petrobras, which was settled in January 2018 for principal objective of Chilean insurance contract law, and US$2.95 billion. The 2015 Mariana dam collapse was the worst reinsurance is classified as being intended to respond as an environmental incident in Brazil’s history, and 2019 has seen a indemnity policy for the reinsured, subject to the limits and similar scale of tragedy with the Brumadinho disaster in January conditions established in the contract.4 There is also recognition 2019. September 2018 also saw the destruction of the National that the terms of the reinsurance do not alter the obligations under Museum of Rio de Janeiro, following a fire. It is speculated that this the original policy,5 and that the Chilean courts will look to could have been avoided if the building had been properly “international use and custom” when it comes to interpreting maintained (the government withdrew funding for restoration work) reinsurance contracts. This recognition provides grounds for and protected from fire damage. reinsurers in international markets to continue to use established Since 2017, Brazil has relaxed its protectionist regulations principles, such as follow the fortunes/follow the settlements, and concerning foreign investment, including in the reinsurance market. clauses, such as claims cooperation and claims control. However, There is no longer any mandatory rule for placing reinsurance in the Chilean courts will likely resolve any ambiguity in favour of the local market, only the requirement to offer first choice to local reinsured, and the interpretation of reinsurance contracts remains reinsurers of 40% of each treaty or facultative risk. Regulation relatively untested. continues, most notably with the approval of a data protection bill in In our experience, it is important that both reinsurers and reinsureds July 2018 (due to come into effect in early 2020). This will adhere to the strict rules for the adjustment of insurance claims. undoubtedly trigger demand for cyber insurance products. Anti- This includes challenging the independent adjuster’s final report money laundering regulations have also been proposed by the within 10 days of it being issued. In the event of a dispute between Brazilian insurance regulator, Superintendency of Private Insurance an insured and insurer after the final report has been issued, the (SUSEP). insured must commence arbitration proceedings with an arbitrator Brazil’s insurance law is characterised by the lack of a dedicated who is an insurance expert (if the loss value exceeds US$400,000). insurance law. Instead, the provisions relating to insurance are This provides some comfort to insurers/reinsurers that higher value, contained in the Brazilian Civil Code and there is ongoing debate more complex losses will be considered by specialists, rather than about whether or not they also apply to reinsurance contracts. The judges with little insurance experience or expertise. situation is set to change in the future, if and when the draft Insurance Law Bill is enacted. One the proposals contained in the Colombia draft Bill is to prohibit the use of arbitration clauses in insurance contracts, which many argue would be a step backwards for the Although there is some uncertainty around the new conservative liberalisation of the market. At present, insurers are required to president, Ivan Duque, and his lack of a congressional majority, respond to claims within 15 days (capable of suspension with a Colombia continues to see economic growth and investment. request for documentation). However, the draft bill would implement stricter requirements on insurers, including confirmation 2018 was notable for multiple flooding events (including the of coverage if a denial is not properly reasoned. flooding up- and down-stream of Hidroituango, Colombia’s largest hydroelectric dam, which left 600 people homeless and damaged In an interesting case for the D&O market, the Appellate Court of local infrastructure). The January 2018 Chirajara bridge collapse São Paulo recently handed down a judgment2 on the enforceability dominated the headlines at that time. It resulted in nine fatalities of an arbitration clause in the general conditions of the policy, but and necessitated the destruction of the almost-completed bridge the comments of one Judge on the payment of defence costs has structure. attracted comment. The insured was seeking reimbursement of

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Victims have the recourse of direct action against insurers in Ecuadorian courts are focused on compensating the victim, and are Colombia, and the insured can also join its insurer to proceedings via a prone to making significant damages awards. There are strict time ‘call in warranty’ (llamamiento en garantía). For cases involving third periods for responding to insurance claims but no established body of party liability insurance, it would be unusual for the insurer not to be insurance jurisprudence. It is, however, arguably possible to reinsure joined. The limitation period for a claim against an insurer is two years an Ecuadorian risk subject to the law and jurisdiction of England or from the date on which the claim is brought against the insured by a somewhere other than Ecuador (although some may argue that this is third party, arguably whether through formal court proceedings or not. prohibited by the same rule that requires insurance contracts to adhere 9 As the insurance market has become more sophisticated, the use of to Ecuadorian laws ). non-occurrence based policies is becoming more common in the Colombian market, with increasing demand for speciality insurance Mexico products (e.g. product recall policies). Claims made policies have been recognised since 19976, when the law was changed to allow for Politically, 2018 was a historic year for Mexico, with the election of policies to respond to claims made during the policy period in relation Andrés Manuel López Obrador (“Amlo”), the first left-wing to earlier events. The law sets out clear requirements to enable the use president since the 1920s. Amlo and his party (Morena) advocate of claims made policies with a minimum extended reporting period of the eradication of poverty, corruption and violence, whilst achieving two years. However, they have recently returned to the spotlight in sustainable economic growth and a strong currency. At the forefront the context of investigations into the alleged misuse of public funds is Amlo’s National Hydrocarbons Production Plan (announced at led by the Contraloría General de la República. the end of 2018), under which Mexico’s refineries and oil and gas It is important that (re)insurers take account of the one month period infrastructure will be improved and expanded. It is hoped that this for paying a valid claim, once the insured has proved its loss. If they will result in the production of 2,624,000 barrels a day by 2024. fail to do so, the insured has the right to seek interest at a However, Amlo faces several political challenges which may moratorium or penalty rate from the date it first presented its claim.7 undermine his ability to achieve his goals, and there is already An insured may also seek to argue that its defence costs are payable considerable criticism that sweeping changes have paralysed the in addition to the policy limit, in accordance with Article 1128 of the country. This extends to the insurance market, where the majority of Code of Commerce, or as part of the broad obligation on an insurer management at the regulator (La Comisión Nacional de Seguros y of a liability policy to pay for reasonable mitigation costs.8 This Finazas) have lost their jobs. The ruling party is small and will issue is yet to be determined by the Colombian Court, but a require the support of opposition parties in enacting change. The significant body of insurance case law is forming, both in the courts influence and power of the cartels is also deeply embedded in and via arbitration awards (although the law on confidentiality in society, with as many as 800,000 people employed in the drugs arbitrations is unclear). Whilst a first instance court is likely to find industry. Mexico’s relationship with the USA has also intensified, in favour of an insured, appellate courts are increasingly adept at due to US migration policies and contrasting positions on the North dealing with insurance (and reinsurance) issues and are known to American Free Trade Agreement. look to jurisprudence in the US for guidance. Mexico’s courts are focused on ensuring that victims receive

compensation. Public liability insurance is mandatory for certain Ecuador types of (hazardous) business activity. This means that when judgment is entered against an insured, the insurance will Politically and economically, Ecuador is one of the least stable automatically respond and indemnify the victim directly (regardless countries in South America. President Moreno has now been in of policy coverage defences). The insurer must then bring a power for almost two years, and his shift to the centre (away from recovery claim against the insured to recoup the policy indemnity. his predecessor, Correa) has triggered a rift in the Alianza Pais party. Damages and interest can significantly inflate the value of claims. Moreno is focused on reducing public spending, tackling corruption Moral damage awards are assessed by reference to the size of award and implementing major infrastructure projects. Progress, however, and the means of a defendant. As a result, the awards against large is constrained by the need to address the challenges of ongoing corporations can be significant (in the region of US$1m upwards per deforestation, historic pollution events and violence on the victim). The Mexican Supreme Court has also approved the award Colombian border. Ecuador is also heavily dependent on foreign of punitive damages as a deterrent for harmful conduct (albeit these investment (in particular by China). are usually excluded under general liability policies). As part of the fight against corruption, several former government Insurers have 30 days to respond to claims, or they risk paying officials have been indicted in relation to the Odebrecht scandal, interest or being subject to fines or interest. The debate continues as and, in September 2018, Chevron successfully overturned a to whether general rules, applicable to commercial contracts under US$9.5bn environmental judgment by Ecuador’s Supreme Court, in the Mexican Civil Code, should apply to the interpretation of the Permanent Court of Arbitration, at the Hague. It was found that reinsurance contracts. Some people consider that the Insurance Chevron’s liabilities had already been settled by the Ecuadorian Contract Law should apply to address any aspect of a claim not government and the judgment was “procured through fraud, bribery addressed by the reinsurance terms. and corruption”. This is a damaging result for the Ecuadorian judiciary, and undermines the courts’ credibility internationally. Ecuador has borrowed US$19bn from China (repaid with 80% of Peru

Ecuador’s oil exports), to invest in improving its infrastructure. This included constructing the Coco Coda Sinclair dam, which has 2018 was a year of political uncertainty for Peru, with the proven to be an ill-fated venture. The dam sits in the shadow of an impeachment and resignation of President Pedro Pablo Kuczunski, active volcano, deep in the Amazon, and there are serious concerns and investigation of several senior politicians and officials in over its structural integrity, with more than 7,000 cracks forming, relation to corruption charges. Oil and gas continues to be integral the reservoir clogging with silt, equipment failing and the dam only to Peru’s economy, but ageing infrastructure and lack of investment running at half capacity. continue to undermine the productivity of the industry. iclg to: insurance & reinsurance 2019 www.iclg.com 17 © Published and reproduced with kind permission by Global Legal Group Ltd, London Dac Beachcroft llP latin america – an overview

Insurance penetration (for both business and property) in Peru Local insurance markets are growing steadily and it is a positive remains low, although an increase in D&O risks is anticipated sign that previously protectionist regimes such as Brazil and (following legislation concerning the liability of officers in public Argentina are opening up to foreign markets. Careful attention must and private entities). In the wake of the Odebrecht scandal, Law be paid to the particular nuances of each country’s civil liability 2408 was passed, which provides that in corruption cases, civil regime, with the trend for broader duties on companies and their damages awarded to the state are immediately payable. There is management, as well as stricter enforcement. Together with the uncertainty as to whether insurers would be able to exclude liability recognition of the need to stamp out corruption, and the increasing for such claims. risks brought about by climate change and natural disasters, the There has been some controversy concerning non-occurrence based exposures to businesses are increasing significantly. insurance policies. In October 2018, the Peruvian regulator, From the perspective of (re)insurers, there is likely to be a growing Superintendencia de Banca, Seguros y AFP (“SBS”) issued an demand for new products to protect against these exposures. While opinion setting out its view that “Claims Made” policies are not this presents opportunities, care must be taken to understand the permitted under Peruvian law and will be declared null.10 The opinion development of the laws and regulations on insurance in each is based on a strict interpretation of the Peruvian Insurance Contract jurisdiction. In some cases, the rules in the local market may make Law11, which describes the trigger for civil liability policies as being it difficult to implement a new product, so (re)insurers must adapt the occurrence of the harmful act – within the policy period. The their approach on a country-by-country basis. The current challenge opinion does not consider the effectiveness of deeming provisions or to the validity of claims made policies in Peru highlights the need extended reporting periods, but states that any attempt by parties to for caution – but we would add that there is optimism that this issue the contract to circumvent this rule will also be null. This opinion has can be resolved, just as it has been in other jurisdictions, such as attracted much concern, including amongst international reinsurers in Colombia. Likewise, (re)insurers cannot take it for granted that the the D&O and professional liability markets, as well as criticism from courts will appreciate the negotiations between commercial entities, leading academics and law firms. We would anticipate that there will or look to more established jurisdictions for guidance on be further consideration of this issue by the Peruvian judiciary, given reinsurance law. As the markets become sophisticated, the that claims made policies are used by the D&O and professional interpretation of insurance and reinsurance contracts should become indemnity market and these products are gaining popularity in Peru in easier to predict, but this remains some five to 10 years away for the wake of the corruption scandal. many jurisdictions, and that depends on progress being maintained. In 2018, new rules for reinsurance fronting arrangements came into force, permitting “pay when paid” provisions when an insurer cedes Endnotes 100% of the risk. Peru is one of two jurisdictions (alongside Chile), which has a specific definition for a reinsurance contract and that 1. The economies of Brazil and Mexico combined are almost makes it independent of the underlying policy. Reinsurance is twice the size as the rest of the region put together, based on defined as obliging the reinsurer to meet the debt of the reinsured, GDP. within the agreed limits, as a consequence of its obligations under 2. Civil Appeal No. 1011986-32.2017.8.26.0000. the insurance contract. The intent is reportedly to prevent insurers 3. Ley 20,667 replaced all the previous non-marine provisions from using reinsurers as an excuse for late payment under the and made changes to marine provisions. underlying policy. 4. Ley 20,667, Article 584.

5. Ley 20,667, Article 585. Venezuela 6. Ley 389 de 1997.

7. Articles 1053 and 1080, Colombian Code of Commerce. Venezuela is currently experiencing an economic and social crisis. 8. Article 1074 of the Code of Commerce. State-owned PdVSA is failing, oil exportation has reduced and currency controls have been ineffective. The IMF has predicted that 9. Ley General Seguros, Article 25 b). economic growth will fall to -5% and inflation will reach 10 million 10. Oficio N° 36805-2018. per cent, during 2019. Sanctions issued by the EU and the USA 11. Ley de Contrato de Seguro, No. 29946, principally Articles remain in place, in recognition of the human rights crisis. Over 105 and 109. 600,000 Venezuelans have migrated to Colombia and Brazil has confirmed that it will keep its borders open. Acknowledgment Given the sanctions (and ever increasing list of individuals and entities), Reinsurers in international markets will need to take extra The authors would like to acknowledge the assistance of precautions before reinsuring public or government figures, bodies KAYLEIGH STOUT in the preparation of this chapter. or state-owned companies. However, Reinsurers can take some Kayleigh Stout is a lawyer, who works alongside Duncan Strachan comfort from being able to include an arbitration clause (subject to and Lucy Dyson in the international coverage team at DACB. a foreign law and jurisdiction) in reinsurance contracts. Working in Portuguese and Spanish, she advises primarily on Latin American and European losses involving traditional and renewable energy, construction, aviation, infrastructure and environmental Conclusions sectors. Latin America continues to present both opportunities and challenges to domestic and foreign (re)insurers. Changing political regimes, the economic response to domestic demand (as well as the ability to attract foreign investment) and the success or failure of the current crackdown on corruption, are themes that will be most influential over the coming years.

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Duncan Strachan Lucy Dyson DAC Beachcroft LLP DAC Beachcroft LLP 25 Walbrook 25 Walbrook London EC4N 8AF London EC4N 8AF United Kingdom United Kingdom

Tel: +44 20 7894 6876 Tel: +44 20 7894 6876 Email: [email protected] Email: [email protected] URL: www.dacbeachcroft.com URL: www.dacbeachcroft.com

Duncan Strachan advises on litigation defence and coverage issues in Lucy Dyson is an insurance and reinsurance coverage and defence the key jurisdictions, including Argentina, Brazil, Colombia, Chile, lawyer. She routinely advises on domestic and international public, Ecuador, Mexico, Peru and Venezuela. He is fluent in Spanish and product and pollution liability losses in the onshore energy, mining, also works in written Portuguese. Regularly dealing with large and manufacturing, infrastructure and tourism sectors. She has complex cases across Latin America, the Caribbean and the United experience advising on claims in Latin America, the US and common States, Mr. Strachan manages exposures on behalf of the London and law jurisdictions including Australia, South Africa and the Caribbean. Miami reinsurance markets. Lucy also speaks Spanish. His Latin American expertise covers the energy industry, the utilities She is ranked in The Legal 500 as a “Next Generation Lawyer” and as sector, financial services and aviation losses. He is a ranked lawyer in an “Associate to Watch” by Chambers Latin America who “maintains a Chambers Latin America, where he is described as “very analytical”, solid presence in the Latin American insurance space, frequently as well as “fully aware of commercial realities and someone I would assisting insurers and reinsurers with cross-border matters. She describe as a safe pair of hands”. possesses particular acumen in higher-value losses as well as in the property and casualty sector”. As well as his broad international experience, Mr. Strachan advises clients on commercial disputes in the United Kingdom and Europe. He advises on general liability, construction disputes, product liability claims, and D&O and cyber wordings.

DAC Beachcroft is an international law firm with more than 2,500 professionals (including 150 partners and 950 specialist lawyers who specialise in insurance and reinsurance matters) – one of the largest groups of any law firm. We are a broad-based commercial firm serving a wide range of sectors with a strong heritage in insurance, financial services, technology, property and real estate, healthcare and energy. Being an international firm with a London hub connected to our strong regional UK presence enables us to deliver against the evolving needs of our clients. We stand out for delivering bespoke solutions – high quality advice delivered in sophisticated, customised and creative ways – one client at a time. Our relentless determination to deliver a bespoke service means each client receives what they value most – expert advice, tailored to their specific needs. We combine excellent legal skills and cutting-edge delivery expertise to design solutions that fit the needs of our clients – often involving clever uses of technology. We’re easy to engage with, a reputation we are proud to maintain and reinforce through our people and the way we operate.

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insurance anti-money laundering regime maría José Pinillos montaño Developments in mexico

creel, garcía-cuéllar, aiza y enríquez, s.c. eduardo apaez Dávila

I Introduction dialogue between the authorities and the financial entities to understand the technical aspects of the different products and services offered by each sector, and the impact of the amendments The incorporation of Solvency II principles in Mexico by the (operative and economic), to provide the authorities with the Insurance and Bonding Companies Law (Ley de Instituciones de necessary information to achieve the objective of the AML/CFT Seguros y de Fianzas, “LISF”) and secondary regulations effective regime. as of April 2015, have substantially changed the regulatory, financial stability standards, risk management and reporting and Insurance AML/CFT regulations have historically followed the same disclosure requirements for Mexican insurers. One of the missing fortune as the banking and securities regulations, notwithstanding pieces of updated regulation for the insurance industry, however, is that, the risk between these sectors are very different. As recognised that related to anti-money laundering and counter-terrorist financing in the MER, insurance activities – except for long-term life and (“AML/CFT”); the applicable regulations are still those issued back investments products – are considered low AML/CFT risk. in 2012. AML/CFT insurance regulations appeared to be adequate for the The busy agenda of the regulators responsible for the issue of the FATF standards; however, the effectiveness of certain aspects can be new AML/CFT insurance regulations may help explain this four- improved in the new AML/CFT regulations that are expected. year lag: regulators have been busy implementing the Financial For example, all insurance companies are required to perform Action Task Force (“FATF”) international standards. During 2016, customer due diligence prior to entering into business relations, this Mexico carried out the first AML/CFT National Risk Assessment. measure seems appropriate prima facie for traditional insurance As a result of such assessment, the following principal concerns products, however, this requirement has contributed to impeding the were identified: (i) the high volume of proceeds generated by crimes growth of financial inclusion through microinsurance and the (mainly domestic organised crime, including drugs and human operation of bancassurance models in Mexico. This restriction may trafficking); (ii) corruption; and (iii) tax evasion committed in and be tempered by allowing a digital onboarding of clients, simplifying outside of Mexico. The financing of terrorism was not considered to customer due diligence at this stage and providing the technical be a relevant risk in Mexico. requirements of the technological tools to comply with FATF Then, the 4th Round of the FATF Mutual Evaluation was performed international standards, considering differentiated risk levels, and where the technical compliance with the international standards and, allowing simplified measures for specific customers and services. for the first time, the effectiveness of the regime was under scrutiny. Currently, banking AML/CFT regulation allows digital onboarding The Mutual Evaluation Report (“MER”) published in January 2018, in certain products and in accordance with the risk level determined highlighted that the financial sector, including insurance, complies, by each company. The SHCP could adopt a holistic approach for the in general, with the recommendations for the preventive AML/CFT new AML/CFT insurance regulations, keeping in mind the need for regime. financial inclusion and the specific characteristics of the products and distribution channels of the sector.

In addition, the existing AML/CFT regulations require that ‘Know II Insurance AML/CFT Regulations Your Customer’ obligations under AML/CFT guidelines be carried

out by insurance agents and brokers. This is not an obligation that is The Ministry of Finance and Public Credit (“SHCP”) is the generally complied with by insurance intermediaries, perhaps authority responsible for issuing the AML/CFT regulations because it sets a higher standard than the AML/CFT obligations applicable to financial entities. The drafting of the regulations is imposed on banking agents. Moreover, insurance agents and conducted by three units of SHCP: the Banking, Securities, and brokers generally lack the infrastructure to comply with full ‘Know Savings Unit (Unidad de Banca, Valores y Ahorro); the Insurance Your Customer’ obligations as their role is usually limited to Pensions and Social Security Unit (Unidad de Seguros Pensiones y conducting customer due diligence for selling traditional face-to- Seguridad Social); and the Development Banking Unit (Unidad de face insurance. Banca de Desarrollo). Naturally, convergence implies shared On a side note, a real challenge for the insurance industry is the interests and common challenges and there is much that banking and identification of final beneficiaries, since there is an excessive insurance authorities can learn from one another. overconfidence on clients’ declarations regarding final beneficiaries. In such regard, one of the areas of improvement for both banking and insurance AML/CFT regulations is to establish a permanent

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The MER states that the supervisors have been lenient in imposing Despite the more comprehensive mandate, in practice CNSF’s on-site sanctions on financial institutions since the FATF considers that supervision has focused more on customer due diligence/sampling sanctions, generally, are not effective, proportionate, and dissuasive. customer files and imposing penalty fees for each incomplete file and One of the factors identified by FATF supporting this conclusion is less so on identifying substantive AML threats. AML/CFT the protracted time lag between a final resolution issued by the obligations and supervision standards are, in most cases, limited to insurance regulator with respect to violations of AML/CFT technical compliance with the legal obligations regardless of the lines obligations and the assessment of fines. In this context, the LISF of business or business model of the company, even if they are on run- sets forth a maximum fine – roughly USD$422,450 – that may be off and not carrying out underwriting activities. imposed for each violation of the AML/CFT regulations but not a It is worth noting that the MER recommends to review the amount criteria that should be applied by the regulator for purposes of of budgeted resources for the AML/CFT supervision and to develop assessing a lower fine. There is also a lack of consistency between a more focused approach to assess the terrorism financing risk in the the criteria applied by the insurance regulators for imposing inspection procedures. The input from the SHCP, the CNSF and the AML/CFT penalties from the criteria applied by the SHCP. This Financial Intelligence Unit could be useful to achieve a positive discretional element in the assessment of fines by insurance result to implement the recommendations issued by the FATF. regulators, that needs to be justified in every case, may give rise to challenges. IV Conclusion

III Insurance AML/CFT Surveillance The new Federal Executive administration that took office on

December 2018, should focus on improving insurance AML/CFT Mexican insurers are subject to a risk-based supervision of regulations. The intersection between insurance and AML/CFT has compliance with the AML/CFT procedures by the National fast become a complex area of focus and concern across the Insurance and Bonding Commission (“CNSF”). However; since industry. insurance is categorised as low risk for money laundering and If the SHCP seizes the opportunity at this critical juncture where terrorism financing purposes the relevant supervisory procedures new AML/CFT insurance regulations are pending and the results of are significantly less developed than the ones carried out by the the MER are available, it could provide the Mexican insurance National Banking and Securities Commission (“CNBV”) with sector with top-class AML/CFT regulatory framework that respect to the banking and securities sector. recognises and considers the specifics of the industry. A The CNSF has started to develop risk-based models to classify differentiated AML/CFT framework must be put in place, but only institutions based on the lines of business and distribution models. after a profound and sound exchange of technical and operative Accordingly, the CNSF uses a risk matrix considering inherent risk information between the authorities and insurance companies. and mitigating factors and performs both off-site surveillance and on-site inspections as part of its supervisory programmes to validate compliance with the AML/CFT legislation. Acknowledgment The CNSF prepares its annual inspection programme based on four We would like to express our gratitude to Carlo Romero for his key considerations: (i) recent corporate changes of the insurance valuable assistance in the drafting and research carried out for the company; (ii) the extent to which life policies and savings products preparation of this chapter. are offered; (iii) the previous cycle of visits; and (iv) whether the company should be given priority on the basis of having an AML/CFT high risk rating. Consistently with the FATF recommendations, the primary focus of the CNSF, is on long-term life and investment products, in recognition of the fact that these pose the highest risk for the sector.

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María José Pinillos Montaño Eduardo Apaez Dávila Creel, García-Cuéllar, Aiza y Enríquez, S.C. Creel, García-Cuéllar, Aiza y Enríquez, S.C. Torre Virreyes Torre Virreyes Pedregal 24 24th floor, Molino del Rey Pedregal 24 24th floor, Molino del Rey 11040 Mexico City 11040 Mexico City Mexico Mexico

Tel: +52 55 8525 1978 Tel: +52 55 8525 1933 Fax: +52 55 4748 0660 Fax: +52 55 4748 0660 Email: [email protected] Email: [email protected] URL: www.creel.mx URL: www.creel.mx

María José Pinillos is a Counsel of the firm. Her practice focuses on Eduardo Apaez is a Counsel of Creel, García-Cuéllar, Aiza y Enríquez the representation of insurers, reinsurers and other insurance-related and heads the firm’s anti-money laundering practice. entities, including brokers. She has extensively advised and assisted Eduardo’s career as an AML expert spans more than 10 years. He has insurance companies in a broad array of matters including applications held relevant AML positions at the Financial Intelligence Unit (FIU), the to obtain business licences, M&A, corporate reorganisations, transfer National Commission for Banking and Securities (CNBV), and of portfolio and liquidation, as well as day-to-day regulatory Mexico’s Central Bank. During his Government tenure he also acted compliance including the drafting of corporate resolutions and as Head of Delegation for the Mexican evaluation process conducted registration of insurance policies. Ms. Pinillos has also advised by the Financial Action Task Force (FATF), the Financial Action Task insurers and reinsurers regarding the interpretation of insurance Force for Latin America (GAFILAT) and the International Monetary policies on coverage opinions and dispute resolutions. Fund. María José has had a close involvement in the development, implementation and compliance of Solvency II Corporate Governance regulations. Her expertise allows her to combine her deep understanding of the insurance industry with a strong business-oriented perspective, providing bespoke solutions. María José is a member of the Insurance Committee of the International Bar Association, the Mexican Insurance and Bonding Companies Association (AMEDESEF) and the Mexican Bar Association (Barra Mexicana de Abogados). Ms. Pinillos recently co-authored the articles “Trending Tremors: Cat Bond Developments in Mexico and Latin America” and “Mexico’s Financial Ombudsman: A New Mandate for Protecting the Interest of Insureds” for the 2017 and 2018 editions of The International Comparative Legal Guide to: Insurance & Reinsurance.

Creel, García-Cuéllar, Aiza y Enriquez was founded in 1936 and is a full-service corporate law firm, with an established reputation for providing in- depth, sophisticated and responsive legal advice, coupled with an unwavering commitment to excellence. Our practice is based on the philosophy that a client is best served by legal advice designed to anticipate and avoid problems, rather than to respond to them. Our goal is to be the law firm of choice for clients with the most demanding transactions and projects, and in such endeavour become a strategic service provider to them by offering the type of legal advice that gives clients certainty and peace of mind. Our Insurance and Reinsurance Practice brings together the talent of professionals with substantial experience in the transactional, regulatory and contentious aspects of insurance and reinsurance.

22 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 6 middle east overview michael Kortbawi

Bsa ahmad Bin Hezeem & associates llP simon isgar

Introduction to the Middle East United Arab Emirates

Insurance markets in the Middle East have remained buoyant Insurance in UAE is primarily regulated under the Federal Law no. despite economic turmoil and lower oil prices. Rating agencies are 6 of 2007 concerning the Establishment of the Insurance Authority changing their outlook for the region from negative to stable and and Regulation of Insurance Operations (the Insurance Law). The some of the factors supporting the outlook include the settling down Insurance Laws sets out the requirement for an entity to be able to of geo-political risks, limited disruption caused by the carry out insurance business in UAE and sets out that such entity implementation of value-added tax, advances in risk management must be either a UAE public stock company, with at least 51% of and improved regulatory sophistication across the region, capital held by UAE or GCC Nationals, or legal entities fully continually strong capital buffers and extensive reinsurance support. controlled by UAE or GCC Nationals; or a branch of a foreign Two of the region’s largest markets, the United Arab Emirates insurer. However, the latter category is only permissible if the UAE (UAE) and the Kingdom of Saudi Arabia (KSA), are in excess of market requires additional capacity and/or the foreign insurer US$10 billion each in gross written premiums – underlining the provides products, which existing, local, insurers do not. region’s increasing significance to global insurance markets. Derived from information of the UAE Insurance Authority As Middle East markets continue to mature due to new regulatory information, as of the end of 2017, there are 62 registered and requirements, mandatory lines of business (primarily, motor and regulated insurance companies, of which 35 are national and 27 are health insurance) are driving overall growth. Profitability remains a foreign insurance companies. Within the 62 companies, 17 key concern for insurers, as investment income is impacted by low companies (15 national and two foreign companies) are licensed to interest rates, weak equity performance and a stagnant real estate carry out all insurance activities (including life, property and market. Margins remain poorly governed by obsolete processes, liability insurance); 32 companies (15 national and 17 foreign) are outdated legacy systems, low productivity and high incidences of licensed for property and liability only; and 12 companies (three fraud, especially in motor and health lines. national and nine foreign) are licensed to provide life insurance In increasingly competitive markets with price and margin pressures, only. 12 companies within the 62 are takaful insurers. most insurers are cutting costs to maintain their bottom line. Despite The Dubai International Financial Centre (DIFC) and the Abu these efforts, short-term financial results in some markets are Dhabi Global Market (ADGM) are also allowed to license impacted by regulatory change and the need for better reserving – insurance/reinsurance companies and intermediaries, but such leading some local insurers to actively look at consolidation. entities are not allowed to carry out any direct insurance business in Low levels of penetration are both a challenge and an opportunity. UAE. DIFC and ADGM have their own Insurance framework and We believe that insurers willing to invest in innovation and digital regulator – the Dubai Financial Services Authority (DFSA) and technology in Middle East markets will reap significant benefits. Financial Services Regulatory Authority (FSRA). The regulations Penetration levels will improve as insurance companies break the in these jurisdictions are modelled on the previous United Kingdom barriers of traditional distribution channels. This will require Financial regulator, the Financial Services Authority and the insurers to adopt robust actuarial modelling techniques to improve insurers and reinsurers operating in these financial free zones must pricing sophistication, apply data analytics to reduce fraud, focus on be authorised by the home regulator. Such insurers can only write customers and adopt advanced technology to revamp operations. (directly) insurance for entities situated or risks arising within the financial free zone and/or outside the UAE. Reinsurers in the DIFC We expect economic activity in the region to revive, lead by the Expo authorised by the DFSA can provide reinsurance capacity for UAE 2020 in Dubai and Saudi Arabia’s Vision 2030. The industry has on-shore risk as is the case for the overseas reinsurance market. many opportunities to capitalise on the economic revival, particularly with large-scale government spending on infrastructure and mega As with the trend across the region, the UAE insurance market is led projects. We expect the life and savings culture to develop, as GCC by the compulsory classes of insurance, motor and health, the latter States look for ways to reduce subsidies and large government-funded of which is compulsory across Dubai and Abu Dhabi and the former social security schemes to retain the earnings locally. compulsory in all UAE. As of the end of the year 2017, the motor and health insurance contribute to more than 60% of the Gross In the following parts of the chapter, we will have a brief look at the Written Premium of AED 44.8 billion. The UAE health insurance is insurance/reinsurance landscape of each of the major economies in also regulated by the health regulator of the respective Emirate, the the Middle East. Dubai Health Authority (DHA) and the Department of Health Abu

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Dhabi (DHAA), which set out its own regulatory regime which have to be obtained before they sell products through banks. every insurer and insurance intermediary must adhere to when It further states that an insurance company can no longer sign dealing with health insurance in these Emirates. an agency, brokerage or consulting agreement with banks and can only sign a distribution agreement. As compared to the other international jurisdiction, some of the factors which make UAE a unique jurisdiction in terms of ■ Life Insurance Regulations, the first draft of which was produced for the first time in 2016 has seen three drafts so far insurance/reinsurance are as follows: and, from what we understand from the market, the ■ Multiple Regulators – insurance in most jurisdictions is regulations are likely to be finalised anytime now. The regulated by a centralised insurance regulator or forms part of regulations are going to change the entire landscape for the the financial regulator. However, in UAE, onshore insurance UAE Life insurance market as they propose caps on is regulated by the UAE Insurance Authority, health commission, limitation on indemnity commission, mandatory insurance is regulated also by the DHA and DHAA. Insurers free look and introduction of mandatory license of Insurance in the financial free zone are regulated by the regulators of Producers for individuals involved in insurance sales. those free zones, such as the DFSA and FSRA. ■ Draft of the Board of Directors’ Resolution No. ( ) of 2019 ■ Lack of Insurance Penetration – while the insurance Concerning the Electronic Insurance Regulations, which penetration is better than its other Middle East peers, it is still once finalised will regulate all online sales and servicing of very low as compared to the world-wide insurance penetration insurance in UAE, whether by the Insurer or the other level at 2.9%. The reason for a large part of this is cultural insurance intermediaries. sensitivity to insurance, rather than a commercial reason. ■ Cabinet Resolution No. (7) of 2019 Concerning the People are averse to the concept of insurance and there are Administrative Fines Imposed by the Insurance Authority cultural and religious sensitivity at play. While a challenge, being the latest instruction, in which the UAE Cabinet has this is also implies that there are great opportunities to tap into. listed down 204 different violations and respective fines for ■ Under-regulation and over-regulation – while at one end of each such violation. the spectrum, there are no rules on life insurance sales or on commission given to intermediaries or ceding of risks, health Lackluster financial results and recent regulatory changes introduced insurance is over-regulated, i.e. the benefits, exclusions, by the UAE Insurance Authority such as changes in reserving minimum premiums are all decided by the regulator. There is requirements, governance, controls, actuarial signoffs and restrictions need of conduct of business rules and prudential regulation of on equity investments are forcing insurers to take a hard look at their these aspects. business models. As a result, the market is likely to witness an increase ■ Lack of transparency – there is lack of transparency in so far in capital raising from the secondary market and consolidation activity as the results, the solvency ratio and all other details are not over the medium to long term. Despite these factors, the insurance published by all players in a timely manner. Similarly, a sector is expected to grow at a steady pace. Government expansion of number of insurance regulations may not be even present in non-oil revenue and planned investment in infrastructure projects, the public domain. coupled with rising life expectancy and increasing oil prices, will ■ Language – while most of the insurance players are support the industry’s growth in the coming years. international and the industry is driven by the global insurance industry, the insurance regulator expects insurers to issue the documentation in Arabic, i.e. it is a requirement Kingdom of Saudi Arabia

under the law that all insurance policies must be issued in Arabic as a primary language and may be accompanied by Saudi Arabia in the recent months has announced a number of English. Similarly, for an Arbitration clause to be considered economic measures and projects, in a bid to boost the non-oil valid it must be contained in an agreement separate to the economy. One such announcement was Saudi allowing females to insurance contract and be signed by both parties. drive cars, which is likely to have a medium to long-term impact on ■ Lack of retention – the UAE Insurance Law and the the motor insurance sector and overall economy. Saudi Vision regulatory framework does not specify any minimum 2030, formed on similar lines to Dubai 2020 is an inclusive plan for retention requirements on Insurance cedents and therefore it reforming Saudi Arabia’s overall economic structure, aiming to is not uncommon for Insurers to be ceding 100% of the risk develop various industries and sectors, and drive the economy to reinsurers and essentially act as fronting partners with no forward. It is therefore expected that Saudi Vision 2030 will also participation in the risk. lead to opportunities in the insurance sector. While the above list can go on, the UAE has been on the forefront of To achieve the targets laid down in Vision 2030, the Saudi insurance regulatory overhaul in the last 12–18 months and below we set out market has been going through an evolution with the introduction of some of the major developments that are likely to have a medium to more developed regulations, reforms and other trends. Following long-term impact on the UAE Insurance Sector: the global and local surrounding economic conditions, along with ■ The Federal Law No. (3) of 2018 on the Amendment of the oil price meltdown over the last few years, the insurance certain Provisions of Federal Law No. (6) of 2007 was issued industry was affected by a substantial increase in losses of some earlier last year and while it reiterated a number of existing insurance companies leading to numerous customer complaints. requirements such as those relating to policy wordings, one of the significant changes was introduction of an Insurance To overcome such difficulties, the Saudi Arabian Monetary Agency Disputes Committee at the Insurance Authority. Once (SAMA) has formulated tougher rules for insurance companies as implemented, all insurance disputes must first be brought to part of a drive to support financial solvency. Accordingly, SAMA the Authority and following adjudication at the Authority the has compelled insurance companies to review and restructure their parties can appeal in the courts. businesses and ultimately undergo consolidation. Given the size of ■ Insurance Authority Board of Directors Decision No. (13) of the economy and the fact that Saudi Arabia’s insurance market is 2018 Instructions Concerning Marketing Insurance Policies largely fragmented with small companies competing against each through Banks came as the much-needed regulatory other, the insurance industry needs consolidation. SAMA has framework for bancassurance in UAE, which were highly suspended several insurance companies from issuing new insurance unregulated. The new requirements specify that prior contracts in the past few months until they increase their capital and permission all insurance companies and takaful operators meet the solvency requirements.

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The Saudi Insurance consists of three business lines: health ■ Central Bank Law, Law No. 13 of 2012 (the “Central Bank insurance; protection & savings insurance; and general insurance, Law”), which came into force in January 2013, issued which, in turn, includes seven activities, namely: motor; marine; through the Qatar Central Bank, related to the supervision aviation; energy; engineering; accidents & responsibilities; and and control over financial institutions including insurance property & fire insurance. The health insurance maintained is the companies replacing and re-appealing the 1966 Decree and Law No. 33 of 2006; and largest insurance segment in the Saudi market, with a market share of 53.7% in terms of gross premiums in 2017, followed by the motor ■ The Qatar Financial Centre (QFC), namely Law No. 7 of insurance which held 30.7%, then the general insurance with 13.1%. 2005 as amended (QFC Law). It has its own legal and regulatory regime. The regulation of a QFC licensed entity The protection and savings insurance accounted for only 2.6% of falls outside the jurisdiction of the law of the State. the total market premiums. The Central Bank Law confirms that the Qatar Central Bank is the In terms of the regulatory changes, the new vehicle insurance rules primary regulator of financial institutions including the are important. On 30 March 2017, SAMA introduced Rules on the insurance/reinsurance sector. The Central Bank Law deals with Collection and Exchange of Motor Insurance Information. The several oversight and regulatory controls including, consolidation, objectives of these Rules, as stated in Article 2, are to: run-off, mergers of insurance/reinsurance institutions, credit rating ■ Regulate the process of collecting, maintaining and agencies, insurance intermediaries including providing conduct of exchanging of the insurance information necessary to business provisions in treating customers fairly and resolution of enhance the ability of insurance and/or reinsurance failing insurance/reinsurance companies. companies in the Kingdom to analyse insurance risks associated with motor insurance. Non-admitted insurance is prohibited under Central Bank Law. ■ Maintain confidentiality of insurance information. Article 205 of the Central Bank Law imposes a specific penalty for providing insurance services including underwriting and placement ■ Improve the quality of insurance information. without a licence from the Central Bank. Article 205 imposes ■ Reduce insurance fraud. liability of imprisonment and financial penalty in the form of fine. In addition, SAMA recently signed a co-operation pact with the Under previous law a prescribed penalty did not exist for providing General Directorate of Traffic aiming to automatically check insurance services in Qatar without a licence. insurance records in cases where drivers have committed traffic Qatar has 14 insurers operating in the State of Qatar and 12 in the violations. Insurance companies will be linked with the Traffic Qatar Financial Centre (QFC). Under Qatari Law, a company that Police Department through electronic terminals, to guarantee intends to carry out insurance/reinsurance operations must be enforcement of compulsory insurance on all vehicles and force licensed by the Central Bank of Qatar. Setting up in QFC, however, motorists of illegally uninsured vehicles to purchase insurance provides considerable administrative independence from the State coverage. This step is expected to significantly increase the as it exempts from the licensing requirements of the State and the percentage of insured vehicles in the coming years. entities within QFC are allowed to be 100% foreign owned, where The Solvency II Directive which provides a regulatory framework for those entities can write risks both on-shore and off-shore. a new risk-based capital and supervisory regime for almost all Qatar has also been grappling with its health insurance scheme. In European Economic Area (EEA) insurers, and was implemented on 1 2015, the Government cancelled “Seha” – the mandatory health January 2016. Non-EEA insurers need to remain competitive with insurance programme scheme – administered by the National EEA ones, and therefore may need to evaluate the adoption of Health Insurance Company (NHIC). The Ministry of Public Health, Solvency II within their businesses. In January 2018, the UAE was the Ministry of Finance and QCB then formed a committee to consider primary country in the Gulf Region to fully implement a model based the introduction of a new mandatory health insurance scheme that on Solvency II. It is likely that Saudi Arabia will follow shortly, and it would be managed by the insurance industry. However, given the has already introduced regulations in relation to risk management, slowdown in oil prices, which has led to the economic downturn in capital adequacy, and solvency requirements which will readily the region, the insurance scheme has not yet been implemented and provide the foundations for a Solvency II model. SAMA has there is no clarity on its implementation date either. periodically introduced relevant reforms in the insurance sector. Should insurance regulations move toward the Solvency II model, it is Qatar’s ambitious infrastructure programmes under the Qatar expected that diversified insurance companies will benefit. This National Vision 2030 programme (projected £140 billion would most probably lead to market consolidation, and consequently investment), which will focus on economic, social, human and market growth. environmental development is likely to benefit the insurance sector as well. Additionally, Qatar will be the first Arab state to host the

FIFA World Cup in 2022 and, as preparation progresses, the Qatar insurance sector, particularly property, casualty, and retail lines,

should be positively influenced. The penetration of insurance within the financial services industry in Qatar is strikingly low. At annual premiums of close to US$3 billion, the sector accounts for just 1.5% of Qatar’s GDP. This Kingdom of Bahrain compares with the global average of more than 6%. A lot can be blamed on the cultural and institutional hurdles that prevent the The insurance industry in Bahrain is projected to grow at an annual growth of the insurance sector, such as the lack of Sharia-compliant average of 7.3% from US$0.74 billion in 2016 to US$1.05 billion in Takaful insurance and embossed regulatory frameworks. The 2021. Effectively, the country’s insurance industry is home to 36 Government is committed in supporting developments within the insurance firms, of which 25 are locally incorporated including six industry by transferring additional risk management and Takaful providers and two each reinsurer and reTakaful firms. provisioning tasks to private insurers. Hence, Takaful has a strong base in Bahrain, with a share of 22% in There are two main jurisdictions which govern the Qatar insurance the country’s total insurance GWP in 2016. Its contribution is sector: mainly high at over 30% each in medical and motor business lines. Foreign insurance providers comprised eight conventional insurers iclg to: insurance & reinsurance 2019 www.iclg.com 25 © Published and reproduced with kind permission by Global Legal Group Ltd, London Bsa ahmad Bin Hezeem & associates llP middle east overview

and three reinsurers. The more interesting development in Bahraini Due to mandatory third-party motor insurance, motor is the largest market over recent years has been a sustained expansion of insurance line accounting for nearly 30% of the country’s GWP. reinsurance activity. Reinsurance firms licensed to operate from Health and life are the other key segments. A growing base of Bahrain have grown steadily in number since 2006. population and recouping economy presents a large opportunity for The Central Bank of Bahrain (CBB) is a public body established by the insurance players to penetrate the market, given the present low the government under the Financial Institutions Law 2006 (“the penetration levels. 2006 Law”). It is responsible for maintaining monetary and The presence of 23 local players and 10 foreign companies in the financial stability in Bahrain and is also the single, integrated small insurance market has led to intense competition. Limited regulator of Bahrain’s financial services sector. Article 40 of the regulatory oversight and permission to hold 100% ownership have 2006 Law provides that no person may undertake a ‘Regulated attracted many foreign insurers, including takaful providers. Service’ in the Kingdom of Bahrain unless licensed by the CBB. Nevertheless, domestic firms lead the insurance industry with the Regulated Services are defined as financial services provided by top five local players accounting for more than 56% of the country’s financial institutions, including those governed by Islamic Sharia GWP. principles. Both the age of the insurance law and the lack of a specialised In its capacity as the regulatory and supervisory authority for all regulatory body pose challenges to the expansion of the industry. financial institutions in Bahrain, the CBB issues regulatory The relatively unregulated market allows smaller players to instruments with which licensees and other specified persons are compete with larger operations by reducing premiums to levels that legally obliged to comply. These regulatory instruments are are unsustainable, which Kuwait’s more established firms are contained in the CBB Rulebook. The CBB Rulebook is divided into unable to respond to without violating their underwriting principles. seven volumes, covering different areas of financial services It is therefore this segment of the market that has been most vocal in activity. Breach of a Rule contained in the CBB Rulebook can lead its call for regulatory reform. to a variety of sanctions being taken against a licensee. Rather than being overseen by an independent regulator, the The CBB’s wide scope of responsibilities allows a consistent domestic insurance industry is governed by the Ministry of regulatory approach to be applied across the whole of the Commerce and Industry (MoCI) through its Insurance Department. Kingdom’s financial services sector. This, in turn, gives Bahrain a To date the MoCI has not sought to introduce a solvency framework key competitive advantage relative to other GCC states. in a similar vein to the EU’s Solvency II, which is widely seen as the Growth in life insurance is likely to be aided by an anticipated rise global standard. Neither has it sought to control the actuarial in population and that in non-life will be driven by revenue practices of domestic insurers – the process by which they apply diversification efforts, improving business activity and spending on probability and statistical theory to price their products – as its healthcare. On 30 May 2018, the Kingdom of Bahrain (“Bahrain”) neighbouring jurisdictions have done. passed Law No. 23 of 2018 promulgating the Health Insurance Law The current requirements and effects of the current Legislation: (the “Law”). The Law came into force on 1 December 2018. Prior ■ Locally incorporated non-life insurance companies must to the Law, there was no standalone health insurance law as health comply with a minimum capital requirement of KD5 million insurance was governed by a number of different laws overseen by (US$16.5 million), while reinsurance companies must meet a the Ministry of Health. The Law applies to all nationals, residents level of KD15 million (US$49.6 million). and visitors (the “Beneficiaries”) subject to certain limited ■ Insurance companies must deposit guarantee funds in a exceptions. These exceptions include: civilian and military Kuwaiti bank or a Kuwaiti branch of a foreign bank, the personnel of the Bahrain Defence Force (the “BDF”) and their amount of which depends on the number of insurance lines families; hospitals and medical facilities affiliated with the BDF; that the company is licensed to offer, and ranges from and foreigners associated with diplomatic and related missions in KD500,000 (US$1.7 million) to KD1 million (US$3.3 million). Bahrain. Mandatory health insurance benefits will be procured through a dedicated fund, where insurance contributions will be ■ The foreign insurance companies which operate branches in deposited into the Fund. It is anticipated that the fund will provide Kuwait are exempt from capital requirements. insurance coverage via licensed insurance companies authorised to The government is looking at implementing a new insurance law pay the beneficiary claims acting as facilitators between the fund and setting up an autonomous body to regulate the industry. and the insured member. It is believed that the law will be enforced Moreover, in a move to reduce the burden of health costs on through residency requirements and other immigration conditions. government coffers, members of parliament have introduced While short-term economic conditions appear stressed, significant mandatory health insurance for visitors. Such developments are investments planned by the Government and a potential rebound in likely to set a progressive path for the insurance sector. crude oil prices are expected to improve the economic climate in the country. Sultanate of

Kuwait The Omani insurance market enjoys positive growth prospects in the next two to five years, even while short-term growth may be The insurance sector in Kuwait is expected to reach US$1.7 billion subdued. Oman has a young, growing population that is in 2021, registering an increase of 9.0% from 2016. At 1.01% the progressively becoming aware of the benefits of insurance. The country has the lowest penetration rate in the GCC but is likely to development of explicitly Shariah compliant takaful insurance experience strong growth in both life and non-life segments. products in Oman will support awareness of the insurance sector Factors that would drive the market include rising population and and the benefits of insurance protection in certain segments of disposable income, evolving regulatory environment and spending Oman society. Oman’s insurance sector, although small, has on infrastructure projects. outperformed many of its peer countries in terms of ROE in the recent past.

26 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Bsa ahmad Bin Hezeem & associates llP middle east overview

The principal legislation governing conventional insurance Acknowledgment activities in Oman is provided under Royal Decree 12/79 (Insurance Companies Law). Separate legislation has applied to takaful The authors would like to acknowledge the assistance of their operators since 2016. The law of 1979 liberalised the insurance colleague Anand Singh in the preparation of this chapter. market in Oman from previous competitive restrictions in favour of Anand is a Senior Associate in the Insurance & Reinsurance “national” companies. In 2004, the supervision of the insurance Practice based in our DIFC office in Dubai. With over eight years sector was moved from the Ministry of Commerce to the Capital of experience as a corporate insurance and regulatory lawyer having Market Authority (CMA) under Royal Decree 90/2004 in order to practiced in India and across the Middle East. develop and restructure the legislative and regulatory framework of Anand has extensive experience in advising insurance companies, the insurance sector. Since then, the CMA has issued several reinsurers, insurance brokers and agents across multiple circulars, laws and regulations looking to adopt global best practice jurisdictions on incorporation, distribution strategy, regulatory, whilst taking local market conditions and requirements into account. compliance and other advisory matters. Having worked across Further implementing regulations for the takaful law are currently jurisdictions, he is able to provide cross-jurisdictional advice to being drafted by the regulator. This includes, inter alia, the Sultani financial services clients who have a global footprint. Decree No. 39/2014 in relation to the legal form and the share Prior to joining BSA, Anand worked for Kennedys, as an Associate capital requirement of companies that conduct insurance business in in the Dubai office for four years, prior to which he was an Associate Oman. in Tuli & Co in India, an associate of Kennedys. His experience Under the CMA new regulations, all insurance companies includes advising international and regional clients on commercial (excluding foreign branches) must convert to public joint stock arrangements, shareholding structure, nominee arrangements, companies, divesting a 25% stake owned by promoters, instead of employment agreements and he has been instrumental in growth the normal 40%, in initial public offerings, and increase their and expansion of a number of Fintech and Insuretech startups in the minimum paid-up capital from US$12.9 million to US$25.9 region. million. In the long term, these regulations are expected to improve Anand is a regular contributor of articles and commentaries for local insurers’ access to funds, strengthen capital, increase transparency insurance magazines and online publications on current topics in the and enhance financial strength. This should result in market GCC insurance market. He was recently recognised by the India consolidation and help ease competitive pricing pressures. Business Law Journal as one of the go-to lawyers for India related Recently, the CMA and the Omani Government launched these transactions. other key initiatives: Anand holds an LL.B. (Hons) from ICFAI University, Dehradun, ■ New disclosure requirements and minimum standards for India and was admitted to the Bar in 2010. investment-linked products. Contact info ■ A unified auto insurance policy, which aims to increase transparency by amending legal definitions to limit disputes Phone: +971 4 368 5555 arising from different interpretations. Email: [email protected] ■ A proposal to make health insurance compulsory and encourage growth of health insurance premiums. Although the Omani insurance market is facing challenges due to low oil prices and the resulting macroeconomic environment, it is poised for robust long-term growth, benefiting from favourable regulations, Government diversification policies to increase private participation and a strong pipeline of infrastructure investments.

iclg to: insurance & reinsurance 2019 www.iclg.com 27 © Published and reproduced with kind permission by Global Legal Group Ltd, London Bsa ahmad Bin Hezeem & associates llP middle east overview

Michael Kortbawi Simon Isgar BSA Ahmad Bin Hezeem & Associates LLP BSA Ahmad Bin Hezeem & Associates LLP Level 6, Building 3, The Gate Precinct Level 6, Building 3, The Gate Precinct Dubai International Financial Centre Dubai International Financial Centre Dubai Dubai United Arab Emirates United Arab Emirates

Tel: +971 4 368 5555 Tel: +971 4 368 5555 Email: [email protected] Email: [email protected] URL: www.bsabh.com URL: www.bsabh.com

Michael is a Partner in the Corporate and M&A Practice in our DIFC Simon is a Partner and Head of Insurance/Reinsurance at our Dubai offices in Dubai. With a strong focus on insurance and reinsurance, he office. Previously Head of Kennedys’ Corporate and Regulatory has gained hands-on experience in the Middle East and North Africa Insurance MENA practice, he is a qualified barrister who was called to region. Now, having practiced in the UAE for over 11 years, he has the Bar in 1998, practising commercial and company law matters in supervised the organic growth of BSA into the six countries in which the English courts. we operate. A specialist in international health regulation and health insurance law Heading a team of eight corporate lawyers, Michael oversees our as well as general corporate law, Simon advises insurance companies corporate and regulatory advice in relation to all aspects of corporate and intermediaries on placement of risks and products in foreign law. This includes cross-border business transactions, real estate, markets including underwriting agents and brokers. insurance and mergers and acquisitions in the UAE, Iraq, Oman, and He has extensive experienced in corporate insurance transactional Lebanon. work including setting up international insurers and agents in foreign Michael’s specific areas of experience include directors and officers markets through local incorporation, reinsurance arrangements and duties under UAE and DIFC laws, setting up insurance and partnering with local licensed primary insurers in all lines of insurance, reinsurance companies in the GCC, business acquisitions in the specifically life and health. energy sector, joint ventures in various industries and deregistration of With nearly 20 years’ experience representing international insurers commercial agencies. and international intermediaries in the insurance markets globally, Simon is a member of the DIFC Insurance Association and sits on the Regulatory and Life & Health committees. He holds a BA (Hons) from Sheffield University and LL.B. (Hons) from the University of Hertfordshire.

BSA Ahmad Bin Hezeem & Associates LLP is a law firm originally founded in Dubai with the primary mission of delivering top tier legal services based on our comprehensive knowledge of local, national and international law. Since our inception in 2001, we have rapidly expanded to a leading full-service law firm, with offices throughout the Middle East and France. Our lawyers are internationally educated and dual-qualified in both regional and international jurisdictions, having rights of audience in every country within which we operate. Our lawyers, advocates and legal consultants come from a diverse range of backgrounds with the majority being bi-lingual in languages such as English, Arabic and French. Areas of Strength Include: ■ Arbitration & Dispute Resolution. ■ Banking & Finance. ■ Commercial. ■ Construction. ■ Corporate & M&A. ■ Employment. ■ Insurance and Reinsurance. ■ Intellectual Property. ■ Litigation. ■ Real Estate. Our clients range from public and private sector companies, local businesses and multinationals from a variety of industries, government-owned entities and other law firms. We regularly represent and collaborate with international law firms, assisting with the delivery of high-end legal services. BSA is a law firm that strives to create synergies between regional and international law.

28 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 7 australia Kemsley Brennan

minterellison James stanton

1 Regulatory 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Specifically, only a body corporate or Lloyd’s underwriter wishing to carry on business as an insurer in Australia can seek authorisation from APRA, which in turn may approve in writing or refuse such Two government agencies perform regulatory duties in respect of application. The term ‘carrying on business’ means doing a general insurance in Australia, one in respect of prudential succession of acts designed to advance some enterprise, pursued regulation and the other in respect of corporate regulation: with a view to pecuniary gain. The process of seeking APRA’s ■ The Australian Prudential Regulation Authority (APRA), authorisation can take up to 12 months. which administers the Insurance Act 1973 (Cth); and If the applicant is the subsidiary of a non-operating holding company ■ The Australian Securities and Investments Commission (NOHC), then both the applicant and the NOHC are expected to apply (ASIC), which administers the Insurance Contracts Act 1984 (Cth). to APRA for authorisation. Further, any foreign insurer applicant must apply by way of a local Australian agent. The process is ordinarily For the purposes of prudential regulation, APRA was established expected to take up to 12 months once an application is made. under the Australian Prudential Regulation Authority Act 1988 (Cth) and remains the key prudential regulator of the general A minimum expected requirement for an applicant company is its insurance industry in Australia. capacity to comply in all ways with the legislative standards expected of an insurer carrying on business in Australia. That is, the company APRA’s purview covers general insurers. This expressly includes must be in a position to abide by the terms of all relevant legislation reinsurers and effectively includes any insurance provider governing insurance companies in Australia, primarily including the authorised to provide general insurance services in Australia. APRA Insurance Act, Insurance Contracts Act, and Corporations Act 2001 has the power to authorise such insurers to carry on general (Cth). Applicant companies must also comply with APRA's own set insurance business in Australia. It may also revoke such authority. of prudential standards, which set out minimum standards and its The regulatory scheme established by APRA requires strict assessment methods. For companies wishing to carry on business as adherence by general insurers, which includes the maintenance of a life insurer the process is similar, but the applicant in that case must adequate capital reserves to meet actual and expected claims costs. be able to comply with the terms of the Life Insurance Act which The other key regulator, ASIC, administers the Insurance Contracts contains consumer-specific provisions. Act at the direction of the Commonwealth Treasurer. It has the APRA facilitates the application by way of consultation, to obtain the general power under that Act to do all things that are necessary or abovementioned sufficient minimum standard information from the convenient to be done in connection with administration of the company seeking authorisation. The applicant must address key issues relevant legislation. It has additional supervisory powers to: of ownership, capital, governance, risk management, reinsurance, ■ obtain insurance documents (whether issued or proposed) information and accounting systems, internal supervision and arm’s from insurers; length related-party transactions. ■ review insurers’ organisational structures and administrative In terms of ownership, at the time of publication of this document, arrangements; the applicant must identify that no one person holds more than 15% ■ intervene in any proceedings relating to a matter arising from of the assets of the proposed insurer without prior consent of the the Insurance Contracts Act or insurance product standards relevant Minister, in compliance with the Financial Sector in medical indemnity insurance contracts; and (Shareholdings) Act 1998 (Cth). From 1 April 2019, the 15% ■ promote the education of the insurance industry and ownership trigger under that statute is increased to 20%. At the time consumers as to the objectives of the Insurance Contracts of publication, the same had not been reflected in the Insurance Act. Acquisition and Takeovers Act 1991 (Cth), under which statute the ASIC, as the market conduct regulator, is responsible for licensing threshold remains 15%. The application should also demonstrate and monitoring the corporate conduct of general insurers and their that the body corporate’s substantial shareholders are financially intermediaries. ASIC also exercises a consumer protection function secure, well established and of good standing. APRA requires them under the Insurance Act and Life Insurance Act 1995 (Cth). to demonstratively be committed to long-term investment and add capital if needed. As to capital itself, the body corporate must have iclg to: insurance & reinsurance 2019 www.iclg.com 29 © Published and reproduced with kind permission by Global Legal Group Ltd, London 30 australia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com The insurance contract is effectively governed by the dictates of the Arethereanylegalrulesthatrestricttheparties’ 1.4 than greater revenue operating with insureds high-value atypicalrisksasdesignated inthelegislation;and ■ insurance requiredbyforeignlaw; ■ risks that cannot be reasonably met by the Australian market; ■ ■ write business with Australian consumersbutonlyfor: can insurer) foreign unauthorised an as known (commonly APRAby authorised not insurer foreign a that noted be should It but foreign insurer atitshomelocation. the operations, govern will regulators Australian foreign the the that acknowledges of supervision prudential local the the overseeing in role a for plays APRA operations. responsible Australian insurer’s foreign primarily are insurer) foreign a local its of branch (or subsidiary foreign-owned a of management local The by or (directly apply must subsidiary) forauthorisationfrom APRA. it the option elects, Whichever insurer foreign insurers. foreign or subsidiaries owned foreign- either of operations of mixture or size number, the restrict not does APRA company. branch a through Australia in operate in subsidiary foreign-owned a Australia to carry on insurance business, and/or seek an authority to establish may insurer foreign A and carryingonofbusiness. application their to apply which rules additional are there insurer, local a of obligations prudential and regulatory legislative, the with comply must insurers foreign While insurer. local a as way same insurance on carry to permitted business in Australia, but must seek authorisation from expressly APRA in the is insurer foreign A Areforeigninsurersabletowritebusinessdirectlyor 1.3 and financialpositionoftheproposedinsurer. maintain risks the of can aware management keep systems and records business updated its that ensure to systems accounting and capitalmanagementrisk. applicant’sinformation the of adequacy the assess also APRAwill strategicrisk;and ■ concentrationrisk; ■ reinsurancerisk; ■ insurancerisk; ■ operationrisk; ■ creditrisk; ■ balancesheetrisk; ■ ■ risk managementframeworktomonitor, manageandreporton: adequate an has company the that – standards APRA’sprudential with accordance in – APRA satisfy must company applicant The of the prudentialstandardspublishedby APRA atthetime. suitability the of in elaborated is requirements these of Each exempt. unless actuary APRA satisfy also an and auditor an both appoint must and directors and management must It governance APRA’s with standards. comply must company applicant The mix, business size, on complexity andriskprofile. assessed generally is adequacy standards. Capital prudential APRA’s meet to place in capital sufficient minterellison into (allorsome)contractsofinsurance? freedom ofcontractbyimplying extraneousterms $200M. must theywritereinsuranceofadomesticinsurer?

opn o ulwu ue f oiin r nomto fr personal for information or position of use unlawful or company in respect of risks involving a wilful breach of duty in relation to the from paying the insurance premium for a director, officer or auditor eto 19 o te the of 199B Section connection with proceedings for relief to the person under the ■ liquidator a or ASIC by proceedings resisting or defending the which in proceedings criminal ■ resisting or defending ■ defending or resisting proceedings where the person is found ■ will notbepermittedareifthecostsincurredin: costs are legal where costs circumstances only legal The indemnified, preserved. specifically be cannot itself liability the While a liability owed to someone other than the company or related ■ a pecuniary penalty order or compensation order made under aliabilityowedtothecompanyorrelatedbodycorporate; ■ ■ corporate fromindemnifyingadirectororofficer against: the of 199A section in Corporations Act out set are which rule, the to exceptions to duties companies – their of out arising expects risks for officers and usually directors their indemnify and – permits law Australian the of 15 section addition, In eti saue, uh s h the as such prejudicialcontractvarianceclauses. statutes, Certain insurance); compulsory ■ than (other clauses insurance other arbitrationclauses; ■ attemptstomodifytheoperationof Act; ■ ■ under statuteare: voided are which terms Some or contract. the Act of the purpose reasonable of scope the outside are which terms any void render than the Rather terms, imply legislation). positively of piece other any under not (and Act that under sought be only can review contract of form the in relief The Act Insurance Act Contracts Insurance . Arecompaniespermittedtoindemnifydirectorsand 1.5 f ae n sil Ti eepin lo xse i ta Act’s that in existed also exemption This predecessor, the skill. and care of the within implied contained Consumer Act the terms from law excluded consumer expressly are contracts Insurance is which known relevant totheinsurer’s decisiontounderwritetherisk. matter every insurer the to to insured disclose the effectively requiring disclosure of duty the including duties, certain imposes and interest insurable an for need the removing by negative theimpliedtermbyexpressterms. to parties allow but contracts, risk-specific into conditions imply Insurance Contracts Act Contracts Insurance Act butwherethecourtdeniesrelief. applied forthecourtorder);and liquidator the or before ASIC costs investigation than (other liquidator the or for ASIC finds court the if order court a for person isfoundguilty; and orders, actions notingoodfaith); compensation or pecuniary certain company, to have a liability of the type excluded above (i.e. owed to the in not was good faith(inthatperson’s roleforthecompany). that conduct from arose which corporate body certain sectionsofthe Act; and officers underlocalcompanylaw? and qua iclg to: insurance &reinsurance 2019 ietr ad fies Ntrly tee r some are there Naturally, officers. and directors , and is exempt from other implied contractual terms. terms. contractual implied other from exempt is and , 2010 (Cth), such as fitness for purpose or guarantees or purpose for fitness as such (Cth), 2010 Trade Practices Act . That section prohibits a company or related body oprtos Act Corporations , or in the case of life products by the by products life of case the in or , nuac Cnrcs Act Contracts Insurance Insurance Contracts Insurance Act modifies certain insurance contracts insurance certain modifies aie nuac Act Insurance Marine 1974(Cth). lo rhbt a company a prohibits also

optto and Competition australia provides that provides 99 (Cth), 1909 il instead will Life © Published and reproduced with kind permission byGlobal Legal Group Ltd,London certain warranties,andinformationstandards. agreements, consumer unsolicited practices, trade unfair conduct, a pay to breaches under that practices Act. Prohibited actions include unconscionable consumer liability of respect their in costs legal for or penalty officer pecuniary or director a Act indemnifying Consumer and Competition the within (contained Law the Consumer of Australian 229 Section equally companies and law, cannot indemnifytheirdirectorsforsuchactions. Australian in uninsurable are acts criminal that law common the follows generally section The gain. h sbtnie a udr h the under law substantive The to thelawcanbesaidbetterprotectinsureds. of insureds and insurers, though recent movements and amendments The law of insurance in Australia is designed to balance the interests minterellison iclg to: insurance &reinsurance 2019 third partybeneficiary. a as insurer the from recover to seek may contract a on insured an not is who person a where exceptions certain acknowledges which Ltd Pty an Bros McNiece v Ltd under Co Insurance See directly exceptions. claiming limited with from policy, insurance parties third prevent would doctrine contract of privity Traditionally,law,the under Australian Canathird partybringadirectactionagainstan 2.2 Ingeneralterms,isthesubstantivelawrelatingto 2.1 professions particular for insurance indemnity professional publichealthcare;and ■ marineorshippinginsurance; ■ workerscompensationinsurance; ■ compulsorythirdpartymotorinsurance; ■ ■ service areas. The morefrequentlycitedcompulsoryschemesare: insurance, professional and compulsory workplace vehicle, health, of across predominantly kinds different several has Australia Arethereanyformsofcompulsoryinsurance? 1.6 eto 5 – n poiin emtig n nue to insurer an an if extended automatically is cover insurance – 58 Section permitting provision any – ■ 53 Section ■ Section 31 – in any proceedings where there is an ■ r svrl osmr rtcin rvsos nldd n the in included provisions protection Insurance Contracts Act consumer several are favours an insured compared with common law. For example, there ■ Section 63 – an insurer cannot cancel a contract of general of contract a cancel cannot insurer an – 63 Section ■ (Re)insuranceClaims 2 contract had not been avoided or such part as the recoverc the whole amount that would have been payab fraudulent discl misrepresentation, of duty the the court withmay complyallow t to failurefraudulent insurance morefavourabletoinsurersorinsureds? insurer? insurance lawyers, providers, service intermediaries, andaccountants. financial as such nue fis o oiy h isrd f o-eea or non-renewal of insured the notify expiration ofcover. to fails insurer unilaterally varyacontractofinsuranceisvoid. nuac ad n rpre cnelto wud e in be would Act cancellation reported contravention except as provided by the any and insurance .

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, , 31 australia 32 australia Under the Under certain issues, factsorareas. to relating information seek not does it that indicating by the insurer. However,by the insurer requested may specifically waive the expressly broad duty are they not or whether facts disclose coextensive. In each, the insured has a broad, ongoing obligation to are statute and law common in disclosure of duties insured’s The and theinsurerdoesnotmakefurtherenquiries. duty in circumstances where the the insured does not with answer a question, compliance waive to deemed is insurer an Additionally, an insurer knows or, in its ordinary course of business, ought areofcommonknowledge;and ■ diminishrisktotheinsurer; ■ ■ being matterswhich: information, of kinds certain disclose not need but facts disclose to © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com average However,the backlog. matter and issues priority court, of How quickly a case is heard will depend upon the jurisdiction, level Howlongdoesacommercialcasecommonlytake to 3.2 such, itisquiteuncommontoinvolveajuryincivilmatters. to be in the interests of justice before it will make such an order. As trial jury a only.consider judge-heard must be court will The civil trials that assumed is it but party, a by court the to application on In Australia, jury trials are available in some state and federal courts to up disputes over certain levels. jurisdiction have which services resolution dispute independent and bodies statutory also are there corporate insureds) or consumers (retail dispute of type the on Depending the limit foreachleveldiffers acrosseachstateorterritory. and apply, limits jurisdictional Monetary dispute. insurance those courts are therefore an appropriate forum for the hearing of an issues in any state, territory or federal court of first instance. Any of system. court federal-level and Cross-vesting legislation allows the hearing of state-level both state and federal a both has Australia Whichcourtsareappropriateforcommercial 3.1 or not the loss is subject to a deductible or excee indemnify (or does indemnify) the insurer for the w e wording. The right can only included be exercised when the ordinarily is term the rights, equitable on founded policy. the of is inception from exists Australia and principles in subrogation of right The Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to discl 2.5 minterellison 3 Litigation – Overview Litigation–Overview 3 to know. insurers all matters material to a risk, irrespecti whether the insurer has specifically asked about th bring tocourtonceithasbeen initiated? jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes Insurance Contracts Act, Contracts Insurance the insured has a positive duty positive a has insured the

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© Published and reproduced with kind permission byGlobal Legal Group Ltd,London with thecourt-appointedexpertotherthanatcourt’s direction. particular. Parties will not generally be entitled to meet on their own in parties more or one by made be to payment direct may court the The parties are jointly and severally liable for that expert’s fees, and experts. own their involve to court the of leave granted are parties utain ors ae h pwr o pon a epr i the in expert an appoint to proceedings who will power report the have courts Australian payment appropriateness ofsucharrangement. special any of the assess may court basis The fee. contingency a the as such arrangement, on engaged are they if court be the inform must not witnesses expert and usually evidence expert as will accepted evidence employee’s an partisanship, to As upon. or to prepare a joint report specifying matters agreed and not agreed other each with confer to experts party-appointed require also may court The above). 3.2 question in cited principles overarching the of terms in both evidence, relevance and the efficient resolution of expert the dispute (bearing in mind of appropriateness and the need consider also must Courts expertise. and independence both declare must and party-appointed are witnesses expert Generally, video via evidence conferencing facility. give to them ask instead those in may and circumstances unavailable is witness overseas, the be that accept may not do witness courts a witness where circumstances allow is In witness not the available. where do circumstances courts in evidence rule, into statements accepted commonly a As prior of witness’written statementmaybeadmitted. that dint then by death, or unavailable disappearance is illness, terminal witness that where However, party. that against inferences adverse draw to court the allows evidence give to available otherwise is who witness material a call to Failure Isevidencefromwitnessesallowedeveniftheyare 4.4 minterellison iclg to: insurance &reinsurance 2019 appeals level, federal role. At appellate and trial a both plays itself Court Supreme territory.The or state that of Court Supreme the to courts district or magistrate’s,county local, the from made be may must permission and appeal, of generally be sought from the appellate court. At state level, appeals right inherent no have Parties Is thereanyrightofappealfromthedecisions 4.7 in available are injunctions Australia, bothundercommonlawandinstatute. freezing) (asset Mareva and orders injunctions, pre-action of terms In seizure) and (search Piller Anton civil procedureregulationor, whereunavailable,inequity. a Rules concerning disclosure orders are found under of state and federal filing to defendant, the prospective determine if there is a a cause to of action and for other related identify purposes. prior to available documents are proceeding of disclosure for Orders Whatsortofinterimremediesareavailablefromthe 4.6 Arethereanyrestrictionsoncallingexpert 4.5 experts? not present? grounds? Howmanystagesof appealarethere? courts offirstinstance?Ifso,onwhatgeneral courts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed

in lieu of the parties’ experts, unless the

the successfulparty. to awarded is interest proceedings, of course ordinary the In year. rate cash and state/territory the by varying rates, courts interest unique own their adopt State presently 6%. plus is Australia) of system Bank Reserve by federal (published the for which rate, in contract the in terms by dispute (if any). Post-judgment interest is calculated at a prescribed determined often fit, sees court the on interest post-judgment application by a party. and Pre-judgment interest is calculated at the rate pre-judgment award may Courts to do so in good faith. Impeding the mediation process may result may process mediation the Impeding faith. good in so do to and mediation attend to duty,court, a the have by Parties ordered if where mediationmayhaveaconsiderablepossibilityofsuccess. and partners business former or family that between cases disputes involve in fitting 4.2). considered question been has in mediation discussed Compulsory as adduced, be cannot negotiations prejudice” “without (and litigation continue may they mediation, in mediation and participate with the knowledge that failing resolution from arising benefits potential and need the recognise often Parties parties’ consent, on the application of a party, or on registrar referral. the without so do may It appropriate. circumstances the considers it if mediate to parties order may court The dispute. a of resolution cheap and quick just, a of purpose overriding the with alignment in circumstances, suitable in court the by encouraged is Mediation this maysecureindemnitycosts. circumstances, the on Depending appropriate. and reasonable be offeringthe to protection grant party, can offerthe assuming to found is offers such Both statute. under available are compromise of Calderbank protection, costs of terms In 60 to costs. up those usually of –70% is former the whereas party’scosts, successful the of 100% almost to up means latter The a are basis. indemnity on an on or awarded basis but party/party be can event, Costs particular offers. resolution or early by cause modified the follow ordinarily Costs . Isinterestgenerallyrecoverableinrespectofclaims? 4.8 .1Ifapartyrefusestorequestmediate, what 4.11 Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregardingcosts? Are 4.9 filed withintwoweeksoramonth,dependingonjurisdiction. be to generally are appeals or applications Leave months. 24 to 12 around be may term most standard law,the of issues on be must that appeals given but jurisdictions across differs appeal of Length highest courtofappeal. the as Australia of Court High the to subsequently and state, that appeal to progress from a first instance court to the supreme court of an for common is it but jurisdictions across differ rules Appellate of investigative authoritydecisionsonpointsoflawormerit. and tribunals Court certain from High made or be also Court may Appeals Federal Australia. Full the to Australia of Court may be made from the Federal Circuit Court of Australia or Federal If so,whatisthecurrentrate? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan offers are available under the common law, and offers law,and common the under available are offers www.iclg.com australia

33 australia 34 australia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Australia, pursuant to the oceanic is location arbitral to the unless effect no have will relating goods of carriage agreements arbitration Additionally, court. a by enforced be not will and void are clause arbitration an include that contracts insurance 5.2, question to response the in noted As Notwithstanding theinclusionofanexpress 5.3 the Under Isitnecessaryforaformofwordstobeputinto 5.2 manifesterroronthefaceofaward. invalidity;and ■ publicpolicy; ■ incapacityofaparty; ■ ■ may refusetorecognisetheaward,including: court a which on grounds limited only insurance are there and preserved, in is disputes clauses insurance arbitration that parties’ The below). 5.2 autonomy question general (see void are contracts basis in the on unusual particularly is arbitration though a former judicial officer, nominated barrister or nominated solicitor, arbitral permanent a institution. Courts are by entitled to refer a matter for administered arbitration before not or whether arbitration Commercial Arbitration Acts to deal with any domestic commercial Model adopted have territories and states All arbitration. domestic and disputes arbitration international acknowledges law Australian Whatapproachdothecourtstakeinrelationto 5.1 later courtproceedings. or an adverse costs order being made against the obstructive party in in a stay of proceedings for any relief claimed by a defaulting party, minterellison eitr Asrla ue fr h Cnut f Commercial of Conduct the for & Arbitrations.’ Arbitrators Rules of Australia Institute the in Mediators to or subject and of with out accordance in arbitration arising to submitted be shall whatsoever contract this with difference connection or dispute ‘Any benefit fromanarbitrationclause,suchas: Contracts Act the contracts, reinsurance with dealing when However, of that Act. any insurance contract. No particular wording will escape the effect Arbitration 5 what groundsanddoesthishappeninmanycases? courts willrefusetoenforcesuchaclause? arbitration clause,isthereanypossibilitythatthe is required? clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty Insurance Contracts Act Contracts Insurance

has no application. Thus, a reinsurance contract will contract reinsurance a Thus, application. no has Carriage of Goods by Sea Act , an arbitration clause is void in void is clause arbitration an , 1991 (Cth). Insurance

e f h sm dti o lnt a jdca raos Te will reasoning forthedecision. They legal reasons. concise provide and judicial evidence, and as facts the cover length ordinarily or detail same the of be detail or length the to as required in arbitral reasons, line though such reasons are not expected to bright no is There settlement. of no that agree reasons parties are to be given or the the award is made on unless agreed terms by way decision for reasons must the award include the Acts, Arbitration Commercial Model the Under relistthematterforrehearinginfullorpart. setasidearbitralawards,onapplication;and ■ issuesubpoenasbypartyrequest; ■ assistinevidencetaking; ■ ■ make a decision on the termination of an arbitrator’s mandate upon arbitrator, an of appointment ■ the on decisions make ■ to fail mediators appointed party where arbitrator an appoint grant interim protection measures upon a party’s application; ■ ■ Courts mayalso: by process outcome. arbitral arbitral the pending proceedings legal of the stay a allowing assist will courts Australian Generally, date thatissueisdisposedbythearbitraltribunal. the from months three tribunal, arbitral the of sought is award the appellant the which on received the award or, date if a request for correction or interpretation of the from months three than longer to appeal a question of law arising out of an award. Parties have no or after (either tribunal within 30 days of its receipt by the parties. Parties may also may firstly seek an interpretation or correction of an award from the parties arbitrations, domestic in above, 5.1 question in outlined As . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 . Isthereanyrightofappealtothecourtsfrom 5.6 reasoned awardisrequired? on applicationbyaparty; application byaparty; agree; examples. circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat iclg to: insurance &reinsurance 2019 in lieu in of a correction application) apply to the court the to apply application) correction a of australia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London minterellison iclg to: insurance &reinsurance 2019 Association. Deskbook Officers and “ the in chapters several of co-authorship including years, 18 past the over topics related insurance other on presented eomne i in recommended ese c-uhrd Pout iblt Isrne a a hpe of chapter a Product Liability in the Asia as Pacific Insurance” Liability “Product co-authored Kemsley the UnitedStates. financial litigated lines, directors’ and profile officers’ and casualty claims in Australia, high Asia and many of management the in been involved has He of zone. Pacific Asia Group the for Manager Chubb Claims Technical the at years Insurance Companies as the Directors’ and Officers’ Liability Casualty 18 approximately spent Kemsley insurance lawyer. enuac cam patc (nldn poesoa idmiy DO cbr pout iblt, sets lf, aie aito, self-insureds, aviation, marine, life, asbestos, liability, product cyber, D&O, indemnity, professional government). We alsohavesignificantexpertisedefendingcomplexlitigation(includingclassactions,regulatoryinvestigationsandprosecutions). (including practice and claims general end back and reinsurance practice reinsurance and general end front comprehensive a maintain to Australia in firm law top-tier only the are We Year atthe AB+F andRFiGroup Annual Insurance Awards in2018. enabling us to tailor advice focused on the client and their business objectives. none, to MinterEllison second was is awarded industry the insurance prestigious Insurance the Law of Firm knowledge of Our the national. truly and in Australia largest the of one is practice insurance MinterEllison’s sector public as well as companies, multinational clients, anditsspecialistlawyershavebeenindependentlyrecognisedamongtheworld'spre-eminentlegaladvisers. and local supports firm The firm. law international Australian-based leading a is MinterEllison and kidnap been recognised as a leading individual in practices, has He recall. employment product and liability product liability, crime, general ransom, and fidelity and advisors, institutions financial for indemnity professional liability, capital, officers’ venture and directors’ spanned has experience Kemsley’s et Lawyers Best , pbiain sud y h Aeia Bar American the by issued publication a ”, R:www.minterellison.com URL: [email protected] +61299218720 Email: Tel: Australia Sydney, NSW, 2000 1 FarrerPlace Level 40,GovernorMacquarie Tower MinterEllison Kemsley Brennan n a a r-mnn Australian pre-eminent a as and (3 rd ed.). He has also authored and The Legal 500 Asia Pacific lbl Directors Global , n nuac, oprt rs, nentoa dsue ad financial and disputes international services inbothpeer-reviewedandindustryjournals. risk, corporate insurance, Investment on Community articles MinterEllison’s numerous co-authored and authored has of He Ambassadors. one as organisations, provides also James providing and Government, advice onRoyalCommissionsofInquiry. Australian with working involved also has representation, This review. contractual authority front-end and drafting and policy insurance tribunal issues, compliance, and coverage regulatory insurance multi- defence, medium litigation, and to in insurers, brokers global small national firms, institutions, multi-service financial entities, large corporate with works James and private internationallaw. and law, institution administrative governance, corporate compliance, financial of the areas in clients his international for services advisory legal an provides and reinsurer, for counsel compliance, corporate regulatory indemnity,as in-house worked has He litigation. and insurance, liability general professional liability, officers’ and directors’ include expertise of areas His compliance. corporate and coverage litigation, insurance around revolves practice James’ r bono pro R: www.minterellison.com URL: [email protected] +61299214261 Email: Tel: Australia Sydney, NSW2000 1 FarrerPlace Level 40,GovernorMacquarie Tower MinterEllison James Stanton ea avc t mlil not-for-profit multiple to advice legal www.iclg.com australia 35 australia chapter 8 austria Philipp strasser

Vavrovsky Heine marth Jan Philipp meyer

1 Regulatory 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance? 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? The parties’ freedom of contract is, to some extent, limited by mandatory substantive law as well as by settled case law. First of Insurance and reinsurance companies are regulated by the Austrian all, the writing of insurance contracts is regulated by the Austrian Financial Market Authority (the ‘FMA’). This federal agency is Insurance Contract Act, which governs the rights and duties of both responsible both for monitoring insurance and reinsurance the insurer and the insured, and also sets certain minimum undertakings as well as for controlling their activities. The FMA requirements for different insurance branches. It also contains a offers a wide range of information in German and English, inter general section, applicable to all types of insurance. For some alia, on its website, concerning mandatory legal provisions and branches, such as motor vehicle third-party liability insurance, procedures to adhere to (www.fma.gv.at). separate laws exist, which set forth special terms as well. Nevertheless, the parties’ freedom of contract remains virtually 1.2 What are the requirements/procedures for setting up a unrestricted for some branches such as credit insurance and new insurance (or reinsurance) company? transport insurance. For these scenarios, the legislator assumes that the insured is sufficiently experienced in the area of business and As a general rule, in order to write business in Austria, both local equally familiar with the risk to be insured, thus not requiring the and foreign insurers are required to obtain a licence from the FMA, same level of statutory protection. the requirements being laid down in sec. 8 of the Austrian Insurance Another aspect limiting freedom of contract stems from the fact that Supervision Act. Insurance and reinsurance undertakings must insurance policies and conditions not individually negotiated are operate under the legal form of a stock company, a Societas considered general terms and conditions and are thus subject to an Europaea (SE) or a mutual insurance company. Moreover, the unfairness test. In general, a certain provision is deemed to be undertaking’s administrative headquarters have to be located in unfair, if – contrary to the requirement of good faith – it significantly Austria. Apart from fulfilling minimum capital requirements as alters the balance of the parties’ contractual rights and obligations to well as ensuring the sufficient professional qualifications of the the detriment of the other party. While the standard is especially undertaking’s board members, applicants must submit a detailed strict vis-à-vis consumers, it also applies, in its basic form, to business plan to the FMA. Additional licensing requirements apply entrepreneurial insureds. for insurance undertakings from outside the European Economic Area (cf. sec. 16 et seq. of the Austrian Insurance Supervision Act). Ambiguities of a policy’s wording are resolved by carrying out a hypothetical interpretation: how would an average and reasonably well-informed insured interpret the provision? Such fictitious 1.3 Are foreign insurers able to write business directly or interpretation by the (equally) fictitious insured has to take into must they write reinsurance of a domestic insurer? account customs and usage as well as linguistic usage. If the ambiguity cannot be resolved by way of this hypothetical While insurers are generally required to obtain a licence from the interpretation, such ambiguity will, as a general rule, be at the expense FMA (cf. above, question 1.2), no licence is necessary for insurance of the insurer as the author of the relevant provision. undertakings already licensed in another Member State of the While the principles on interpretation established by doctrine and European Union or the European Economic Area. However, where case law do give guidance, certainty – to the greatest degree possible such undertakings want to write business in Austria, they have to – can ultimately only be determined by the courts. Experience and notify the FMA of the intended establishment of a branch or of the pertinent knowledge of the case law will, of course, help make use intended commencement of cross-border services (cf. sec. 21 and of the overlapping general principles and rulings. sec. 23 of the Austrian Insurance Supervision Act, respectively).

36 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London insurance policiesandconditions( interpreting in strict quite are courts the that true nevertheless, is, It fall shortofthemark. standards, European by as least at law would, consumer-friendly substantive overly Austrian increased declaring have However, insureds of considerably. protection the increasing at aiming provisions law, secondary Union European of acts various to Due Act, importance, especiallywheretheinsuredisaconsumer. Contract of be may statutes and acts further Insurance of number a course, of fact, In Austrian the in complemented by the general provisions of the Austrian contained Civil Code. are law insurance substantive on provisions statutory important most The exist atall. not do provisions statutory D&O-specific fact, In executive. the by not provide for a certain minimum deductible to be borne personally the does Germany,law as Austrian such systems mitigating legal European other of aim Unlike executives. the of part the the on misconduct of consequences with insurance’) (‘D&O insurance officers’directors’and out take to deciding are Austria in doing business companies of number growing a effect, retrospective with officers and directors discharge to possibility the Notwithstanding of aresolutiontheannualshareholders’ meeting. way by discharged company’s be can Board Supervisory and Board the Executive the of members indemnify the companies, to stock For not officers. and or directors whether on decide to free are company a of shareholders the law, company Austrian Under Arecompaniespermittedtoindemnifydirectorsand 1.5 Vavrovsky Heinemarth iclg to: insurance &reinsurance 2019 this In insurer. person’s liable the against action direct a bring a third person has a claim resulting Where from a car accident, he or she may insurance. cases liability third-party concerns vehicle rule motor general involving the to exception relevant most The the insurernecessarytobringaclaim. other with relationship legal other or contractual necessary the the lack hand, on parties, Third another. of account the for insurance of case in persons insured other by – circumstances certain under – Generally, direct action can only be brought by the policyholder and Canathirdpartybringdirectactionagainstan 2.2 In generalterms,isthesubstantivelawrelatingto 2.1 and doctors as such professionals dentists. tax medical accountants, most public and engineers, advisers architects, lawyers, as such professional the Moreover, liability insurance is compulsory for various freelance is professionals million. €7.6 examples of a sum with insured important insurance minimum liability most third-party the vehicle motor one compulsory Arguably, areas. different of number a in mandatory is coverage insurance system, insurance security social the Austrian by covered areas from Apart Arethereanyformsofcompulsoryinsurance? 1.6 (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? officers underlocalcompanylaw? insurer? cf . above,question1.4). insurance contract. of an important circumstance, the insurer has a right to terminate the insurer the notifying from refrains intentionally insured the If risk. provide on to decision insurer’s whether or the not (or insured under what conditions) to underwrite the specific to germane the aspects all require on information duties disclosure contractual pre- comprehensive however, insurance, of out taking the to Prior the After loss. provide informationattheinsurer’s request. to required a only is insured of the example, for occurrence loss, a of the occurrence after duties and period, disclose prior to the taking out of the insurance, during the insurance The Austrian Insurance Contract Act distinguishes between duties to gis te nue i wiig ihn n mnh fe becoming after month aware oftheinfringement. one within writing in insured the against As a general rule, the insurer is required to formally assert its rights settlement ofaninsuranceclaim. (full) refuse to or contract the cancel to contract, the terminate to degree of culpability. In practical terms, the insurer may be entitled during the insurance period or after the occurrence of a loss) and the contract, the of conclusion before (i.e., breach disclose to duty the the against of time the on depends remedies The these of availability non-disclosure. or misrepresentation of cases for remedies additional of set a provides Act Contract Insurance Austrian The general of principles on based contract law. contract the the insured, avoid may the insurer by misrepresentation fraudulent intentional an on based is risk certain a underwrite to insurer’sdecision an Where provision. itself reinsurer. agreement the cut-through reinsurance a of way by e.g. insured; sue the onto the rights direct confers to where capacity apply have may not Exceptions does insured the No, esn Mr seiial, uh li fr aae i is damages for claim such specifically, More statutory person. a for provides subrogation Act of claims for damages that an insured Contract has against a third Insurance Austrian The . Whatremediesdoesaninsurer have incasesofeither 2.4 Cananinsuredbringadirectaction againsta 2.3 . Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 be to rights contractual assigns insured performed bytheinsurertoathirdparty. the where is course, of sue, to capacity gains party third a which in situation, Another resulting fromtheoperationofaircraft. claims for e.g., exist, provisions Similar debtors. several and joint are accident the causing person the and insurer the constellation, having tobringthe claiminthenameofinsured. directly initiate recourse proceedings against the third party without can insurer suffered. the loss consequence, the a for As insured the compensates insurer the that extent the to insurer the to transferred misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer needaseparateclauseentitlingsubrogation? whether the insurer has specifically asked about th insurers all matters material to a risk, irrespecti payment ofanindemnitybytheinsurerordoes www.iclg.com austria se to ve of e jure de em?

37 austria 38 austria such production under certain circumstances. Grounds for refusal for Grounds circumstances. certain under production such refuse may party aggrieved the trial, a of course the during ordered © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com trial disclosure ( Austrian civil procedural law does not recognise the concept of pre- Canapartywithholdfromdisclosuredocuments(a) 4.2 enforceable claim against the possessing party unde mayalso issue an order to disclose where the reque context relates to the legal relationship t andbetween partyt other the of possession the in document d claim its where e.g. production, document request During the proceedings, a party may – under limited invoking afact. or claim the bringing party the with lies generally proof of burden The disposal. its at evidence necessary the claim has it a ascertain bring should to intending party a event, any In disclosed. be to civil procedural law. Thus, pre-trial, courts cannot order documents to alien Austrian is disclosure or discovery pre-trial of concept The Whatpowersdothecourtshavetoorder 4.1 already cases with overburdened pending, thisperiodmaysurpass12months. temporarily is judge a filed single turn, in has, defendant or court the a where cases However,rare very defence. in of statement and lodged been has claim the after months few a scheduled usually is hearing court first The Howlongdoesacommercialcasecommonlytaketo 3.2 and thevariousstagesofappeal, in are amounts higher dispute. For a where more detailed illustration of competent the Austrian court system are courts regional the whereas €15,000, exceed not does value dispute the which in cases hear will courts district local the issue, at amount the on Depending Whichcourtsareappropriate forcommercial 3.1 Vavrovsky Heinemarth or. qal, h pris a jity eus te ipt t be to dispute transferred toadifferent courtofthe same type. the request jointly may parties the Equally, court. different a before conducted be also can proceeding a court, the of court. If the defendant does not challenge the territorial jurisdiction competent the before brought be to have claims rule, general a As such ascross-borderormajorlossinsurancedisputes. departments or courts can be advantageous in complex proceedings, both at the district and regional level. Resorting to these specialised – courts commercial specialised stand-alone even Vienna,are there The courts have specialised departments for commercial matters. In Litigation–Procedure 4 Litigation–Overview 3 jury? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c) producedinthe relating toadvicegivenbylawyers,or(b)preparedin to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof cf . question 4.1). Where disclosure of documents is cf . below(question4.7). he parties. The court stingparty has an r substantive law. circumstances – e document’she pns n a on epends hr te ttd esn ae efcnrdcoy t frih more furnish corresponding to detailed self-contradictory, are reasons stated the where or, reasons underlying the state to has testify to refusing Awitness information regarding entrusted tothemintheirprofessionalcapacitybyclients. testimony refuse can attorneys example, xs. hs gons r smlr o h gons o rfsn to refusing for grounds ( documents the provide to similar are grounds These exist. required to appear and testify, although grounds to refuse testimony principle, in is, witness this witness, a summoned has court a Once the decisiononcosts( and, once the court decides on the merits of the case, be included in court the by ordered as costs on advances by paid be initially will expert’sThe costs hearing). court a during or writing (in questions additional answer or report the clarify requests, so party one least at where and, report expert written a give will witness expert The to attend. physical a requires investigation of inspection or object examination, the expert will usually invite both parties the If ability. of their best the to and thoroughly examinations and inspections their conduct and impartial be must witnesses expert Court-appointed party.other the by disputed evidence of questions specific to regard with witness expert an appoint to court the request may party Each appointed expertwitnessmayalsosubmitawrittenreport. party- such witness, expert an introduce to wishes party a Where court. the before testimony oral provide only can Rather,witnesses written procedural principlesoforalpresentationanddirectness. allow not does Procedure witness statements. Such written statements Civil do not comply with the of Code Austrian The ec, or-pone epr wtess r mr cmo than party-appointed experts. common more are witnesses expert. expert party-appointed court-appointed a Hence, of that than higher considerably be to The evidential value of a court-appointed expert witness is regarded by lawyersmaybesubjecttodisclosureduringtrial. privilege, given advice of to relating documents Thus, privilege. attorney-client concept law common criminal strict by protected not is client and lawyer between correspondence the to to exposure contrary However, of risk the prosecution. or obligations non- to disclosure adherence the secrets, business of protection the include . Dothecourtshavepowers torequirewitnesses 4.3 . Arethereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 serve therequesttoappearbefore Austrian court. – seek for the foreign court to either directly interview the witness or intergovernmental framework an assistance legal mutual a stipulating basis is collaborative there provided the – at and court domicile foreign witness’ another the in contact will domiciled court is Austrian who the country, witness a presents party a Where for contemptofcourt. arrest an even or fines ordering by testimony the enforce the can court excuse, sufficient without testimony give or hearing a attend give evidenceeitherbeforeoratthefinalhearing? experts? not present? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed iclg to: insurance &reinsurance 2019 cf cf . question 4.2) but are broader in scope. For scope. in broader are but 4.2) question . prima facie prima . question4.9). evidence. If a witness fails to fails witness a If evidence. austria © Published and reproduced with kind permission byGlobal Legal Group Ltd,London court ofappeal.Usually, appealstakeatleastseveralmonths. proceedings appeal of varies considerably depending duration on the complexity and the competent The amount. minimum a certain surpass to party unsuccessful the for effect adverse the require the first instance court or, as in other jurisdictions such as Germany, Appeals against first instance decisions do not require admission by may either retry the case itself or refer it back t original decision. Where the judgment is set aside writtenproceedings, usualeither dismiss will,theappeal, appealame of court The pa judgment.original the after weeks four within filed be may Appeals le incorrect an or facts establishment of wrong the proced errors), procedural (serious nullity include Reasonsappealingfor againstcourtjudgmentaa of and finalinstance. third the as Justice of Court Supreme the Austrian to made be may concerning legal issues of fundamental importance, a further appeal cases In courts. regional higher the of one by heard are decision its against appeals court, instance first the as acting was court regional a If courts. regional before heard are courts district from Appeals courts donothavecompetenceforotherreasons. courts are competent where higher amounts are in dispute or district Regional €15,000. below is dispute in law amount the civil where matters general for jurisdiction have courts District instances. three in proceedings for provides system court civil Austrian The secured, be may claims Monetary secure arightorlegalrelationship. to measures interim and performance; specific for claim a secure to measures interim claim; monetary a secure to measures interim the Austrian protect law distinguishes between three types of interim measures: to courts the by enforceability of a claim or to protect granted a party from irreparable harm. be may remedies Interim Whatsortofinterimremediesareavailablefromthe 4.6 Vavrovsky Heinemarth iclg to: insurance &reinsurance 2019 interest rate,aspublishedbythe Austrian NationalBank. base the above cent per 9.2 entrepreneurs, are parties both where party claim for interest. The winning interest rate is currently 4 the per cent or, in and cases sum monetary expressly claimed interest, the court will also award such additional a awards court a Where Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 the claim,rightorobjectareavailable. or affecting adversely retention action any of from refrain right to debtor a the ordering establishing as such means other or rights, performance specific for the claims securing prohibiting measures interim order to an by regard Withproperty. or immoveable of encumbering or transferring property moveable of selling the prohibiting order an by assets, moveable or money of deposit grounds? Howmanystagesofappealarethere? courts? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral ne alia inter o the first instance court. b a odr o the for order an by , , the court of appeal ndorset aside the rl irregularities,ural of firstinstanceof a assmn. assessment.gal y fe purely after ly sn o the of ssing of inpractice. proceedings (before the district courts), this procedural option legal is rarely made use of initiation formal the to prior mediation trial pre- for request a file to possibility the introduced law national into 2008/52/EC Directive Mediation EU the of transposition the While reach asettlementbeforetakingevidence. to parties the encourage still will judges most reasons, various For agreement. amicable an reach otherwise or mediation to resort to parties force cannot courts the disputes, reinsurance and insurance However, appropriate. deemed if litigation, commencing in least at are supposed to propose the initiation of mediation proceedings prior judges to which in projects pilot launched have courts Austrian of themattervaluemaybeincurred. Austrian Fee Act. According to this act, a fee of 1 or even 2 per cent regard should be had to a special characteristic of Austrian law – the during even however,court, of or out reached is settlement trial a Where proceedings. the to prior it be fees, legal reduce or proof, avoid of burden the and to seeking in path viable a case be to prove may negotiations settlement the of merits the on Depending agreed uponbetweenattorneyandclient. certain as Lawyers’ Fees Act, which might be lower than the fees individually well as fees court expenses. Legal fees are calculated in and accordance with the Austrian legal include reimbursed be party neither fully succeeds, only partial If reimbursement will be ordered. Costs to costs. all for party winning the reimburse to has party losing the that provides law Austrian general, In merits. the The court renders its decision on costs together with the decision on tograntaninterimorprotectivemeasure; ■ party a or agree cannot parties the if arbitrator an appoint to ■ In particular, apartymayrequestcourt: requested by one of the parties or the tribunal. pr arbitral in intervening from refrain will Courts Austria is generally considered a very arbitration- reach anamicablesolution. to offers or requests refusing in consequences detrimental no are there mandatory, not is proceedings mediation in participating As .0Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrules regardingcosts? Are 4.9 . Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Arbitration 5 disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? fails todoso; what groundsanddoesthishappeninmanycases? consequences mayfollow? there anypotentialcostsadvantagesinmakingan to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty www.iclg.com

friendly jurisdiction. ceig unlessoceedings austria 39 austria Vavrovsky Heine marth austria

■ to decide on the challenge of an arbitrator; or 5.4 What interim forms of relief can be obtained in support ■ to intervene if an arbitrator’s mandate has been terminated of arbitration from the courts? Please give examples. and the arbitrator does not resign or the other party does not agree to the termination. Arbitral tribunals and state courts may order interim measures in Also, the arbitral tribunal itself can request judicial assistance from support of an arbitration. In general, a party is free to choose a court: whether it directs its request towards the courts or the tribunal. For ■ to enforce an interim or protective measure; or the relief to be granted, certain conditions need to be met. First, ■ to gather evidence for which the arbitral tribunal has no relief can only be granted in respect of the subject matter of the authority (e.g. to apply coercive measures). dispute. Second, the granting of the relief must be crucial for

austria Of the above powers, only the competence of courts to issue interim preventing the otherwise impeding frustration or complication of measures upon a party’s request, the right to challenge an arbitrator future enforcement or for preventing irreparable harm. before a court, as well as the tribunal’s competence to request An arbitral tribunal may order any interim relief it deems judicial assistance by the courts, are mandatory and unalterable. All appropriate. However, arbitral tribunals lack coercive powers and other powers may be set aside by the parties’ agreement. their decisions must be enforced by state courts, which are limited to the enforcement measures foreseen under Austrian law. Thus, the 5.2 Is it necessary for a form of words to be put into a enforcing court may transform the tribunal’s order into such interim contract of (re)insurance to ensure that an arbitration measure it is authorised to enforce. clause will be enforceable? If so, what form of words is required? 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in Under Austrian law, the only formal requirement for validly the arbitration clause or subsequently) that a concluding an arbitration agreement is that the arbitration reasoned award is required? agreement must be in writing, i.e. in a written document signed by both parties or in letters, faxes, emails or other forms of Austrian arbitration law stipulates that the arbitral tribunal must communication that prove the existence of the agreement. state the reasons on which it bases its award. However, the parties Aside from the writing requirement, in order to be enforceable, an may deviate from this requirement by mutual agreement. arbitration agreement must also fulfil certain substantive requirements, such as identifying the parties and clearly expressing their intention to 5.6 Is there any right of appeal to the courts from the specifically submit a dispute to arbitration. However, no specific form decision of an arbitral tribunal? If so, in what of words is required for the enforceability of the arbitration clause. circumstances does the right arise?

5.3 Notwithstanding the inclusion of an express The grounds for challenging an award are set out in the Austrian arbitration clause, is there any possibility that the Code of Civil Procedure. The grounds closely mirror those provided courts will refuse to enforce such a clause? for in Article V of the New York Convention and Article 34 of the UNCITRAL Model Law on International Commercial Arbitration. As a general rule, if the arbitration agreement is valid and the The list is exhaustive and there is no right to a further appeal. subject matter is arbitrable, Austrian courts will uphold and enforce The grounds are as follows: the arbitration clause. ■ the invalidity of an arbitration agreement or a lack thereof; Only if the clause is invalid, or the subject matter of the dispute is ■ a party’s incapacity to conclude an arbitration agreement; inarbitrable, will the courts refuse to enforce it. All proprietary ■ a violation of the right to be heard; claims are arbitrable, with some exceptions to be found in family law and cooperative apartment ownership rules. Moreover, ■ the subject matter is beyond the scope of the arbitration consumer and employment-related matters are only arbitrable if the agreement; parties entered into the arbitration agreement after the dispute arose. ■ a failure in the constitution or composition of the tribunal; Also, if a contract containing an arbitration clause is rescinded, the ■ the proceedings violate Austrian public policy; arbitration clause is no longer enforceable, unless the parties have ■ the requirements for an action for revision are fulfilled; expressly agreed on its continuation. ■ the matter in dispute is not arbitrable; and/or ■ the award violates Austrian public policy. As of 2013, the Austrian Supreme Court of Justice acts as the only instance in proceedings for challenging an award. Challenges to the award have to be brought before the court within three months after the award has been handed down.

40 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Vavrovsky Heine marth austria

Philipp Strasser Jan Philipp Meyer Vavrovsky Heine Marth Vavrovsky Heine Marth Fleischmarkt 1 Fleischmarkt 1 1010 Vienna 1010 Vienna Austria Austria

Tel: +43 1 512 03 53 Tel: +43 1 512 03 53 Email: [email protected] Email: [email protected] URL: www.vhm-law.at URL: www.vhm-law.at austria Philipp Strasser is a partner at Vavrovsky Heine Marth and an expert Jan Philipp Meyer is a German attorney and works in the Dispute in dispute resolution, corporate law, capital markets as well as Resolution team at Vavrovsky Heine Marth. He specialises in litigation insurance law. He is a member of the firm’s Dispute Resolution team and civil law as well as insurance law. and responsible for the Insurance sector. Jan Philipp studied law in Hamburg and Osnabrück with a focus on With his long-standing experience in resolving conflicts regarding private international law and comparative law. He holds the general general contract and tort law, especially construction and insurance qualifications for German judicial office and was admitted to the law, as well as banking and securities law, he particularly counsels German Bar in February 2016. He recently obtained his doctorate clients in post-M&A, restructuring, shareholder and liability/coverage from the University of Osnabrück. The printed version of his thesis on disputes. His consulting emphasis is on issues of (re-)insurance law, Online Dispute Resolution was published in October 2018 (LIT corporate law and business liability issues. Philipp Strasser is certified Verlag). as a Corporate Compliance Officer according to Austrian Standard. Prior to joining Vavrovsky Heine Marth, he worked, inter alia, for a He advises national and international insurers, inter alia, regarding Hamburg-based law firm. Financial Lines/Specialty Lines (D&O, E&O, PI, POSI, W&I/TRI, etc.), product and public liability, vehicle liability as well as property insurance.

Vavrovsky Heine Marth is a business law firm with offices in Vienna and Salzburg. The firm’s core areas of expertise are Controversy and Real Estate and, at the Salzburg office, Insolvency and Restructuring as well as Private Clients. In Controversy, Vavrovsky Heine Marth supports clients in conflict prevention as well as conflict management and represents them before national and international courts and arbitral tribunals. Main areas of expertise include insurance and reinsurance law, M&A, corporate and commercial, capital markets, banking, competition law, IP, IT and media law as well as real estate- and construction- related disputes. Several national and international legal directories and publications such as Chambers and Partners and The Legal 500 EMEA acknowledge Vavrovsky Heine Marth’s expertise by ranking the firm and its partners among the leading Austrian specialists in their fields. As the exclusive Austrian member of the Alliance of International Business Lawyers ALLIURIS, Vavrovsky Heine Marth provides access to over 450 experts all over the world.

iclg to: insurance & reinsurance 2019 www.iclg.com 41 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 9 azerbaijan Homi motamedi

cis risk consultant company (insurance brokers) llP (cis) Valentina Pan

■ a written application for a licence, reflecting the name and 1 Regulatory address of the open joint-stock company established in accordance with the law, and established to become an insurer; 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? ■ a copy of the charter of the open joint-stock company, certified by a notary; if the number of founders is more than one, a copy of the certified memorandum of association must The Ministry of Finance of the Republic of Azerbaijan is the central also be submitted; executive body which carries out state financial policy and ■ information on founders who are legal entities; organises the management of state finance. The Ministry operates on the basis of a statute approved by Decree 48 of February 9, 2009 ■ information and documents reflecting the ID, permanent place of residence and place of work (type of occupation) of of the President of the Republic of Azerbaijan. The Decree founders who are individuals, as well as documents confirming approved the Ministry’s structure and statutes for the establishment the sufficiency of the funds for the acquisition of shares; of the State Treasury Agency, Public Debt Management Agency, ■ if applicable, a certified document confirming the authority State Financial Control Service, State Insurance Control Service of a person applying for a licence on behalf of the founders; and State Service for Control of Precious Metals and Stones, which are all included in the structure of the Ministry. ■ information on the prevailing interests of the founders in other legal entities, as well as, for each founder who is a legal entity, the prevailing interests of other persons in its 1.2 What are the requirements/procedures for setting up a authorised capital; and new insurance (or reinsurance) company? ■ a business plan that reflects the following information for at least the next three years: a list of persons foreseen for To carry out insurance and reinsurance activities in the territory of appointment to the position of executive officer; and documents the Republic of Azerbaijan, it is necessary to obtain an appropriate proving their civil faultlessness, certified by a notary. licence in the manner prescribed by the Law on Insurance Activity After receiving a positive response from the State Insurance Control № 519-IIIQ, dated December 25, 2007. Service to a preliminary application for a licence, an open joint- An insurer, as a legal entity and a commercial organisation, can stock company established to become an insurer is accepted for state carry out its activities only in the organisational and legal form of an registration as a legal entity in accordance with the law. open joint-stock company. After acceptance for state registration, a legal entity established to The issuance of licences for insurance and reinsurance activities, become an insurer must submit to the State Insurance Control and the temporary suspension, restriction and cancellation of Service the following documents in order to obtain a licence: licences, is carried out by the State Insurance Control Service. ■ a final appeal, reflecting its name, organisational and legal Applications for obtaining a licence for insurance and reinsurance form, location, current account number and the name of the activities are reviewed by the State Insurance Control Service in two relevant bank, and the name of the type of activity for which a licence is applied; stages: ■ a copy of the certificate of state registration, certified by a 1) consideration of the preliminary application for a licence, notary; submitted by the founders or by a person(s) authorised by the appropriate legislation; and ■ a notarised copy of the document on the acceptance of an open joint-stock company established to become an insurer, 2) consideration of the final application for a licence after the to be registered by the relevant tax authority; acceptance of state registration as an open joint-stock company. ■ a copy of its charter, certified by a notary; The preliminary licence for the respective insurance and reinsurance ■ documents confirming the payment of the authorised capital activity of the new joint-stock company is issued for a period of five of an open joint-stock company established to become an years, and the final licence for the respective insurance and insurer to a bank account in accordance with the law; reinsurance activities of the insurer is unlimited. ■ information confirming the compliance of persons appointed For a preliminary application for a licence, along with documents to executive positions within the requirements of the law, proving that the founders or shareholders of an open joint-stock including notarised copies of relevant documents on education company established to become an insurer meet the requirements of and work experience; the law, the following documents should also be submitted:

42 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London ■ a copy of the document confirming the right to use the officethe use to right the confirming document the of copy a ■ insurance rules for the types of voluntary insurance for which ■ directors andofficers. indemnifying company a to relating restrictions no are Yes.There guidelines. bodies’ state authorised the with line in independently, company insurance each by developed insurance of rules internal are There or local through foreign insurancebrokers,aswellthoseenteredintheRegister. or directly out carried be can reinsurance Such Finance. of Ministry the by monitored Brokers and Reinsurers of of Register the law,in Republic the entered of those requirements as the well as the meet of that insurers foreign territory from or insurers local the from Azerbaijan, in present or located subjects Insurers can reinsure risks for property interests related to insurance foreign by insurance is notallowed. of Execution of Azerbaijan Republic the of territory the on companies insurance admitted. is market The Areforeigninsurersabletowritebusinessdirectlyor 1.3 azerbaijan cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 diplomatic in serving persons of insurance compulsory compulsoryinsuranceofgovernmentofficials; and law ■ and judicial of employees of ■ insurance compulsory compulsorystatepersonalinsuranceofmilitarypersonnel; ■ compulsoryinsuranceofauditors’ professionalliability; ■ compulsoryecologicalinsurance; ■ of result a ■ as disability against Specific typesofobligatoryinsurancesare: insurance compulsory compulsorypersonalaccidentinsuranceforpassengers;and ■ motor of owners of ■ liability civil of insurance compulsory ■ compulsory insurance of civil liability in connection with the compulsoryrealestateinsurance; ■ ■ These are: Insurances №165-IVQdatedJune24,2011. Compulsory on Law the by regulated are insurances Compulsory Arethereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 Arethereanylegalrulesthatrestricttheparties’ 1.4 become aninsurerwilloperate. building in which an open joint-stock company established to permission isrequested;and officers underlocalcompanylaw? into (allorsome)contractsofinsurance? must theywritereinsuranceofadomesticinsurer? isos f h Rpbi o Aebia, r prtn in operating or Azerbaijan, of foreign countriesandinternational organisations. Republic the of missions enforcement bodies; workplace accidentsandoccupationaldiseases. vehicles; operation ofrealestate; freedom ofcontractbyimplyingextraneousterms

il nbe h isrd o ae cin gis te enue, if reinsurer, the against action take required. to insured the enable will this contract, reinsurance a to attached is clause a such However,if the Cut-through to clauses are not popular with directly local insurance companies. go to right no has reinsurance company. insured the and insured the of front in responsible fully is contract insurance the issues which company insurance fronting the legislation, insurance the per As agreement cannot bringadirectactionagainstaninsurancecompany. insurance an in title any have not does which party A make to insureds enable will complaints withrespecttotheirpoliciesandrelatedclaims. of which process the ombudsmen, in is creating body authorised the The of interest company. the insurance protect agreements (re)insurance general, In insurance an within clause standard agreement, unlessotherwiseagreed. a is clause subrogation A not returnthepremiumaswell. any,and if claim, the reject can company insurance the Otherwise, pai and contracts, reimbursements, these and submit the relevant documents. under occurred that insura events of type relevant the for contracts insurance conclusionthe contract,theof including informati the circumstances connected to any change of the in to refuse the contract or of to conclude it with insureralter the circumstancesknown tohim which mayaffect informtheins to obliged circumstances arethat should be included Insureds in the contra Yes. the insured. against action legal take required, if and, not premium claim, the the return reject can company insurance the law, the per As . Cananinsuredbringadirect actionagainsta 2.3 Canathirdpartybringdirectaction againstan 2.2 Ingeneralterms,isthesubstantive lawrelatingto 2.1 . Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 (Re)insuranceClaims 2 reinsurer? insurer? insurance morefavourabletoinsurersorinsureds? insurer needaseparateclause entitlingsubrogation? them? misrepresentation ornon-disclosurebytheinsured? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof

www.iclg.com ed terms, as well as all ct, as well as all the on on all previousallon on surance risk after c, insurance nce, urer’sdecision insurance d

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43 azerbaijan 44 azerbaijan Courts ofappeal official submissionofthecourtdecision. of month one within submitted be may Appeals appeal: for Period enters intolegalforceonemonthafterithasbeenissued. Entry into legal force: If the court decision has not been appealed, it of receiptastatementclaimbythecourt. date the from months three within settled Aand heard be must case into legalforcefromthemomentofitsissuance. enters cassation of court the of decision The force: legal into Entry its submissiontothecourt. A case must be heard in the court of cassation within two months of © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com to evidence, the all documents, the question theconcerned parties,etc. all examine to necessary is it this, For case. the of circumstances the all of analysis deep a for its claims and objections. Legal representation in court involves grounds the as to refers it circumstances the prove must party Each The courtshavefullpowerinthis regard. Whatpowersdothecourtshavetoorder 4.1 Courts offirstinstance Howlongdoesacommercialcasecommonlytaketo 3.2 court willdismissthecase. the Otherwise, court. to go parties the may then only failed, have negotiations If court. to going before procedure that follow should pre-trial they negotiations), a through upon (e.g. resolution agreed dispute have for procedure agreement, their in parties, the If Court of cassation – there are four boards under the Supreme 3) and country the of regions six in function – appeal of Courts 2) Courts of first instance – district (city) courts, military courts, 1) The courtsystemof Azerbaijan consistsofthreeinstances: Whichcourtsareappropriate forcommercial 3.1 azerbaijan cis riskconsultantcompany(insurancebrokers)llP(cis) Court ofcassation official submissionofthecourtdecision. of months two within submitted appeal: be for may Period Appeals issued. been appealed, it enters into legal force two months after it has been not has appeal of court the of decision the If force: legal into Entry submission tothecourt. Cases must be heard in courts of appeal within three months of their Litigation–Procedure 4 Litigation–Overview 3 jury? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? administrative- and military criminal, civil, economical. – Court and military criminal, civil, – boards administrative-economical. four of consist administrative-economical courts and courts on grave crimes. the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof :

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edn te eaie vrin o h cuty hr te ae s in is process. case the where country the to version legalised the sending then and public notary a to referring by or lawyer his via evidence No. In cases where the party is not present, he is able to provide his bodies areusedbythecourttoenforcethis. a on court enforcement law attend local and evidence, to their provide to them date specific request can court the Azerbaijan, in an him to provide his evidence. In cases where the parties are resident send to territory his in embassy for order in court the to him inviting court, local the via application the ask to able is court the Yes, they do. In cases where one party is reluctant to give evidence, No. A partycannotwithholddocumentsfromdisclosure. the generaltrend is torefercasescourt. be benefits for the parties due to the status of the claim. But usually, will there that case the in trial to prior settled be can Cases tariffs. regulated the per as clients chargetheir solicitors and lawyers Civil Yes, itisrecoverable. The current rateisbetween0.1%and0.5%. a accepts appeal of court the maximum ofbetweenthreeandfiveappeals. usually possible; is appeal Yes, the prosecutoroffice. by prosecuted being not to of subject period imprisonment the or avoid confinement, to fine a pay to right the with imprisonment fine, a include may vary,and can remedies case, the on Depending common tohaveacourt-appointedexpert. not is It in. called be can witness expert an case, the on Depending . Isevidencefromwitnesses allowedeveniftheyare 4.4 Dothecourtshavepowers torequirewitnesses 4.3 Canapartywithholdfrom disclosuredocuments(a) 4.2 . Whatarethestandardrulesregardingcosts? Are 4.9 Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 Whatsortofinterimremediesareavailablefromthe 4.6 Are there any restrictions on calling expert wit 4.5 not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? offer tosettlepriortrial? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts? addition or in place of party-appointed experts? Is it common to have a court-appointed expert in contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin there anypotentialcostsadvantages inmakingan courts offirstinstance?Ifso,onwhatgeneral iclg to: insurance &reinsurance 2019

nesses?

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London otne, n a eiin a b md wie h ise of issue the while made be may jurisdiction ispendingbeforethecourt. decision a and continued, or When a claim is brought to court, the arbitration may be initiated or inoperative invalid, is agreement the incapable ofbeingexecuted. that established is it the request of one of the parties, send the parties to arbitration unless at may, agreement, arbitration an into entered parties the which of A court before which a case has been initiated, on a matter in respect institution currentlyfunctioningin Azerbaijan. arbitration only the is It country. the in court arbitration first the becoming by arbitration of idea the popularising in succeeded has which instruments, normative other and Arbitration’ International Azerbaijan, of established in accordance with the Law of Azerbaijan Republic ‘On Court Arbitration Commercial International The cargoagainst claims to related Cases from deriving shippers, in taken ■ measures, enforcement mandatory on decision a If ■ the of recognition of respect in claims to relating Cases ■ and dissolution entities, of status legal the to related Cases ■ Litigation related to property rights, rent or mortgages, where ■ of the Civil Procedure Code, and cannot be resolved via arbitration: courts of the Republic of Azerbaijan, in accordance with the Article 444 of jurisdiction exclusive the within are matters following The the in still is process ofdevelopment. Azerbaijan of Republic the in practice Arbitration A party will receive a court application with the deadline to mediate. Ifapartyrefusestorequestmediate,what 4.11 enforcement authoritiestomakeaparty/partiesobey. legal use can court The mediators. their introduce to them ask and invitation for purpose the on them advise court, the to them invite mediator either for one party or all the parties involved, they have to a use to decides court the However,if practice. usual a not is This azerbaijan Canthecourtscompelpartiestomediate 4.10 cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 Whatapproachdothecourtstakeinrelationto 5.1 Arbitration 5 what groundsanddoesthishappeninmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty contracts fortransportationservices. the courseoflitigation,hasbeenimplementedin Azerbaijan. out in Azerbaijan. an application for registration of these rights has been carried validity of patents, marks or other rights where registration or legal addressin Azerbaijan. a have entities legal such if entities, legal of deregistration of territory the in located estate Azerbaijan. real to relates case the ocrig nuac, n rirto cas sol b inserted be should within theinsuranceagreement. clause arbitration an insurance, Concerning the of Law 7, (Article Azerbaijan Republic‘OnInternational Arbitration’.) contract. the of part agreement, a clause that arbitration makes an deemed be provided that the contract is concluded in writing and such shall reference an to contract clause a in arbitration reference A object. not does party the opposite which to etc., telegraph, teletype, communication, electronic reflected in a document signed by the parties, or is signed by is a letter,it if writing in concluded deemed be shall agreement An form. separate a agreement. as An arbitration or agreement must be contract concluded in a a written in clause arbitration an via concluded Arbitration’be may agreement arbitration an that states specifically International ‘On Republic the Azerbaijan of Law The arbitration. to dispute the refer to parties the of consent the specify and writing a clause into the insurance agreement. Such an agreement must be in such insert will company, fronting the i.e. company,local insurance the contract, the in clause such includes reinsurer a case In nldd ihn h dcmns f h apiain o arbitration for before itissubmittedtothetribunal. application the be of can documents this the However, within included details. provide must tribunal The Yes. commenced inorderforthecourttoreviewrequest. properly been with have proceedings court arbitration the the that provide confirmation must petitioner The measures. security Parties to arbitration proceedings may apply to the court for interim prefer nottointerfereinarbitrationproceedings. courts since well, work not does article this however, practice, In ‘On International Arbitration’). Republic the Azerbaijan of Law 9, (Article it grant to court the for and protection of measure interim an proceedings, arbitral or before during court, the from request to party a for possible also is It request this execute can within its competence and according to the court rules on taking evidence. The Arbitration’). International ‘On when Republic Azerbaijan the Court of Law Supreme 27, (Article evidence the taking from assistance request can tribunal, arbitral the of approval the with party any or tribunal, arbitral for The methodology unified a have not considering suchcases. do courts the that shows courts (arbitration) foreign by rendered decisions of enforcement and recognition regarding practice judicial the of review recent A . Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaform ofwordstobeputintoa 5.2 . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 is required? reasoned awardisrequired? examples. courts willrefusetoenforcesuchaclause? arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration the arbitrationclauseorsubsequently) thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive

www.iclg.com 45 azerbaijan 46 azerbaijan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com can bechallengedbyanarbitralheadappointedbothparties. Courts cannot appeal the decision. However, the arbitral conclusion Isthereanyrightofappeal tothecourtsfrom azerbaijan 5.6 cis riskconsultantcompany(insurancebrokers)llP(cis) identification, analysis and assessment of our clients’ business activities are central to our operations and our Risk Management Directors are Directors Management Risk our and operations our to available tobecalleduponassistinidentifying,securing,planningandproviding riskmanagementadvice/solutionstominimiseexposure. central are activities business clients’ our of assessment and analysis identification, Risk programmes. ‘hedging’ or derivatives as generally described instruments financial complex and sophisticated the to insurance vehicle basic As a progressive organisation, we are proud to have built up a wealth of knowledge on the subjects of insurance and reinsurance, from the essential known internationally other as core well The as school) MBA risks. universities here. leading of (Kazakhstan’s assessment KIMEP from and Management/Finance reinsurance in insurance, graduates of MBA are knowledge members extensive with personnel experienced diverse comprises team Our London andotherprimeglobalInsurance/ReinsuranceMarkets. The Directors and Shareholders of CIS have over 20 years of experience in Kazakhstan’s Insurance Market and 40 years of direct involvement in the courses withinvariousuniversitiesforMBA departments. management risk and insurance teaches also He 2005. in member Kazakhstan in 1994. He started working with Willis again as a network and risk management consultant in prime markets until he relocated to broker insurance as acted then He years. four for JV Grassvoye and Hubener and Jauch Higgins, and Johnson Faber, Willis a in worked His experience of working with Willis goes back to early 1971, when he LL.D. graduateinInternationalLaw. an is He etc. Arabia, Saudi in Gas British and UAE; Dugas Neka, in plant power their in Berger+Babcock of ABB+Bilfinger consortium the such as: Floor Thyseen in their oil and gas refinery in the Middle East; places various in companies multinational for services provided has He etc. France, in Grasavoye and Germany; in Hubener and Jauch USA; the in Marsh UK; the in Willis as: such years 30 last the during Brokers brokers Reinsurance Insurance and Management Risk the international major with of member worked has He a 1989. since London been in (IBRC) Counsel Registration has He 1970. since consultant insurance and manager risk a been has Motamedi Homi circumstances doestherightarise? decision ofanarbitraltribunal?Ifso,inwhat mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Homi Motamedi

Consultant Company. Bank National examination and has been approved the to act as the passed CEO of the CIS Risk successfully has and insurances liability and property risk, locally all construction medical, energy,aviation, in expert per as them harmonised and approved legislations and internationally similar lines regulations. She is an insurance the servicing of of most capable became and company the within grew rapidly She clients. international and local with dealing executive, account Valentina Pan joined CIS Insurance Brokers in September 2008 as an iclg to: insurance &reinsurance 2019 mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Valentina Pan chapter 10 Belgium Philip woolfson

steptoe & Johnson llP alexander Hamels

1 Regulatory life, unit-linked and in non-life, accident, sickness, etc.; classes can be combined or “supplementary”). Authorisation must be granted or refused within a period of six months from the date of receipt by 1.1 Which government bodies/agencies regulate the NBB of a complete application. Authorisation is published in insurance (and reinsurance) companies? the State Gazette. The 2016 Law and its implementing decrees (principally, the Royal In the wake of the financial crisis, Belgium moved to a “twin-peaks” Decree of 22 February 1991 regarding the general regulation on the supervisory model. Pursuant to the Law of 2 July 2010 amending supervision of insurance undertakings – the “1991 Decree”) provide the Law of 2 August 2002 relating to supervision of the financial a comprehensive list of the documentary requirements for an sector and financial services (the “2002 Law”), the National Bank of application for authorisation. Belgium (the “NBB”) assumed responsibility for prudential Applicants for authorisation must also demonstrate that, taking into supervision of the financial sector. A separate authority, the account reinsurance cessions, the company’s technical and financial Financial Services and Markets Authority (“FSMA”) became resources are sufficient for its scheme of operations and that they meet responsible for regulation of financial services and markets, other conditions and rules of the 2016 Law. By way of example, the including the conduct of business of (re)insurance undertakings in 2016 Law prescribes: the form of a Belgian insurance company Belgium. In addition, the Law of 13 March 2016 on the status and (essentially, joint stock or mutual) and the scope of the objects of the supervision of insurance and reinsurance undertakings (the “2016 company; that the constitutive documents must avoid any provision Law”) – Belgium’s implementation of the Solvency II Directive – detrimental to insureds, contracting parties and beneficiaries; and that sets out the competences of the NBB. restrictions apply in relation to loans in any form whatsoever to The NBB is, therefore, the entity responsible for the authorisation of directors or management. Numerous provisions of the Companies (re)insurance undertakings in Belgium, and, for prudential purposes Code, referring to the classic form of a joint stock company under (above all, solvency), monitoring and supervising their activities. Belgian law, apply to Belgian insurance entities, while specific FSMA monitors and supervises these entities’ compliance with adjustments also reflect the characteristics of Belgian mutual insurers. conduct of business rules. Implementing measures adopted pursuant Application for authorisation of the Belgian branch of a third- to the 2002 Law ensure extensive cooperation and consultation country insurer is subject to similar requirements. In addition, the between the NBB and FSMA. FSMA is also responsible for insurer must appoint an authorised agent for its Belgian branch, regulation of (re)insurance intermediaries, following registration in such agent being officially authorised to represent the company specific registers (broker, agent, sub-agent and ancillary insurance before the Belgian authorities and courts. Lastly, authorisation may intermediary). On 18 January 2019, the government announced a be refused to a third-country company if that country refuses bill on a “no-deal” withdrawal of the UK from the EU, including new equivalent treatment to Belgian insurers. rules for insurance intermediaries that carry on activities as The 1991 Decree further regulates the authorisation procedure. managing general agents and are incorporated as such in Belgium. A separate register will be set up for this category. The NBB issues the authorisation. Authorisation must be used within 12 months and without interruption for a period exceeding six months or it will be forfeited. 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? In 2017, the NBB released a guidance memorandum for applicants seeking authorisation as insurers. These guidelines set out a two- phase procedure for the application (preparatory and approval in The primary legislative text for the authorisation and supervision by principle; and formal filing) and comment on the scope of the NBB of insurers is the 2016 Law. information required in support of the application; for example a The 2016 Law applies to various categories of (re)insurance business plan, insurance classes, organisation and management of undertakings, including the Belgian branches of foreign, i.e. non- the company, internal supervision, audit and compliance, technical EEA, insurers. and financial questions, asset liability management, etc. Authorisation is granted on fulfilment of statutory and regulatory The quality of the application and the scope of activities conditions. The insurer is authorised for specific classes of contemplated determine the statutory and additional capital and insurance (grouped under life and non-life headings; for example, in other requirements which the NBB has set in a given case.

iclg to: insurance & reinsurance 2019 www.iclg.com 47 © Published and reproduced with kind permission by Global Legal Group Ltd, London 48 Belgium © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com and disclosures pre-contractual on Decrees Royal various non-misleading and clear ■ fair, on provisions Law 2002 the ■ the 1991 Decree provisions on pre-contractual disclosures for Belgium’s lawsonuseofanofficial language; ■ ■ The numerousprovisionsrestrictingfreedomofcontractinclude: are considerablymorerestrictive). for example for workplace accidents and insured pension schemes – – texts insurance (specialist contract of freedom restrict may which Belgium has also enacted specific texts on insurance contracts, all of active ontheBelgianmarket. undertakings insurance non-Belgian upon imperative therefore texts and legal of list a with published by the FSMA, are considered protecting the general good together Law, 2014 the of The agreement. provisions by application their waive to parties the enables numerous public contains policy basis; with the exception of provisions whose drafting It of above. its of virtue by often contracts – consumer the protect to designed provisions noted on Law 2014 legislation the detailed insurance: has Belgium addition, In tort. provisions on insurance, as well as the general rules on contract and Belgium is a civil law jurisdiction: the Civil Code includes summary Arethereanylegalrulesthatrestricttheparties’ 1.4 Belgian market without having to set up a branch or andsubject toits conditions, USreinsurers can wr however, has, NBB The recognised branch. that, in accordance a with the up EU-US “Cove set reinsu to required Third-country lines. specialised in business however,allowdoes, Decree 1991 Thebranch. local Foreign, proposed the of suitability shareholders. the of extended) be can which days, for example, NBB review (within a prescribed period of 60 business requirements; authorisation face still will but run-off), in or active (whether company existing an in holding a take also can insurers (or and basis; branch or services of freedom a on insurer market the in rights “passport” Belgian exercise can insurers EEA entry: market for a basis sole of authorisation authorisation of the Belgian branch of a non-EEA insurer) is not the and Incorporation Areforeigninsurersabletowrite businessdirectlyor 1.3 international under duty, authorisations grantedtosuchcompanies. its of Commission European fulfil the inform to arrangements, will reciprocity NBB the applicants, third-country to regard with Furthermore, operations. post-Brexit their for Belgium considering for firms UK of pragmatic; context the an also in example is preparing NBB the when but required, disclosure be frank will application and Full applications. of The NBB is no less rigorous than its larger neighbours in its scrutiny steptoe &JohnsonllP Royal Decree of 21 February 2014 on the rules of conduct ■ Royal Decree of 14 November 2003 regarding the activity ■ must theywritereinsuranceofadomesticinsurer? into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms mandatory terms: information; life andnon-lifecontractsonuseofplainlanguage; i.e. n te aaeet f ofit o itrs fr the for interest of conflicts insurance sector; and of management the and of lifeinsurance(the“2003Decree”); “third-country” insurers are generally required to itebusiness onthe post collateral. red Agreement” es r also are rers limited directlimited expressly set up a liability inthenuclear energy sector. usday gis laiiy rsn ot f uh ponmn will the notwithstanding appointment valid, be such generally of out a arising in liability officer against corporate subsidiary a as appointed employee its to company, parent a as such party, third a by granted indemnity An liability. Companies limit to attempts override 528, may rights shareholder Minority (Article Code). Code Companies the of or documents company’sthe of breach constitutive for not but Code), Civil 1382, (Article liability tort general for or Code) Companies 527, (Article criminal and fraud sanctions; or (iii) allow limitation for of liability for management faults except parties, third towards liability for officer corporate a indemnify to undertakes company the which in indemnity an of validity the accept (ii) committed; is fault a before any such waiver of right of action to be invalid, at any time, or only the third parties. Some legal commentators may, for example: (i) deem that providing from claims against (ii) officers corporate its or guarantee will company officers; corporate its against Legal action of rights waives company a that law. providing by liability limiting Belgian or under excluding (i) clauses: question of validity the regarding vary controversial commentaries a is This a bcm cmusr i a eti rs i cvrd covered, is risk certain a if compulsory become of may variants insurance non-compulsory also a example, are for There insurance: compulsory associations. voluntary and agents estate intermediaries, insurance agents, travel architects, campsites, . Arecompaniespermittedtoindemnify directorsand 1.5 f hc i pbihd nuly y SA FSMA; by annually published is which of There are at least 30 examples of compulsory insurance, the full list accidents workplace for (Law of10 April 1971onworkplaceaccidents). insurance and liability); vehicle of motor insurance compulsory to relating 1989 November 21 of insurance (Law motor examples: important particularly two are There insurance. compulsory of system developed highly a has Belgium Arethereanyformsofcompulsoryinsurance? 1.6 & cvrg wl tpcly nue gis etacnrcul ( extra-contractual against insure typically will coverage D&O the of exclusions the policy itself;forexample,intentionalfaultoftheinsured. to subject officers, insured the to imputed fault the corporate of categorisation the legal the of on depend liability it does for nor officer, proceedings for basis legal the on for dependent not is Coverage officers. corporate its of benefit insurance the for liability of validity corporate officers. The policy the is typically taken out by the company recognises law Belgian basis ofliabilitycorporateofficers undergeneralcompanylaw. ot ad otata laiiy ae o seii poiin o the Civil andCompaniesCodes. of provisions specific on based liability contractual and tort) Directive andthe2011 ConsumerRightsDirective. Unfair Practices Commercial 1993 Unfair 2005 the the Directive, Terms of Contract implementation current Belgium’s out sets which 2013, February 28 of Law Economic of Code the is example key A sector. restrictionsonchoiceofcompetentjurisdiction. insurance the to apply texts general various Finally, restrictionsonchoiceoflaw;and ■ the2014Lawprovisionsoninsurancecontractsconditions; ■ ■ ■ Royal Decree of 2 May 2017 regarding approval of the of approval regarding 2017 May 2 of Decree Royal ■ officers underlocalcompanylaw? iclg to: insurance &reinsurance 2019 f h poiin f nuac mdain evcs in services mediation insurance Belgium; of provision the service of that charges and providers must communicate to their clients costs in the context on regulation FSMA ordre public ordre .. e.g. arae hunting, carriage, or imperative or Belgium e.g. civil cf . © Published and reproduced with kind permission byGlobal Legal Group Ltd,London in the retail/B2C sector – is generally more favour In conclusion, Belgian substantive law relating to harmonised pre-contractual disclosures. document” information “key a of insured prospective requires particular, in and, 2018) January 1 since Bel in appliesinsurance-basedproducts,investment packaged for documents information key on 1286/2014 f 0 aur 21 o isrne itiuin ( distribution insurance on 2016 January 20 of Directive has(EU) 2016/97 Belgium of distribution, the insuranceEuropean Parliament to a regard With inducements for insurance intermediaries and on con intr and disclosures pre-contractual additional conductfor of rules the on management of conflicts 2014of interest for the insuran February 21 of “AssurMiFID” Decree as to referred often sector, insurance provi II MiFID EUextended hasFurthermore, Belgium i and (Article omissions 59) protect the insurer. intentional of consequences the and to: regard with particularomissionscertain(Articledisclosure60); requirem in insured, mis the and omissionsprotect on rules detailed example, of way protecting(thusrigour ofexcess avoid to order in protect the insurer) or may regulate their scope or becomplex: the2014 Lawmay impose duties onthe i Distinguishingbetween protection theinsurerof an that theinsurercannotwaivetheseprovisionsinitsfavour. add documents Parliamentary 74–76). (Articles claim a of event to pay the premium (Articles 69–72); and the insured’s duties in the risk of caused (Article 62) and claims arising from war (Article 63); failure declaration to relation (Articles 58–60); exclusion of claims which have been in intentionally provisions certain example: be a threat to the insurer and its interests are therefore protected; for may insured’sbehaviour the that recognises also Law 2014 the but insured, the protect to is concern primary legislator’s The insurer. the protect which those and insured the protect which its provisions of those between distinguish Law 2014 the on Commentaries text andsetsouttheprimarysourceofsubstantivelaw. key the is Law 2014 the above, noted As above. 1.4 question See Ingeneralterms,isthesubstantivelawrelatingto 2.1 steptoe &JohnsonllP iclg to: insurance &reinsurance 2019 legal any create not in Therefore, reinsurer. does the and insured the reinsurance between relationship law, Belgian Under Cananinsuredbringadirect actionagainsta 2.3 insured (Article150,§2). the of creditors other of exclusion the to victim the in vests insurer the from claim to right insurer (Article 150), independent as a result of which indemnification an due by the victim, the party, third a grants insurance liability that provides expressly Law 2014 The Canathirdpartybringdirectactionagainstan 2.2 In the savings insurance sector, the PRIIPs Regulat the 2014 Law (on insurance mediation and distributi DistributionDirective” –“IDD”), in particular by (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? reinsurer? insurer? sanctions for failure i.e. amendingPart 6of insurance – at least able to the insured. ion, ce sector provides the insured). By insured). the on). ents (Article58);ents d theinsuredd can nd of the Council dcs ue on rules oduces te “Insurance the , rvso t the to provision flicts of interest. gium (effectivegium i.e. nsured(which unintentional implemented te Royal the : etn out setting sions to the to sions naccuracies Regulation eal and retail statements n the and pl dpnig n hte sc crusac i a euto or aggravation oftheinsuredrisk. reduction a is circumstance such whether on depending apply of course the in known performance of the becomes contract, specific provisions (Articles 80 and contract 81) the of conclusion of time the at parties two the to known not is which circumstance a If premiums paid(Article60,§3). of all of repayment to limited is benefit its claim, the by disclosed been has nature real whose risk the insured have circumstance any however,If, risk. in not would it that proves insurer the claim, a on the disclosed properly had he if paid have should policyholder the which premium the and paid premium the to proportionate benefit a provide to bound only is insurer the effect, taken has termination the or contract the of amendment the before arises claim a if and policyholder the to imputed be can misstatement or omission the If benefit (Article60,§2). agreed the provide must the insurer or the contract effect, taken the has of termination amendment the before arises claim a and If the omission or misstatement is not imputable to the policyholder the futurecontestfactswhichareknowntoit. or contract the in cannot terminated above out set period not the within amendment has an proposed which insurer An days. 15 has not been accepted, the insurer may terminate the contract within proposal the proposal, such of receipt from month one of period a to amend the contract may is refused by the policyholder or if, on expiry of proposal the insurer If the period. same risk, the within the contract the insured terminate have event any in it not that the proves would insurer the of If or amendment date. omission such from an effect the with propose contract of must aware insurer became the insurer misstatement, the when date the from month one within Instead, §1). 60, (Article void and null not is contract the misstatement, or non-disclosure unintentional for As are payabletotheinsurer(Article59). misstatement or omission intentional the of aware becomes insurer the when time the the to risk, up due Premiums the void. determining and null for is contract factors the to as error into insurer As for intentional omission or misstatement, where these induce the omission such on rely subsequently (Article 58). cannot insurer the fraud, of cases than other contract, the concludes nevertheless insured the If no reply is given to certain written questions of the insured and if insurer the insurer should reasonably know. to Genetic data may not be disclosed. declare risk. as to the which or have insurer the the to known already are which consider circumstances not determining does reasonably for insured must factors the However, insurer, he the which for and comprising, him circumstances to all declare to known contract, the of conclusion of time the at bound, is insured the disclosure, of duty the to regard With and (omissions) of non-disclosure consequences misstatements. unintentional the and and disclosure intentional regulates Law 2014 The . Whatremediesdoesaninsurer have incasesofeither 2.4 insurer’s actionagainstaretrocessionaire. the to relation in option same the note commentaries The insurer. to bring insured an action against the the reinsurer in the enabling event of insolvency clause, of the through” “cut a include to option reinsurer.however,do, commentaries Legal the approval with note the from indemnity of payment seek cannot insured the principle, misrepresentation ornon-disclosurebytheinsured? www.iclg.com Belgium 49 Belgium 50 Belgium ■ the insured is not liable for not declaring what he does not does he what declaring not for liable not is insured the ■ See question2.4.Bywayoffurthercomment: genetic data must not be disclosed. Other disclos ■ circumstances disclose to required not is insured the since ■ circumstances certain on information wishes insurer the if ■ © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Finally, suffered. harm subrogation byagreementisalsopossible andknown. the of amount the to up paid indemnity in the of repayment claim may insurer the cases, such delay in above, noted evidence, preparing etc. As liable, person the to discharge a granting claim, in a notifying negligence through for either; to example action insured insurer’s the the hinder on not law must he in but duty cooperate, express no is There the party. third insurer: the to law, of subrogated insurer exercises the insured’s right operation of action against the by transferred, are rights insured’sThe insured. the of name the in sue not does insurer The personal their whether on liability isinsured. particular, in be may depending, action of restricted right insurer’s the minors, by malice of event specified categories of persons – essentially family members. In the Other than cases of malice, the insurer has no right of action against or insured the case, the insurer’s rights. such to In preference in balance the for rights his enforce may beneficiary indemnified. partly been only has who beneficiary or insured the of rights the prejudice not the may of repayment claim may indemnity paid up to the amount of insurer the harm suffered. Subrogation the insurer, the to denied If, are beneficiary,subrogation or of effects damage. insured the the of because the for liable party third the against beneficiary the the to up subrogated, of or indemnity,insured such the is of of amount actions and rights in insurer The indemnity. an of payment on subrogation for provides expressly 95) (Article Law 2014 The Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 to right insurer’s the restrict challenge ongroundsoffailuretodiscloseapre-existingcondition. rules specific insurance, In health Decree). Royal 2003 10, Article and Law 2014 162, (Article an unintentional omission or misstatement after a period of one year Finally, for life insurance contracts, the insurer can no longer rely on steptoe &JohnsonllP insurers all matters material to a risk, irrespecti whether the insurer has specifically asked about th insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes know. The 2014 Law requires him to declare what “he must “he what declare to him know.requires Law 2014 The gender. ground on discrimination and secrecy medical AIDS), fundamrights. of Case breach law includes of grounds criminal on challengerecords, tohealth open be theinsured’s privacy/personal data mayberequeste know islimitedtowhatactuallyknown;and to need insurer’s the known, be should or already are which the layman, a by missed insurer mustseekdisclosure; be to likely is relevance whose esnby osdr t b priet nt ht h should “he reasonably know”(Article58); what not pertinent, be to consider” reasonably ures regarding (in particular, d,butmay se to ve of em? ental of s

a jury. In commercial and civil matters, there is no right to a hearing before apply. exceptionsdisabilitymarineworkin relatedandto policyholderdomicilethetheof compcourtsof are partiesmay enjoy freedom to vary such jurisdiction Additional rules govern territorial jurisdiction an and occupationalpensions,thelabourcourtiscompetent. to workplace accidents, mandatory sickness and disability insurance related claims For the court. appropriate the capacity,be will court commercial trading a in courts. acting other are parties to the reserved where Typically, are which those except matters all for instance first of court the on jurisdiction confers Code Judicial The officio Likewise, faced with a breach of the allocation rules, a court must rules. such waive not may parties The urgency. the and capacity) omril rceig ad h cut a a iie rl i the in role limited gathering ofevidence. a has court the and proceedings commercial Belgium does not have a formal procedure of discovery in civil and shorter to periods. subject are matters urgent particularly in Proceedings above the cases, such In period maybereducedtoonetwomonths. hearing. introductory an at with be dealt may Code, Judicial the in prescribed as cases, simple Certain varies for the other courts of appeal between 20 an beforethe Brussels court ofappeal isabout 30mon A 2016 study on the length of proceedings shows tha rounds of pleadings, may substantially delay the pr su steps, procedural other as well as expert, an of instancefirstjudgmentoinitial writ the of issue A commercial case will typically take 12–24 months li, h bss o te li, h cpct ( capacity the claim, the for basis the claim, The Judicial Code allocates jurisdiction according to the value of the articles ofthatCode. the by relevant governed the from drawn are sections following The Code. mainly Judicial are courts Belgian before Proceedings Which courts are appropriate for commercial insu 3.1 . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 3 Litigation – Overview Litigation–Overview 3 Litigation–Procedure 4 dispute? Is there any right to a hearing before a j disputes? Does this depend on the value of the to theaction? bring tocourtonceithasbeeninitiated? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin declare thatitdoesnothavejurisdictiontohearthecase. iclg to: insurance &reinsurance 2019 d, in certain cases, the e.g. t. The appointmentThe t. d 30 months. . In. principle, the rdn o other or trading ths.This average oceedings. t the average time surancecontracts etent. However,etent. ch as additional as ch from the date of Belgium ury? rance ex © Published and reproduced with kind permission byGlobal Legal Group Ltd,London be orderedtoensuredocumentsremainavailable. Before the case has commenced, interim measures, e.g. seizure, can own its upon order such issue initiative (Articles877–882,JudicialCode). also may court The document. proceedings, he may request the court to order the production of the the the to relevant is in that document a possesses degree party third another a certain or believe party to reason a has party to a If cooperate evidence. of must production and faith good of duty a to subject are parties However, party’scase. that contradict which documents disclose to party a on duty specific no is There or issuelettersrogatory. sick or resident abroad, the magistrate may travel to hear the witness is he because example for hearing, the attend cannot witness the If without evidence considered tobealegitimatereason. give is secrecy Professional to fine. a refuses to liable be or may reason legitimate absent is who witness A debates. the re-open evidence atanytime. to hearing, final Therefore, theoretically it has the the power to require witnesses to give after even always may decide, court a However, date. later a at set then is hearing final The witness. a hearing after up drawn Generally,are minutes ask to court the specific questions. invite may parties the parties, the of absence or presence the in witnesses, interrogate may court the only Although the Belgiancourts. before witnesses heard seldom are hearing witnesses However, for 915–961). procedure (Articles the out sets Code Judicial The may notbewaived. privilege the that means which Code), to Criminal the subject of be provisions may (and policy public be to considered are generally privileges Such secrecy”). (“medical profession medical the as such professions, other to apply privileges Other proceedings. privileged, principle, in is, above), (c) and (b) of respect (in attorneys among or (a)), (under client his and attorney an between Correspondence steptoe &JohnsonllP iclg to: insurance &reinsurance 2019 ( times all at accepted is evidence witness and flexible In commercial and criminal proceedings, rules of evidence are more to hearwitnesses. prove a claim, to but, as stated above, Belgian courts adduced are very reluctant be can evidence witness liability, extracontractual on founded disputes for or contracts never of However,interpretation the for is and €375 exceeding value accepted tocontradictwrittenevidence(Article1341,CivilCode). prove a to with allowed claims not is contractual evidence witness proceedings, civil In Isevidencefromwitnessesallowedeveniftheyare 4.4 Do thecourtshavepowerstorequirewitnesses 4.3 Canapartywithholdfromdisclosuredocuments(a) 4.2 apply criminal evidence rules to that offence and offence that to rules evidence criminal apply If a civil court rules on a claim, based on a criminal offence, it must 25, CommercialCode). give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? not present? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin i.e. may not be used as evidence in civil or commercial or civil in evidence as used be not may vice versa vice e.g. Article . For . will oftenfollowtheexpert’s conclusions. it expert, the of findings final the by bound not is court a Although enjoys court ordered tobeartheexpert’sis costs. party the losing the cases, but most In expert, otherwise. decide to the discretion of appointment party for the by applying pre-paid be must expert the of costs the Generally, court-appointed expert, as this could give rise to Furthermore, a party should not, in principle, meet expert can be dismissed if he is connected to a par JudicialCode for magistrates also apply for expert Theexpert must beindependent, and the relevant re expert. The courtcanalsoappointanexpertonitsowninitiative. own its appoint to court the ask generally will party a Therefore, expert party’s accepted bythatotherparty. one but unless party, other any on evidence, binding not are findings and statements expert present may Parties powers of the lower court. The appeal court has power to affirm, set and the all enjoys court appeal law the appeal, the considering When both facts. in mistake a of grounds on appeal may side Either from thedateofjudgmentitself. (Article run to starts period appeal the cases, some In Code). Judicial 1051, abroad resident is party a where particular in apply, can periods other but bailiff, a by judgment the of notification formal of date the from days 30 within brought be generally must Appeal covering the part of the claim which is not contest for instance in commercial claims for payment of a The court can also issue an interim but definitive injunction to refrain from an act (Article 19, Judi temp activitysubjectsanctionto eventthe failure inof comp to an cease to order an include Examples court’s the from removed are law by which those for may grant a provisional order in all matters of ext The president of a civil court of first instance or As fordisclosureofdocuments,seequestion4.1above. . Are there any restrictions on calling expert wit 4.5 . Isthereanyrightofappealfromthedecisions 4.7 Whatsortofinterimremediesareavailablefromthe 4.6 See alsoquestion4.3above. witness evidence(Articles961/1–961/3,JudicialCode). Finally, written declarations can enjoy the same evidentiary status as will generallytakesuchdocumentsintoaccount. court The file. court the in these file and parties third by produced or written documents to pleadings, their in refer, also can Parties threatened incriminalproceedings. but certain exceptions apply; for example, where a witness has been witness, the of presence the principle, in require, rules Procedural to thataccident. traffic a accident will not in prevail over a witness involved declaration in relation parties both by signed form declaration a example, addition or in place of party-appointed experts? Is it common to have a court-appointed expert in grounds? Howmanystagesofappealarethere? courts? courts offirstinstance?Ifso,onwhatgeneral www.iclg.com of a commercial court reme urgency (except a suspicion of bias. cial Code). ty to the proceedings. order against a party, ed by the defendant. separately with the ly), or a temporaryaly), or s. Fors. instance, an sum of money and quirementsinthe Belgium jurisdiction). rrl (and orarily nesses? 51 Belgium 52 Belgium to theEuropeanCourtofHumanRights. appeal the of appeal bailiff for except final, is court’sjudgment supreme by The decision. notification the of months three within lodged be must appeal The law. in mistake a of basis the on only but Cassation), of Court (the Belgium in court supreme the before challenged be generally may appeal Finally,on rendered decision a proceedings (and not after the judgment has been re Justiceof the European Union. The reference must to the Constitutional Court or, on questions of EU Parties may request a court to make a reference for an appealrequiresexchangesoffurtherpleadings. practice, in appeal; the in included were which and court lower the before parties the by raised arguments legal and factual all address must It court. lower the of decision the of aspects all to relation in therefore refer not the appeal back to may the lower court and it must exercise its powers appeal): of effect” “devolutive (the case the evidence, ordered by the lower court, the appeal court is seized with © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com of choice the on agree parties the If Code). Judicial 1734, (Article parties the of agreement the with and court the of initiative the on or request so parties the if mediation judicial a order can court The the record to court the settlement. The court’s ask orderhasthesamevalueasajudgment. can parties the agreement, an reach they If initiative. own their on dispute the settle always can Parties Canthecourtscompelpartiestomediate 4.10 the of amount the of percentage judgment, isdueandgenerallybornebythelosingparty. a is which fee, registration A substantially reduced. be can costs for award the hearing, introductory the before is settled claim the When hearing. a to prior settle to attempt genuine a into take may been has there if example, court for parties; the of behaviour the account the award, the of amount the setting When actually incurred. Royal by costs the of short far fixed fall often will award the practice, amounts In Decree. maximum and by sum minimum the to awards court reference The claim. the defending in incurred and a lump sum intended to compensate the winning party for costs the litigation. The order will award the costs of the writ of summons of costs the bear to party losing the order generally will court The Whatarethestandardrulesregardingcosts? Are 4.9 general statutoryrate. As of the date of the writ of summons, certain courts apply a reduced A partymustalwaysapplytothecourtforanawardofinterest. rate statutory general the applies (2% which in 2019 for civil claims and failing 8% to for commercial claims). subject court, contract, the the by in reduction provided that be will rate applicable The contract. the by contract determined date the the on if interest, for or, provides served been has claim of notice formal a date the from as awarded be normally will interest claims, monetary In Isinterestgenerallyrecoverable inrespectofclaims? 4.8 matters, procedural certain confirms it where cases for Except court. lower the by made judgment any vary or aside steptoe &JohnsonllP disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan If so,whatisthecurrentrate? a preliminary ruling law, to the Court of ndered). takeplace during e.g. taking of taking ■ when the arbitral award includes provisional enforcement, a enforcement, provisional includes award arbitral the when ■ ■ prior to enforcement, an award must be declared enforceable declared be must award an enforcement, to prior ■ or annulment, for proceedings to subject is award an when ■ persons the of and/or parties the of failure the of event the in ■ arbitral the which failing law, The courtmayinterveneinvariouscircumstancesincluding: substantive applicable the whetherthearbitraltribunalmayproceedasamediator;and ■ ■ the language, of choice the (including rules procedural the theplaceofarbitration; ■ themethodforselectingarbitrator(s); ■ ■ fit, deem they as proceedings arbitral including: the organise to free are parties the applicable, be may that rules mandatory any to Subject proceedings (Articles1676–1723,JudicialCode). arbitration promotes) (and regulates specifically Code Judicial The than thecourtrulingonmeritsofdispute. There are no significant consequences following such a refusal other clause in a contract, in a separate agreement dealing solely with the with solely dealing agreement separate a in contract, a in clause a as either writing, in evidenced be must arbitrate to agreement The . Whatapproachdothecourts takeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 before thecourtwilldoso. Once again, the parties must agree on the appointment of a mediator negotiation. order always will court the procedures, action class In other thanonrequestbytheparties. mediator a appoint to courts Belgian for practice general not is It an accreditedmediator. mediator, he will be appointed. In other cases, the court will appoint . Isitnecessaryforaformofwordstobeputinto 5.2 Arbitration 5 cases oronlygrantitfollowingprovisionofsecurity. specific in enforcement provisional such suspend may court when theawardiscontrarytoBelgian exequatur parte an on for applied instance, first of court the of president y en o a efreet re ( order enforcement an of means by 1708, JudicialCode); (Article below explained as incomplete, is award an when may doso. This decisionisbindingontheparties; instance first of court the of president the tribunal, arbitral arbitrator/the the of appointment the on agree to appointed tribunal willdecide. for theproceedings); party, losing set time of the period the and appeal by to right confidentiality,the borne be to costs legal the of amount what groundsanddoesthishappeninmanycases? consequences mayfollow? is required? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty clause willbeenforceable?Ifso, whatformofwords contract of(re)insurancetoensure thatanarbitration iclg to: insurance &reinsurance 2019 ai. h cuts oto i mnml sne the since minimal, is control court’s The basis. can only be refused for strict reasons; for example for reasons; strict for refused be only can ordre public exequatur Belgium ; and o the of ) ex © Published and reproduced with kind permission byGlobal Legal Group Ltd,London parties’ consenttoarbitration.Noformalwordingisrequired. question of arbitration, or even in an exchange of letters showing the the validityofarbitrationandothercomparableclauses. extended also has law Case Law. 2014 the by covered not classes arbitration classes, in including contracts, prohibited insurance in the included regularly are of clauses one in unless practice, In no RoyalDecreeallowingarbitrationclausesinlifeinsurance. is there likewise, Law); 2014 §2, 90, and §2 85, (Articles expenses legal and assistance and basis; individual an on injury accidental liability; personal defined); as risks (“simple” fire liability; motor comprise: clauses arbitration include never may which classes The of classes certain of out arising disputes for Arbitration ■ The parties may resort to arbitration once a dispute has arisen ■ void. There aretwoexceptionstothisprohibition: submit and null deemed is arbitrators to to contract the of out arising disputes advance are in undertake contract clauses the to parties arbitration the which that is rule prohibited. The 2014 Law (Article 90, §1) provides that a clause in general the insurance, In is or expired has agreement or clause arbitration the When arbitration ■ the of application waived have parties the When ■ including thefollowing: circumstances, specified in clause a enforce to refuse may court A Notwithstandingtheinclusionofanexpress 5.3 steptoe &JohnsonllP iclg to: insurance &reinsurance 2019 questionsofallegedforgery ofdocuments;and anyseizureorder, includinganyconservatorymeasure; ■ for ■ enforce, to position a in not instance: is tribunal arbitral the which tribunal, arbitral the although the courts in principle retain jurisdiction to to order measures made be normally would measures such for application an Thereafter, constituted. fully is tribunal arbitral the as time such until court the by ordered be may measures Such provisional or of assetsorevidence.Seequestion4.6above. interim order to measures, which include conservatory jurisdiction measures for the preservation retain courts The What interimformsofreliefcanbeobtainedin 5.4 risk mayincludearbitrationclauses. of fact classes numerous for insurance in of contracts that Decree provides Royal 1992 a permitted: be may insurance subsequent a not forbidden, are agreement toarbitrate. clauses arbitration – arbitration clause,isthereanypossibilitythatthe courts willrefusetoenforcesuchaclause? examples. support ofarbitrationfromthecourts?Pleasegive datg o oe f h pris r ih ead o the to regard with or parties the appointment ofthearbitrator(s). of one on advantage an confers clause arbitration the when example for invalid; clause.

back tothearbitraltribunalcompleteitsaward. matter the remit may court, the extent some to or parties, the claim, the of parts all answer to failed However,has tribunal arbitral the if the to back matter the remit given. be then can award the for reasons the that so tribunal arbitral to power have not does court The as totheadequacyofreasoningrequired. however,are, commentaries Legal divisible. is award the uncertain if partial or full is annulment parties. The the of one by application upon court, the by annulled be can award the which failing award, the in out set be must reasons the and reasoned be must award The not amediator. power to decide on purely equitable, rather than legal, grounds. It is no has tribunal arbitral the parties, the by agreed otherwise Unless neti, owtsadn spee or spot o such for support court challenge wherethethirdpartyhasbeenavictimoffraud. supreme notwithstanding is uncertain, award arbitral an challenge may party third a whether Finally, generally bechallengedwithinonemonthofitsnotification. A court decision granting an order to enforce the arbitral award may of thedatenotificationawardtoparties. As a general rule, an appeal must be introduced within three months Code (Article1717). by one of the parties in any of the circumstances listed in the Judicial The award can, however, be annulled by the court, upon application and final binding andnotsubjecttoappeal. is award the otherwise, agreed have parties the Unless . Isthearbitraltribunallegally boundtogivedetailed 5.5 . Isthereanyrightofappealtothecourtsfrom 5.6 court tograntordersrequiringsuchdisclosure. a ask may tribunal arbitral the case, of that In clause. arbitration the rules the determine by an to arbitral tribunal sitting in Belgium if expressly provided for in free generally proceedings, are Anglo-American discovery procedures may be applied parties the As oath. parties under statements of taking of the as well as tribunal arbitral the before appearance the investigation, on-site an investigation, The arbitral tribunal may order and organise the holding of an expert tribunal. arbitral the by issued award final a of context the in recovered and any order it may issue. This penalty can, however, only be enforced with comply to failure arbitral for penalty daily a pay to the arbitration the to when witnesses of Regarding such measures, the arbitral tribunal may order the parties appearance compulsory ■ reasoned awardisrequired? circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in decision ofanarbitraltribunal?Ifso,inwhat tribunal hasdecidedtohearwitnesses. www.iclg.com

Belgium 53 Belgium 54 Belgium © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com steptoe &JohnsonllP 0 lwes n ohr rfsinl i ofcs n ejn, rses Ciao Lno, o Agls Nw ok Ponx Sn rnic and Francisco San Phoenix, York, New Angeles, Los London, Chicago, Brussels, Beijing, in Washington. offices in successful professionals arbitration, other and and litigation lawyers complex 500 in advocacy vigorous for recognised widely firm representation of clients law before governmental agencies, and creative and practical advice in guiding business transactions. The firm has more than international an is LLP Johnson & Steptoe on advises also He laundering, andonEUtaxlawpolicyaffecting thesector. anti-money data, personal operations. of protection as their such issues, compliance of corporate-commercial out and arising regulatory, questions supervision, prudential on associations and intermediaries, undertakings, (re)insurance foreign particular in a cross-border context within the EU. He advises EU and in sector, the facing issues legal the of experience extensive has He Philip Woolfson concentratesonEU(re)insurancelawandregulation. R:www.steptoe.com URL: [email protected] +3226260500 Email: Tel: Belgium 1050 Brussels 489 Avenue Louise Steptoe &JohnsonLLP Philip Woolfson oe ludrn, rtcin f esnl aa n international and data personal sanctions. financial of protection of laundering, and money sector services keen financial regulatory and transactional law, a as well as related areas such as the anti- has he of markets, financial understanding and capital in experience work policy his and economics and law in background his and to Due corporate areas. these Belgian in experience advisory and and litigation has insurance, He law. on commercial focus financial a of with law services, regulatory EU on concentrates Hamels Alexander iclg to: insurance &reinsurance 2019 R:www.steptoe.com URL: [email protected] +3226260500 Email: Tel: Belgium 1050 Brussels 489 Avenue Louise Steptoe &JohnsonLLP Alexander Hamels Belgium chapter 11 Bermuda mark chudleigh

Kennedys chudleigh ltd. nick miles

1 Regulatory The regulatory regime for insurers registered under the Insurance Act is calibrated based on whether the insurer is a captive insurer, a commercial insurer or a special purpose insurer (“SPI”). An 1.1 Which government bodies/agencies regulate applicant seeking registration as a commercial insurer must meet far insurance (and reinsurance) companies? more rigorous standards than those that must be met by an applicant seeking registration as a captive insurer. SPIs are a sui generis The Bermuda Monetary Authority (the “BMA”), an independent category of insurer whose liabilities must be fully-funded and (non-governmental) body created by statute, is responsible for the whose investors and cedants must be “sophisticated participants”. licensing and supervision of insurance and reinsurance companies For insurers carrying on general business, the minimum margin of and has broad enforcement and disciplinary powers. The Minister of solvency is calculated by reference to the greater of net written Finance has limited powers, on the advice of the BMA, to make premiums and discounted loss reserves and other insurance regulations prescribing the division of insurance and reinsurance reserves. This is subject to a minimum floor of $120,000 for single- companies into different insurance classes, the value to be attributed parent captives at one end of the scale, and $100 million for “Class to assets and liabilities of insurance and reinsurance companies, the 4” reinsurers at the other. For insurers carrying on long-term information to be provided by insurance and reinsurance companies business, the minimum margin of solvency is a proportion of assets in their regulatory returns and to make exemptions from provisions of reported on the insurer’s statutory balance sheet, subject to a floor of the Insurance Act 1978 (the “Insurance Act”). In addition, the $120,000 for single-parent captives at one end of the scale and to a Minister of Finance is responsible for issuing permits to “non-resident floor of $8 million for “Class E” insurers at the other. insurance undertakings” (see the answer to question 1.3 below). All multi-parent captives and commercial insurers carrying on general business must appoint a suitably qualified approved loss 1.2 What are the requirements/procedures for setting up a reserve specialist to confirm the insurer’s reserves. Insurers new insurance (or reinsurance) company? carrying on long-term business must appoint a suitably qualified actuary approved by the BMA. However, for certain insurers An application for registration as an insurer under the Insurance Act carrying on fully-funded business, this requirement may be must be made to and be approved by the BMA. Only bodies dispensed with. corporate may be registered as insurers, thus a separate, parallel All insurers must maintain a principal representative resident in application must be made to the Registrar of Companies seeking to Bermuda whose role it is to report matters of concern to the BMA. register the corporate body. The BMA must be satisfied that, among There is an exemption applicable to underwriting members of other things, the applicant will, when registered: Lloyd’s of London who write business in Bermuda via local cover ■ Maintain a prescribed minimum margin of solvency and (to the holders who are registered as insurance intermediaries under the extent it carries on general business) a minimum liquidity ratio. Insurance Act. ■ Meet the “minimum criteria” of registration, namely that (among other things): 1.3 Are foreign insurers able to write business directly or ■ officers and controllers are fit and proper; must they write reinsurance of a domestic insurer? ■ the business of the applicant will be conducted in a prudent manner; Foreign insurers are able to write business directly insuring ■ the position of the applicant within the structure of any Bermuda risks (subject to any rules imposing eligibility group to which it belongs will not obstruct effective requirements on insurers permitted to insure certain compulsory consolidated supervision; and classes of business) without being registered under the Insurance ■ the business of the applicant will be carried on with Act, provided that they do not thereby carry on insurance business in integrity and the professional skills appropriate to the or from within Bermuda. nature and scale of the applicant’s activities. The exception to the above proviso (that a foreign insurer must not Bermuda has a multi-licence system of regulation which categorises carry on insurance business in or from within Bermuda unless it is general insurance companies into six classes, long-term insurance registered under the Insurance Act) is the small number of “non- companies into five classes, a class for Special Purpose Insurance resident insurance undertakings”, being foreign insurers which and provides for composite companies. write business in Bermuda through resident representatives pursuant iclg to: insurance & reinsurance 2019 www.iclg.com 55 © Published and reproduced with kind permission by Global Legal Group Ltd, London 56 Bermuda © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com is and 2012 Act Representations) perceived to be fairly pro-insurer. However, and parties to insurance and (Disclosure Consumer UK the Insurance and 2015 Act Insurance UK the of force into coming the to prior law English to similar is breach for remedies the and terms policy of performance and interpretation the insurers, and insureds of duties pre-contractual the to relating law Bermuda Ingeneralterms,isthesubstantivelawrelatingto 2.1 CorporateServicesProvidersBusiness Act 2012. Trusts (Regulationof Trust Business) Act 2001. ■ InvestmentFunds Act 2006. ■ InvestmentBusiness Act 2003. ■ ■ risks on against inherent intheoperationoftheirbusiness: insurance carry procure to to manner, acts prudent a following in business the under imposed duties statutory of part By-Laws as required, are Bermuda persons regulated of of variety a addition, Accountants In Chartered of Institute BermudaBar Act 1974. ■ MotorCarInsurance(Third-PartyRisks) Act 1943. ■ Workmen’s Compensation Act 1965. ■ MerchantShipping Act 2002. ■ ■ to thefollowingacts: pursuant required those are examples significant more the of Some Bermuda. in insurance compulsory of forms of number a are There Arethereanyformsofcompulsoryinsurance? 1.6 or breachoftrust. diligence, and in respect of their negligence, default, breach of duty and skill care, of duties their of breach for liability and against officers directors their insuring insurance purchase to permitted also are companies Bermuda dishonesty. or fraud to extend to purport they as insofar void are agreements Such trust. of breach or duty directors and officers in respect of any negligence, default, breach of Bermuda companies are permitted to indemnify the liability of their Arecompaniespermittedtoindemnify directorsand 1.5 context. is statute reinsurance this and insurance the in However,relevance practical any of seldom agreement. by excludable not are that performance of standard and performance of time consideration, to as Terms)(Implied terms Services implies of 2003 Supply Act The fit. see they as terms on contract to freedom broad have contracts reinsurance and insurance to parties the context, commercial a In Arethereanylegalrules thatrestricttheparties’ 1.4 Bermuda their agents withoutbeingregisteredundertheInsurance through Act. Bermuda in business insurance may on insurers carry Non- Such the 1967. under Act Finance Undertakings of Insurance Resident Minister the by granted permits to Kennedys chudleighltd. (Re)insurance Claims 2 into (allorsome)contractsofinsurance? insurance morefavourabletoinsurersorinsureds? 2006. officers underlocalcompanylaw? freedom ofcontractbyimplyingextraneousterms

(the “LifeInsurance Act”). 1978 Act Insurance Life the to pursuant policy the under assured life the of rights enforce may policy insurance life a of Assignees as the by enforced borrowing be the name of the insured. may assignment statutory a of pursuant to a transaction which does not meet the f Incertain circumstances, righta against aninsure judgment, settlementoraward. insurer’s the liability to words, the insured must have been ascertained other and quantified by in insurer; the against right matured a the insurer (a statutory assignment). A statutory assignment requires to given been has assignment of notice and insured the of hand the right in its own name where the assignment is made in writing under The assignee of an insured’s right against its insurer may enforce the contract expressly provides in writing that the third party can ■ third party is identified in the contract by name, as a member ■ own rightwherethe: its in reinsurance or insurance of contract a of term a enforce may certain Under the Contracts (Rights of Third in Parties) Act 2016, a third party may, claimants bankruptcy orwinding-upoftheinsured. 1943, the of event the in insurers against directly proceed Act circumstances, Insurance Risks) Car Motor the (Third-Party Under pre-condition. a not is insured of respect in owners against ship Shipping under Merchant liability The the of Insolvency 2002. Act permitted insuring policies are issue actions who insurers direct circumstances, certain In or settlement judgment, award. by quantified and the ascertained been on has insurers party third liability the to liability against whose person insured action an of bankruptcy direct a bring to party (Rights third Parties a The Insurers) Third allows Against 1963 Act under an insurance policy unless it is a party to the insurance policy. insurer an against law Bermuda under action direct a bring party cannot third a below, discussed cases of range limited a in Except or non-disclosure are not governed by statute. Und scope of the Life Insurance Act) in cases of materi (other than an insurer in respect of a remedies policy theof law,li English under position the Unlike statutory assignment (see the answer to question 2. (seethe answer to question 2.2 above) or holds the contractpursuant Contractstheto (Rights ofThird the reinsurance contract, is entitled to enforce a reinsurerunderreinsurancea contract unless thei Aninsured cannot bring directa action under Bermu . Canathirdpartybringdirectaction againstan 2.2 accurate and disclosure of representation and/ortheinsurer’s/reinsurer’s remediesforbreach. duties pre-contractual reinsured’s reinsurance contracts may agree to limit the scope of the insured’s or . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 insurer? misrepresentation ornon-disclosure bytheinsured? reinsurer? enforce theterm. of aclass,orasansweringparticulardescription; iclg to: insurance &reinsurance 2019 term of the reinsurance fe insurance within the al misrepresentation ormal requirements r whichr isassigned nsuredpartyaisto er the common law, 2 above). right pursuant to a Parties) 2016Act dalawagainst a Bermuda f n insurer an of ine by signee

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London insurer orofwhichthewaivesneedfordisclosure. the to known be to presumed or known are which risk, the reduce to tend that circumstances disclose not need insured the However, them. about asks specifically insurer the whether of regardless risk, the to material are which the it to known be to to ought which or known insured circumstances all disclose must insured The Yes. ins saeet ad oiyn te ot rgm. h Civil The regime. costs the modifying and statements witness of exchange the for providing example, English for including, updates and 1979 the on based Supreme Court Practice are Rules, subject to a number of modifications procedure of rules Bermuda’s insurance, including categories, reinsurance andarbitration. designated of number a of one to relates or matters) insolvency (including the 1981 under Act Companies application an either is which commerce, and trade of transaction the of out arising counterclaim or claim a contain must case a Court, Commercial the for qualify to order In matters it. to all relating hear normally then and stage early an at assigned are an practice. There are by currently two specialist Commercial Judges who expeditiously tried is modern best the with accordance in judge, commercial experienced litigation commercial that ensure to is purpose Its Bermuda. of Court Supreme the of Division Court Commercial the to assigned are disputes reinsurance and Insurance imposed by the Life Insurance Act. LifeInsurance Actare avoidance but are subject to inducing the issuance of a life insurance policy wi remedies of an insurer for material non-disclosure insurermayalsoclaimhaveafordamages thetoin fraudulent misrepresentation is the Where breach. disclosureaccurateandrepresentation insutheand pre-conofscope thelimit to agree partiesmay the enteringintothepolicy. noted Asabove (inanswe misrepresentat or non-disclosure the that establish viac o te oiy policy the of avoidance the insurer’s remedy for material nondisclosure or the rights ofonecoinsuredunderapolicyagainstanother. to subrogated not is insurer the the However, of respect rights. subrogated in claims compromise to right the retains insured the enforce or the provision, express establish any absent Nevertheless, to rights. subrogated litigation in insured the of name the borrow can insurer the circumstances, certain in However, rights. subrogated the of respect in sue to right legal the insurer the give the insured as a result of a “double recovery”. Subrogation does not loss. The purpose of subrogation is to prevent unjust enrichment of the of respect in insured the indemnify to duty dischargingits upon insured the of rights the to subrogated automatically is insurer The Kennedys chudleighltd. iclg to: insurance &reinsurance 2019 Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the insurers all matters material to a risk, irrespecti insurer needaseparateclauseentitlingsubrogation? whether the insurer has specifically asked about th dispute? Is there any right to a hearing before a j payment ofanindemnitybytheinsurerordoes b initio ab rsiso) Te nue must insurer The (rescission). or misrepresentation thin the scope of the misrepresentation is certain limitations rer’sremediesfor r to questiontor 2.1), tractualofduties rt of deceit.ofrtThe o idcd its induced ion n aue the nature, in se to ve of ury? rance em? unaware of any incidence of this happening in moder involvingallegations offraud may betried byjua Although there is provision in the rules for a judg There is no right to a hearing before a jury as reg $25,000. than less of value a with cases adjudicates Court Magistrates The London, assetoutinthecurrentCommercialCourtGuide. in Court Commercial the of procedure and practice the follow will Court Commercial the provision, local express no is there Where the further overriding objectivebyactivelymanagingcases. to court the on duty related the and justly; cases with CPR regime: the “overriding objective” of enabling the court to deal English the of aspects significant two incorporated have Bermuda in procedure of rules The “writ”. and “discovery” “interlocutory”, “plaintiff”,terminology,“subpoena”, as such England, in discarded in litigation “old” the use to continues therefore, adopted Bermuda, Bermuda. been not exceptions, significant two with pre-action have, 1999 and since procedure Court directions English revolutionised have that practice protocols (“CPR”), Rules Procedure is evidence expert perhaps required –casescantakebetweenoneandtwoyearstogettrial. and statements are witness discovery, and petition where – actions writ For or months. few a within resolved generally motion originating of way summons, by proceed originating Court Commercial the before matters Most pry a wthl iseto o piiee docum privileged of inspection withhold may party A jurisdiction wherethenon-partyresides. of Bermuda Court to issue discovery a letter of request to the foreign court of the obtain to possible is documents from non-parties It outside of Bermuda through asking the court. the of jurisdiction the within effective only is court Bermuda the by issued subpoena a However, production. their for subpoena a issuing by non-party A party to the action may seek the production of the documents of a specific discovery. f courtthe to madeapplication be discovopponent, mayan the with dissatisfied is party a If action. in matters to relating power orpossession, b custody have or are which documents to applies and action th discoverybyprovidedbeing onlyon is focus The discovery tendstobenarrowerinBermudathantheU.S. of breadth The listed. documents non-privileged the of inspection allowing then and documents of lists exchanging parties litigating the involves Discovery U.S. the and U.K. the in courts the to lines order to powers similar along action the has to parties the from discovery documentary Court Commercial the speaking, Broadly . Howlongdoesacommercial casecommonlytaketo 3.2 . Can apartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c) producedinthe relating toadvicegivenbylawyers, or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

www.iclg.com ards insurance cases. e to order that cases ry,the authors are r gvn y the by given ery usin n the in question Bermuda n times. e parties to the partiesto e or an order fororder an or e i their in een ns The ents.

57 Bermuda 58 Bermuda © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com response andthen arebuttalreport. one party’sother the by followed first evidence expert its serve to order party may court the Alternatively, reports. rebuttal serve to simultaneously exchange expert evidence and then allow each party circumstances of each case. For the example, it may order in the parties to appropriate is of thinks it service what on the depending evidence with expert dealing in flexibility considerable has court The court. the of leave with adduced be only may evidence Expert Arethereanyrestrictionsoncallingexpert 4.5 cross-examination. for evidential produced not is who witness the a of statement a concerning to give to weight discretion a has court The is Bermuda. statement the outside if resident is or deceased is statement the of maker the where apply circumstances in example, not for notice; does hearsay a however, by accompanied This, it. may upon court the trial, attend rely not may party other no and statement the of contents the disregard does witness the If cross- be to examined. trial attend to called be must witness the Generally, written witnessstatementsthatarefiledinadvanceofthetrial. Direct witness testimony or evidence-in-chief is given in the form of to attendthetrialtestify. to the time of trial and in circumstances where the witness is unable closer place take would rare) relatively are (which depositions such Typically, trial. for evidence witness’s the obtaining of purposes the for deposition a but deposition discovery U.S.-style a not is this a of deposition a witness before of a judge or officer taking or examiner of the the court. order However, to power the has court The Isevidencefromwitnessesallowedeveniftheyare 4.4 judicial the to request of letter a issue authorities ofthecountywherewitnessresides. to court the to may Bermuda apply in proceedings to party a trial, at testify to unable or unwilling is and Bermuda of outside based is witness a Where Non- documents. held incontemptofcourt. produce and/or testify being to liable witness the render will subpoena a with compliance to court attend to A party to an action may issue a writ of subpoena requiring a witness Dothecourtshavepowerstorequire witnessesto 4.3 prejudice”. disc the that agree to parties the co for discussions, of start parties the at between and prejudice” correspondence “without settlement all mark to usual misunder no is there So communications.prejudice” priv tel also privileged. In Bermuda, as and in England, “litigationthese meetings n settlement recording or containing of conversations) (so-called notes (including Communications litigation contemplated ab advice seeking or conducting of purpose dominant being into brought if or privilege”) advice “legal adv legal of receiving dec or giving the English with concerned by guided be documentsterms,general In concerningprivilege. usually will Court Bermuda Kennedys chudleighltd. experts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed not present? give evidenceeitherbeforeoratthefinalhearing? are called “without ussion is “without is ussion are privilegedif are o te oe or sole the for n settlement any gtain are egotiations c (so-called ice standing, it is it standing, out actual or actual out ncerning lg”. ilege”). ephone isions matter oflitigation. the for order subject the an is which property of make preservation or custody detention, to jurisdiction has court the addition, In and just is convenient inallthecircumstances. order the that and judgment any satisfy would assets the which to relation in case arguable good a has applicant the that question, in assets the of dissipation of risk real a is there that show England) may be obtained in circumstances where the applicant can in injunction “freezing” a as known (now injunction “Mareva” A foreign commencing by jurisdiction exclusive clause (knownasan“anti-suit”injunction). contract or arbitration an of of breach breach in proceedings in acting from party a restrain to granted the often In are injunctions context, act. insurance specific a doing from refrain or do will to party injunction a an require granted, If orders. restraining U.S. to similar are which injunctions, grant to jurisdiction has Court Bermuda The justice, to enable action to be brought against ththe in and necessary where obtained, be to documents Commissioners Excise case, English the in down However,BermudatheappliedCourtgeneralhasthe En pre-orderto court thethe enable ProcedurethatRules of provisions the introduced not has Bermuda iety r niety sm cam r usin o r respecting or to question or property or some civil right amounting to or of the value of $12,000 claim some indirectly, or directly involves, appeal the where or upwards or $12,000 of value the of is or to amounts appeal the on dispute in matter the where Appeal, of Court the of judgment final any from right of as lies appeal an judgment of the Supreme Court. For an appeal to the Privy Council, final a appeal to permission seek to need no order.is costs There a the or Bermuda or order interlocutory an either of of appeal Court to needed is Appeal Court Supreme the either of permission The year foranappealtobeheardbythePrivyCouncil. a over take can it United cases, urgent for Save the appeals. hear in Lords), of sit also who House (formerly Court judges, Supreme the court, appeal Kingdom’sfinal Five London. in Council Bermuda’sPrivy the of Committee Judicial the is court appeal final stay executionofajudgment)beforethecourthearsanappeal. to application an as (such applications interlocutory determine and It is possible for the Court of Appeal acting by a single judge to hear may be possible to have an earlier hearing in a case of real urgency. it although months, nine to six within heard be usually can appeal Bermuda and hearings take place in in three sessions each appeals year. hears Ajudges, civil three of consisting Appeal, of Court The and Bermuda in Appeal of finally tothePrivyCouncilinLondon. Court the to first Bermuda of Court Supreme the of decisions from appeal an of possibility the is There . Whatsortofinterimremediesare availablefromthe 4.6 Ikarian Reefer expert Ltd Co Assurance Prudential v SA Naviera Compania Justice to approach the followed case, English the in J Cresswell by articulated as evidence has Court Bermuda the this, Regarding advocates. as act not and independent be must experts Joint or court-appointed experts are uncommon but party-appointed . Isthereanyrightofappealfromthedecisions 4.7 courts? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral iclg to: insurance &reinsurance 2019 ’) [1993]2Lloyd’s Rep68,[1993].

17] Al R 4, hc enables which 943, ER All 2 [1973] owc Pamcl o v utm & Customs v Co. Pharmacal Norwich ultimate wrongdoer.

action discovery.action Bermuda principleslaid itrss of interests e ls Civil glish National (‘the © Published and reproduced with kind permission byGlobal Legal Group Ltd,London hc, y esn f t get eea o pbi iprac, or importance, public or general otherwise, oughttobesubmittedthePrivyCouncilfordecision. great its one of is reason appeal the by in which, involved question the Appeal of Court the other any Appeal, of of opinion the in if Council Privy the to appealed Court be may judgment the of discretion the At upward. or e ae y pyet no or. h css osqecs are consequences costs The similar toapaymentintocourt. court. into payment a by made be save as to costs”. This is usually only effective for offers that cannot prejudice “without is that offer an make may party Alternatively,a the pay to have thereafter but defendant’s costs. in, payment the of date the until costs its recover will plaintiff Usually,the trial. at in payment the beat to fails it if consequences plaintiffsuffercosts the will adverse and court into payment a make may claim money a to Adefendant party concerned. a of behaviour the with displeasure its expressing of way a as often costs, indemnity award may court basis. the occasions standard rare the on However, on paid be must costs that is order usual The when superfluous issues are raised unnecessarily. party either by behaviourunreasonable penalise may from the successful party.) c However, higher the court has a producing thus reasonableness, of favour the on award indemnitybasis means that costs are assessed with (An basis. indemnity or standard the expenses/disburandattorneys’ fees(i.e. costs its terms, the successful party of a trial or applicati Bermuda follows the English “loser pays” practice a the to awardcompoundinterest. The statutoryrateiscurrently7%. time the from rate statutory judgment is given until the judgment is satisfied. There is the no power at otherwise, orders court the date of judgment. Post-judgment interest is awarded, unless the and arose action of cause the when date the between period the of part any or whole the for damages or debt the of part any or whole interest. Pre-judgment interest is awarded at the statutory rate on the post-judgment and pre-judgment award to discretion has court The Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Kennedys chudleighltd. iclg to: insurance &reinsurance 2019 For example, in mediate. to refused unreasonably have who parties sanction to orders costs to or mechanisms, dispute make alternative explore to to parties encourage power the has nevertheless it mediate, to parties the compel generally not will Court Bermuda the While at thediscretionofparties. Mediation is used in Bermuda occasionally and on a voluntary basis Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregardingcosts? Are 4.9 This is not to say, however, that the Court does not have such power. reported decision in Bermuda in which the Court ordered mediation. no yet as is there context, law family the Outside cases. extreme in and do not provide a particularly strong incentive to mediate except rare are mediate to failure for sanctions judicial that, said Having refusal todoso,mayberelevant costsorders. of Appeal held that a party’s willingness to attempt mediation, or his offer tosettlepriortrial? If so,whatisthecurrentrate? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan Knight v Warren [2010] Bda LR 27, the Bermuda Court on is usually awarded sements) on either on sements) the discretion and a presumptiona in nd so, in general ; for example, for ; ss recovery osts oe penal more

of an arbitration agreement; or to enforce an award witnesses; to grant injunctive relief restraining p failed secur challenged;to isarbitrator an ofneutrality has process appointment arbitrator the where is very limited. Situations in which the Court may enthusiastically supported by the Bermuda Court. C thi and prevails autonomy party Act, 1993 the Under International on r the Law answers and in this section Law”),deal only with Modelthe Model position (“the Arbitration UNCITRAL Commercial the 1993 insur the implements all under place Almost take arbitrations designated.reinsurance where or arbitrations Concili International Bermuda Arbitration Act 1993 (“the 1993 the Act”), which applie to and applies arbitrations; arbi which 1986, commercial Act for Arbitration the regimes Bermuda: different two are there the In England.and Bermuda arbitration inbetween supportive of the arbitration process. There are s BermudaBermudacontainarbitrationthe clausesand reinsurancecon insuranceand ofmajority great The media compulsory willingness to reprimand no parties for failures is in th there no hascommercialCourtthe Bermudadisputesand in stage this at However, fre voluntarily, remain disputesand unreasonable commercial conduct to may attract Parties c context. t in than other mediate, to parties compel to power indicatedAs above, theBermuda Court hasnothithe shown that the contract in which it is contained is void. Under the Under void. is contained is it which in contract the that shown is it if even survive may so and contract separate a be to deemed for invalid; is example, because clause it was procured by arbitration fraud. The the arbitration clause is that shown be can it if Only contained inanotherdocumenttobeincorporatedbyreference. clause arbitration an allows expressly Act The communications. of exchange an by formed agreement an include can which writing, in recorded agreement an be must there that save clause, arbitration an for format or form specific any require not does Act 1993 The . Whatapproachdothecourts takeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 . Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 mediation or, atleast,tostayproceedingspendingmediation. There is a reasonable argument that the Court has the power to order Arbitration 5 what groundsanddoesthishappeninmanycases? consequences mayfollow? courts willrefusetoenforcesuch aclause? is required? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty arbitration clause,isthereany possibility thatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration www.iclg.com ignificant differences is regard. roceedings in breach under the 1993 Act. e the attendance ofattendance the e intervene include: osts consequences. . s to international ourt intervention Bermuda rtoexercised its tracts issued in issuedtracts e aiy law family he first instance,first Court is very isCourt t mediate to e t evidencedat s principle is principle s wee the where ; c, which Act, to and ation domestic rto in tration ne and ance emaining in of tion

59 Bermuda 60 Bermuda © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com from party a restrain to proceeding inbreachofanarbitrationclause. injunctions issuing including and non-parties from injunctions, discovery and evidence of for taking by, the facilitating arbitrations witnesses, of support attendance the will compelling example, court The or relief. monetary of declaratory giving the to limited is arbitrators of power The Whatinterimformsofreliefcan beobtainedin 5.4 of review. concerning its own jurisdiction with the court then retaining a power issues decide to power the given expressly 1993 is tribunal the Act, Kennedys chudleighltd. examples. support ofarbitrationfromthecourts?Pleasegive

including invalidity and conflict with the public policy of Bermuda. 1993 the under award an challenge to Act, grounds limited very are An award is final and not subject to any appeal on the merits. There unless thepartieshaveagreedthatnoreasonsaretobegiven. given, be must based is it which upon reasons the and arbitrators Under the 1993 Act, the award must be in writing and signed by the . Isthereanyrightofappealtothe courtsfromthe 5.6 Isthearbitraltribunallegally boundtogivedetailed 5.5 circumstances doestherightarise? reasoned awardisrequired? decision ofanarbitraltribunal?Ifso,inwhat the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in iclg to: insurance &reinsurance 2019 Bermuda

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London Kennedys chudleighltd. iclg to: insurance &reinsurance 2019 extensive understandingoftheglobalandlocalissuesfacingourclients,so wecanoffer themrichanddiverseperspectives. an with lawyers Bermuda-based our empower knowledge sector deep and experience, international and local reach, global Bermuda’s Kennedys finance andregulatoryadviceforBermudiancompaniesinternationalorganisations involvedininsuranceandoffshore finance. Members of the team provide corporate legal services, including commercial contract drafting, legal opinions, corporate structuring advice, corporate The teamalsospecialisesincommerciallitigationandarbitration,trustsdisputes, andinsolvencyrestructuringassignments. litigation, arbitration,mediation,andregulatorycompliance. claims, drafting, policy coverage, involving matters reinsurance and insurance on counsel providing in history unparalleled an has team expert The most complexlegalissuesfacinginsurers,reinsurers,corporateorganisations,andfinancialprofessionalserviceproviders. and largest the of some on clients advising experience substantial have partners The Bermuda. in practice legal premier a is Bermuda Kennedys evolved tobecomeoneoftheleadinginsuranceandlitigationfirmsinWorld. Globally, thefirmnowhasmorethan800lawyers. has and London in 1899 in founded was Kennedys LLPLtd. Law Chudleigh Kennedys Kennedys with association its through Bermuda in operates the arbitrator. in law Bermuda an as acted of has and proceedings arbitration issues and court US of on context witness expert an as acted has and the insurance affecting He market. Bermuda the industry,to insurance relation in particularly issues complex regulatory on advises on and claims, counselling reinsurance provides Chudleigh Mr. trust managers, companies, accountantsandlawfirms. captive administrators, and managers the fund funds, Bermuda, in and entities hedge institutions, financial including elsewhere, and Islands “off-shore”Cayman insolvency involving litigation, matters includes insurance also practice commercial His spa compensa workers and frequently advises and on issues concerning the captive accident satellites personal reinsurance, marine, liability, property intellectual environmental and cyber (p liability, liabilityproduct general including officers’liability anddirectors’ Form”), “Bermuda business, of classes has practice insurance/reinsurance Chudleigh’s Mr. on focuses insurance andfinancialservicessectors. practice His the on emphasis particular a with elsewhere. arbitration and litigation commercial and Europe States, United and Wales & maintains an international practice that serves clients in Bermuda, the England in solicitor a as and California and Bermuda of Bars the and of Barrister Attorney a as admitted is Chudleigh Mark R:www.kennedyslaw.com URL: [email protected] +14412969276 Email: Tel: Bermuda Hamilton, HM10 20 BrunswickStreet Kennedys ChudleighLtd. Mark Chudleigh , professional liability,professional , insurance industry. iblt, property, liability, riual the articularly oee most covered e financial ce, in He tion. ■ ■ ■ transactional and regulatory matters including: r wide a onindustryinsurance the ininvestors and He advises insurers, reinsurers, insurance intermed and Wales. England of Courts Senior the of Solicitor a as enrolled and admitted reinsurance, is and Bermuda of Court Supreme the and of Attorney and Barrister a as insurance encompasses insolvency and restructuring and banking and finance. He is admitted practice Miles’ Nick ■ ■ ■ ■ ■ ■ ■ the Insurance Act 1978. regulatory capital). ae ad custos f hrs n opne rgsee under registered companies in shares of acquisitions and Sales Taking securityoverassets. Reinsurance agreements. et euiis sune (nldn sbriae db ue as used debt subordinated (including issuances securities Debt Bermuda insuranceregulationgenerally. Longevity andlapsationswaps. Distribution agreements. Schemes of Arrangement. Redomiciliations. Corporate amalgamationsandmergers. R:www.kennedyslaw.com URL: [email protected] +14412969276 Email: Tel: Bermuda Hamilton, HM10 20 BrunswickStreet Kennedys ChudleighLtd. Nick Miles www.iclg.com iaries, policyholders ange of corporate,of ange Bermuda 61 Bermuda chapter 12 Brazil andré tavares

tavares advogados Daniel chacur de miranda

1 Regulatory general terms, there are no additional requirements imposed on foreign insurers seeking authorisation to operate in Brazil. In relation to reinsurance, the legislation issued post-2007 ended the 1.1 Which government bodies/agencies regulate state monopoly on reinsurance and permitted the entry of new insurance (and reinsurance) companies? national and foreign reinsurers. Even though there is still (to some extent) a reserved market for local reinsurers (albeit a declining In Brazil, the insurance and reinsurance market is essentially one), a significant amount of risk is placed on the international governed by two laws: namely Decree-Law 73 of 1966 (insurance); market via reinsurers that have been authorised to operate in Brazil and Complementary Law 126 of 2007 (reinsurance). Insurance (i.e., foreign capital reinsurers that have a branch in Brazil and are contracts are governed by the Brazilian Civil Code, and the sale of subject to some additional requirements) and “eventual” reinsurers insurance policies is regulated by the Consumer Defence Code. In (i.e., foreign capital reinsurers that are not subject to additional addition to these laws, the market is governed by Resolutions of the requirements other than a minimum rating). National Council for Private Insurance (CNSP) and by circulars Moreover, insurance brokers are subject to the supervision of SUSEP issued by the Private Insurance Superintendence (Superintendência and also to a self-regulatory body recently created by law (Brazilian de Seguros Privados – SUSEP). Institute for Self-Regulation of the Brokerage Market for Insurance, Specialist health insurers also have to comply with specific statutory Reinsurance, Capitalization and Open Complementary Pension provisions and the rules of specific supervisory bodies, such as the Plans – IBRACOR). Insurance brokers are the only intermediaries National Supplementary Health Agency (ANS). In the event of a entitled to receive commission on the basis of insurance. breach of the norms pertaining to solvency, SUSEP has powers to intervene in insurance companies and to order their winding-up. In 1.4 Are there any legal rules that restrict the parties’ terms of conduct, SUSEP has powers to impose administrative freedom of contract by implying extraneous terms sanctions on companies or individuals (directors or officers) who are into (all or some) contracts of insurance? proven to have breached the applicable legal provisions, or to have participated in such a breach. Although SUSEP has comprehensive, In general terms, and according to consumer protection legislation, adequate and rigorous legislation to punish administrative infractions, all contracts involving consumer relations – including insurance there is a consensus amongst practitioners that the regulatory body contracts – must be drafted in a clear and precise manner, especially needs to be modernised and better equipped to fulfil its institutional the clauses that may impose limitation on consumer rights. mission. Specifically, with regard to insurance contracts, the Law (Decree 73/1966) confers on the regulating and market supervision bodies, respectively, the National Council of Private Insurance (CNSP) and 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? the Superintendence of Private Insurance (SUSEP), the power to establish the general characteristics of insurance contracts and also the policy conditions to be mandatorily used. SUSEP authorisation is required to act as an insurer or reinsurer in the Brazilian market. SUSEP makes extensive analysis of the authorisation request, taking into account the capacity and 1.5 Are companies permitted to indemnify directors and suitability of the controlling group. SUSEP cannot deny the request officers under local company law? if all legal and regulatory requirements are met. This analysis takes on average six months in ordinary circumstances. Although companies are allowed to indemnify directors and officers, they usually contract a D&O civil liability policy for them, in order to cover losses or defence costs incurred by the D&Os in 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? exercising their legitimate corporate acts.

Mandatory insurance covering risks in Brazil, taken out by 1.6 Are there any forms of compulsory insurance? individuals resident in Brazil or legal entities that are domiciled here, can only be issued in Brazil itself. The rule does not apply to Brazil has several classes of compulsory insurance, which are set insurance taken out by Brazilian citizens to cover risks abroad. In out in Decree 73/66 (article 20). That includes, for example: carrier

62 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London and reinsurance law with possible change of approach in relation to relation in approach of change possible with law reinsurance and insurance of concepts and tenets the to relation in law previous the will lead to Brazilian courts reviewing the positions they took under is It rules. difficult to predict the SUSEPrepercussions of the law, but it is and likely that it CNSP and Code Civil the of several provisions revoke will it introduced, of If stage advanced Congress. through an progress at currently on is Law 29/2017) Draft PLC (a – legislation Insurance specific that note to important is It to theactualwordingoflaw. CNSP and the SUSEP as sources of interpretation by and will adhere more edited rules the account into take will court the that likely sound very is It basis. technical its with line in law the applying approach technically more a taken has STJ the Recently, 785). and establishing or of the Civil norms Code (particularly the interpretation of articles 763, 768 qualifying as presumptions contrary to insurers far in the interpretation of provisions so issues, insurance going to relation sometimes in parties insured of favour in find to tendency distinct a had Justice of Court Superior the past, the In the FederalGovernmentandregulatoryagencies. of activities regulatory the and insurance, on regulations and laws law,federal of the issues of for all country essentially covers which relevant in relation to insurance. The STJ is the highest court in the particularly is (STJ) Justice of Court Superior the of law case The the developmentofactivity. which guarantees relative equilibrium in the market, contributing to basis technical correct the a on act to they general, In applied market. insurance regulations and a rules have the Brazil on influence in significant agencies regulatory and protection Consumer America andEurope. Latin in insurance to applied concepts and framework legislative the to similar is and contracts insurance and insurance of operation the to applicable principles legal the with consistent is framework Insurance legal Private This ordinances. of and (circulars) guidelines Superintendent issues (SUSEP) the and regulations issue to powers has (CNSP) Insurance Private of Council National the regulations, infra-statutory of terms In Consumers. of Defense the for Code Brazilian the and Code Civil Brazilian the (c) and 2007; January of 126, Law Complementary (b) 1966; 21, November of is Brazil in governed Insurance by the following statutory framework: (a) Decree-Law 73, system. balanced evenly more a shift towards certain a indicate developments recent certain but insureds, to favourable more currently is law substantive terms, general In (article 123). void and null deemed be to are cover mandatory exclude to that seeks contract insurance any that states and insurance compulsory The Draft Law certain on Insurance (PLC 29/2017) maintains provisions on for cover mandatory conditions. stipulate the Authorities compulsory, not Regulatory is insurance health Whilst drivers. vehicle uninsured of victims for cover provides Bureau) Insurer’s Motor operations. The DPVAT scheme (the Brazilian equivalent of the UK export for provided credit for cover insurance and events; by external caused apartments/units to damage covering owners building injury caused by boat/vessel owners; property damage insurance for personal for cover companies; construction for insurance liability civil transport); river and sea rail, land, air, (for insurance liability tavares advogados iclg to: insurance &reinsurance 2019 Ingeneralterms,isthesubstantivelawrelatingto 2.1 (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? liquidation of an insurer to automatic reinsurance however,also applying the possibility ofdirect ac Insurance29/2007)of(PLCfollows LawthDraft The statute, but extends the provision 14, to retrocession (article contract Regulation 168, reinsurance of December 17, 2017, uses the same the in provision joint defendants (article 103). filing by the third party of an action against the referredabove29/2017)(PLCtomakes legislative p for application for joinder (joinderapplicationforfor party to move against the insured and insurer toget theSuperior Court ofJustice has softened its stan c party third enforcement theawardanof directly against theinsure joined, been has insurer the Once eff that applicationto an to subjectbeing insurer ( lawsuit the to party a being insurerwithoutagainstthecannotmovepartythird relationnon-mandatoryheld,inpasttothe liabili direct action against the insurer. The Superior Co tomandatory liability insurance thatthird a party liability insurance (article Code) 788 Civilof the Civil the Code) of 787 (article insurance liability Brazilian law draws a distinction in this respect b Moura Ribeiro, 3 Justice Rapporteur 1484628/MS, REsp in Case AgRg on Justice of Court effect,Superior this the to of (see, ruling contract the the into entering when questionnaire risk the out fill accurately as to insured information much as given be possible as to the risk to and, therefore, that it is very important for the needs insurer the that i.e. insurer; and for insured the need between the gap information to the of as reduction clear very are courts the and jurists Brazilian withheld amountshould,therefore,bepassedontothereinsurer. proportionate part of the insurance compensation. The a benefit withhold of the to entitled is insurer the omission, intentional of event the In cover. insurance of loss to rise insurer,gives the by risk the of acceptance the influenced have would that and aware, been have omission by the insured party of a circumstance of which they must deliberate the that stipulates 766) (article Code Civil Brazilian The liquidation of the insurer (article 14, I); or (b) ar actiondirect to optionalrightreinsurance,the l the in out set are 126/200 rule general the Law to exceptions Complementary 14 (article reinsurer the The general rule is that the insured has no right o the fortunes,statutorylimitation,etc.). follow actions, third-party direct payout, of apportionment salvage, certain issues (e.g. the regime of aggravation of risk, expenditure on . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectaction againstan 2.2 purported insured. the than rather party, insurance the to party contracting the is that questionnaire insurance the out fills that person/entity the is it that states correctly Law Draft Moreover,the issue. this on Code Civil current the of provisions the adopted has 29/2017) (PLC Insurance Whatremediesdoesaninsurerhaveincasesofeither 2.4 insurer? misrepresentation ornon-disclosurebytheinsured? reinsurer? rd Bench published 16/11/2016). The Draft Law of Súmula Súmula 537). The Draft InsuranceLawDraft The 537). 2) n wt jidr f the of joinder with and 529) www.iclg.com if there is a insured and insurer as f direct action against contracts (article 34). . It is only in relation etween optional civil hasrighta tofile a ises in the event of eventthe in ises urt of Justice has in (article 66). ce,enabling thirda ty insurance,ty athat tioninthe event of her, without a need ect by the insurer. the by ect r.Morerecently, gsain () in (a) egislation: the insuredalsothe n mandatory and rovisionthefor wording as the e same logic;same e n oe for move an I. CNSP II). cut through Brazil ) The 7).

63 Brazil 64 Brazil ae f gn i Rs 1438S, aprer utc Moura Justice Rapporteur 1641348/SP,3 Ribeiro, REsp in AgInt of case recent the in and faith, good for requirement the full in upheld have Justice) of Court Superior the notably most (and courts Brazilian cover to entitlement losing (article 766oftheCivilCode). of pain on questionnaire, risk the in fill correctly to insured the for need the to as provision specific a is utmost good faith (articles 422 and 765 of the Civil Code) and there in act to contract insurance an to parties the requires law Brazilian © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com matters for available the are courts of claims Small court the domicile. insured’s by decided are disputes insurance Commercial Whichcourtsareappropriateforcommercial 3.1 (PLC the exercisebyinsurerofsubrogatedrights(article98). Congress with cooperate before to insured the currently on duty fresh a Insurance introduces 29/2017) of Law Draft The published DJe13.10.2017.) insured the of position then insurer the whilst that, exercises the subrogated rights in its own name, it held acquires the legal has Justice of Court Superior by indemnity,the the of payment following subrogation of case the In acquired that party third subrogation therightsofcreditor/insuredparty. interested an considered legally being subrogation, to right automatic an had insurer the that 188) ( held had Court Supreme Federal the that, to Prior 2002. The right to subrogation is set out in article 786 of the Civil Code of Isthereanautomaticrightofsubrogationupon 2.6 requested of them regarding the risk (article 47). a provide to duty a hasinsured the stipulatesthat In relation to the initial duty to declare the stat andintervenient parties in insurance contracts (ar reaffirmsgooddutythefaithofrelationsin betwe The Draft Law of Insurance currently before Congres with article766. strict duty of accuracy in filling out the questionnaire, in accordance a considered be otherwise might what attenuates and 15.09.2011, 4 Salomão, Felipe Luis Justice Rapporteur 1210205/RS, REsp in court the of decision the reflects ruling That the not or questionnaire. risk the out filling in faith whether good in acted had insured was issue key the that held 08.09.2014, DJe Is there a positive duty on an insured to disclo 2.5 tavares advogados utc i smwa nacd I cs Rs 1410G, the 1340100/GO, REsp case Rapporteur In Justice Ricardo Villas Bôas Cueva, 3 nuanced. somewhat is Justice not was duty to the article 766 of the Civil Code, the position that of the Superior Court of and relation involved In questionnaire. risk the out risk filling by merely discharged the to as insurer the the insured was under a duty to be proactive in relation to informing (REsp 1651936/SP, Rapporteur Justice Nancy Andrighi, 3 Nancy Andrighi, 1651936/SP,Justice (REsp Rapporteur 3 Litigation – Overview Litigation –Overview 3 insurers all matters material to a risk, irrespecti whether the insurer has specifically asked about th jury? the dispute?Isthereanyright to ahearingbefore insurance disputes?Doesthis depend onthevalueof insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes rd Bench, published in DJe 14.08.2017, the court held that held court the 14.08.2017, DJe in published Bench, vis-à-vis the third party that caused the loss. loss. the caused that party third the th Bench, published DJe published Bench, e of risk, the Draft Law ticles6, 40 and 62). rd en insurer,en insured Bench, published ll the informationthe ll s (PLC 29/2017) se to ve of rd Bench, Súmula em?

if necessary. knowledge and to produce or exhibit a document in their possession, to duty is have a they which of circumstances and facts under that the of court the inform is party evidence third A produce interests. to own their compelled to contrary be cannot party a that the with cooperate caveat the to to subject facts, the of duty truth the ascertaining in judiciary a under are litigation to parties The third parties isrelativelyrare. or parties by evidence of production mandatory for powers inherent these of use the but inspection, and disclosure discovery, the litigation. Brazilian judges have wide discretionary powers to order to prior extensive non-judicial discovery procedures that are common in US even Brazil is more inquisitorial than adversarial and does not feature the discovery/disclosure for in litigation civil terms, general In proceedings. of commencement orders request to court powers of wider with gathering parties the the Code provided to that Procedure evidence regard Civil with 2015 innovations The certain introduced case. their upon base facts the they of which truth the proving for them to available means legal duty,all the use and to right, the have litigation to parties The the typeofevidencetobeproduced. and deadlines the submissions/pleadings, of number the define to whereby the parties are allowed to enter into procedural agreements system flexible more a of introduction the with timeline trial the up new Brazilian Civil Procedure Code, enacted on 2015, was to speed a ratio of one judge to 9,730 cases. One of the main initiatives of the gives which judges, 2,607 before pending – others and commercial – cases 25,366,780 are there Paulo São of Court State the In years. the to or Justice of Court 1.1 another by increase can timeframe this Court, Superior Supreme Federal the to goes then case the If a total of 3.3 years to be judged by a civil court and a court of appeal. In the State Court of São Paulo, for example, a case takes on average pl t i-os lwes Piiee xed t () information (a) to extends Privilege lawyers. in-house to also apply privilege attorney-client on rules lawyer’s The disclosed. publicly the if of exercise information known by the the lawyer that might be harmful to his client in otherwise professional practice of law. Legal professional privilege covers all or litigation for it, including documents prepared by or for the lawyer in preparation attorney-client privilege and so, therefore, are documents relating to professional privilege. Advice given by lawyers is protected by this legal by covered are that documents withhold to entitled is Aparty . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcase commonlytaketo 3.2 to up (i.e. wage minimum the criminal casesinvolvingwilfulhomicide. times 40 for except Brazil, in trial jury no is There £10,000). approximately to up involving . Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 to theaction? bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin iclg to: insurance &reinsurance 2019

Brazil © Published and reproduced with kind permission byGlobal Legal Group Ltd,London to assistindraftingquestionsbeputtheexpert. in practice is to provide relevant input to the expert examination and assistants the of role ‘assistants’ The expert. court-appointed the to for the court. The parties are entitled to appoint their own experts report as a produce and investigation the undertake to expert neutral a appoint to court the for is practice common proceedings. most the the Currently of stage production evidence the during expert the question expert may who parties, the by jointly technical or appointed court the be by either can a witness expert authorise The expert. may an by examination judge the their and with together submissions evidence expert file to right the have Parties testify inperson. testimony of the witness is not admitted, as the witness is required to circumstances, day, time and place to inquire. However, the written but able to give testimony, the judge will designate, according to the appear,to unable is reason, relevant other or illness to due witness, the If court. the of seat the at heard be should witnesses general, In are that matters on subject toprivilege. testify to A compelled be not like. also the can witness or relatives close spouse/partner, their to themselves, prejudice significant cause to likely are that matters on testify to compelled be not may witness a However, measures. coercive other to subjected or fined be may witness the which failing attend, to witness the direct and summons witness a issue can court The Dothecourtshavepowerstorequirewitnesses 4.3 comply with court directions regarding the producti judicialelucidatemeasurenecessarydeemedanyto wi cooperateotherwise to and them to put questions respondanysummonsto appearto before thejudge a is that than other but interests, own their against Moreover, a party cannot be compelled to testify or legal lawyer’s professional practice. the with connection in sources other from lawyer a by obtained information (b) and client, their by lawyer a to given tavares advogados iclg to: insurance &reinsurance 2019 the verify to future the difficultin very becoming it to or lost being the producing in delay a evidence pending the filing of a lawsuit might lead to said evidence that concerns reasonable are there (a) of production evidence prior to the the filing of the lawsuit in for circumstances in which: court the from order/direction an is parties One form of conservatory measure that can be of considerable use to merits andariskthreatofirreparableharm. plaintiffs are usually required to show a likelihood of success on the measures, preventive these obtain To action. certain a performing from defendant a enjoin or asset, freeze particular a to seize accounts, bank e.g. awarded, be may relief conservatory or Injunctive Whatsortofinterimremediesareavailablefromthe 4.6 Are thereanyrestrictionsoncallingexpert 4.5 Is evidencefromwitnessesallowedeveniftheyare 4.4 experts? not present? give evidenceeitherbeforeoratthefinalhearing? courts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed

produce evidence ne a uy to duty a under on of evidence. the facts and to andfacts the

th the court in court the th nd answernd any wre atmtcly a te ae emd n neet at of part inherent an claims fordamages. deemed are they as automatically, awarded limited to 1% per month. Both interest and monetary correction are effective of payment date by the judgment debtor. the Pre- and post-judgment interest is until defendant the on process of service of to the accrual of interest, which monetary is normally calculated from the date to subject and index) official are an applying inflation for (adjustment correction law Brazilian under awards Damages made bythelowercourts. evidence or facts the on findings the review to entitled not is court the and appellant the by asserted Law Constitutional or Federal of issues narrow the to limited is Court Supreme Federal or Justice of Court Superior the to appeal An proceed). to leave of granting the to subject (again, issue Constitutional a on Court Supreme Federal the to appeal an and/or proceed) to leave of granting the to (subject Justice of Court Superior the to Law Federal of issue further an on appeal a of possibility the is there order, appeal instance the Following second law. and fact of issues review to court appeal the against the awards. An appeal against a first instance award permits appeal of right automatic an has instance first at party defeated The solutions to conflicts, including mediation (Resolu mediation including conflicts, to solutions app to judges encourage to drive m a Con develop including to Brazil years recent hearing. in made mediation been have a efforts and conciliation a attend fo compulsory it makes Code Procedure Civil New The the by ( fees suit of loss pay to incurred required generally also expenditure is party the losing The etc. fees, expert fees, court on party reimburse prevailing to ordered being At the award, costs normally follow the event, with the losing party court-mandated evidencegatheringand/orexpertevidence. of fees the e.g., of, costs the share and litigation the of costs own During the course of the proceedings, the parties generally bear their 0) ahr hn n h ata fe cagd y h legal the is rejected andwhothenobtainabetterresultbeforethecourt. by which settlement of offer charged an make who fees parties for mechanism actual the on protection cost no is there US, the Unlike concerned. professionals than rather 20%) 10– (usually parties the by percentage stipulated issue in a amount the of as value fixed are which party, prevailing the of counsel . Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfrom thedecisionsof 4.7 .0Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregardingcosts? Are 4.9 being unnecessarytoproceedwiththelawsuit. might question in facts justify the commencement of proceedings or, the alternatively, lead to it of knowledge prior (c) and conflict; the enabling of capable the resolving of means adequate other be or settlement reach to parties the to likely (b) is proceedings; produced the be to of evidence course the during question in facts If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? courts offirstinstance?Ifso,onwhatgeneral there anypotentialcostsadvantagesinmakingan www.iclg.com sucumbência tion 125/10 of of 125/10 tion ly a range of of range a ly ediation in in ediation r parties to to parties r Brazil siderable siderable ) to the to ) 65 Brazil 66 Brazil © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com contracts. specific form standard of signatories the for to protection legal and protection subject are clauses such provisions, particularly with regard to the requirements of clause, consumer arbitration an for words of form the to as stipulation legal precise no is there Whilst Isitnecessaryforaformofwordstobeputinto 5.2 in rare are practice. which defects, procedural serious of cases proved serious in featured award the the award. Therefore, the challenges to arbitral if awards only succeed of award merits the review to allowed not are Courts defects. arbitral procedural the aside) (set vacate to order an for courts the to apply may arbitration to Parties a court. by enforced be only can which but 31), of article (Law Arbitration, order court a with par a on title, enforceable an be to considered is award arbitral Moreover,the proceedings. the of course the during tribunal the by granted measure coercive another or relief interim enforce to need they which in circumstances in than other issued, parties can only resort to the courts after the arbitral award has been kompetenz of principle the apply courts Brazilian 2). paragraph 21, of article (Law Arbitration, corollaries its and process legal due that best suits them, provided they comply with the requirements of on and Parties to arbitration proceedings are free to establish the procedure awards foreign recognise to applications tosetasidedomesticawards. applications in rulings The resolved. position of be the Superior Court of to Justice on this is is very clear from dispute its their which by procedure the and Brazilian in enshrined autonomy legislation, so that parties have broad freedom to party choose the manner of principle the uphold fully Justice of Court Superior the especially and courts Brazilian Whatapproachdothecourtstakeinrelationto 5.1 s only. for conciliation to regard grounds with penalty reasonable no are there as draftsman, by oversight an been have to appears This at hearing. appear to failure for only penalty a stipulates curio t hearing, mediation a parties and hearing obliges conciliation Code Procedure Civil the Although Ifapartyrefusestorequestmediate,what 4.11 sett to opportunity genuine a than rather procedure a merely as hearings mediation a view to procedure tend parties the in engage fully to profession legal relucta by hampered is mediation of development the However, 13.140/15). Law and Code Procedure Civil pro including – mediation of aspects various govern o introduction the and Council Justice National the tavares advogados Arbitration 5 consequences mayfollow? is required? clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration what groundsanddoesthishappeninmanycases? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty

and, once an arbitral tribunal has been constituted, the constituted, been has tribunal arbitral an once and, the conciliation conciliation the le the dispute. dispute. the le the legislative legislative the f legislation to to legislation f usly enough it it enough usly visions in the the in visions bureaucratic bureaucratic nd generally generally nd tipulating a a tipulating in practice, practice, in kompetenz- nce by the the by nce o attend a a attend o sign anagreementtoarbitrate. to hearing special a at court the before appear to party recalcitrant the requiring summons a for court to apply may party interested an arbitration, of commencement the resisting is parties the of one but respective a witness. Further, in circumstances in which there is a valid clause the within act given a territorial jurisdiction. This is commonly used; e.g. for summons of of performance the direct or perform to judiciary the to request formal a issue may arbitrator An clause that was null and void (Law of Arbitration, seek to set aside an arbitral award issued on the b has powers to prevent the commencement of arbitrati arbitral clause (e.g. fraud, non-existence of conse o te uig fiig hc, h odr s ul n vi. n this In void. and null is order the which, failing ruling, the for All judicial and arbitral awards issued in Brazil must set out grounds prin the consecrated Law kompetenz-kompetenz Brazilian above, stated As dispute. However,dispute.caseswherethereis in decidetowhether,on whatextenttoandjurhas it has emerged, whichgenerateslegalinsecurityfortheinsurer. is it that means That necessary to draw up another agreement 256. to arbitration after a dispute Circular SUSEP and Arbitration of Law the by required manner the in clause the of signature separate obtain to fail frequently They effective. is clause the that ensure an contain to steps necessary the taking Brazil not are insurers the clause, arbitration in policies risk major most whilst practice, litigation In the of fractioning the between stateandarbitraljurisdiction. avoiding thereby arbitration, is deemed to agree to resolve all disputes related to the insurance via insured the clause, the to adhering in (b) and institution; arbitration separate signature of the clause or by by another expressed means specified by be the may consent and clause arbitration the to adhere establishes that: (a) it is up to the insured to decide whether or not to clause annexed this [separate] a in out document or of in set bold typeface, with specific signature or initialing of is initiative agreement the [such takes provided signatory the if commencement, its expresslyagreesto Arbitration or arbitration, commencing effective of be Law only Brazilian will the of “ that 2 establishes paragraph 4, Article an arbitralclauseinastandardforminsurancecontract. the to agreed signatory clause. arbitration efficacythe to pre-condition a is consent This of the that evidence clear requires system the legal Brazilian the contracts, insurance form standard to relation In by established previously terms regulatory agencies. standard are conditions frequently are insurance the of they many that in policies form the standard but be to deemed within relationship”, fall “consumer generally of not definition do policies insurance risk Major . Is thearbitraltribunallegallyboundtogivedetailed 5.5 What interim forms of relief can be obtained in 5.4 Notwithstandingtheinclusionofanexpress 5.3 reasoned awardisrequired? of arbitration from the courts? Please give example courts willrefusetoenforcesuchaclause? the arbitrationclauseorsubsequently) thata reasons foritsaward?Ifnot,can thepartiesagree(in arbitration clause,isthereanypossibilitythatthe iclg to: insurance &reinsurance 2019 . UE Crua 26 crooaig hs view, this corroborating 256, Circular SUSEP ”. in standard form contracts, an arbitration clause arbitration an contracts, form standard in sothat essentially it falls to the arbitral tribun primafacie nt, etc.), the judiciary asis of an arbitration article 32, I). isdictionthetryto on. A party may nullity of thenullityof Brazil support il of ciple

s. al © Published and reproduced with kind permission byGlobal Legal Group Ltd,London place whereitwasissued. the and award the of date the (d) and necessary; if ruling, the with issues submitted to them and establish a time period for compliance the resolve arbitrators the which in ruling, the (c) equity; of the basis on decided arbitrations the whether stating and fact of issues summary of the dispute; (b) the grounds for the ruling, analysing the a and parties the of names the out setting report a (a) contain: must award arbitral the that determines Arbitration of Law the context, tavares advogados iclg to: insurance &reinsurance 2019 rceig, s el s os dutet rcdrs Te ofr ohsiae assac i isrne n risrne atr, including matters, reinsurance and insurance in assistance sophisticated offer They procedures. adjustment international work. The firmalsoprovides regulatory, civilandcorporateadviceinsupportofclients within thesector. loss as well as proceedings, Tavares Advogados is a highly-specialised boutique firm, founded by a group of partners with proven experience in complex litigation and arbitration reviews. – Revista Journal de Seguros; and Insurance author of articles the published in of specialised law Board for Editorial the of Commission member a CBMA; Association Bar the at Insurance of Janeiro Vice-president Secretary- Law; Reinsurance de and Insurance Insurance; Rio Guarantee the and of General Credit on Group Working the of AIDAPresident National (AIDA); Law Insurance of Association International the of Board Advisory the in of member a 2013, is: He since journal. mentioned, been the has of and 3 ranking Band in 2015 since listed been has He 500. Advocacia Análise through field health and operations (2014 row to 2018) as most a admired lawyer With in in the insurance, civil, years financial five elected was cases. he Market, the litigation in recognition complex ample highly in and matters reinsurance and insurance of range wide a in experience extraordinary has André R: www.tavad.com.br URL: [email protected] +552135530520 Email: Tel: Brazil Rio deJaneiro 3101, Centro Rua da Assembleia 10 Tavares Advogados André Tavares hmes n Partners and Chambers h Lgl 500 Legal The re-examination ofthemeritsisexpresslyprohibited. and defects procedural serious of circumstances to limited is award court to set it aside (motion to to vacate). Judicial application control of an an arbitral lodge may party a award, an of rendering the of effects as a final same and binding court ruling. However,the within 90 days produces It appeal. to subject not is award arbitral The . Isthereanyrightofappeal tothecourtsfrom 5.6 of articlespublishedinspecialisedlawreviews. author the also is He (AIDA). Insurance Association International the University/NY Columbia (CIAA), a member of the Comitê Brasileiro de Arbitragem (CBAR) and at Arbitration International for at Association Law Procedural Civil in the of President former the Master is He (USP). Paulo São de Universidade a for studying currently is and Law) Comparative and International in Achievement of Recognition School Parker and Scholar Stone Fiske (Harlan honours with School ( opinions legal innovative and accurate involving provides who lawyer, brilliant proceedings “ as 2018, and 2017 in rankings adjustment legal international in recommended was Daniel issues. loss and contract and national corporate reinsurance, in insurance, represents He clients courts. complex international the of and major before resolution institutions cases arbitral the handling disputes, in insurance and experience commercial extensive has Daniel The Legal 500 circumstances doestherightarise? decision ofanarbitraltribunal?Ifso,inwhat , Insurance). Daniel holds a LL.M. from Columbia Law R: www.tavad.com.br URL: [email protected] +552135530520 Email: Tel: Brazil Rio deJaneiro 3101, Centro Rua da Assembleia 10 Tavares Advogados Daniel ChacurdeMiranda www.iclg.com Brazil a ” 67 Brazil chapter 13 canada carol lyons

mcmillan llP lindsay lorimer

1 Regulatory 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Forms of insurance business There are two main vehicles for establishing an insurance business in In Canada, responsibility for lawmaking is shared among the federal Canada federally: incorporation of a Canadian insurance company; government and the governments of 10 provinces and three territories and qualification of a Canadian branch of a foreign insurance (“provinces”). Under Canada’s constitution, there is a division of company. Insurers may also carry on business in Canada in other powers between the federal and provincial governments. The federal forms, such as a fraternal benefit society or a reciprocal exchange, and government makes laws for the whole of Canada in respect of matters may be incorporated under the laws of a province. For simplicity, this assigned to it by the constitution. Likewise, a provincial legislature has discussion is restricted to insurers carrying on business in Canada as a legislative jurisdiction relative to the subject matters over which it has company or a branch and whose primary regulator is OSFI. The been assigned. In the context of insurance, this jurisdiction is shared information requirements and timing for incorporation of a Canadian but somewhat compartmentalised. The federal government has company and establishment of a Canadian branch are very similar. jurisdiction over the prudential regulation (e.g. solvency) of insurance Both involve an extensive approval application to OSFI. Since a companies and other entities that are authorised federally to provide branch is not a separate legal entity from the foreign insurer, one of insurance products (“insurers”), while the provinces have authority the main differences between the two vehicles is that a Canadian over the market conduct of insurers carrying on business in their insurance company involves incorporation of a new corporate entity jurisdictions. (Although, to be complete, insurers can be provincially and requires a board of directors and mandatory board committees. incorporated, in which case the province in question regulates Canadian insurance companies are subject to the OSFI Corporate solvency as well.) Unlike the rest of the Canadian provinces, which Governance guideline which contains comprehensive requirements are common law jurisdictions, Québec is a civil law jurisdiction. The for board and committee oversight. Although a branch operation does general principles of Québec insurance law are contained in the Civil not have a board, OSFI requires the Chief Agent of a branch to fulfil Code of Québec. many of the corporate and risk governance functions required of a board of a Canadian-incorporated insurance company. Despite the As a result of the shared constitutional jurisdiction, in Canada, there legal distinction between a company and a branch, from an is a federal insurance regulator, the Office of the Superintendent of accounting perspective (e.g. financial and regulatory reporting), the Financial Institutions (“OSFI”), and each province has its own branch is treated as a separate entity. insurance regulatory authority; for example, the Financial Institutions Commission in British Columbia, Alberta Treasury The requirements for incorporation or qualification of a reinsurer Board and Finance, the Financial Services Commission of Ontario – are no different than those applicable to a primary insurer, although to be replaced in 2019 by the Financial Services Regulatory the business plan, for example (discussed below), would be tailored Authority of Ontario (“FSRA”) – and l’autorité des marchés appropriately if the insurer proposes to limit its activities to the financiers (“AMF”) in Québec. The provincial insurance regulators business of reinsurance. In addition, reinsurers may apply to be are typically government agencies that report to the Minister of exempted from certain consumer-related requirements, such as the Finance of the provincial government. FSRA is a new, independent requirement to establish procedures for dealing with consumer regulatory agency established by statute. FSRA is governed by a complaints if they do not deal directly with individuals. board of directors appointed by the Lieutenant Governor in Council. Although there are a number of insurers that are incorporated under the In Canada, reinsurance is regulated in the same manner as laws of a Canadian province, most of the largest insurance companies insurance. There are no separate regulators, although different rules in Canada are federally incorporated, and many companies that were will apply given the nature of reinsurance, some of which are originally incorporated provincially have migrated into federal discussed below. jurisdiction where the legislation is comparatively modern and solvency regulation is more robust. One provincial insurance

68 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London f uies, cmlt mre aayi/esblt study, analysis/feasibility market complete as well as capital, of sources of a identification business), of include, line (by activities proposed the of and descriptions things, other among comprehensive be must plan business The capital. application, including the actuarial calculations and proposed initial the with submitted is that plan business proposed the on centre will review OSFI’s of much of focus the branch, Canadian a establish If an applicant wishes to incorporate a Canadian insurer federally, or Focus ofOSFIreview –businessplan the International Association of Insurance Supervis issubject to supervision that meets the new solven transfer farm to federal andjurisdiction exchanges or another reciprocal jurisdi than (other province inrequiringinsurersexistingandprovincial laws, considered compan insurance recently incorporation of the onmoratorium (Ontario) authority regulatory mcmillan llP iclg to: insurance &reinsurance 2019 infrastructure/advisors Entity Information requirements required Minimum initialcapital provinces provincial licences–all Estimated feesfor Minimum OSFIFees Application form Application timeframes Copiesofgovernance,riskmanagementand ■ Criminalbackgroundchecksforprincipals ■ Financialinformation(financialstatements ■ applicant’s jurisdiction,etc.) ownership andfinancialstrength;regulationin Regulatory informationforapplicant(detailsof ■ Businessplantosupportaregulatory proposed businessplan) specified bytheMinister, e.g.basedonthe million paidincapital(orsuchgreateramount Company tohaveaminimumofCdn.$5 Cdn. $65,000 Cdn. $32,000 ■ ■ Approximately 12–18months ManagementofOversightFunctions: ■ Review, CorporateGovernance,Risk) governance committees(Audit,Conduct Board ofdirectorsandstatutoryregulatory PeerReview Actuary ■ External Auditor ■ Information Technology ■ Governance,riskmanagementand ■ Appointed Actuary ■ noprto Branch Incorporation planned reinsurancearrangements) statements andsolvencytestcalculations– submitted compliance policiesandprocedurestobe and seniorofficers for thecompany– for applicant,comprehensivebusinessplan years ofoperation 150% LICAT (life) forthefirstthreefull least 300%MCT (property&casualty)and solvency ratiooftheproposedcompanyat Order toCommenceandCarryonBusiness Letters Patent;and Compliance; andInternal Audit Finance; Actuarial; RiskManagement; compliance policiesandprocedures ction where the insurer pro forma pro forma pro cystandards set by ors (“IAIS”). corporated in that corporatedin e udr its under ies uul) to mutuals) financial utn a putting financial a Canadian branch, based proce on OSFI’s issued the guidance of summary requirements to a incorporate contains a Canadian chartinsurer fede following The and branch Summary information for Federal Applications – incorporation (life insurer)forthefirstthreefullyearsofoperation. LICAT150% and insurer) casualty & (property MCT 300% least at of ratio solvency a times, all at maintain, to sufficient be to “day one” on capital initial of amount the require generally will the OSFI on based determined be plan’sbusiness OSFI’sand testing stress contents, assessment. own will require ultimately will OSFI that capital initial of amount The testing. stress and calculations actuarial the particular in including plan, business the assess and staff,actuarial its including OSFI, period. three-year the probe will years following start up. three The business plan must for be stress-tested for case each in calculations, ratio solvency and statements Cdn. $65,000 Cdn. $32,000 entity Order approvingtheInsuringinCanadaofRisksbyaforeign Approximately 12–18months PeerReview Actuary ■ External Auditor ■ Information Technology ■ Governance,riskmanagementandcompliance policies and ■ Appointed Actuary ■ ManagementofOversightFunctions:Finance; Actuarial; Risk ■ Chief Agent ■ Copiesofgovernance,riskmanagementandcompliance ■ CriminalbackgroundchecksforChief Agent andsenior ■ Financialinformation(financialstatementsforapplicant, ■ financial strength;regulationinapplicant’s jurisdiction,etc.) Regulatory informationforapplicant(detailsofownershipand Branchtovestandmaintainintrustaccountunderthecontrol ■ Non-life:applicanttohaveconsolidatedassetsofCdn.$200 ■ Life:applicanttohaveconsolidatedassetsofCdn.$1billion; ■ procedures Management; Compliance;andInternal Audit policies andprocedurestobesubmitted employees reinsurance arrangements) financial statementsandsolvencytestcalculations–planned comprehensive businessplanforthebranch– first threefullyearsofoperation BAAT(property &casualty)and150%LIMAT (life)forthe regulatory solvencyratioofthebranchatleast300% of OSFIsufficient minimuminitialcapitaltosupporta million; capitalandsurplusof20%assets capital andsurplusof5%–10%liabilities www.iclg.com rally and to qualify pro forma and instructions. canada ss and sses 69 canada 70 canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com the to made changes with hand in hand goes Advisory The OSFI. by licensed be to required is insurer foreign Risks of entitled Advisory its finalised OSFI 2009, In OSFI Advisory oninsuring risks jurisdictions. federal insuranceregulator). other Canadian (the OSFI in by discouraged as generally are Canada they However, in common as a as are business acts “fronter”, that the writer direct reinsures Canadian-licensed a insurer by underwritten foreign a where arrangements, business in Canada depends on certain factors. That said, “fronting” direct write can insurer foreign unlicensed an which to extent The Areforeign insurersabletowritebusinessdirectlyor 1.3 the under restrictions If there is a foreign bank in the applicant’s corporate group, there are Compliance withother statutes been has process insurer’s qualification completed andtheinsurerhasbeenfullycapitalised. the OSFI entertain the after not until may application provinces certain and longer) even or months six to one from ranging (roughly vary also licences can vary widely. analysis Accordingly,and timeframes for review issuance own of provincial provincial of depth its The documentation. and conduct will jurisdiction evaluation each of the application and may require additional information standardised, is form for applying for a licence in all 13 jurisdictions. Although the CCIR used be can which form application standardised a together put has the of Insurance up made of association OSFI, of representative a and province each of regulators insurance Council an is Canadian which the (“CCIR”), Regulators varies, provinces 13 the three of each of legislation the province. Although the in located is peril least or at property) or person present, (e.g. risk the at insuring if licensing However,require on provinces carries province. and/or the presence in the of activities kind that some contemplates has legislation insurer licensing attract provincial to Generally, the requirements, business. on carry to intends it the branch, or company insurance insurer will be required to federal obtain a licence in each province in a which as qualified Once Provincial licensing mcmillan llP nuac bsns my eur a oiiain iig ne the under filing notification Investment Canada Act a require may Canadian business new a insurance of establishment the Canadian, not is applicant the Where compliance. for reviewed be to have will statute that in contained provisions the that so Canada, in establishment financial Other must theywritereinsuranceofadomesticinsurer? Te dioy ecie te icmtne i wih a which in circumstances the describes Advisory The .

Bank Act Bank . OSFIapprovalofanyproposedreinsurance ■ Initialcapitalinjection ■ OSFIon-sitereviewofoperations ■ Membershipinindustrycompensation ■ “Letterofcommitment”regardingnotification ■ “Supportprinciple”acknowledgmentby ■ Nameclearance ■ Pre-notificationpublicationrequirements ■ noprto Branch Incorporation affiliate by thecompanywithanon-Canadianlicensed association of materialchangestobusinessplan controlling shareholder (Canada) with respect to having a having to respect with (Canada)

Insurance Companies Insurance Insurance in Canada in Insurance ses r mitie i Cnd i crusacs wh insurers are insuring risks or circumstances persons located in t in Canada in maintained mai are assets to (and bra branches accounts). Canadian Thus, provincial Canadian their regulators have taken in their vested reserves of corresponding books the on part the report to themselvesobligated have Canada exis with insurers foreign undertaking, the signing eea federal “rvne” – hc rglt isrne n hi r their is insurer the in insurance regulate jurisdictions– require insurers to be licensed in which – (“provinces”) a provinces Canadian the of most hand, other the On Provincial licensingrequirements operations branch their of books the Canadian risksdirectlyunderwrittenbythem. on record to required be be to have licensed, not and existing licensed branch operations may in Canada may not insurers foreign place, insuring take of etc.) the premiums, collection underwriting, where soliciting, on promoting, (e.g. depending activities perspective, OSFI an from the on activities insuring concentrate to is transactions insurance approach in determining whether licensing is required for particular Act thetransaction would constitute legislation,conducttheirinsuranceagreetothey insure risks in a manner that would require licensi that, statingundertaking an basis,voluntary a on regulators provincial foreign companies with CCIR, existing branch operations i the through Ultimately, foreign insurer could be caught by provincial licen same thelicensing, forrequireOSFIbut, not would foreigninsurers toinsure risks inmannera that, I legislation.provincial some of approach the and locationinsuringtheof activities accordancein w is, that – licensing to approach OSFI’s the between legislativechangesreaction,undertakenresultein cer with together Advisory,takenthe of upshot The Federal andprovincial discrepancies andCCIRundertaking contains a somewhat similar deeming provision. is property or a person be business tothein province theifrisk subject or insurermat an deem Alberta and Advisory) the of inBritish Columbia (which was amended following OS carriesor someonactivity theinprovince. Howev insurer is caught by the licensing requirements if somewhat similar from jurisdiction to jurisdiction. ac enumerated by determinedjurisdiction,generally n 07 ad mlmne i 21) I caiis ht OSFI’s that clarifies It 2010). in implemented (and 2007 in OSFIapprovalofanyproposedreinsurancebythebranchwith ■ EstablishbranchtrustaccountandagreementwithOSFI, ■ OSFIon-sitereviewofoperations ■ Membershipinindustrycompensationassociation ■ “Letterofcommitment”fromseniorofficer ofapplicant ■ Nameclearance ■ Pre-notificationpublicationrequirements ■ a non-Canadianlicensedaffiliate applicant andcustodian regarding notificationofmaterialchangestobusinessplan iclg to: insurance &reinsurance 2019 nuac Cmais Act Companies Insurance arig on carrying rather than the than rather located in the province r or transacting insuringin Canada a risk location of the risk the of location ie udr h Avsr) By Advisory). the under (i.e.

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© Published and reproduced with kind permission byGlobal Legal Group Ltd,London each provincialjurisdiction. ensure that to their reinsurance activities are within wishing legal boundaries in reinsurers for issues poses requirements provincial of reinsurer’s the uniformity of lack The province. the provided outside transacted is business reinsurer, unlicensed an with province licensed insurers to reinsure risks in respect of a contract made in the provincially permits legislation provincial Other basis. unlicensed an on Canada in reinsurance, as well as business, direct underwrite to wishes insurer foreign a example, for if, problems present may This reinsurance. to limited is province the in business insurer’s the things, other among that, provided province the in requirements licensing the from insurers exempts legislation provincial Certain Unlicensed reinsurance under rights their of policies. enforcement the to barriers unlicensed potential the with if faced even be could insurers Unlicensed requirement followed. is regime insurance licensing this from specified no relief is there adjustment, and inspection loss unlike But, licensing. requires and business on carrying of indices the of one also is insurance of contract a of respect in province the in action country. In the majority of provinces, prosecuting or maintaining an the with. if complied is licence, However, this important issue is not dealt with uniformly across province the a that of without regime insurance permitted, unlicensed expressly is activity this loss in the province is one of the indices of carrying on a business, and adjusting provinces, few a In adjusted. and inspected are losses and concluded is contract insurance the before met are conditions that ensure to insurer unlicensed the on is onus the jurisdictions, of into enter requirements for unlicensed insurance in to their regimes. In a number residents for the following offence without insurers unlicensed with contracts an insurance is it provinces, some In among otherspecifiedexceptions). insurance, life and reinsurance than (other insurance unlicensed to provincial These applies that insurers. 10% of tax excise federal the to addition in chargesare Alberta-licensed from available is insurance the whether on depending premium, the of 50% and 10% between is insurance unlicensed for Alberta in exacted charge the example, For jurisdiction. the on depending insurance, unlicensed for penalties of application and/or taxes premium of collection the the by either insurance – insured or, where transactions required, by the the special broker of – for the purpose of reporting in particular in involved including be to for required transaction and there are regime various limitations and other requirements, is a licence special have jurisdictions a with broker on insurance an cases, many In insurance”. “unlicensed provincial carrying for most indices unique business, province’s each to addition In Unlicensed insurance mcmillan llP iclg to: insurance &reinsurance 2019 loss, third party rights and termination of contracts, amongst others. of valuation loss, of proof and notice policies, of content force, into entry negotiations, in misrepresentation and disclosure regarding rules includes and insurance, of contracts of content the and form Act Insurance the by prescribed is policy insurance automobile entire the Ontario, in example, For insurance. of class the upon depending insurance, of side the on of contracts in included be to deemed are that protection, consumer mainly obligations, and rights certain prescribes marketplace regulation. Each province has an insurance statute that over jurisdiction have provinces Canadian the above, indicated As Arethere anylegalrulesthatrestricttheparties’ 1.4 into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms (Ontario). Provincial legislation deals both with the with both deals legislation Provincial (Ontario).

with claimsfairlyandingoodfaith. implied an become has it risk, deal also will insurer the that contract insurance every in obligation the to material facts the to all disclose to insurer insured the of part the on duty a as articulated the benefitofitsdirectorsandofficers. for insurance maintain and purchase to entitled also is company A fulfiltheconditionsin(a)and(b)above. (d) or fault any committed have to court the by judged not were (c) company ifthey: the by indemnified be to entitled officeris or director a addition, In was conduct their that believing for grounds reasonable had best the to view a with (b) faith good in and honestly acted (a) the director orofficer having: with association their the upon conditional is of indemnify to right the However,company. because involved are they which in proceeding other or investigative any administrative, criminal, civil, of respect in officers and directors of indemnification a broad for provides essentially insurers, incorporated of majority vast Act Companies The officers. and directors its indemnify to permitted It is a basic principle of Canadian corporation law that a company is . Arecompaniespermittedtoindemnifydirectorsand 1.5 nue pros gnrly praet eiet) ae ces to access have residents) permanent (generally, persons The insured all that ensure to programmes. designed is Program insurance Insurance Health National social “compulsory” of number a has it that in countries other to comparison in unique is Canada mandatory liabilityinsuranceforpassenger injuriesordeaths. carry to vessels purpose public and commercial of operators and Canada is in the process of introducing regulations requiring owners expanding, are example, TransportFor events. world insurance recent of result a as possibly compulsory requiring medicalliabilityinsurance forphysiciansinprivatepractice. laws Canadian and lawyers for insurance ■ omissions and errors minimum insurance for insurance omissions and ■ errors minimum minimum automobileliabilityinsurancefordrivers; ■ ■ insured. Justafewexamplesinclude: person the of part parties the on innocent omissions and errors to or liability indemnity against an provide to intended generally sizes, and shapes many in comes Canada in insurance Compulsory Arethereanyformsofcompulsoryinsurance? 1.6 good faith (or utmost accordingly.of interpreted duty are the insurance Although of contracts and contracts, insurance of element foundational a as common law provinces recognise the principle of utmost good faith In addition to provincial statutory property provisions, courts in the Canadian under articles Code’s Civil the insurance aredevotedexclusivelytofireinsurance. of Some Canada. in elsewhere those to similar are Québec in insurance governing rules the part, most the For Québec. of Code Civil the of XV Chapter in contained are law insurance Québec of principles general The proceeding thatisenforcedbyamonetarypenalty. or action administrative or criminal a of case the in lawful, interests ofthecompany;and officers underlocalcompanylaw? other professionals;and intermediaries; omitted todoanythingthattheyoughthavedone;and uberrimae fidei (Canada), being the federal statute that governs the governs that statute federal the being (Canada), ) as recognised in Canada was initially www.iclg.com canada Insurance 71 canada 72 canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com contractual the joining actually an to relationship. without Third party beneficiaries are persons who are found to beneficiary a contract become also insurance can party third a Sometimes upon thebankruptcyordeathof insured. occur example, also for law, of operation can by or consent insured’s Assignments the without assignee. party third the the under to benefits policy receive to right insured’s the or itself, policy insurance the example), for house, (a object insured the either sells contract. the to assignees Assignments may becoming occur voluntarily, wherein the insured transfers thereby or insured, the from directly rights acquiring by relationship contractual the join may parties third Sometimes, law. insurance of context the in contract of privity of principle the to exceptions some however, are, There against aninsurer. action direct a bringing from party third a exclude typically would and obligations, its by bound be or it from benefit either contract may itself the to parties only that means This contracts. insurance to applies contract of privity of principle the speaking, Generally Canathirdpartybringdirectactionagainstan 2.2 the broadestlevelofcoverage. presuming by insured the favours insurance this Again, narrowly. construed that coverage to limits indicated any with broadly, interpreted be has to are policies law case Canadian Furthermore, this clauses thatfavourstheirinterests. contracts, form standard ambiguous of reading a from benefit provide insureds that implies typically often most insurers that the to interpreted in favour of the party who did not dictate its wording. In subject also are proferentem contracts insurance Canadian she hasactedingoodfaith. The insured benefits from the assumption at common law that he or insurer to prove that the insured has breached its duty of disclosure. the on rests always therefore burden The contract. insurance the of negotiation the during obligations has disclosure insured its with an complied that presumption general a is there example, For or denied. it up to insurers to prove why a consumer’s rights should be limited leaving doubt, the of benefit the insured the give to likely more are the of area this in controls regulatory and protection law common the Both insured. the favours generally law insurance Canadian Ingeneralterms,isthesubstantivelawrelatingto 2.1 employer. insurance benefits are wholly or partially funded by the individual’s temporary these for premiums cases, certain In own. their of fault no through offers employment programme their lost have who Canadian Canadians to assistance financial (“EI”) The disability. Insurance or death Employment retirement, of event the in persons who have worked in Québec with basic financial protection provides that plan insurance public compulsory a of is Plan Pension residents than Québec the Québec, (other In from. benefits and Canadian to contributes Québec) every which Plan, Canada the Pension include programmes insurance social Similar basis. prepaid a on services physician and hospital necessary medically mcmillan llP (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? rule, meaning that any ambiguities in a policy are to be contra statutory provisionsauthorisingunilateraltermination. with accordance in it cancel subsequently but valid as contract the treat (c) or breach; the despite continuing and valid as contract the treat (b) breach; the of date the after insured the by paid premiums state the repay not and contract the repudiate (a) may: insurer the otherwise, do legislation and contract options. insurance three the that has Provided insurer the insurer, non- the this prejudiced that disclosure and not fact, material intentionally a by misrepresenting disclosure or disclosing of duty its breached insured an Where the insurer can prove, on a balance of probabilities, both that insured cannotbringadirectactionagainstreinsurer. the them, between relationship a establishing any provision contractual Absent contract. this to party a not is insured individual the and reinsurer, the and insurer the between exists thus relationship contractual The insurers. for insurance essentially is Reinsurance a cnieal rsrce te viaiiy f urgto by subrogation personal or of damage property suffers who availability insured an that insisting the restricted considerably has scheme insurance auto fault” “no statutory Ontario’s Conversely, even iftheinsurerhasonlypartially indemnifiedtheinsured. subrogate to right the insurers give provisions statutory instances, these In insurers. marine and fire by accessible more even it make to subrogation to right law common the expanded has Legislation No right toarise. subrogate. to this for order right in required is policy insurance the the in clause separate has insurer the indemnified, fully been has insured the and losses, her or his of part least at recover to party third a against right enforceable law,an has insured common the where the Under policies. insurance individual of terms the and legislation of independent exists subrogation to right The are form application insurance an on insurer automatically consideredtobematerial. an by questions all asked not that indicated have courts Ontario Conversely, irrespective of whether the insurer specifically inquires about them. knowledge, her or his within facts material all insurance to applies disclose provide to decision coverage or to do so at that low of a premium. insurer’sAn insured’s duty to reasonable a adversely affected have would disclosed, if which, one is fact material A . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 the sue to able insurer iftheinsuredisalsojoinedtoaction. be may contract insurance the negotiating when agent or trustee her or his as can acting was who insured individual the that an establish example, For privity. of principle the to exceptions therefore are who and negotiated was contract the when insured the and insurer the of contemplation the within been have . Isthere an automaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer needaseparateclauseentitlingsubrogation? them? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof iclg to: insurance &reinsurance 2019 canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London elrtr rle o fretr cno b had y jr. Most jury. a claims inOntarioareadjudicatedbyajudgeasopposedtojury. by heard be cannot forfeiture or relief declaratory for claims although action, an commences it that time the at jury a are dealt with using the ordinary civil procedure. $100,000 A Cdn. party can opt for of excess in claims whereas procedure, simplified generally the under commenced be can $100,000 Cdn. than less but $25,000 are Cdn. disputes of excess in Claims jurisdiction. has Court Claims Small the insurance $25,000, Cdn. under claims For Court. commercial Superior a in commenced Ontario, In months ofthematterbeingsetdownfortrial. 18–24 within date trial a have may procedure simplified the under proceeding those while wait, five-year to three- a for prepared be should Court Superior the in heard being are matters whose Parties the paceatwhichpartiesadvancelitigation. and initiated, are steps interlocutory any whether trial, the of length of availability the anticipated the argued, involved, experts and parties of be number the judges, to issues legal the of complexity the final date for trial depends on a number of factors, including the and claim commercial a of initiation the between time waiting The specifically and clearly be must worded tothateffect. clause the limited, is right the that clauses expand or limit an insurer’s contain common law subrogation rights. may Where policy insurance individual an Finally, insurer own her against otherpartiesareseriouslyrestrictedbystatute. or his from irrespective of who is at compensation fault for the damage. Any additional claims seek must injury mcmillan llP iclg to: insurance &reinsurance 2019 the that including remedies, of number any order may court the document, relevant a produce or disclose to fails party a Where to know what coverage may be available to satisfy a action. Thisrule exists to promote settlement by policy is admissible as evidence unless it is relev information no although action, the from resulting pa or all satisfy to liable be may insurer an which A party must always disclose and produce any insura the trial. questioning under oath about the subject matter of the action before be must party each oral discovery,to Second, for submit examined must she or he that meaning privilege. claiming not is it which to over documents such all and parties other the by inspection for produce action, the to relevant are the that documents disclose all to of discovery duty existence continuing two-part a a have parties have First, proceeding obligation. a to parties Ontario, In Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Which courts are appropriate for commercial ins 3.1 Litigation–Procedure 4 Litigation–Overview 3 bring tocourtonceithasbeeninitiated? dispute? Is there any right to a hearing before a j to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin disputes? Does this depend on the value of the ant to an issue in the enablingeach party rt of a judgment a of rt n order. nce policy under ocrig thatconcerning urance ury? Affidavit ofDocumentsrequiredaspartdocumentarydiscovery. the to B Schedule a in claimed, privilege of type the and document the of date the with along one, each of description brief a providing nonetheless disclose the existence of these documents by listing and must party The privilege. of classes three these of any within fall believes it that documents of production the to object can party A that the expert witness testify must serve on all other parties a pre- a parties other all on serve must testify witness expert the that proposes who party the trial, at testify can witness expert an Before call to court the from additional experts. leave for move witnesses, successfully expert they three unless calling to limited are parties Ontario, In person’s testimony can then be tenderedtranscript asThe evidence trial.at beenhave would she or he be examined, cross-examined, and re-examined in the a witness to be taken by examination before the tri from the court or on consent of the parties, arrang or because he or she lives outside of Ontario – a p When a witness is unable to attend the trial – for absence and testify before potentially being fined attend can be arrested and brought before the courtcircumstances,witnessome Ina court. contemptof evid give and trial the attend not does who witness summonsand enforcea topower the have courts The documents orotheritemsinthewitness’s possession. specific trial, at produce, to witness a require also may summons a as Ontario witness in must serve the witness person with a summons to a attend the trial. of A attendance the requires who party A . Canapartywithholdfromdisclosuredocuments(a) 4.2 . Are there any restrictions on calling expert wi 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 the latterisnotpartytolitigation. the in documents possession of the party’s subsidiary relevant or affiliated corporation, even if disclose to party a order may court A be satisfiedbeforeanysuchorderwillgranted. relevant to a material issue in the action. A fairly stringent test must discovery a non-party who there is reason to believe has information Likewise, a party may move for leave from the court to examine for to trial without having had the opportunity to inspect that document. proceed to party moving the require to unfair be would it when and cases where the document is relevant to a material issue in the action in the possession of a non-party. The motion will be granted in rare and discovery. A party may move for the production of a document Non-parties may also be subject to court orders related to disclosure defence bedismissedorstruckout. of statement or action an that discovery,even for and examinations document may not be used at trial, that a party may not participate in Is it common to have a court-appointed expert in course ofsettlementnegotiations/attempts? addition or in place of party-appointed experts? not present? give evidenceeitherbeforeoratthefinalhearing? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin www.iclg.com example, due to illness or even incarcerated. e for the evidence of al. The witness may arty may, with leave to explain his or her at the trial. or video of that of video or same manner as s who does notdoes who s ne o e in be to ence canada can find anyfind can tnesses? 73 canada 74 canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com post- current the while judgment rateis2.0%. 1.3%, is 1989) action 23, of October causes after (for arising interest pre-judgment for rate current The website. General’s Attorney the on quarterly posted are rates Ontario. The in recoverable are interest post-judgment and pre- Both Isinterest generallyrecoverableinrespectofclaims? 4.8 rarely are ordered incivilmatters. trials new and below, court the before was that fact. record of not and law of the of basis the on decision Generally,its makes court appellate the issues to limited typically are Appeals damages inissue. the if heard of amount the and instance first of court of level the on depend will be also may appropriate leave is obtained. Again, orders the court that hears the appeal interlocutory from Appeals national importanceisinvolved. of matter a when Canada of Court Supreme the by considered be to leave, with proceed, may of Appeal Court Ontario the of decisions and, in certain cases, the amount of damages in issue. instance Appeals first from of court of level the on depending Appeal, of Court provincial the or Court, Divisional the Court, Superior the by heard of first instance without requiring leave. Appeals in Ontario may be Generally, a litigant has the right to appeal a final decision of a court Isthereanyrightofappealfromthedecisions 4.7 somet doing from example, a party other the prevent to seeking prohibi for move may Parties Ontario. in litigants Avariety ofinterlocutory ortime-limited injuncti Whatsortofinterimremediesareavailablefromthe 4.6 owed bytheexperttopartywhomheorshewashired. appointed experts to the court therefore prevails over any obligation expertise. party- of duty matter.The a determine to required be may as court of area expert’s that within Experts also have a duty to provide such additional assistance to the matters to only related and non-partisan, objective, fair, is that evidence to opinion duty provide a have – party-appointed or court- whether – experts All any on report and into inquire question offactoropinionrelevanttoanissueintheaction. to experts more or one appoint judge’sthe on or party a by motion a In may judge a initiative, own as wellhisorheremployment,educationandqualifications. and data and documents, assumptions used by the expert in reaching his or her conclusion(s), information, opinions factual the findings, including expert’s details, of number a the include must report This matter. out the on conclusions setting report trial mcmillan llP documents eveninadvanceofanactionbeingcommenced. or information certain provide to party third a compels that remedy forcetheother side totakepositive a action fo– mandato a for move also mayParties assets.its of s nw a a a as known is from a third party before commencing litigation may move for what information wants who Ontario in litigant potential Interestingly,a Piller order requiring the other party to preserve specif If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral courts? Mareva Norwich injunction to restrain another party from disposin re. A order. Norwich re i a pre-action a is order r example,r an onsare available to tive injunctions,tive ry injunctionto ry ic evidence. ig for – hing Anton g technically the“winner”attrial. were plaintiffs the though even disbursement and fees defendants’ the of portion substantial a pay to have defendants’would plaintiffsthe the offer,“beat” to failing by words, other In trial. of end the offerto the of date the from scale indemnity partial the on costs defendants’the pay to have would plaintiffs importantly,the More the partial indemnity scale only up to the date of the settlement offer. on costs recover would plaintiffsoffer, the the than favourable less judgment a obtain to were but trial defendants’at establish liability to were plaintiffs the If settle. to offer written a serving by favour its in rule costs normal the of operation the alter can defendant A usually result inarecoveryof70to80%theactualcostsincurred. will scale That circumstances. special in only applied is actual costs incurred by the winner. The substantial indemnity scale the of 70% to 50 of recovery a in result usually will it and applied, often most one the is scale. scale indemnity” indemnity partial The recoverable costs: the “partial indemnity” scale; and the “substantial of amount the determine to used are that scales cost two are There to berecovered. fair a also is amount There of discretion used by the court in scale. fixing the quantum of published costs a to according determined is amount the Instead, incurred. disbursements and fees actual the the if The amount recovered under this costs rule costs is generally not 100% of defendants’ the pay to plaintiffs’ caseisdismissed. ordered be will plaintiffs rule, pays” Conversely,the trial. “loser at damages any recovering in successful are the of operation defendants normal will be ordered to pay the plaintiffs’ costs if the the plaintiffs under Thus, disbursements. and fees party’slegal winning the pay must matter) that for proceeding other or motion a (or lawsuit a loses who party any that is rule general The litigation, jurisdiction. pays” “loser in a is Ontario disbursements and fees lawyers’ to comes it When diinl d. 4,0 o tp f en odrd o a the pay to ordered being an of of top penalty” plaintiff’s legalcostson apartialindemnityscale. on cost $40,000 “remedial Cdn. a faced additional case automobile an in mediation mandatory in participate to refused who insurer Ontario being set on a costs substantial indemnity scale. For of example, in 2010, an quantum the including consequences, cost face can faith bad in mediates who or mediation to Asubmit to refuses who party mandatory therefore is mediation irrespective ofwheretheclaimiscommenced. This party. either of the at request mediation to submit must claim the defending insurer any vehicle, a of operation the of result a as death or injury bodily from Ontario’s Per filed. jurisdictions must take place within 180 days of th Ottawa,Toronto,in WindsorCounty.EssexMedi and civil Ontario.Indeed, of mediation featureis now mandatory significantfor cl a become has Mediation . Whatarethestandardrulesregardingcosts? Are 4.9 .1Ifaparty refusestoarequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 offer tosettlepriortrial? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan iclg to: insurance &reinsurance 2019 Insurance Act Insurance , where a party alleges loss or damage or loss alleges party a where , e first defence being aimscommenced ation in theseination iiain in litigation canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London appoint thearbitrator(s). party,to a intervene by may,application court on a proceeding, the parties cannot mutually agree on which arbitrator(s) should conduct to assist with the conduct of the arbitration. For example, where the There are also limited circumstances in which a court may intervene unequal or unfair treatment of parties; or to enfor conducted in accordance with the a arbitration that ensure agreem intervene: to only now may courts The Ontario courts to intervene regarding the content o arbitration clauseisfoundbyacourttobeunenforceable. the if even stand will contract the of rest the that such agreement, main the from severable as treated typically are clauses Arbitration clause broadly enough to cover the intentions of bo dra to taken be should Care clause. the of clauswording arbitration of increasingly scope more open to finding that a dispute the is scrutinising closely reconsider clauses. arbitration terms to standard or boilerplate need a signalled have decisions court r However, enforceable. clause arbitration an make arbitratbycovered be todispute the intentionfor reflect language that suggests law case the of Much orally orinwriting. a after arbitration dispute has arisen. In Ontario, arbitration agreements may be made to submit to electing jointly by or agreement, original their in resolution dispute of form mandatory or preferred the as it specifying by either arbitration in engage to opt can Parties ArbitrationAct reflec further is non-interventionist approachThis disputes byarbitrationwheretheyhaveagreedtodoso. their resolve to The required be should parties that adjudication. is principle general of favour in clauses not arbitration are oust courts to quick Canadian arises, question jurisdictional a the Where designing in and arbitration for arbitration proceedings. opting in both parties’ autonomy the favouring agreements, arbitration a individual to parties’ approach hands-off relatively a taken have courts Canadian Whatapproachdothecourtstakeinrelationto 5.1 a or dismissed be defence struckforfailingtomediatewhereitiscompulsory. even may claim a cases, exceptional some In mcmillan llP iclg to: insurance &reinsurance 2019 the (b) incapacity; legal a under while agreement party the a into entered (a) if: clause arbitration an enforce to refuse can court A Notwithstandingtheinclusionof anexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 Arbitration 5 to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty is required? what groundsanddoesthishappeninmanycases? courts willrefusetoenforcesuch aclause? arbitration clause,isthereany possibility thatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration , which has introduced major limits to the abilitythe to limitsintroducedmajor has which , ce awards. f arbitration clauses. not covered by the ion is sufficienttois ion Courts are more are Courts ent; to prevent the th parties. e b Ontario’s by ted ft an arbitrationan ft ing the parties’the ing rbitrations are cn Ontario ecent h ue of use the s n are and es of give directionsabouttheconductofarbitration. and arbitrator the to award the remit also arbitration may court the The process. during fairly or equally treated not the was where applicant or invalid, is agreement arbitration the where include gemn; oee, hs a ol be alwd tu fr i the in context ofinternationalarbitration. far, thus allowed, been only has this however, agreement; to agree to able be may dispense with the parties requirement for written reasons in their arbitration that suggest to law case recent unless the award was made on consent of the parties. There is some reasons, written with award an justify must arbitrators Ontario, In ongoing any from result may that award arbitration. an cover to funds order to able are sufficient are there that ensure to courts receiverships or costs for security Finally, injunction, litigation. anti-suit civil pursue to an able order also interlocutory being before process arbitration the may to submit to parties compelling aforementioned Courts the of injunctions. any granting arbitration by the process support can courts circumstances, appropriate In the 10 circumstances listed in the in listed circumstances 10 the The court will grant the application and set aside the award if one of A party may also apply to the court to set aside an arbitrator’s award. would significantlyaffect therightsofparties. justifies an appeal, and where a determination of the question of law be granted where the importance to the parties of the matters at stake appeal to the court, with leave, on a question of law. Leave will only may party a appeals, to as silent is agreement arbitration the Where the arbitrationagreementwhatrightofappeal,ifany, exists. to the right of appeal. Parties are typically empowered to specify in extends also autonomy party of principle the court’sof The respect . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 . Isthereanyrightofappealtothecourtsfrom 5.6 however, have generally been upheld and are not sta clauses in these instances. Arbitration clauses in arbitrated under Ontario law. Courts can refuse to c not arewhich matterssubject some also areThere default orsummaryjudgment. for one proper a is matter the (d) or delay; undue with brought was proceedings stay to motion the (c) invalid; is agreement arbitration reasoned awardisrequired? examples. circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat Arbitration Act www.iclg.com insurance contracts, enforce arbitration exists. Examples exists. tute-barred. apable of being ofapable canada 75 canada 76 canada © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com mcmillan llP For moreinformation,pleasevisitourwebsiteat www.mcmillan.ca client service commitment, and professional excellence teamwork, – are at respect, the heart of McMillan’s– commitment advice to values serve our clients, our firm local legal communities and Our the legal profession. solutions-oriented Kong. provide Hong and we Montréal Vancouver,Calgary,Toronto,Ottawa, in sectors, offices business our through major in and States leadership United acknowledged the and Canada, in expertise industries recognised key With across clients internationally.not-for-profit and private public, serving firm law business leading a is McMillan regulatory and ■ matters governance corporate compliance generally. to respect corporate with ventures, joint insurers advises also She changes. corporate other and transactions acquisitions, of context the in process approval and regulatory the and reorganisations mergers advises Canada, She years. 25 over in businesses establishing on brokers/agents and reinsurers insurers, for industry insurance the in with worked clients has She Group. Insurance the of Co-chair and Group Regulatory Services McMillan’sFinancial of member Lyonsa Carol is ■ ■ ■ ■ ■ Company. Reinsurance Canada SCOR Committees: Governance Corporate insurance reciprocal. n Risrne adok rcmedd rciinr (2010 practitioner non-contentious). recommended Handbook: Reinsurance and Regulatory”. Projects, 2013, S 2014 and 2015). Committee (Canadian (Insurance Association Intermediaries Bar International Insurance and Activities (2) The Duty of Utmost Good Faith, and (3) Insuranc Corporate CounselGuide or Car n mme o Adt Rs ad odc Review/ Conduct and Risk Audit, of member and Chair Board dioy or ad ui Cmite ebr Canadian member: Committee Audit and Board Advisory itd n rcia Lw opn’ PC rs-odr Insurance Cross-border PLC Company’s Law Practical in Listed Co-chair: TerraLex Practise Group “Insurance, Transactional and Transactional “Insurance, Group TerraLexPractise Co-chair: A Principal author of (1) The Legal Nature of Insur ofNatureLegal The (1) APrincipal ofauthor rnia cnrbtr o to contributor Principal R:www.mcmillan.ca URL: [email protected] +14168657048 Email: +14163074106 Fax: Tel: Canada Toronto, Ontario,M5J2T3 181 BayStreet Brookfield Place,Suite4400 McMillan LLP Carol Lyons h Isrne aktlc – Ultimate – Marketplace Insurance The (CCH/LexisNexis). e Intermediation ance Contracts,ance Substantive ections), . Services CommissionofOntario. as counsel before all levels of court in Ontario, as well as the Financial appeared has and cases civil of range a in counsel been has Lindsay their of management and litigation matters. coordination national with of number companies a assists also Lindsay evidence. technical and medical scientific, complex involve that cases includes experience broad Her products. juvenile and materials industrial building vehicles, motor and machinery, construction security products, and recreational devices, fire and medical pharmaceuticals including products, food products products, of consumer products, range broad a involving lawsuits liability product commercial and individual both and actions has class Lindsay defending experience extensive has Lindsay reinsurance. and counsel. issues in-house coverage insurance disputes, insurance as complex in expertise served class and prominent a boutique with practised action Lindsay firm, the joining to Prior on riskassessmentandmanagement. class litigation, clients counselling involves also liability practice Her insurance. product and actions on focused is practice Her Group. Resolution Dispute and Litigation the in partner a is Lorimer Lindsay iclg to: insurance &reinsurance 2019 R:www.mcmillan.ca URL: [email protected] +14168657048 Email: +14168657197 Fax: Tel: Canada Toronto, Ontario,M5J2T3 181 BayStreet Brookfield Place,Suite4400 McMillan LLP Lindsay Lorimer canada chapter 14 colombia Juan Diego arango giraldo

Dac Beachcroft colombia abogados sas angela Hernández gómez

1 Regulatory As provided in law – Article 53 (5) of the EOSF – the authorities have a four-month term to issue a decision. The stated legal term is stayed if the concerned authorities request further information. 1.1 Which government bodies/agencies regulate Before using them, insurance companies must deliver to the Finance insurance (and reinsurance) companies? Superintendence the draft policies they will offer to the public, together with the annexes (Article 184 (1) of the EOSF). The Finance Superintendence, a state entity, is responsible for approving the establishment of insurance and reinsurance companies 1.3 Are foreign insurers able to write business directly or in Colombia, and for monitoring, surveying and controlling insurance must they write reinsurance of a domestic insurer? activities in the country (Article 325 (1) of Decree 663/93 – Finance System Statute (EOSF)). Before 15 July 2013, only insurance companies duly set up in Colombia with prior authorisation from the Finance Superintendence 1.2 What are the requirements/procedures for setting up a were allowed to conduct insurance activities in the country. Foreign new insurance (or reinsurance) company? insurers could only sell insurance business under special circumstances and in reliance on a prior authorisation granted by the The establishment of an insurance or reinsurance company in Finance Superintendence on a case-by-case basis; such authorisation Colombia requires prior authorisation from the regulator, i.e., the involved assessment for reasons of general interest. Finance Superintendence. To that end, the interested party is On 15 July 2013, Articles 61-66 of Law 1328/2009 came into force, required to file an application that satisfies all requirements partially opening up the Colombian insurance market, as follows: provided in Article 53 of the EOSF and in External Circular ■ Foreign insurance companies registered in the RAIMAT (the 029/2014 of the Finance Superintendence (First Title, Chapter I, official register maintained by the Finance Superintendence) Section 1). can offer coverage for MAT insurances; i.e. international By the time of its incorporation and throughout its existence, an maritime transport, international commercial aviation and insurance company must demonstrate that it holds the minimum space launching and transport, including satellites, but only for risks affecting the merchandise being transported, the capital required by law, as well as assets required to conduct the vehicles used and the civil liability arising from them, as well intended insurance activities. Reinsurance and insurance as coverage for merchandise in international transit. companies that carry out reinsurance activities must demonstrate the ■ Foreign insurance companies may operate in Colombia availability of the minimum capital required, comprising assets through branches. needed to operate the various insurance sectors (Article 80 (1) of the EOSF, in line with Book 31, First Title, Chapter 1 of Decree ■ Any resident in Colombia is allowed to acquire any type of insurance outside Colombia’s jurisdiction, except for 2555/2010). insurances related to social security, compulsory insurances, Insurance companies must also maintain and demonstrate – as a insurances in which prior compulsory coverage is legally solvency margin – availability of adequate technical assets required, and insurances in which the policyholder, insured or equivalent, at the very least, to the amounts identified under the beneficiary is a state entity, a constraint that the government rules set forth in External Circular 029/2014 (Article 2.1.1, Section may suppress in particular cases. This authorisation has raised 2, Title 4, Chapter 2). Likewise, they must create certain technical a discussion about whether it implies that the Colombian resident must be physically located outside the country or can provisions that include, inter alia, ongoing risks, outstanding do it through means such as the internet, avoiding physical claims, and losses deviation (Article 186 of the EOSF and Chapter displacement. The Finance Superintendence has set forth that 1, Fourth Title, Book 31 of Decree 2555/2010). physical displacement is required (Concept 2013046201-005 Following the filing of the application and further to compliance September 23, 2013). with all legal requisites, upon issuance of a resolution that allows Nevertheless, except for the so-called MAT insurances, foreign setting up the company, an incorporation deed must be granted insurance companies are not authorised to offer, promote or within the term provided therefor. The company must operate as a advertise insurance in the country. stock company or as a cooperative partnership and, subsequently, On a reinsurance basis, insurance companies may cede 100 per cent must be recorded on the mercantile registry. of the written risks. iclg to: insurance & reinsurance 2019 www.iclg.com 77 © Published and reproduced with kind permission by Global Legal Group Ltd, London 78 colombia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com companies engaged in passenger’s terrestrial pu (ii) reinsurance brokers are obliged to take out insurance to cover in (i) required insurance compulsory of Colombia; someexamplesare: types several are There Arethereanyformsofcompulsoryinsurance? 1.6 (Article 1522oftheCivilCode). thereof waiver a prohibits law the as insofar inefficacy legal entail of such director benefit or officer will have in an unlawful object and, conduct hence, will or this cover directors to by aiming covenant misconduct any officers, wilful of event the in Furthermore, non-written (Article200oftheCommercialCode). deemed be will duties their perform to granted sureties of amount the releasing at aimed directors’ deeds officers’or the to same the circumscribing at or liabilities corporate in included Provisions Arecompaniespermitted toindemnifydirectorsand 1.5 contrary to the concerned rules. p anyunenforceability providesfurtherof EOSF the voidancejudiciallybemust Moreover,adjudged. Ar viewof the violation of amandatory rule of law an Commerc the of 899 Article under void absolutely be colombia Any clause which is inconsistent with the mentioned Commercial Code rules, which are applicable to insu se are provisionsconstraining These party.weaker policyhold (i.e., relationbeneficiary) and hence might only contractualbe amended for th the of party likewise,otherprovisionsincluded ben arethefor pro those than other conditions contract, insurance Certain regulations of a mandatory nature prevent a Arethereanylegalrules thatrestricttheparties’ 1.4 Dac Beachcroftcolombiaabogadossas (v) the distribution chain of liquid fuels derived from petroleum from derived fuels liquid of chain distribution the (v) hold must territory Colombian the in circulating vehicles all (iv) transport multimodal of operators international or domestic (iii) into (allorsome)contractsofinsurance? officers underlocalcompanylaw? freedom ofcontractbyimplyingextraneousterms aube (ril 4 f ere 8619 ad Article and 1866/1992 Decree of 2.30.1.4.4 ofDecree2555/2010); 4 (Article valuables corporate officers or employees, including loss of money and the cover to policies corporation for losses which arise from fraudulent actions by insurance include corporate These of pursuance purposes. the in officers its or company the by incurred omissions or errors from derived liability civil 4299/2005); and Decree of 31 (Article policies liability civil extra-contractual hold must etc.) carriers, consumers, large distributors, (i.e., Article 42ofLaw769/2002–National MobilityCode); (SOAT), or drivers in traffic accidents (EOSF, Casualties Part VI, Chapter IV and Transit covering bodily injuries sustained by pedestrians, passengers for Insurance Compulsory (Articles (P&I) Clubs Indemnity 2.4.4.1.3. ofDecree1079/2015andResolution425/1996); & Protection mutual by provided services through or companies insurance from obtained be can coverage Such policies. insurance extra-contractual liability and contractual civil hold must goods of ..... ad ..... o Dce 17/05 S – 1079/2015Regulatory Decree Decree of the Transport of 2.2.1.3.3.1 Sector); and 2.2.1.3.2.4 trans activities to inherent(Articles 2.2.1.4.3.3, risks 2.2.1.4.4.1, cover 2.2. to policiesinsurance civilobligedholdcontractualto extra-contracand

efit of the weakertheof efit greeing, under an dorder, and such 1.3.3,2.2.1.1.4.1, provisions shall blic transport are e benefit of said rance contracts. t out under the under out t ticle 184 (2) of(2) ticle184 rovision that is thatrovision r isrd or insured er, ie therein; vided a Cd, in Code, ial tual liabilitytual portation ingle prohibits the inclusion of abusive rights, clauses in consumers’ financial the of defence the for office an have should entity every that others, among include, which sector, the list of rights, and at the same time imposes obligations on entities in Law 1328/2009 on the protection of financial consumers sets forth a general and conditions ofinsurancecontracts. aspects specific regulates Superintendence Finance the application, general of circulars external issuing in Moreover, practices thatundermineinsurancegoals. companies’ insurance prohibit and restrict and beneficiaries, and insureds both of defence the for aim that rules provides EOSF The amendable only in favour of the stated weaker parti legal provisions that the parties cannot amend, and Article 1162 of the Commercial Code sets out a non- mere covenant or agreement – that seek to concretis contractualrelation.mandatoryThereare rules – and beneficiaries, which are considered to be the w policyholprotects law contractinsuranceColombian and the insurer will be entitled to retain the enti theretain entitledto be insurerwill the and contract insurance the of nullity relative entails conditions, onerous have would insurer, stopped it from entering the the contract or induce the inclusion to of more known if that, circumstances or facts questionnaire the with line proposed by in the insurer, any risk non-disclosure or inaccuracy relating the to about statement a makes As provided in Article 1058 of the Commercial Code, if the insured brought byinsuredsagainstreinsurers. obligations no have latter the and reinsurers against actions direct bring to entitled not are insureds Code, Commercial the 1135of to Article Pursuant any wording. of requirement the without Code, Commercial the in of 1133 Article provided as companies, insurance against actions direct bring to entitled are parties third damaged insurance, liability civil Under a 18/01 Cnue Saue icroae sm rules some incorporates expressly – aimed at the protection of policyholders and Statute beneficiaries. Consumer – 1480/2011 Law abusive practices. . Ingeneralterms,isthesubstantive lawrelatingto 2.1 . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2

v)Clmin tc Ecag boes ut od poli hold must brokers Exchange Stock Colombian (vi) (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer? nieiy Atce ... o te eea Rls of Rules General the ofColombian Stock Exchange). 6.1.1.1 t (Article to infidelity caused emplo or managers’ damages directors’, of or reason managers by losses company directors, as well by as omissions employees, or acts negligent cover, iclg to: insurance &reinsurance 2019 inter alia inter vis-à-vis , civil liability of the company as a result of result a as company the of liability civil , the former. Accordingly, no action can be can action Accordingly,no former. the pro forma re premium as legalpremiumas re a list of provisions eaker party in such not amendablenotby es. e such protection. exhaustive list of ders, insureds,ders, contracts and is to cies yees’ the he or

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London thus, loss; the for strictly speaking,nocooperationisrequired. liable party third the against claim to entitled several categories within ordinary or administrativ identifyt tofactor a also disputeis the ofvalue duties,administrative courts havejurisdiction to tha personprivate a orentity” “public involving a priva ordinary civil between courts have jurisdiction disputes to settle t commercial to referring When insurance- settle to tribunals special no are There Claimants must bring their actions before the compe o oeat r gemn i rqie fr h enforc the for required penalties. is agreement or covenant No entering thecontract. accepts such facts or circumstances, either expressly or tacitly, after insurer the if or, refers, inaccuracy or non-disclosure the which to circumstances or facts known, have should or known, has contract, Penalties are not enforceable if the insurer, prior to entering into the ne te urgto, subrogation, the Under of personswhoseactionsmighttriggertheinsured’s liability. cases the to apply not does it likewise, spouse; non-divorced or son adopted father, adopting relationship, blood of degree civil second the within line co-lateral or direct in insured the of relative a is loss the for liable party the where events to apply not does Subrogation coverage or to surgical clinical, as pharmaceutical expenses–asprovidedin Article 1140 medical, i.e., except – aspects insurance, monetary personal involving to applicable not is subrogation that provides Code Commercial the of 1139 Article casualty. to the amount paid, in the insured’s rights against those liable for the pays an indemnification shall subrogate, by virtue of the law and up who insurer an that provides Code Commercial the of 1096 Article would be required (Article 1058 of the Commercial C questionsposed bythe insurer, but ananalysis of circumstances determinant for the risk status, rega principle,In policyholders obligedopenlyared to colombia accounts for, p the portion the toequivalent indemnity an pay to is valid, but in the event of a casualty, the insur disclosure or inaccuracy derives from the insured’s non-disclosureinaccuracyor willhavethesame eff the insured’s negligence and also entails aggravati penalty.If there is no questionnaire and the non- Dac Beachcroftcolombiaabogadossas iclg to: insurance &reinsurance 2019 Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the insurer needaseparateclauseentitlingsubrogation? them? dispute? Is there any right to a hearing before a j payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof

vis-à-vis the premium suitable to the actual risk. n lieu in f h isrd isrr become insurers insured, the of he case. In litigations er will only be bound he judge among theamong judge he rdless of the specific settlethecase.The eachparticular case disclosureis due to on of the risk, such e courts. isclosefactsorall error, the contract t performs publicperforms t tent judicial body. eae dsue. disputes. related ects. If thenon-Ifects. remium chargedremium ode). ibid e parties, te mn of ement . ury? rance “jury”. a of mechanism the provide not does system legal Colombian The superior judicialauthority. immediate the before conducted is ruling trial first a of appeal The el s h iseto o dcmns ojcs pae o persons or places objects, involved intheaction. documents, of inspection the as well as properties, movable and ledgers documents, disclose/discover to requested judicially be may action the to non-parties or parties thereof, service before even or complaint the of filing the to Prior the discoveryofwhichmighteventuallyjeopardisethem. which or for reserve legal enjoying documents privileged disclose to documents obliged all disclose to inspection or discovery is ordered. Non-parties to the action obliged are not are the parties The in documents of possession ofpartiesornon-partiestotheaction. inspection and/or disclosure/discovery to enacted seen inthefuture. been have regulations accelerate the administration of justice, of but their effects will only be number a Nevertheless, act ratherexpeditiously. development of the case depends on the incumbent court; i.e., some the as indications, mere are above The only. trials two of consist and as lengthier generally are proceedings jurisdiction Administrative known recourse special the commercial while casación trial, a appeal the jurisdiction, in years civil three to up and trial first the ordinary in years five nearly takes proceeding the in Currently, fails to justify the reasons for his non-attendance, he shall be fined; be shall he non-attendance, his for reasons the justify to fails and appear to reluctant is witness the If parties. the of act any in or witness a final the ruling, courts are entitled to summon of witnesses. The court may call adoption until and stage evidentiary the Throughout as covered those or security professional secrets. national or order public to related documents regarding case the is the Such law. by the by granted or Constitution is reserve a which in cases in except documents, of disclosure withhold to party a allowing regulation no is There instruct, may court the case, a of matter Among the powers available to assess and clarify the factual subject . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcase commonlytaketo 3.2 . Dothecourtshavepowerstorequirewitnesses 4.3 Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin before the Supreme Court of Justice might take one year. one take might Justice of Court Supreme the before ex officio ex only if his name is mentioned in other evidence other in mentioned is name his if only

ex officio ex www.iclg.com or upon request, upon or 79 colombia Dac Beachcroft colombia abogados sas colombia

should the court deem it convenient or if the interested party asks for These types of injunction measures are requested together with the it, the court may request the support of the police to compel the complaint seeking that the court orders them prior to servicing the witness’ appearance. complaint upon the respondent; a claimant must grant a bond, i.e. The Code of General Procedure – Law 1564/2012 – provides that money surety, insurance policy or bank guarantee to secure for evidences to be practised abroad, the use of technical means – compensation of damages caused by the injunction measures in the video conference – is authorised, provided that the opposite party event that the complaint does not succeed. has the right to cross-examination and the court has direct contact with the evidence. 4.7 Is there any right of appeal from the decisions of the In case the evidence cannot be practised through such technical courts of first instance? If so, on what general means, procedural laws allow the court to submit a rogatory letter to grounds? How many stages of appeal are there? colombia the judicial authorities of the country where the examination is to take place or directly commission, by means of exhortation, the As a general principle, rulings entered by first trial courts may be Consul or diplomatic agent of Colombia in the concerned country to appealed. conduct the examination. In civil matters, appeals must be filed in writing at the court which adopted the concerned ruling and within three business days 4.4 Is evidence from witnesses allowed even if they are following its service or, if entered in a hearing, verbally thereat. not present? Following the new Code of General Procedure, the alleged flaws in the judgment must be briefly explained. Should the appeal be In general terms, a witness deposition involves his appearance before admissible, the court will submit the case file to the superior court in the court, in order to allow the other party’s right of cross-examination order to process the appeal, and it has to be sustained thereat. as well as the court’s direct contact vis-à-vis the evidence. Should the first trial court dismiss the appeal, the appealing party may file a remedy of complaint (recurso de queja) seeking that the superior court admits the appeal. 4.5 Are there any restrictions on calling expert Second trial rulings may also be subject to the extraordinary remedy witnesses? Is it common to have a court-appointed expert in addition or in place of party-appointed of casación filed before the Supreme Court of Justice on the basis of experts? specific reasons and provided that the unfavourable ruling exceeds a certain amount which is annually indexed. Such remedy may be Courts are empowered to order independent and impartial expert filed within five days following service of the ruling. opinions ex officio. Additionally, either of the parties may submit In administrative proceedings, the appeal must be filed and their own expert opinions. The opposite party may request the expert sustained before the first instance court within 10 days following to be summoned for cross-examination purposes and/or present service of the ruling. As well as in the civil jurisdiction, should the another expert opinion. No more than one expert opinion may be first trial court dismiss the appeal, the appealing party may file a submitted by each party in relation to the same matter. remedy of complaint (recurso de queja) seeking that the superior The party who submits the evidence must cover all expenses and fees court admits the appeal. related to the expertise. Should the evidence be decreed ex officio, For this jurisdiction, the Colombian Administrative Procedure Code the parties must cover the costs thereof in identical proportions. – Law 1437/2011 – establishes an extraordinary remedy against a single or second instance judgment taken by administrative tribunals, looking for the unification of the national jurisprudence, 4.6 What sort of interim remedies are available from the when such decisions are contrary to previous judgments issued by courts? the State Council, the highest authority of the administrative jurisdiction. The appeal must be filed in writing before the In general terms, as to pre-action disclosure orders, no procedural administrative tribunal, within five days following finality of the mechanism has been provided per se, as court powers are only ruling. enforceable upon formal initiation of the proceedings; i.e., upon filing of the complaint. However, it is feasible that a party which Both in civil and administrative matters and in rather restrictive intends to file a complaint or which is threatened to be sued requests circumstances, it is feasible to file an extraordinary revision remedy the disclosure/discovery of documents prior to the formal initiation against final rulings, to the extent that the conditions provided in law of the proceedings. are satisfied. In civil matters, the remedy may be filed within two years following finality of the ruling; in an administrative dispute, Any documents necessary for the proceedings and derived from the the general term is of one year. However, in both proceedings, there disclosure/discovery will be kept on record as an integral part of the are some exceptions as to the term counting. court file. Imposition of injunction measures aimed at “freezing” the assets is 4.8 Is interest generally recoverable in respect of claims? feasible. If so, what is the current rate? Attachment is an injunction which prevents trading the properties, including alienation thereof; in the case of transactions made in Only if claimed is the court empowered to award interest in favour breach of the seizure, these will have an unlawful purpose and will of the prevailing party. Amounts awarded in the ruling may be produce no effect whatsoever. indexed to adjust them vis-à-vis currency losses. In commercial In turn, seizure involves physical confiscation of the concerned cases, it is feasible to award compensatory or default interest but properties generally by either a third party (previously authorised to these will not be subject to indexation. Compensatory interest be part of a legal list of officers) or by the affected party itself matches bank current interests; that is, the average interest charged depending on the decision of the court, who shall be responsible for as general, consistent and public practice on common credits the custody and management thereof. granted by banks (currently around 20 per cent). The maximum

80 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Dac Beachcroft colombia abogados sas colombia default interest permitted by law is the bank current interest plus 5 Arbitration one-half thereof; however, a lower percentage may be contractually agreed upon. The ruling may be enforced on an executive basis and, therefore, 5.1 What approach do the courts take in relation to non-payment of the award accrues default interest. arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able As to insurance, the law provides penalties against the insurers to intervene in the conduct of an arbitration? If so, on which delay payment of the indemnity. Penalties, consisting of the what grounds and does this happen in many cases? payment of default interest at the maximum permitted rate, are enforceable as from expiration of the legal deadline (one month), Arbitration, as a mechanism for dispute resolution, is well counted as from the demonstration of the loss and its value, without

established under the Constitution and, therefore, must be colombia the insurer paying the claim (Article 1080 of the Commercial Code). acknowledged by tribunals and courts. In general terms, courts do In case of damages, where the insured is a legal entity and the not get involved in arbitration proceedings. The only exceptions amount insured under the policy exceeds 15,000 monthly minimum relate to the event where the parties fail to reach an agreement as to wages, the deadline to pay the indemnity may be extended by designation of the arbitrators, in which case a civil court shall make mutual agreement of the parties, to a term no longer than 60 the relevant designation (Law 1563/2012, Article 14). A judicial business days (Article 185 (1) of the EOSF). intervention is also feasible in view of the challenge of all of the arbitrators (Law 1563/2012, Articles 15 and 17). Likewise, courts 4.9 What are the standard rules regarding costs? Are are in charge of resolving any voidance appeal filed against an there any potential costs advantages in making an arbitral award (Law 1563/2012, Article 46). offer to settle prior to trial?

5.2 Is it necessary for a form of words to be put into a Civil procedural rules provide that the losing party in a judicial contract of (re)insurance to ensure that an arbitration proceeding, incident or appeal is obliged to pay court costs incurred clause will be enforceable? If so, what form of words by its counterparty, provided the demonstration and usefulness is required? thereof, as well as their consistency with the law. The court may refrain from awarding court costs, or may do it partially, in the case Recourse to arbitration to submit disputes to an arbitral tribunal where the complaint is admitted in part. requires the existence of a prior arbitral agreement between the However, in administrative proceedings involving public interest, parties, which may be part of a contract or included in a separate there are no awards costs. document. In the latter case, the document shall state the name of the Court costs encompass expenditures such as notifications, copies, parties and the contract to which it refers. Likewise, it is also possible registrations, experts’ fees and the like, as well as attorneys’ fees; the to enter into a “compromiso” (submission agreement), whereby in the latter are awarded by the court in favour of the prevailing party in case of a current controversy, the parties commit to settle the same line with criteria set out in procedural and administrative rules. through arbitration. Such “compromiso” shall state the parties’ names, the disagreements submitted to arbitration and the ongoing In connection with court costs, there are no benefits for the party proceeding, if applicable without the need to use a pre-stated form. that submits an offer for arrangement or settlement.

5.3 Notwithstanding the inclusion of an express 4.10 Can the courts compel the parties to mediate arbitration clause, is there any possibility that the disputes? If so, do they exercise such powers? courts will refuse to enforce such a clause?

In the civil, administrative and family jurisdictions, as a general rule, in Explicit arbitration clauses are effective without the need of the parties’ disputes involving subjects that can be settled by the parties, restatement of their consent subsequent to the dispute. However, extrajudicial mediation is a pre-requisite to file a claim (Law 640/2001, according to the law, when a party files a complaint before ordinary or Article 35 and Law 1285/2009, Article 13). Nevertheless, some administrative courts, and within the deadlines provided, the defendant actions are excepted from this requirement. For some proceedings, does not invoke the arbitration clause as defence; it is understood that there is also a mediation stage to be carried out within the process the arbitral jurisdiction has been waived and the ordinary courts will be where the parties are encouraged to reconcile their differences. This competent to settle the case (Law 1563/2012, Article 21). also happens in arbitration proceedings (Law 1563/2012, Article 24). If a party fails to attend the extrajudicial or judicial mediation 5.4 What interim forms of relief can be obtained in support hearing and does not justify its absence within the legal of arbitration from the courts? Please give examples. opportunity, he can be fined and such behaviour can be regarded as serious evidence against its claims or defences, depending on the case (Law 640/2001, Articles 22 and 35 (paragraph 1) and Law Arbitrators have the same judicial powers as courts and, therefore, 1564/2012, Article 372 (paragraph 4)). are entitled to order, practise and assess evidence, instruct judicial inspections and discoveries, and decree injunction measures. However, the possibility to settle a case is completely at the discretion of the parties and if an agreement is not reached, there are no legal consequences. 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a 4.11 If a party refuses to a request to mediate, what reasoned award is required? consequences may follow? Pursuant to Article 279 of the General Procedure Code, arbitral Please refer to our response to question 4.10 above. awards must set out the reasons supporting the decision. iclg to: insurance & reinsurance 2019 www.iclg.com 81 © Published and reproduced with kind permission by Global Legal Group Ltd, London Dac Beachcroft colombia abogados sas colombia

Should the Arbitral Tribunal fail to support its decision or if it is or supplementing the award. However, there are some isolated ambiguous, the parties may request, within five days following its cases where, alleging formal reasons, awards have been voided as a adoption, clarification, correction and/or supplementation of the consequence of an in-depth review of the merits of the decision; award (Law 1563/2012, Article 39), but a change in the merits of the strictly speaking, this is not permitted by law. decision is not allowed. Both the award and the court decision on annulment are subject to extraordinary revision remedies, when exceptional circumstances 5.6 Is there any right of appeal to the courts from the listed in the General Procedure Code are verified (Law 1563/2012, decision of an arbitral tribunal? If so, in what Article 45). circumstances does the right arise? Some arbitration awards have been challenged by means of “Acción de Tutela”, which is a special action that protects constitutional colombia Arbitral awards may be appealed through the extraordinary fundamental rights whenever they are harmed or threatened by the voidance remedy, the bases of which are specifically limited to act or omission of any public authority. This kind of action proceeds formal aspects, without affecting the merits of the decision (Law only if it fulfils certain requirements established by the jurisprudence 1563/2012, Article 41). The remedy must be filed within five days of the Constitutional Court. following service of the award or the decision correcting, clarifying

Juan Diego Arango Giraldo Angela María Hernández Gómez DAC Beachcroft Colombia Abogados SAS DAC Beachcroft Colombia Abogados SAS Carrera 7 No. 79B-15 Carrera 7 No. 79B-15 Suite 401, Bogotá Suite 401, Bogotá Colombia Colombia

Tel: +57 1 742 4719 Tel: +57 1 742 4719 Email: [email protected] Email: [email protected] URL: www.dacbeachcroft.com URL: www.dacbeachcroft.com

Juan Diego is an Attorney-at-Law, who graduated from the Angela Hernández is an Attorney-at-Law, who graduated from the Universidad Externado de Colombia with post-graduate studies in Universidad Externado de Colombia with post-graduate studies in both insurance and corporate law from Pontificia Universidad Insurance Law from Pontificia Universidad Javeriana. She has Javeriana. He has vast experience in insurance and reinsurance law, extensive experience in matters involving insurance and reinsurance as he has been giving advice to both reinsurers and insurance law. Her areas of practice also include commercial and civil law. In companies for the past 11 years for which he has been member of the The Legal 500 she has been recommended as a Next Generation firm, acting in complex cases in this area. He also has experience in Lawyer in the field of insurance and reinsurance. the areas of commercial and civil law and litigation and is currently acting in Court in several cases involving insurance companies in Colombia. He has been recommended in The Legal 500 in the field of insurance and reinsurance as a Next Generation Lawyer.

International law firm DAC Beachcroft, with more than 2,200 staff and coverage across the UK, Europe, Asia-Pacific, Latin America and North America. DAC Beachcroft Colombia is specialised in working with international insurers and reinsurers, advising on the full range of claims, as well as litigation, arbitration, corporate, commercial and regulatory issues, and has consistently been recognised as a leader in its field by editorials Chambers and Partners and The Legal 500 for the last five years. Experience and knowledge allow the firm to meet each client’s particular needs and address their problems efficiently.

82 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 15 costa rica

cordero & cordero abogados ricardo cordero B.

1 Regulatory The process is composed of two phases. Phase One is the initial submission by the company to SUGESE containing all the regulatory requirements and information established in Schedule 2 1.1 Which government bodies/agencies regulate of the Authorisation Regulation. In this part of the process, insurance (and reinsurance) companies? SUGESE conducts a detailed and extensive review of all documents and information and requests for clarifications and/or correction of Pursuant to the Insurance Market Regulatory Act (also known as any conflicting issues. Once the company answers all inquiries “LRMS”), the supervising entity with the legal authority to supervise and/or corrects all issues addressed by SUGESE, the company is insurance and reinsurance companies, as well as the insurance granted a conditional authorisation, which completes Phase One. market in Costa Rica, is the General Insurance Superintendency Phase Two is composed of the subsequent steps which include final (also known as “SUGESE”). SUGESE is an independent body, incorporation of the company, deposit by its shareholders before the which operates under the direction of the National Council for the Central Bank of Costa Rica (“BCCR”) of the minimum capital stock Supervision of the Financial System (also known as “CONASSIF”). and verification by SUGESE of all the operative requirements such as physical address, physical and IT security, adequate operative equipment and installations, among others. 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? The legal requirements and procedure for setting up an insurance company in Costa Rica are clearly established pursuant to Accord SUGESE 01-08 Regulation regarding authorisation, registry and As a general rule, foreign insurers are not authorised to write operating requirements for supervised entities (also known as the business directly in Costa Rica. The LRMS establishes that public “Authorisation Regulation”). offering of insurance and/or the realisation of insurance business, is restricted to entities that have been authorised pursuant to the LRMS A new entity can submit a request before SUGESE in order to obtain to do so. Public offering and realisation of insurance businesses is an operating licence either as a personal insurance company (health, identified as promotion, marketing of any sort or by any means, life, rent, accidents), as a general insurance company (property, auto providing information regarding the act of insuring people or goods and other vehicles, aviation, maritime, liability, credit, other), as a or general presentations and commercial intermediation of mixed-use insurance company (both personal or general insurance insurance products. It also includes any acts which imply the company) or as a reinsurance company. activity normally conducted by an insurance company. The requirements are extensive and are explicitly listed in Schedule Notwithstanding the above, there is an exception to the above 2 of the Authorisation Regulation. Some of the requirements general rule, which is established in article 16 of the LRMS, which include a detailed corporate legal structure of the company, final indicates that any person or company may contract trans-border shareholder information (final beneficiaries), a detailed list of the insurance products with foreign insurers from countries that have board of directors’ and key executives’ information and credentials, signed an international commercial or trade agreement. Under this submission of an extensive and detailed business plan which must exception, only the trans-border insurance products expressly listed include the background of the company, desired product lines and in the international commercial or trade agreement may be sold services, sources for funding, desired market sectors and share locally. market, etc. In addition, the company should submit information related to accounting and IT information, projected financial In addition, article 16 also expressly establishes that reinsurance and information, corporate governance information and control systems, its intermediation or brokerage shall be considered an exception to physical and IT security systems, etc. The company shall also the general rule and may be freely contracted by local insurance deposit and keep free and clear a minimum capital stock that will companies with foreign insurers (re-insurers). Thus, foreign vary depending on the type of insurance company it intends to reinsurance companies are not required to register and/or obtain an operate (personal, general or mixed use). operating licence from SUGESE in order to conduct reinsurance business with local insurers.

iclg to: insurance & reinsurance 2019 www.iclg.com 83 © Published and reproduced with kind permission by Global Legal Group Ltd, London 84 costa rica Costarricense del Seguro Social Seguro del Costarricense the by operated is which System Security Social mandatory monopoly) was implemented in 2008 after more than 82 years of a State-owned ohsiae eooi aet, n a a eut te cn freely can they considered result, negotiate thetermsandconditionsforthesecontracts. are a as that and parties agents, economic contracting sophisticated between used be only © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com State-owned a of laws years such as 82 than more monopoly– –after all recent substantive law, including Congress-approved 2008 of July in opened was monopoly market insurance the since terms, general In Ingeneralterms,isthesubstantivelawrelatingto 2.1 approved recently the of scope the within included not are fact in which Rica, Costa in systems insurance compulsory the of 2 Yes,article Arethereanyformsofcompulsoryinsurance? 1.6 under localcompanylaw. officers and directors indemnify to restrictions legal no are There Arecompaniespermittedtoindemnifydirectorsand 1.5 the in provisions the as many are there Insurance Contract Regulatory Act thus, negotiation; without consumer final the by accepted be be to have that to contracts accession considered are contracts insurance most rule, general a As Arethereanylegalrules thatrestricttheparties’ 1.4 cordero &abogados LRMS the of 5 article through evidenced is system legal pro-insured This interests overinsurers’ interest. insureds’favour and protect to enacted been have dispositions and otat, lo nw a jit icsin nuac contracts insurance of discussion types joint some (“ as are there known rule, also general contracts, the to exception an As be abletosold. substance and to order form in registered be shall eventually and SUGESE, by analysis a receive shall contracts insurance of types weakest the party in these type of protect insurance contracts: the final Act consumer. Protection These Consumer the and LRCS the terms that cannot be overridden by these contracts. In essence, both extraneous certain establish laws two these regard, this In contract. rnil. principle. Workers Risk Insurance System (also known as “ known as “ (also System Insurance Accident Vehicle obligatory the (iii) and insurance; of type this offer and operate eventually could company “ as known (also State-owned the by currently offered eventually could company insurance operate thistypeofinsurance. private local any almost Contratos Paritarios Contratos (Re)insurance Claims 2 wih tplts n u-ril c te the c) sub-article in stipulates which , Consumer ProtectionConsumer Act into (allorsome)contractsofinsurance? insurance morefavourabletoinsurersorinsureds? officers underlocalcompanylaw? freedom ofcontractbyimplyingextraneousterms . SOAT hs ril etbihs ht wt rgrs o insurance to regards with that, establishes article This LRMS h cmusr isrne ytm ae () the (i) are: systems insurance compulsory The INS ”) which is only offered currently by or ”), although almost any local private insurance private local any almost although ”), LRMS LRCS ”) . . These types of types These , clearly stipulates that there are several are there that stipulates clearly

as well as all other regulations, accords that restrict the parties’of the freedom restrict that (also known as “ as known (also (also known as “ Instituto Nacional de Segurosde Nacional Instituto Contratos Paritarios Contratos ota proferentem contra RT CCSS ”) which is only LRMS LRCS INS ”); (ii) the (ii) ”); , although ”) as well (this law (this Caja can eus t te nue t mdf te em ad odtos f the of conditions insurance contractorterminatethecontract. and terms the modify to insured the to a request submit either can insurer the unintentional, be to considered is In addition, if the misrepresentation or non-disclosure by the insured the extinguishing misrepresentations orreluctance. 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Isthereapositivedutyonaninsuredtodisclose 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 judicial cases. insured meaning of the terms judge, under scrutiny in favour of the the consumer ( (arbitrator,interpret or claims party resolve always deciding must entity) administrative and/or insurer the doubt, for grounds or terms ambiguous any are there case in and, legislation applicable the by abide must insurers all disputes, and/or contracts reinsurer? insurer? them? misrepresentation ornon-disclosurebytheinsured? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof . hs rnil i apial bt i amnsrtv and administrative in both applicable is principle This ). iclg to: insurance &reinsurance 2019 LRCS specifically indicates that the insured the that indicates specifically LRCS , in case there are cases of costa rica pro- © Published and reproduced with kind permission byGlobal Legal Group Ltd,London odtos f h isrne otat te a elrtv judicial declarative “ as a known (also proceedings then contract, insurance the of conditions and terms the with non-compliance or breach a to related dispute a is it If initiated. being litigation of type the on depend will This this the by insurer withtheintentofcompensation. done above, were payments unless the accidents), person rent, life, contracts Notwithstanding (health, insurance the personal to against apply not paid shall loss. right subrogation amount the the for to responsible limited be to going is subrogation This insurer. the by indemnity an of payment upon Yes, article 49 of the Isthereanautomaticrightofsubrogationupon 2.6 what insured the might beconsideredmaterialornot. from seek proactively to some insurer been the also on burden has there information, disclose to duty positive risks. any assuming to prior insured’sthe to addition in result, a As result, they should ask the insured the correct and specific questions cordero &abogados iclg to: insurance &reinsurance 2019 misrepresentation or case. fraud particular a on information financial relevant and/or calls, phone recorded accident, an of videos as such case, particular a regarding evidence or documents public are these unless documents, of disclosure the request to courts for common not is it result, a As case. their support which documents disclose only may parties the thus information; of disclosure or discovery on rules of sort any include not does system legal Rican Costa The Whatpowersdothecourtshavetoorder 4.1 was case the where courthouse civil the presented andtheeventualappealspresented. case, of type the on can take anywhere from 24 months to four years. This shall depend litigation commercial complications, major no are there Assuming How longdoesacommercialcasecommonlytaketo 3.2 Which courtsareappropriateforcommercial 3.1 iiain gis te tt-we cmay as kon as known involving litigation (also company State-owned “ the against of sort some filing litigation is insured an when is above the to exception only The courts. civil before litigated be shall proceeding judicial Juries arenotvalidinCostaRica. courts. nttt Ncoa d Seguros de Nacional Instituto Litigation –Procedure 4 Litigation–Overview 3 payment ofanindemnitybytheinsurerordoes jury? insurer needaseparateclauseentitlingsubrogation? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof LRCS INS hl b bogt eoe administrative before brought be shall grants an automatic right of subrogation Ordinario o “ or ” INS ”) will apply. This type of type This apply. will ”) ) I tee ae, all cases, these In ”). neetd ate. f o te oslt wl ise witness a issue will Consulate the so, declaration thatwillbeallowedasawrittentestimony. If parties. interested the by sent previously questions answer and Consulate the and before illness appear may they as abroad, lives witness a such if Also, death. exceptions, imminent several are testify. there to present Nonetheless, be must witnesses the that is rule general The it, the court may summon witnesses before the final thei enforcing by powers. Also, in stage the event of an urgent matter evidentiary and the during them Yes, if a party has offered a witness, the courts a the happened duringtheprocess. during Public Notary what of deed notarial a a through faith give appointing to negotiations/attempts by or produce recorded be might will parties the in evidence. For example, by informing the other party that a meeting prepared negotiations/attempts, of course (b) settlement the lawyers, in conducting while produced Nevertheless, by negotiations/attempts. (c) settlement or given litigation, advice of contemplation to relating (a) documents disclosing from withhold to right their regarding party the to extended be may privilege client-attorney the Rica, Costa In ntne o te olwn rsltos 1 a eouin eyn a denying first resolution of a courts 1) the resolutions: of following the decision for the instance of appeal of right a is There the whilst assets procedures areterminated. the preserve to order and in injunctions inspections; temporary deposition; evidence; documentary testimony; interim specific has Rica Costa remedies available: reply to interrogatories; proof of witness; expert of Code Procedures Civil The of source court- primary expert witnessesoverparty-appointedexperts. a these as courts above, by the used be on will experts Based appointed topics. more certain have and on objective expertise more be to deemed usually are experts, which court-appointed of list detailed a has system judicial the Nevertheless, witnesses. expert calling on restrictions no are There . Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowers torequirewitnesses 4.3 Canapartywithholdfrom disclosuredocuments(a) 4.2 . Isthereanyrightofappealfromthedecisions 4.7 Whatsortofinterimremediesareavailablefromthe 4.6 Arethereanyrestrictionsoncallingexpert 4.5 not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? grounds? Howmanystagesof appealarethere? courts? experts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin courts offirstinstance?Ifso,on whatgeneral expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed www.iclg.com re entitled to summon if a party requests costa rica hearing. subpoena r 85 costa rica cordero & cordero abogados costa rica

demand by a party; 2) a resolution deciding on competition; 3) a well as case law, has established that arbitration shall be optional to resolution denying an injunction; 4) a resolution rejecting evidence; the parties involved in an agreement and shall not be used as a way 5) a resolution on sentencing; 6) a resolution approving or denying for insurers to limit an insured’s right to access justice through civil the liquidation of damages and the assessment of costs; and 7) a litigation. Thus, the courts will analyse carefully what type of resolution decreeing a body’s compulsion to perform an action. insurance contract is brought before them and the type of parties Additionally, there is a right to appeal a sentence or final resolution associated with them, in order to be able to determine whether to before the Cassation Court. This appeal may proceed if it is based intervene or not intervene in the conduct of an arbitration if there is on violations of procedures and/or violations of law expressly a valid arbitration agreement. indicated in the new Procedural Civil Code. With regards to contracts that are not deemed accession contracts, the principle of party autonomy will prevail and courts will not

costa rica 4.8 Is interest generally recoverable in respect of claims? intervene in the conduct of arbitration. If so, what is the current rate? 5.2 Is it necessary for a form of words to be put into a Yes, interest is recoverable with regard to claims, specifically when contract of (re)insurance to ensure that an arbitration the party has requested so in a complaint; nonetheless it is not clause will be enforceable? If so, what form of words officially declared by the courts. The current rate is normally agreed is required? between parties, but if it is not, the legal interest rate would be the prime rate for the United States dollar, and the Costa Rican currency There is no specific wording required to enforce an arbitration for the basic interest rate, published by the Central Bank of Costa clause. Notwithstanding the above, it is advisable to include the Rica. name of the arbitration centre that will be used and to state that the parties agree to submit to the regulations of said centre. See question 5.1. 4.9 What are the standard rules regarding costs? Are there any potential costs advantages in making an offer to settle prior to trial? 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the Normally, parties request that their counterpart is condemned to pay courts will refuse to enforce such a clause? the legal costs of the process, and the courts will grant this if the party has acted in bad faith. Legal costs must be evidenced and legal Yes, there is a possibility that courts will refuse to enforce an fees are calculated by the fee rates issued by the Costa Rican Legal arbitration clause depending on the type of insurance contract and Bar Association. The potential cost advantages in making an offer the parties involved. See question 5.1. to settle prior to trial is that the parties might negotiate that each party will assume their own costs and legal fees. 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give 4.10 Can the courts compel the parties to mediate examples. disputes? If so, do they exercise such powers? Interim relief must be requested to the courts by the arbitral tribunal Courts cannot compel parties to mediate disputes. Nevertheless, or the parties involved and there are no limitations regarding the during the process and previous to the evidence stage, parties are forms of relief that can be obtained. summoned to a voluntary conciliation. If the parties are able to reach an agreement, the judicial process will be stopped. 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a 4.11 If a party refuses to a request to mediate, what reasoned award is required? consequences may follow?

If there is a request to mediate and parties refuse to attend it, there Pursuant to article 58 of the Alternate Resolution Conflict Law are no legal consequences. number 7727 (also known as the “RAC Law”), the arbitral tribunal must give detailed reasons for its award, unless the parties have requested the arbitral tribunal to not support their reasoning. 5 Arbitration Also, article 62 of the RAC Law states that, if the parties deem the reasoning is not duly supported, they may request the clarification, adoption or correction of the award. 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able 5.6 Is there any right of appeal to the courts from the to intervene in the conduct of an arbitration? If so, on decision of an arbitral tribunal? If so, in what what grounds and does this happen in many cases? circumstances does the right arise?

As a general rule, the courts respect the principle of party autonomy; Yes, arbitrary awards may be appealed. Pursuant to article 65 of the nevertheless, since most insurance contracts are considered to be RAC Law, any party may file an appeal for annulment within 15 accession contracts (contracts that have to be accepted by the days of the notice of the award. Also, any party may file an appeal consumer without negotiation), recent consumer protection laws, as for review based on the grounds listed in the Civil Procedure Code.

86 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London cordero & cordero abogados costa rica

Ricardo Cordero B. Cordero & Cordero Abogados Edificio Terraforte, 2nd Floor San José Costa Rica

Tel: +506 2201 6640 Email: [email protected] URL: www.corderoabogados.com

Professional Experience: Ricardo is a Partner at Cordero & Cordero costa rica Abogados, mainly focused on Financial-Insurance Law, Corporate Law and Foreign Investment. In these areas he has: acted as legal counsel to local and international financial institutions on project finance transactions, international loan facilities, trust structures, etc.; has assisted foreign companies investing and doing business in Costa Rica successfully set up and operate; and has acted as legal counsel to several regional companies investing in insurance-related matters. After completing an LL.M. (Master’s Degree Program) on International Legal Studies at Georgetown University Law Center, he worked as a Foreign Associate at the Washington D.C. offices of Thompson Hine LLP (2005 to 2006). He the co-authored “Doing Business in Costa Rica: A Legal Overview” San José, Costa Rica, 2006, as well as other articles on current legal topics. Ricardo is recognised by international legal directories such as Chambers & Partners as a recommended attorney in the areas of Banking & Finance and Insurance Law. In addition, he is referred to by the U.S. Department of Commerce’s Buyusa.gov agency in Costa Rica, CINDE, as well as the U.S. Consulate in Costa Rica. Education: Georgetown University Law Center; LL.M.; 2005. Universidad de Costa Rica; Licenciado en Derecho; 2002. Honorary Distinction for thesis: “International State Responsibility for Acts of Private Individuals”. Georgetown University Law Center; Foundations of American Law; 2004. Team Captain, Philip C. Jessup International Law Moot Court Competition. Professional Associations: Costa Rican Bar Association. American Bar Association. Inter-American Bar Association. Costa Rica – American Chamber of Commerce. Languages: Spanish and English.

Cordero & Cordero Abogados is a full-service law firm that specialises in Business and Financial Law in Costa Rica. Among our main areas of practice are: Banking & Finance; Corporate and Contract Law; Foreign Investment; Real Estate; Insurance & Reinsurance; Mergers & Acquisitions; Civil Litigation Practice; Intellectual Property; Labour & Immigration; Energy; and Information Technologies & Telecommunications. The firm, established in 1940, currently has offices in San José and Guanacaste, and has been ranked by international directories such as Chambers & Partners, ILFR and The Legal 500 and is currently referred to by the U.S. Commercial Service as well as other regional bar associations. Cordero & Cordero Abogados is a member of the prestigious International Lawyers Network (www.iln.com), an association of 91 high-quality, full-service law firms with over 5,000 lawyers worldwide.

iclg to: insurance & reinsurance 2019 www.iclg.com 87 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 16 Denmark anne Buhl Bjelke

Bech-Bruun law Firm P/s Henrik Valdorf

1 Regulatory A foreign insurance undertaking that has been granted a licence in another Member State of the European Union (EU) or the European Economic Area (EEA) is allowed to carry out insurance activities in 1.1 Which government bodies/agencies regulate Denmark (i) on a cross-border basis immediately after the Danish insurance (and reinsurance) companies? FSA has received notification from the supervisory authorities of the home country, or (ii) through a branch two months after the The Danish Financial Supervisory Authority (FSA) is responsible Danish FSA has received notification from the supervisory for supervising the financial sector, including (re)insurance authorities of the home country. companies. Foreign insurance undertakings outside the EU and the EEA cannot The Danish FSA governs the legislation of regulatory insurance law. rely on a licence from their home country, and in order to become an insurer in Denmark, they will have to establish an insurance company The most important task of the Danish FSA is supervision of solvency, or branch in Denmark and apply for a licence with the Danish FSA. i.e. monitoring whether (insurance) companies have adequate own funds to cover their risks. In addition, the Danish FSA supervises that insurance companies comply with the applicable legislation and 1.3 Are foreign insurers able to write business directly or operate in accordance with honest business principles and good must they write reinsurance of a domestic insurer? practice within the field of insurance. 1.3.1 Foreign insurers and reinsurers within the EU or the EEA

1.2 What are the requirements/procedures for setting up a (Re)insurance companies from other EU or EEA countries may new insurance (or reinsurance) company? carry out (re)insurance business in Denmark on either an establishment or a freedom-of-services basis without the need for a licence from the FSA; cf. question 1.2. The insurance company is Pursuant to s. 11(1) of the Financial Business Act (consolidating act required to observe Danish good business practice rules, consumer no. 1140 of 26 September 2017), undertakings that carry out protection regulation and certain insurance contract requirements insurance as well as reinsurance activities shall be licensed as that are contained in, for example, the Insurance Contracts Act. (re)insurance companies. The licence shall state the classes of insurance which it covers. The licence is granted by the Danish 1.3.2 Foreign insurers and reinsurers from outside the EU and the FSA. EEA Undertakings intending to mediate insurance products (including (Re)insurance companies from outside the EU and the EEA are not sales and marketing) have to be registered according to the allowed to carry out insurance business in Denmark. To be able to following. write (re)insurance business covering risks situated in Denmark, the insurance company is required to set up an insurance company or The Danish FSA operates with three different insurance registers: branch in Denmark and apply for a licence with the FSA. (a) The FSA insurance and reinsurance broker register – There are limited possibilities for non-admitted insurers to cover companies mediating (re)insurance products as an Danish risks on a non-solicited basis. It is not illegal under Danish independent broker are required to be licensed and to register. law to procure insurance coverage for Danish risks from a non- (b) The Danish Insurance Association’s insurance agency admitted insurer. The insurers are, however, not allowed to actively register – insurance agencies or management companies market their insurance services in Denmark without a licence. mediating insurance products on the basis of an agency Further, it is not allowed, on a commercial basis, to facilitate or agreement with an insurance company or a branch of an EEA assist in such procurement. insurance company are required to register. (c) The FSA insurance agency register – insurance agencies or management companies mediating insurance products on the 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms basis of an agency agreement with an EEA insurance into (all or some) contracts of insurance? company on a cross-border basis are required to register. Further, sub-agencies or management companies mediating Insurance activities are subject to mandatory Danish laws on good insurance products on behalf of an insurance agency are business practice rules, consumer protection regulation, etc. required to register.

88 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London eas i wud osiue nuac atvte. oee, such However,declaration maygiverisetoquestionsaboutlegalcapacityandtax. activities. insurance officers, constitute and would it directors because indemnify to allowed not are companies certain a to the that literature legal in concern insurance a as raised been not has it extent, may liability declaration officers’ such & directors’ if substitute Even indemnification. of declaration not but permitted, is without it controversy, to indemnify directors and that officers by issuing a indicates however, literature, a legal whether of Danish question officers. and directors indemnify to the permitted is company regulate 14 not of 1089 does no. 2015) act September (consolidating Act Companies Danish The a on binding management. not is discharge a shareholder However, meeting. general annual the to known are that matters concerning management the aaeet s-ald icag fr ciiis icoe a the at meeting. 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Ingeneralterms,isthesubstantive lawrelatingto 2.1 . What remediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 ICA. (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosure bytheinsured? reinsurer? insurer? undertakings inDenmark. aircraft tothird-partyproperty. third-party property. www.iclg.com misrepresentation, cf act is not binding not is act . s. 95(2) of the of 95(2) s. . Denmark 89 Denmark 90 Denmark cuae nomto be dslsd t h pit n ie of time in point the at contracting; disclosed been had contract information insurance the accurate into entered have not would insurer the that or material was information particular the that demonstrate is insurer can the insurer the unless contract insurance the under bound generally information, false provided negligently of case In insurer mayterminatetheinsurancewithoneweek’s notice. disclosure, ofareinsuredwillrenderthereinsurancecontractvoid. non- including misrepresentation, of fraudulent which to according case in 2016), March 2 of 193 no. act (consolidating Contracts Act Danish obligations insurer’s When it comes to reinsurance, the matter is governed by s. 30 of the the and misrepresentation. insured’s the Additionally,regulate ICAthat the provisions of number a contains © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com the districtcourts regardlessofthevaluedispute. court cases, all including commercial insurance disputes, commence in rule general a as and Denmark, in courts district 24 are There In Denmark,nocourtsarespecialised ininsurancedisputes. Whichcourtsareappropriateforcommercial 3.1 the insured. towards have may tortfeasor the obligation contractual any or law law,namely,tort Danish of standards general the to according loss is insurer required to substantiate that the the tortfeasor is tortfeasor,liable for the damage the or from insured the to paid amount the insurer an 2018), tortfeasor.for the recourse with claim relationship to legal order In August the 24 in insured Act the of status Damages of legal the into subrogates for automatically 1070 Liability no. Danish act the of (consolidating 22 s. to According Isthereanautomaticrightofsubrogationupon 2.6 was incorrect. application upon given information the that knowledge insured’s the to comes it if or policy the in specified is that risk in change a obligation to disclose information, unless the confirmation concerns any under not generally is insured the period, contract the During the by insurer areansweredtruthfully. asked questions all if disclosure of duty his fulfilled have out, filled has signed she and sent the application. or In general, the insured is deemed he to until faith good show must insured The has ageneraldutytodisclosematerialfactsthe(re)insurer. According to principles of Danish law of obligations, the (re)insured Isthereapositivedutyon aninsuredtodisclose 2.5 not was information false if as provided; liable is insurer the false, was given information the that know to the ought nor knew if neither insured i.e. faith, good in information false provides insured the If Bech-Bruun lawFirmP/s 3 Litigation – Overview Litigation–Overview 3 jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes them? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof cf . s. 5(1) of the ICA. In case of general insurance, the insurance, general of case In ICA. the of 5(1) s. . cf . ss6–10oftheICA. period variesaccordingtothedistrictcourt. final a where The months. 15–16 approximately is settlement, out, carried been has hearing or judgment by decided cases civil in Denmark in the first six months of 2018, the average casework time of Courts the by published statistics recent most the to According (a) Persons bound by professional secrecy, such as ministers of ministers as secrecy,such professional by bound Persons (a) Administration ofJustice Act. Danish the in regulated are which statements witness as limitations same the to subject rule, general a as is, documents of Disclosure the after requested be only can disclosure commencement ofacaseorthetakingevidencebycourt. for order court A decides to draw an adverse inference on the evidence from that fact. party’s A have a prejudicial effect on the case, including the risk that the court enforced. be may disregard of and a court order to produce documents or information may non-party the upon binding A court order directed to a non-party for disclosure of information is to prove. intended are documents the what explain and specificity reasonable with documents the identify shall disclosure requesting party The documents areofsignificancetothecourt’s ruling. produce specific evidence, e.g. documents, if the court finds that the However, the court can, upon request, order a party or a non-party to which evidencetheywishtoadduce. As a general rule in civil law action, the parties are free to determine . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcase commonlytaketo 3.2 only existincriminalcases. Jury hearings do not occur in civil cases, e.g. insurance disputes, but complaints boardmaybebroughtbeforetherelevantdistrictcourt. the by decision Any individuals. private by out taken insurances concerning complaints considers only board complaints the main rule, a As Board. Complaints Insurance the named Growth and Business for Minister Danish the by private authorised Danish board a complaints exists there law, of court a being not Although to thehighcourtifcaseconcernsaquestionofprinciple. request – refer a civil case, such as a commercial insurance dispute, In special cases, the district court can – by its own initiative or upon . Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin to advicegivenbyitslawyer. relating documents disclosure from withhold can party a that give to the course of the exercise in of demanded their functions. knowledge This their also implies to be come having matters not about court evidence must counsels, lawyers, religious and defence other mediators or doctors, Church medical State communities, Danish the of religion iclg to: insurance &reinsurance 2019 Denmark © Published and reproduced with kind permission byGlobal Legal Group Ltd,London icmtne cuig ob aot h epr’ impartiality, expert’s the about including whenan expertisinsomewayconnected toaparty. are doubt there when causing expert court-appointed circumstances a as serve may one No orderthepolicetotakewitnessintocustody. imposeacontinuousfineonthewitness;and ■ orderthewitnesstopaycostsoccasionedbywitness; ■ orderthepolicetobringwitnesscourt; ■ finethewitness; ■ ■ a without answer to refuses lawful excuse,thecourtmay: or court attend to fails witness a If give evidence byuseofvideocommunicationequipment. to is abroad located or resident is who witness a that decide may court the adequate, and appropriate deemed if Furthermore, not are to s.297oftheDanish Administration ofJustice Act. statements witness Written common, but may be allowed under certain circumstances, pursuant hearing. final the before given be shall evidence the that decide can court the cases special As a general rule, witnesses give evidence at the final hearing, but in witnesses privileged. the are circumstances limited in Only evidence. their on examined witnesses of fact; thus such witnesses must attend trial and be cross- no. all on evidence give to duty a imposes 2018) November 14 of 1284 act (consolidating Act Justice of Administration Danish The produced inthecourseofsettlementnegotiations. documents its disclosure from withhold can party a Accordingly, Society Law and Bar Danish the for Conduct of Code The (c) There is no privilege rule specifically governing the question (b) Bech-Bruun lawFirmP/s iclg to: insurance &reinsurance 2019 in 2017, in the Danish Administration of Justice Act which entered into force expert and opinions provision However,new a limited. is hand, other the on witnesses, expert party-appointed of application The due totheirsignificantevidentialvalue. appraisal by court-appointed experts, is widely present in civil cases an on based is which opinions, expert and reports expert of use The Arethereanyrestrictionsoncallingexpert 4.5 Yes; Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 cf give evidenceeitherbeforeoratthefinalhearing? experts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed not present? ayr s hwvr pritd o umt n disclose and submit to permitted information concerninghisownclient’s settlementoffer. however, is, lawyer adjudicating party.opposing the of consent express the without body the The to offer settlement that divulge or submit not must party opposing the of behalf on acting lawyer the offer,settlement a makes resolution dispute other or tribunal case, court ongoing an during or to prior party a if that states order, whichinsomecasesmaybeappealed. not be disclosed. Ultimately, it is up to the court to decide by only, implying that, as a general rule, such documents should may courts use in-house for that and confidential as suggests documents such regard law case Danish of contemplation but in litigation, prepared documents of disclosure of . question4.3. cf . s.209a,invitestheirusetoagreater extent.

eod hs tee r seil ue ealn te rsrain of preservation evidence inthecaseofinfringementintellectualpropertyrights. the enabling rules special are there this, Beyond later coverageotherwisewillbesignificantlyreduced. of prospect the that assumed be may it that and claim, the for made otis w tps f nei rmde: tahet ( Act attachment remedies: Justice interim of of types two Administration contains Danish the speaking, Generally In acivilcase,interest mustbeclaimedinorderto awarded. a year. takes Court Supreme the or court high the to appeal an average, On be must courts high appealed withinfourweeksfromdeliveryofthejudgment. and courts district the by made Judgments general publicimportance. of questions concerns judgment a if leave a such grant may Board Permission Appeals Danish The Court. Supreme the i.e. instance, third the to appeal second a to leave for Board Permission Appeals Danish the to submitted be must application an court, high the to appealed then and level court district at heard initially was case a If of righttotheSupremeCourt. Additionally, first instance high court judgments may be appealed as Denmark. Eastern of Court High the to or Denmark Western of Court High the to appealed be may courts district the by made judgments Thus, appeal therulingofonecourttoahigherinstance. to chance one have generally case a to parties the that means which The Danish legal system is based on the so-called two-tier principle, ot i ti rgr. h fnl loain f h epr’ fe is fees expert’s the of decided bythecourtaspartofcourt’s allocation overallcostsallocation. final The regard. this in costs the for liable is hearing final the attend to summoned be to expert the requested having party The questions. its of answering the to attributable is which costs the of portion the for liable also is party ( The party having requested the court to commission an expert report prohibitory ormandatoryinjunctions( Whatsortofinterimremedies areavailablefromthe 4.6 . Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 h ue f tahet eurs ht o xcto ( execution no that requires attachment of use The attachment. the by covered assets the of dispose to unable debtor the making Additionally, the court may order attachment, i.e. a “freezing order” will belostifthepartyhastoawaitafulltrial. the of right his enforce to granting party the of ability the the that (3) necessitates and injunction, party opposing the of conduct it make the that (2) sought, is injunction mandatory or prohibitory a of way or prove by protection which must for right the holds injunction party the that (1) plausible the for applying party The or toleratecertainactions. doing from refrain do, temporarily to relationships legal private to the of parties as capacity their representatives in municipalities and regions state, Danish and individuals private order injunction, mandatory or prohibitory may,a court of the way request, by Upon syn og skøn og syn courts? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral ) is liable for the costs involved. However, the other the However, involved. costs the for liable is ) forbud/påbud www.iclg.com Denmark ). udlæg arrest cn be can ) ; and ); 91 Denmark 92 Denmark

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com arbitrators. the an of appoint challenge arbitrator. party’s to a on decide courts can courts the the Furthermore, request may party any constituted, successfully not is tribunal arbitral the Additionally,if measure ofprotectionorforenforcement, e.g.attachment. the courts may, at the request of a party, grant an order for an interim arbitration, to dispute the submit to agreed have parties the if Even during anarbitrationincertaincases. may,courts The jurisdiction. their of however,courts the intervene arbitration enforce and clauses. recognise As a general rule, a valid arbitration courts agreement will deprive Danish the Generally, Whatapproachdothecourtstakeinrelationto 5.1 This isnotapplicable; Ifapartyrefusestorequestmediate,what 4.11 a negotiate to parties the compel to settlement orotherwiseparticipateinmediation. powers no has court the During the course of the case, the court may mediate the dispute, but Canthecourtscompelpartiestomediate 4.10 costs ofthesubsequentpartprocess. the for party unsuccessful the compensate must party opposing the party,that to offersettlement trial, a to with prior connection in e.g. offeredhas party unsuccessful the If due is what party opposing the if thepartysucceedsinlawsuit. party must therefore be prepared to bear parts of his own costs, even are awarded discretionarily on the basis of the amount in dispute. A reports, etc. are covered in full, whereas legal expert fees, i.e. with lawyers’connected fees, costs and fees court only that being reason In reality, the successful party’s costs are only partly reimbursed, the costs connectedwiththelawsuit. all for party other the reimburse must party unsuccessful the rule, the of part As closed. been judgment, the court awards costs to the winning party. has As a general case the until a least with at connected costs lawsuit, and expenses own its bear must party A legal (iii) fees. and etc., translations, fees, witness reports, expert e.g. evidence, preserving including litigation, the with connected costs The costs connected with a lawsuit in Denmark are (i) court fees, (ii) Whatarethestandardrulesregarding costs? Are 4.9 of Bank an addition of8percent with Central cent, per the 0.05 currently to rate, lending corresponds official Denmark’s rate interest current The Bech-Bruun lawFirmP/s Arbitration 5 offer tosettlepriortrial? what groundsanddoesthishappeninmanycases? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan per annum cf . question4.10. . o nue h efreblt o a abtain lue te Danish the Institute of Arbitration recommendsthefollowingstandardclause: clause, arbitration an of enforceability the ensure To whatever reasonshallbesubjecttoarbitration. for them between arise ever may that dispute future any that agree a to limited Consequently, be relationship. validly legal cannot defined parties the must clause arbitration an valid, be contract, to However, (re)insurance the of wording the including thearbitrationclause. choose to free are parties the contract, of freedom of principle the to According No. the partieshaveagreedotherwise. is obliged to state the reasons upon which the award is based, unless Danish tribunal the arbitral Arbitration of the 31 Act, s. to Pursuant Consequently, a party may, courts frominitiatinginterimremedies. the fact that the dispute is to be settled by arbitration does not bar the if the parties have agreed to submit the dispute to arbitration. Thus, even enforcement for or protection of measure interim an for order party,an a grant of request may,the courts at the 2005), June 24 of 553 no. act Danish (consolidating Arbitration the Act to According a of case dispute arosewillnotbebindingontheconsumer. in However, the before concluded agreement arisen. arbitration an contract, has consumer dispute a after both agreement and arbitration before an into enter may parties Generally, answer toquestion4.6above. the see please law, Danish in remedies interim of elaboration For the with accordance in injunction Danish Administration ofJustice Act. mandatory or prohibitory a . Isitnecessaryforaformofwords tobeputintoa 5.2 for setting asideanarbitralaward(seequestion5.6). application an on rule to jurisdiction have courts the Finally, tribunal, andreviewthedeterminationofcostsit. arbitral the of jurisdiction the on rule may courts the requested, If . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 Notwithstandingtheinclusionofanexpress 5.3 is required? reasoned awardisrequired? examples. courts willrefusetoenforcesuchaclause? clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive arbitration clause,isthereanypossibilitythatthe when suchproceedings are commenced.” by The Danish Institute of Arbitration and in in force at the time Arbitration adopted procedure of arbitration of rules the Institute with accordance Danish The by administrated this existence, with the validity or termination thereof, shall be settled by arbitration regarding connection disputes in any or including of contract, out arising dispute “Any iclg to: insurance &reinsurance 2019 inter alia

, obtain an attachment order or

Denmark © Published and reproduced with kind permission byGlobal Legal Group Ltd,London (b) the party making the application was not given proper notice proper given not was application the making party the (b) the or capacity, lacked agreement arbitration the to party a (a) An arbitralawardmaybesetasideif: arbitral an award. aside setting for application an on rule to jurisdiction have courts the courts. Act, Arbitration the Danish the to to appealed pursuant However, be cannot and final is award arbitral An Isthereanyrightofappealtothecourtsfrom 5.6 Bech-Bruun lawFirmP/s iclg to: insurance &reinsurance 2019 solutions to our clients, embracing all of our business areas. Our goal is to strengthen our clients’ businesses and help them outperform their outperform them help and businesses clients’ our strengthen to is goal competitors. Our customise we areas. business, business the our in of experts all experienced embracing and clients, recognised our most to the solutions of some and employees talented 500 than more of help the With Danish the of section large a serve we services, of range wide corporate sector,our theDanishpublicsectoraswellinternationalenterprises. With services. specialist offering firm law market-oriented a is Bech-Bruun within insurance lawby individual” “Leading a as admitted was she later years few A Denmark in Berlingske Nyhedsmagasin’s “Talent 100” at the age of 35. illustrated by her being is admitted to which the list expert, of young legal talents recognised of corporate a was Anne age, young a at Even liability, professional on D&O liabilityandproductaswellinsurancecover. cases several conducted with conviction has she great and Court, Supreme Danish the including courts, the before cases many argued has and litigator special experienced an is Anne has also She regulatory include mediation. services knowledge offinancialsectorregulation. insurance advisory and Her law insurance such. as industry the for opportunities and challenges commercial the on focusing abroad, and Denmark in companies insurance life and general advises Anne acknowledged expert. an is she and expertise, of field separate her as law insurance regulatory and corporate established has Bjelke Buhl Anne f h apitet f n rirtr r f h arbitral the of or arbitrator an of proceedings; appointment the of said agreementisvoid; decision ofanarbitraltribunal?Ifso,inwhat circumstances doestherightarise? The Legal500 R: www.bechbruun.com URL: [email protected] +4572273450 Email: Tel: Denmark 2100 CopenhagenOE Langelinie allé35 Bech-Bruun LawFirmP/S Anne BuhlBjelke . f h aad s aiety otay o h pbi plc in months ofreceivingtheaward. policy public the to An application for contrary setting aside an award must be made within three manifestly is award the (f) settlement of capable not is dispute the of subject-matter the arbitral the or (e) tribunal arbitral the of composition the (d) not or by contemplated not dispute a with deals award the (c) results inefficient andresult-orientedadvisoryservices. insight legal and experience his with combination in which approach, As a legal adviser, Henrik is appreciated for his analytical and strategic has he years cases concerningprojectliabilityintheconstructionsector. recent In and sector turbine wind issues. the in cases substantial numerous conducted coverage and damages, law of construction law the and liability, professional liability, product law concerning cases in particularly insurance on advises also Henrik for courts, arbitration instance inShanghaiandXiamen. Chinese an of is number He a at arbitrator team. accredited Resolution Dispute & Insurance Bech-Bruun's of head was he years several for and 1986, in partner a became Henrik of thembeforetheDanishSupremeCourt. many proceedings, arbitration and legal countless conducted has and Henrik Valdorf is a highly sought litigator in the area of commercial law Denmark. by arbitration;or parties orwiththeDanish Arbitration Act; the of agreement the with accordance in not was procedure the of scope the beyond submission toarbitration; matters on decisions contains or arbitration, to submission the of terms the within falling R: www.bechbruun.com URL: [email protected] +4572273577 Email: Tel: Denmark 2100 CopenhagenOE Langelinie allé35 Bech-Bruun LawFirmP/S Henrik Valdorf www.iclg.com Denmark 93 Denmark chapter 17 england & wales Jon turnbull

clyde & co llP michelle radom

1 Regulatory insurance-related regulated activities are the ‘effecting’ (i.e. entering into) and ‘carrying out’ (i.e. performing) of contracts of insurance. 1.1 Which government bodies/agencies regulate For regulatory purposes, insurance business is divided into 10 insurance (and reinsurance) companies? classes of long-term (life and related) business and 18 classes of general (property, liability, guarantee, etc.) business. Separate A new regulatory regime was introduced in the UK on 1 April 2013. permissions from the PRA must be obtained for each class of The Financial Services Authority (FSA), previously the centralised business being underwritten. regulator for all financial services, was replaced as regulator by two Lloyd’s (a specialist insurance market) is also subject to prudential new regulatory bodies: regulation by the PRA and conduct regulation by the FCA, as are ■ the Prudential Regulatory Authority (PRA); and Lloyd’s managing agents. Lloyd’s members’ agents and Lloyd’s ■ the Financial Conduct Authority (FCA). brokers, as well as other insurance brokers, are regulated by the FCA alone. The PRA is responsible for the prudential regulation and supervision of insurers, deposit-takers and major investment firms in the UK. The PRA has three statutory objectives: 1.2 What are the requirements/procedures for setting up a ■ a general objective of promoting the safety and soundness of new insurance (or reinsurance) company? the firms it regulates; ■ a specific insurance objective of contributing to the securing To establish a new (re)insurance company, an authorisation of an appropriate degree of protection for those who are, or application must be made to the PRA for permission to carry out may, become policyholders; and regulated activities under Part 4A of the FSMA. This must include: ■ a further objective to facilitate effective competition. a regulatory business plan; financial projections; details of financial The FCA is responsible for the conduct of business regulation for all resources; details of systems, controls and compliance arrangements; financial institutions (as well as the prudential regulation of and details of personnel, including key individuals who will be companies not regulated by the PRA). The FCA has a strategic performing ‘controlled functions’, and of the controllers of the objective, to ensure that relevant markets function well, supported applicant. It must also contain an address in the UK for service of by three operational objectives: any notice or other document under the FSMA. The PRA leads and manages the application process, coordinating with the FCA. ■ to secure an appropriate degree of protection for consumers; The PRA assesses applicants from a prudential perspective, and the ■ to protect and enhance the integrity of the UK financial system; and FCA from a conduct perspective. In either case, the relevant regulator will assess whether, if authorised, the applicant would ■ to promote effective competition in the interests of meet the relevant Threshold Conditions at authorisation and on a consumers. continuing basis. (Re)insurance companies and Lloyd’s entities are ‘dual-regulated’ The Threshold Conditions constitute the minimum requirements for firms. They are authorised and prudentially regulated and becoming and remaining authorised. The Threshold Conditions that supervised by the PRA, as well as being regulated by the FCA for applied under the old regime have been changed and responsibility conduct purposes. (Re)insurance intermediaries, on the other hand, for them allocated between the PRA and the FCA. are regulated solely by the FCA. The Threshold Conditions relevant to (re)insurers include The PRA and the FCA have a statutory duty to coordinate the requirements as to: legal status (being a body corporate, a registered exercise of their respective functions under the Financial Services friendly society or a member of Lloyd’s); location of offices; and Markets Act 2000 (FSMA). As required by the FSMA, the PRA conduct of business in a prudent manner, ensuring among other and FCA have entered into a Memorandum of Understanding things that appropriate financial and non-financial resources are setting out their respective roles and how they intend to comply with held; suitability, involving an assessment of whether the applicant is the obligation to coordinate the exercise of their functions. fit and proper to be an authorised person, including being generally Authorisation from the PRA is required under the FSMA to carry cooperative in the provision of information to the regulators and out ‘regulated activities’ in the course of a business. The key ensuring that those who manage the applicant’s affairs have the

94 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London compliance functions. certain of respect in PRA the by approved otherwise not directors hog a aet n h U) ihu atoiain uls their (unless authorisation home country benefits from a relevant bilateral treaty with the EU). without UK) the in agent an through (or UK the within from activities insurance on carry to able be not would EEA the outside is office head whose (re)insurer foreign A UK wherethesearerequiredinthe interestsofthegeneralgood. the into passporting (re)insurers on requirements additional impose insurance application must be made to the For FCA. The regulators are entitled to UK. an however, regime, the passporting the use of, to seeking intermediaries out or (re)insurance into, by passport applications to on companies leads PRA The reinsurers. to insurance Directives. These arrangements have now been extended the with accordance in and activities permitted comprising UK, the EEAthe to consent in services provide or branch a establish to firm receives notice from the EEA Home State regulator that it has given PRA The 2019. March of end the at Union European the leave to an of ‘passport strength so-called regime’). the This the position is likely to change after (under the UK is scheduled on State Home directly their in UK authorisation the in business insurance FCA-controlled significant influence functions ( core part of the approval process. There is, in addition, a number of a form Interviews soundness. financial and capability competence, actuary functions. PRAThe individual’sthe assess will probity, with-profits reputation, or function actuarial the of head the insurer, FCA. life a of the case the in and, chairman, or the functions, executive senior PRA the other executive, chief to the include SIMR the designated by covered Functions is function on the depending FCA, whether the or PRA the either by approved be must Individuals carrying out certain functions in relation to a (re)insurer Managers Insurance ( Senior Regime new the with companies insurance run who individuals of regulation the changed also has II Solvency implemented intheUKasof1January2016. the public. The project was subject to some delay, but and has now been supervisors Assessment. to disclosures Solvency for requirements and contains III Pillar Risk Own an of completion regular including management, capital and risk their for and governance II Pillar corporate their for standards minimum meet to (re)insurers requires liabilities. market and assets a valuing out for sets framework consistent and requirements quantitative covers capital I Pillar risk-based new, 2016. to January 1 from effective pillars three on based subject requirements becoming (re)insurers UK in resulted (re)insurers, EU for requirements solvency regulatory the to reform major a involved which project, II Solvency EU The PRA Handbook. the and FSMA the in out set requirements capital the to pursuant resources financial adequate demonstrate to able be must Insurers business of a businessmodelsuitableforitsregulatedactivities. complexity or nature organisation;having offeredbusiness and products and undertaken, the of because supervision to act with probity; ensuring that there is no impediment to effective expected be may and acted have and experience and skills requisite clyde &collP iclg to: insurance &reinsurance 2019 European Economic Area ( the in elsewhere officeis head whose companies insurance Foreign business isnotcarriedoutfromwithintheUK. insurance provided authorisation, without UK the in risk a cover a regulated activity in the UK without authorisation. It is possible to Under section 19 of the FSMA, it is an offence for a firm to carry out Areforeigninsurersabletowritebusinessdirectlyor 1.3 must theywritereinsuranceofadomesticinsurer? SIMR hvn cm it fre n Mrh 06 2016. March 7 on force into come having ) EEA ) are currently permitted to conduct SIFS ), which cover to performisanullity. public policy is unenforceable, and a stipulation to which is impossible contrary is which policy insurance an in condition A contract. so of freedom of concept English basic the with inconsistent be would be may policy this However, a unenforceable. be in to as unreasonable stipulation or capricious a that suggested been has It to alimiteddegree,innon-consumercontracts. reasonable time. It will a be possible to contract out of within this provision, claims valid pay will insured every the of that term contract implied insurance an it made that 2017) May became 4 (which on section effective a limited 2015 Act Insurance in the to intervene added 2016 to prepared Act Enterprise The unfairness. perceived correct are to circumstances Parliament and Courts K n i te E t a au seiid n h Prudential the in specified value a to EEA Sourcebook forInsurers( the in and UK the in localised assets admissible have must it reinsurer, pure a not an authorised UK representative. In the case of an applicant who is appoint and situated is office head its where country the of law the for requirements usual the authorisation, the to (re)insurer must be a body corporate addition formed under in to order authorisation, in branch, obtain a of case the In required. be will FSMA the establishing a subsidiary. In or each case, permission under (re)insurer,Part 4A of the of branch a up setting by achieved be can This ( Providers and Distributors for the Fair Treatment o writing before the policy is concluded. The FCA’s iblte icre i uscesu dfne f rmnl r civil or criminal of proceedings (orunsuccessful applicationsforrelief from liability). defence unsuccessful and in FCA), incurred the penalties, liabilities as (such criminal bodies are regulatory by exceptions imposed only penalties The in scheme. occupational incurred an pension of liabilities trustee as and role director’s end; the with this connection to parties Insurance Officers’ third & by brought proceedings (covering both of legal costs and damages) and may take out Directors’ respect parties, in may third to including company incurred A liabilities against: directors liabilities. indemnify such against insurance maintain (s)he is a director. However, a company is permitted to take out and default, negligence, from breach of duty or breach of arising trust in relation to the company of liability which any against director a Pursuant to the Companies Act 2006, a company may not indemnify . Arethereanylegalrulesthatrestricttheparties’ 1.4 . Arecompanies permittedtoindemnifydirectorsand 1.5 ( Busines ofFCA’s ConductInsurancethe addition, In and cancellationfeesshouldnotbedisproportionatelyhigh. prominent and transparent be must exclusions example, For 2015. the Consumer Rights Act 2015, which came into effect on 1 October by introduced were provisions Further consumer. the of the detriment to obligations, and rights individually parties’ the in been imbalance significant have a cause they if not unfair as regarded be will therefore will and negotiated terms such because business of terms standard on formed are contracts when taken be must care the purposes of the Regulations will be deemed to be void. Particular for unfair are Terms which 1999. Regulations Contracts Consumer Unfair Termsthe of in virtue by consumer a and insurer an between concluded contracts in unfair be may terms contract, any with As RPPD ICOBS into (allorsome)contractsofinsurance? officers underlocalcompanylaw? freedom ofcontractbyimplyingextraneousterms ) includes guidance on product design and governanc ) details information which must be provided to con INSPRU ). england &wales www.iclg.com f Customers Guide Responsibilities of s Sourcebook s sumers in e. 95 england & wales 96 england & wales © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com als Act This Scotland. or Wales and England of law mat for whichdatethatrenewed contractsafter written or available remedies 2013. The Insurance Act the 2015 came into force on 12 altered misrepresentations by consumers. The Act and came into contract duringpre-contractual negotiations c relatinga to m a maketo reasonable takenotcare to duty a with volunteerconsumerthetomate ofreplacedduty the Representations) Act 2012 (Disand the InsuranceInsurance Consumer Act the201 Parliament: of Acts two heavily in favour of insurers, reform recently took Additionally,law criticismtheresponsethat to in Rights Act 2015(seequestion1.4above). Unfair the of Consumer the and 1999 Regulations virtue Contracts TermsConsumer in by consumers for protection be some is to There felt generally was warranties advantageous toinsurers. of breach and precedent conditions of breach non-disclosure/misrepresentation, to relating law The parties. the between bargain the enforce will courts since English law has traditionally been perceived to be fairly pro-insurer, Ingeneralterms,isthesubstantivelawrelatingto 2.1 certain investmentfirms. and intermediaries finance home and insurance liability are have as insurance, to required also are professionals medical Certain (SI 2005/1089). as supplemented by the Civil Aviation (Insurance) Regulations 2005 L/138), OJ (21 2004 Council April and Parliament European the of cargo785/04 Regulation under compulsory now is parties third and baggage, passengers, of respect in liability for insurance Aviation be to insured againstliabilityforpollution. country, other any in terminal or port a leaving or entering or leaving a UK port or terminal, and owners of UK-registered ships against owners of ships carrying more than 2,000 tonnes of oil and entering insure to require 1995 Shipping Act Merchant the 163Aof and 163 Sections solicitors require 2002 professional liabilities. Rules Insurance Indemnity Solicitors the and 1974 Act Solicitors the of 37 Section against liabilityforanydamagecausedbytheanimal. 1976 Act Animals Wild insurance maintain to animal wild dangerous Dangerous a of keeper a requires the of 1(6)(a)(iv) Section injuries resultingfromthehireoruseoftheirhorses. for liability against insure to establishments riding horse of owners requires 1964 Act Establishments Riding the of 1(4A)(d) Section suitable provisionforcompensationclaims. make otherwise or insurance liability carry must reactor nuclear a Under Section 19 of the Nuclear Installations Act 1965, a licensee of Road Traffic Act 1988. Motor insurance is also mandatory, pursuant to section 143(1) of (Compulsory the Liability Employers’ Insurance) Act 1969). 1(1) (section employment disease or must injury sustained by Britain his employees arising out of, bodily and in the course of, their for Great liability in against business insurance maintain any on carrying employer An Arethereanyformsofcompulsoryinsurance? 1.6 clyde &collP (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? place in the form of onsumerinsurance was weightedtoowas are subject to the subjectto are August 2016 for 5. The 2012 Act force on 6 April rial informationrial isrepresentation bogt in brought o lsr and closure erial hr i a oiie uy n nncnue isrd bt o a not (but insured non-consumer a on duty positive a is There the contractagainstreinsurer. enforce can insured the cases, such insolvency.In in preference of the Contracts (Rights of Third Parties) Act 1999, subject to the rules some a confer under enforceable now However,are clauses such and insured, to the on benefit purport which reinsurer. clauses the contain contracts against reinsurance action of cause direct no has insured the Accordingly,insolvent, becomes reinsured the if reinsurer. a and insured an between contract of privity no is There 1930 Act, nor the 2010 Act applies to reinsurance c accessinformationinsurancerightstothepoabout insurer,againstclaiminsuredthecanimproves and actitheresultsufferedofhas partyawho as loss forceon 1 August2016. It simplifies the procedur The Third Parties (Rights against Insurers) Act 201 operated inpractice. 1930 Certain the how Act to relation however,in were, identified problems provision. this of out contract to parties the for possible not is It insolvency.insured’s the of event the in action insurers direct against a bring to insured an against claim a has who party The Third Parties (Rights against Insurers) Act 1930 enabled a third osmr nues sbet o eti cniin) bt o for not but conditions), certain consumer insureds. to (subject insureds non- for changes consumer the of out contract to insurers for possible is It 2016. 12 August on force into came it when insureds consumer for place in already those as introduced remedies to changes 2015 same the materially Act Insurance the insureds, non-consumer For explained furtherinthe Act. not is proviso This it. retain to consumer” the to unfair be would it that any) (if extent the to “except premium the keep and policy the avoid can insurer the misrepresentation, deliberate or reckless a (because a makes consumer a charged).If been have would premium higher consumer the to payment the proportionately reduce to or terms different impose to or contract the avoid to able being insurer the in result duty.may his/her That breached not consumer the misrepresentation, the had done have would it what on careless based be will remedy insurer’s a makes consumer a if Broadly, Consumer the above). of (see 2012 Act Representations) and implementation (Disclosure Insurance the after insureds consumer The remedies for misrepresentation and non-disclosure changed for . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 . Is there a positive duty on an insured to discl 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 claims came into force in late May 2017 (see question of 1. respect in damages consequential concerning in an to advantage warranties perceived the to redress relating to precedent, law the altered and facts reforms in respect of a business insured’s duty to reinsurer? insurer? whether the insurer has specifically asked about th insurers all matters material to a risk, irrespecti misrepresentation ornon-disclosurebytheinsured? iclg to: insurance &reinsurance 2019 england &wales disclose all material ons of an insolventan ofons 0 was brought into eby which athird ontracts. licy. Neitherlicy.the the third party’sthirdthe 4 above). ues Rules surers. amn of payment conditions d ose to ve of em? © Published and reproduced with kind permission byGlobal Legal Group Ltd,London terms ofthepolicy. the by amended or excluded be may subrogation of principle The party sums any third insured any the from against claim received bywayofcompensationfromthatthirdparty. and proceed loss to the for name responsible insured’s the use of doctrine to right the acquires insurer The The insurance. accident personal and insured. the insurance life of contracts to apply therefore, not, does subrogation indemnified fully has insurer the once all indemnity, of to contracts are applies which insurance which of contracts subrogation of right automatic an is There must takereasonablecare. he so, do to chooses insured consumer a if although, information, consumer insureds, there is no longer any duty to volunteer material For term. policy express an by covered were which or insurers; the which or are presumed to be facts: known by the insurers; which were waived by disclose to required diminish the risk; which not were known, or ought to have been known, is insured the However, for relationship withsomeoneotherthantheinsured). exception an business a through is have agent the by acquired would there information confidential search (although reasonable information a that if revealed insured the to relevant imputed be with person other will agents) as such company, any the outside those (even information by held Information insured. have been revealed would by a reasonable search of information available they to the because know to to ought he knowledge which actual facts material his risk from extends a duty to insured’s consumer material matters all irrespective of whether the insurer has specifically asked. The non- disclose to insured) consumer clyde &collP iclg to: insurance &reinsurance 2019 the financial value of the case; the amount in disp proceedings. In determining the track, judges will a at track)claimssmall or trackmulti-track,fast procedu three of one to claims allocate will Judges the Queen’s BenchDivisionoftheHighCourt. in court therefore, specialist a Court, Commercial is, the in brought and be to claim’likely ‘commercial a is dispute insurance An outcome oftheclaimtopublicingeneral. the of importance the and involved; procedures or remedies issues, legal facts; the of complexity the dispute; in amount the claim; the of value financial the include: factors Relevant judge. Court High a by with dealt be should it believe to reason is there if Court High the in commenced be nevertheless County may thresholds the financial Court within falls which claim a However, Court. County practice, a In to transferred be generally will £100,000 Court. than less worth County claims a in commenced be must £50,000) than less of claims injury personal (or less or £100,000 for Claims issue transfer casesbetweenthetwocourts. to whether choose may, of their own initiative or following application by either party, to free theory, However, Court. County a courts or Court High the in proceedings in is, claimant The Whichcourtsareappropriateforcommercial 3.1 Isthereanautomaticrightofsubrogationupon 2.6 3 Litigation – Overview Litigation–Overview 3 insurer needaseparateclauseentitlingsubrogation? jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof payment ofanindemnitybytheinsurerordoes n early stage in the in stageearly n ute; the complexity take into account: ral ‘tracks’(the ral the application. where an allegation of fraud cases has been (rare) made against in the party except jury,making a before hearing a to right no is There fields or more than one expert in a particular fiel fromevidenceexpert oral adduce to need will party w £25,000, where the casetrial is estimated any to last more for suitable is multi-track The fields. t at exper and field per party per evidenceexpert one tolimited expert oral where and day a than more between £10,000 and £25,000, where the trial parties is est the from obtaineddirections questionnaire. The fast be track is suitab will information This trialtime estimates; settlement proposals; and pre c applications; intended needed; is evidence expert be to likely witnesses of number the issues; the of trial datestobeobtained. earlier enable and trial; for required time the reduce costs; reduce to: are aims Its minimum disputes. their the of resolution fair to the for trial necessary at evidence oral confine to The limit and to disclosure parties encourage thereafter. to designed weeks is Scheme six Trials Flexible within judgment and proceedings, aim of reaching trial within approximately 10 months of the issue of Trials Scheme, cases are case-managed by docketed judges with the both of litigation, at a reasonable and proportionate cost. Under the Shorter aim The business-related for trials earlier 2018. and shorter achieve to is October schemes 1 on permanent became and Flexible the and Trials Scheme, were Scheme introduced in the Business and Property TrialsCourts Shorter the schemes, pilot Two and thenumberofwitnessesinvolved,amongotherfactors. case the of complexity the on depending months, 24 to 12 takes It documents. Pursuant to Practice Direction 31B, documents should documents 31B, Direction Practice to Pursuant documents. disclosable preserve to duty ongoing an to subject are parties The continuing toorderstandarddisclosure inmostcases. party’s documents). a the However, it appears of that, in practice, courts are to all inspect ‘keys to side a other the include allowing order, even warehouse’-type could this that suggested been has of disclosure inquiry’; another party; or any order which the court of considers appropriate (it ‘train a with documents on which a to party relies plus any specific disclosure from dispensing lead of disclosure order which basis; documents an issue-by-issue an of on disclosure possibility disclosure; the include: These is what make. to options ‘menu’ to of a from order which disclosure just, and necessary limit to need the the and to regard objective having overriding decide, will court the 2013, April or 16 on, after, place takes Conference Management Case first the where another party’s case. For all (non-personal injury) multi-track cases support party’sor another case affect adversely case, own its affect adversely which or relies, it which on documents the all disclose and documents for search reasonable a out carry to party a requires This disclosure. standard ordered commonly,have Most courts the . Howlongdoesacommercialcasecommonlytaketo 3.2 . Whatpowersdothecourtshavetoorder 4.1 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin england &wales www.iclg.com le for any case worth d. than a day and each -actionexchanges. t evidence in two inevidence t imated to last not called; whether called; rh oe than more orth more than two than more ss estimates; osts il il be will rial hog a through 97 england & wales clyde & co llP england & wales

be preserved as soon as litigation is contemplated. If documents are A witness abroad cannot be compelled to attend a trial. Therefore, not preserved, this may result in costs penalties, adverse inferences if the court is satisfied that the witness is unwilling or unable to be of fact may be drawn, the court may order the client to forensically present, the application is made bona fide and not so as to cause retrieve deleted data, and there is even the risk of a strike out or unreasonable delay and the witness can give substantial evidence criminal penalties. A solicitor is under a duty to advise clients of that will be material to the case, an order for a deposition can be their obligations on disclosure and about the preservation of made. Part 34 of the Civil Procedure Rules 1998 permits a witness documents. to be cross-examined at a hearing and then for a written record of The duty of disclosure is limited to documents that are, or have that cross-examination to be submissible as evidence before a court been, in a party’s ‘control’. This includes documents for which a in England. party has a right to call. The courts also have the power to order a Where a witness is resident or located in another EU Member State non-party to disclose documents in its possession. (except Denmark), the court may, upon application by a party, issue Disclosure usually takes place after statements of a case have been a letter of request to the relevant foreign court. The foreign court england & wales served. However, before proceedings have commenced, disclosure may refuse the request only in very limited circumstances, such as may be ordered between likely parties to the proceedings and in when the witness exercises a right not to give evidence that exists very limited circumstances against non-parties. under the law of either the English courts or the relevant foreign court. Where a witness is resident or located in Denmark or outside The Civil Procedure Rule Committee has approved the launch of a the EU, a party can take a deposition from the witness by applying compulsory two-year Disclosure Pilot Scheme starting on 1 January for an order for the High Court to issue a letter of request to the 2019 in the Business and Property Courts (which include the judicial authority of the country where the witness is. Commercial Court, the Admiralty Court and the Technology and Construction Court). Under the scheme, standard disclosure will no longer be the default form of disclosure. The court may choose from 4.4 Is evidence from witnesses allowed even if they are five “Extended Disclosure” models for each issue in the case. These not present? range from disclosure of known adverse documents only, to disclosure of documents which may lead to a train of enquiry. It may be possible to obtain an order for the examination of a witness under deposition if a witness cannot attend trial. This involves the witness giving evidence to the examiner as if the 4.2 Can a party withhold from disclosure documents (a) relating to advice given by lawyers, or (b) prepared in examination were the trial itself. There is, therefore, full contemplation of litigation, or (c) produced in the opportunity for cross-examination. The evidence is then reduced to course of settlement negotiations/attempts? writing and the document is received into evidence at the trial. Alternatively, it is possible to rely on a witness statement without Parties are entitled to withhold privileged documents from calling the witness in person. Generally, the witness must be called production to a third party or the court. Legal advice privilege to give oral evidence, unless the court orders otherwise, or the attaches to communications between a client and his or her lawyer statement is entered as hearsay evidence. If the statement is to be for the purpose of giving and receiving legal advice. Litigation entered as hearsay evidence, all other parties to the proceedings must privilege attaches to communications between client and lawyer, or be notified of this. Notice is given by serving a witness statement, between either of them and a third party, for the dominant purpose informing the other parties that the witness will not be called and of giving or receiving legal advice or collecting evidence for use in providing reasons for this. However, the party against whom the litigation, while litigation is pending or in the reasonable evidence in the statement is adduced can apply to the court for contemplation of the communicating parties. permission to call the statement-maker for cross-examination. Written or oral communications between the parties which In addition, the court has the power to allow a witness to give constitute genuine attempts to resolve the dispute attract ‘without evidence through a video link or by other means. prejudice’ privilege. Privilege will attach to such communications regardless of whether or not the documents are marked ‘without 4.5 Are there any restrictions on calling expert prejudice’. Mediation communications are protected by the witnesses? Is it common to have a court-appointed ‘without prejudice’ rule, but the use of a document in mediation will expert in addition or in place of party-appointed not give it ‘without prejudice’ status if it otherwise lacked that status experts? (for example, because it was produced for another purpose). However, the ‘without prejudice’ rule is not absolute and can be The court’s permission is required in order to call an expert witness. overridden where the justice of the case requires this. The expert’s primary duty is to the court and this overrides any obligation to the instructing party. The expert must, therefore, 4.3 Do the courts have powers to require witnesses to remain independent of the instructing party. The court has the give evidence either before or at the final hearing? power to restrict expert evidence to what is reasonably required to resolve the proceedings. Accordingly, the court has the power under The court has the power to issue a witness summons requiring a the Civil Procedure Rules 1998 to direct that evidence to be given by witness to attend court to give evidence or produce documents on a single joint expert where the parties wish to submit expert such a date as the court may direct. If a witness fails to comply, he evidence on a particular issue. It is, however, far more common to risks being found in contempt of court. The court can require a have party-appointed experts only. witness to attend the trial and any other pre-trial hearing, but a party If the court directs that evidence is to be given by a single joint must obtain the court’s permission to have a summons issued for a expert, the court will usually expect the parties to agree on the witness to attend court on any date except the trial date and for any identity of the expert. If the parties cannot agree, the court will hearing except the trial. A witness summons must be served at least select an expert from the list drawn up by the parties or direct some seven days before the witness is required to attend for it to be other method for the selection of an expert. binding.

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Unless the court has given directions or the parties have agreed up in a wrongdoing, whether innocently or not, (although some case otherwise, all of the instructing parties are jointly and severally law has suggested that the only requirement is that the respondent liable for paying the joint expert’s fees and expenses. should not be a ‘mere witness’) and there must be a need for an order to enable an action to be brought against the ultimate wrongdoer. The order will be granted only where it is necessary and in the 4.6 What sort of interim remedies are available from the courts? interests of justice.

The court may make an order in favour of pre-action disclosure 4.7 Is there any right of appeal from the decisions of the before a claim has been made if the matter is urgent, or it is courts of first instance? If so, on what general otherwise necessary to make the order in the interests of justice, if grounds? How many stages of appeal are there? certain conditions are satisfied. This is possible where: the respondent and the applicant are likely to be parties to subsequent Permission to appeal must be obtained either from the lower court at proceedings; the documents sought would fall within the the hearing at which the decision to be appealed was made, or from england & wales respondent’s standard duty of disclosure if proceedings had started; the appeal court itself. Permission will be given only where the and the pre-action disclosure is desirable because it will dispose court considers that the appeal would have a real prospect of fairly of the anticipated proceedings, will assist the dispute to be success, or there is some other compelling reason why the appeal resolved without proceedings, or will save costs. should be heard. The appeal court will refuse to allow an appeal An injunction is an order of the court that requires a party to do, or to unless it considers that the decision of the lower court was wrong, or refrain from doing, a specific act, and may be sought, for example, to the decision of the lower court was unjust because of a serious prevent a claimant pursuing legal proceedings or restrain a breach of procedural or other irregularity. The appeal is generally limited to a contract. Injunctions may be granted where it appears to the court to review of the lower decision and is not a re-hearing. be just, convenient and proportionate to do so. If an injunction is The Court of Appeal has jurisdiction to hear and determine appeals disobeyed, that party will be in contempt of court. from any judgment or order of the High Court. If an application for A prohibitory interim injunction, requiring a party to refrain from permission to appeal made in the High Court is refused, a party can doing a specific act, can be sought at any time. It can be used, for still apply to the Court of Appeal. In very limited circumstances, there example, to protect confidential information or to enforce a may be an appeal directly from the High Court to the Supreme Court. restrictive covenant. A party may apply for leave to appeal a Court of Appeal decision to It is possible to apply for a freezing injunction at any stage of the the Supreme Court. An application must first be made to the Court of proceedings. It must be proved that: the applicant has a good Appeal and an application may be made to the Supreme Court only arguable case; the defendant has assets in the jurisdiction; there is a after the Court of Appeal has refused to grant permission to appeal. If real risk of dissipation of the assets (judged from an objective the application is not made at the judgment hearing, a written perspective); and the order is just and convenient in all the submission must be made within 28 days of the date of the order or circumstances. The remedy is in personam. The applicant is not judgment given by the Court of Appeal. Permission to appeal will be provided with security for his claim and has no proprietary rights in refused by the Supreme Court if it does not raise an arguable point of the assets in question. English courts will usually make orders law of general public importance. The court’s decision on the relating only to property within the jurisdiction. application will usually be made within eight weeks, and the appellant must then file notice of its intention to proceed within 14 days. A search order in respect of documents will be granted only if there is a real possibility that the defendants will destroy the relevant Parties to an appeal cannot agree between themselves to extend any evidence. There are four essential pre-conditions for making the date or time limit set by statute, but it is possible to make an order: first, there must be an extremely strong prima facie case on the application to the appeal court to vary the time limit for filing an merits; secondly, the respondent’s activities must cause very serious appeal notice. potential or actual harm to the applicant’s interests; thirdly, there must be clear evidence that highly material documents or materials are in 4.8 Is interest generally recoverable in respect of claims? the respondent’s possession; and fourthly, there must be a real If so, what is the current rate? possibility that such material may be destroyed before any application can be made with notice. The terms of the order should be limited to When a court awards damages, it also has discretion to award simple no more than is necessary to achieve the legitimate object of the order. interest for such periods and at such rates as it sees fit, pursuant to If entry is not granted, the respondent will be in contempt of court. section 35A of the Senior Courts Act 1981 and section 69 of the The court has the power to order the preservation or delivery up of County Courts Act 1984. The court’s discretion is limited to awards property, pursuant to rule 25.1 of the Civil Procedure Rules 1998. of interest starting no earlier than the day on which the cause of This type of order requires: the defendant to make the item available action arose and ending no later than judgment or sooner payment. to the claimant or some other person and includes orders for the The court’s powers do not override any contractual provision on detention, custody or preservation of relevant property; the interest or interest due under the Late Payment of Commercial inspection of relevant property; the taking of a sample of relevant Debts (Interest) Act 1998. property; the carrying out of an experiment on, or with, relevant In the past, the interest rate in respect of commercial disputes before property; the sale of property where it is desirable to sell quickly; the Commercial Court was presumed to be 1 per cent above base and the payment of income until a claim is decided. An application rate. However, there has been case law supporting the view that this can be made at any time and the procedure to be used is the same as rate of interest is now appropriate only up until 5 February 2009 for an injunction. (when the base rate dropped from 1.5 per cent to 1 per cent). That A Norwich Pharmacal order can be obtained at any time and reflects a provision in the current Commercial Court Guide that there requires a respondent to disclose certain documents or information should no longer be a presumption that base rate plus 1 per cent to the applicant. The respondent must be either involved or mixed represents the appropriate measure of a commercial rate of interest. iclg to: insurance & reinsurance 2019 www.iclg.com 99 © Published and reproduced with kind permission by Global Legal Group Ltd, London 100 england & wales © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com is case leading The successful. is party that if even sanctions, If a party unreasonably refuses to mediate, the court can order costs Ifapartyrefusesto requesttomediate,what 4.11 of Court and Appeal aimedatencouragingparties tomediate. Courts County the the in schemes by are supported there and generally courts is mediation However, mediate. to agreement to mediate, the courts currently do not compel the parties enforceable no is there If place. takes mediation such that ensure to order in proceedings litigation of stay a grant will and mediate to agreement express and clear a enforce generally will courts The Canthecourtscompelpartiestomediate 4.10 not consider it unjust to make the award. £75,000).However, this issubject tothe proviso amountanyabovefigure,thatoncent persubject 5 per cent on the first £500,000 awarded by the court offer and then fails to equal or beat it is now ava additional uplift on all damages where a defendant startedrunning. For Part 36offers made onor aft matter to the date on which the indemnity costs and standard basis (with interest on those costs) from Thedefendant will also beordered topay the claim the period starting from the date on which the rele ratenotexceeding 10per cent above thebase rate, interesttheonwhole part ortheofsumawarded to abovecent per 10 to up at coststhose oninterest period relevant the which on date the from starting basis indemnity the on costs claimant’s the pay to offer,thecourtwill, unless considers it unjusit obtainsjudgmenta which isequal to, ormore advan and offer 36 Part a accept to failsdefendant a If expired, plusinterestonthosecosts. costs any pay incurred to by the defendant from claimant the date on the which the relevant order period unjust, it considers it unless obtain judgment for an amount greater than the offer, the court will, to defendant’sfails a then accept offerand to declines claimant a If commenced. has offerlitigation 36 after Part or a before accept and make can Aparty 1998. Rules Procedure Civil the of 36 Part with accordance in made is settle to offer an where apply rules Special be a may award costs or may success, partial court awarded eachway. reflect The to costs of protocol. percentage pre-action any followed In as the conduct of automatically.the parties and the extent to which the parties have follow they exercising its discretion, the court should have when regard to limited factors such in circumstances except costs, to specific as discretion complete has court the The starting point is that the loser pays the winner’s costs. However, Whatarethestandardrulesregardingcosts? Are 4.9 debt ifjudgmentisinaforeigncurrency. judgment the on interest of rate the to relation in flexibility has and paid, and calculated be to is awards on interest which to reference it is satisfied. The court has flexibility in determining the periods by but begins to run on the judgment debt (currently at 8 per cent) until At the point of judgment, interest ceases to run on the principal sum clyde &collP offer tosettlepriortrial? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan t, ordert,thedefendant ilable (the uplift is 10 the beginning of the vant period expired. er1 April2013, an thatthe judge does rejects a claimant’s , then an additional forsome orall of enhanced interest the claimant thenclaimant the the base rate and rate base the theclaimant aat ant’scosts onthe to a total cap oftotalcap a to tageousthan, its xie, with expired, o te period the for

eoe rirtr o fl a aac, n ha apas rm the from appeals hear arbitrators’ and award. vacancy, a fill or arbitrators remove The court also has the power to determine preliminary issues of law, only iftheotherpartiesconsentinwritingortribunalallowsit. permitted is court the to application Otherwise, assets. or evidence preserving of purpose the for necessary is thinks the it as orders such or injunction interim the to an make can court urgent, subject the is case receiver.the a If of appointment of goods granting any the of and sale the proceedings; taken; be to samples for evidence; orders for the inspection and detention of property; orders of preservation the witnesses; of evidence of taking the to: relating powers has also court The witnesses. of attendance the securing Pursuant to the Arbitration Act 1996, the court can aid arbitration by are unwilling or unable to agree a basic procedure fetvl. h css hc hv ivle signifi involved have which intervention tend to cases have been The effectively. is of intervention in arbitration only where the tr supportive dispute rather than supervisory. a The general asap arbitrationmechanism.UndertheArbitration rol1996,theAct support courts English The arbitration clause alsobeinginvalid. separate a as invalidity of the contract as a whole will not necessarily regarded result in the is clause agreement, independent of the rest of the contract. Accordingly, the arbitration void, an and separability, null is agreement arbitration of doctrine the Under performed. being of incapable or inoperative the that satisfied is it arbitration for common A court will not stay is litigation proceedings in favour of arbitration if it and arisen, agreements tobeconcludedaspartoftheoriginalcontract. has dispute a after to arbitration to agree rise to parties the giving for necessary not avoid is It disputes. to language clear, mandatory use and must unambiguous but enforceable, are clauses arbitration Express principles. arbitration clauses will therefore be construed in accordance with common Arbitration law an enforceable. be will is clause arbitration an there that ensure if only arise will agreement. However, there is no specific form of words required to arbitrate to right A . Whatapproachdothecourtstakeinrelationto 5.1 mediate. to refused unreasonably had party a that conclusion a to lead might which factors of list non-exhaustive a out set and sanction, costs a in result could mediate to refusal unreasonable an that held Appeal Trust NHS General Keynes Milton v Halsey . Notwithstanding theinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 Arbitration 5 what groundsanddoesthishappeninmanycases? courts willrefusetoenforcesuchaclause? is required? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration iclg to: insurance &reinsurance 2019 ad hoc arbitrations in which the parties england &wales (2004). The Court of Court The (2004). ibunal is unable to act proach of the courts for arbitration. e of the courtisthe of e resolution at court cant © Published and reproduced with kind permission byGlobal Legal Group Ltd,London 1996, the parties are free to agree on the power of the tribunal to tribunal the of power the on agree to free are parties the 1996, the parties can apply to correct the award. Under the Arbitration Act If the award does not include reasons, or the reasons are ambiguous, agreed award orthepartieshaveagreedtodispensewithreasons. an is it arbitration unless award 1996, the for Act reasons Arbitration contain must the awards of 52 section to Pursuant in disclosure pre-action respect ofdisputeswhicharetobereferredarbitration. grant to empowered not are courts The to reluctant are intervene inarbitralproceedings(seequestion5.1above). courts English the however, practice, In 1996). Act Arbitration the of 44(1) (section receiver a of appointment the preservation of property, and the granting of an interim injunction or and inspection the ordering evidence, of preservation the evidence, that it has in court proceedings and can make orders for proceedings the taking of arbitral supporting in powers same the has court The Whatinterimformsofreliefcanbeobtainedin 5.4 clyde &collP iclg to: insurance &reinsurance 2019 Isthearbitraltribunallegallyboundtogivedetailed 5.5 support ofarbitrationfromthecourts?Pleasegive reasoned awardisrequired? examples. the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in l. iial, t a bcm vr dfiut o aif te et for test the serious irregularity. satisfy to difficult very become has it Similarly, all. at be clause arbitration valid to no was there where tend situations to limited applications successful and jurisdiction its exceeded It is very difficult to challenge an award on the basis that the tribunal circumstances. exceptional in extended be may limit time this although award, the Any challenge or appeal must be made within 28 days of the date of question ofEnglishlaw. a on right, the waive to agreed not have parties or,the award; if the or proceedings the tribunal, the affecting irregularity serious a was on the basis that the tribunal lacked substantive jurisdiction or there award an appeal may party a 1996, the Arbitration Act to Pursuant original award. or clarifications to the award and these will take effect as part of the the corrections issue will it application, the grants tribunal the If to court. application an consider may applicant the application, the any within or award, the longer period which the parties may agree. of If the tribunal dismisses date the of days 28 within made be must Applications award. additional an make or award the correct . Isthereanyrightofappealtothecourtsfrom 5.6 circumstances doestherightarise? decision ofanarbitraltribunal?Ifso,inwhat england &wales www.iclg.com 101 england & wales 102 england & wales © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com clyde &collP we have been recognised as “Insurance & Reinsurance Law Firm of the Year”the of by Firm Law Reinsurance & “Insurance as recognised been have we in Claims Contentious Insurance: for One Band Chambers Global ranked are we example, For expertise. insurance leading our for recognised frequently are We bloodstock, health, & accident (including specialty and reinsurance; contingency, cyber, property; fineart,kidnap&ransom,politicalrisktradecredit,productrecall,speciejewellers’ blockandsurety). indemnity; professional recall; & liability product fraud); and loss, financial institutions and D&O; marine; mining, industrials energy; & power; liability; personal injury (including practices disease, EL/PL, employment motor, services; clinical negligence, insurance catastrophic corporate engineering; & construction aerospace; & aviation including: lines, business firm offers insurers and reinsurers the opportunity to source legal advice from one law firm across many jurisdictions and across a wide spectrum of We are distinguished by our focus on insurance, with over 200 specialist insurance partners and over 1,000 insurance-focused qualified lawyers. The reputation ininternationalarbitration. healthcare, energy, aviation, of sectors contentious and transactional matters. Clyde & core Co has a particularly strong track record in complex cross-jurisdictional disputes and its an outstanding on focus resolute a associated offices across six and continents, the firm advises corporations, financial institutions, private individuals, and heritage governments on a wide range of pioneering a with firm infrastructure, industrials, law insurance, marine, professional practices, shipping and trade. With over international 1,800 lawyers operating from over 50 offices and an is Co & Clyde xesvl o te ujc, n hs atcptd n numerous in participated Advanced NegotiationandLeadership. has and in Certificate CEDR the completed recently also subject, has He spoken Mediations. and the written on has and extensively Mediator CEDR-accredited a is Jon policy of issues on Courts construction. English the before come to case Form Bermuda first the in successfully Reinsurers representing including field, this in cases numerous with involved been has and arbitration) (usually involving New Form York Bermuda substantive law and English the or Bermudian in expertise particular has He reinsurance. and of the Year” in2017by Transatlantic Legal Awards. Jon has been recommended in and reinsurance (principally non-marine) litigation 2001 and a consultant in September 2016. He specia JonhasbeenClydeatsince Co & 1994 and became a “UK Insurance Firm of the Year 2015” by , we were named “Insurance Law Firm of the Year” at the Reactions London Market Awards for the years 2011, 2012 and 2013, and R:www.clydeco.com URL: [email protected] +442078765111Email: +442078765000 Fax: Tel: United Kingdom London EC3A 7AR 138 Houndsditch St. BotolphBuilding Clyde &CoLLP Jon Turnbull The Legal 500 The Legal 500 in the field of insurance . lises in insurance . The firm was named “Firm of the Year” in 2016 by partnerMayin client queries. external audience on a wide range of topics. She also helps advise on Law Westlaw’s to contributor a was and Reviews, Year of department’sEnd insurance Weeklyand the Updates and textbook firm’sthe writing in involved is She Lawthe and Practice Reinsurance updates and articles to contributes frequently produced bythefirm. She 2006. since Co & Clyde at been has and 1993 litigation. in solicitor a reinsurance Co’sas qualified Michelle and & insurance Clyde in in specialising lawyer office, support London professional senior a is Michelle Who’s Who Legal Who Who’s Series. She frequently provides training to both an internal and internal an both to training provides frequently She Series. iclg to: insurance &reinsurance 2019 for the years 2012, 2013, 2014 and 2015 and 2015 and 2014 2013, 2012, years the for R:www.clydeco.com URL: [email protected] +442078765111Email: +442078765000 Fax: Tel: United Kingdom London EC3A 7AR 138 Houndsditch St. BotolphBuilding Clyde &CoLLP Michelle Radom The Lawyer england &wales and “Transatlantic Law Firm Insight Insurance Insight chapter 18 Finland

railas attorneys ltd. Dr. lauri railas

■ documents providing information about the management 1 Regulatory of the company and its shareholders; ■ evidence about payment of the founding capital; The share 1.1 Which government bodies/agencies regulate capital requirement varies depending on the nature of the insurance (and reinsurance) companies? insurance business: for life insurance and specified forms of non-life insurance, the minimum is 3,000,000 EUR; and for other forms of non-life insurance, 2,000,000 EUR; for The Act on Supervision of Financial and Insurance Conglomerates reinsurance companies, the minimum capital required is (699/2004) regulates the supervision of insurance business in either 1,000,000 EUR (captive reinsurance companies) or Finland, setting up the regulatory authority, the Financial 3,000,000 EUR (other reinsurance companies); and Supervisory Authority. The Act on Financial Inspection (878/2008) ■ an account of potential conflicts of interest. provides the rules for the authority’s organisation and powers. The The licence applies within the EEA or, on the request of the Financial Supervisory Authority can issue binding instructions or applicant, beyond the EEA depending on agreements entered into by standards concerning insurance activity. The most important are the the Finnish or the EU authorities with other states. Finnish Conditions on the General Good (2003:1). General consumer protection authorities have authority within the field of consumer insurance, and anti-trust officials have authority 1.3 Are foreign insurers able to write business directly or when a competition issue is involved. must they write reinsurance of a domestic insurer?

Pursuant to the Act on Foreign Insurance Companies (398/1995), 1.2 What are the requirements/procedures for setting up a insurers domiciled within the European Economic Area (“EEA”) new insurance (or reinsurance) company? may undertake insurance business in Finland either on the basis of freedom of establishment or the free provision of services. The Both insurance and reinsurance providers operating in Finland must procedures for the commencement of undertaking insurance be authorised. Authorisation can be granted by the: business are spelled out in the Act and are based on EU legislation. ■ Finnish authorities. The domestic supervisory authority to have notified the Finnish ■ Authorities of another state. FSA of the commencement of said underwriting activities. In the latter case, an undertaking established in the EEA can carry on An insurance company domiciled outside the EEA has to apply for business under the principle of freedom to provide services. a licence before commencement of undertaking insurance business Undertakings established outside the EEA must operate through a in Finland. Such licence must be granted, if the preconditions branch, the establishment of which requires authorisation. The Act imposed by law are fulfilled. For the conduct of its business in on Foreign Insurance Companies (398/1995), however, requires Finland, such a company must open an agency here headed by a that authorisation must be granted, subject to the criteria set out in general agent approved by the Insurance Supervision Authority. that Act being met. A licence from the Financial Supervisory Authority is needed to 1.4 Are there any legal rules that restrict the parties’ establish a new insurance undertaking in Finland. An application freedom of contract by implying extraneous terms for a licence must: into (all or some) contracts of insurance? ■ Refer to the particular insurance classes to be provided. ■ Be accompanied with documentation, including: Insurance contracts are governed by the Insurance Contracts Act (543/1994) which is mandatorily applicable if the policyholder or ■ an action plan, with details on the: assured is a consumer or an enterprise comparable to a consumer as ■ intended business; to the nature or size of the business. Insurance contract terms ■ estimated premium income; concluded with said parties may not deviate from the minimum ■ administrative structure and its costs; terms/protection granted under the Insurance Contracts Act. The so- ■ reinsurance strategy; and called large risks as defined in EU legislation are, however, outside ■ other aspects possibly requested by the Financial the scope of mandatory cover. Foreign insurers must, more Supervisory Authority (its guidelines and prerogatives generally, abide by the Finnish general good provisions (see the may contain more details); Commission Interpretative Communication – Freedom to provide iclg to: insurance & reinsurance 2019 www.iclg.com 103 © Published and reproduced with kind permission by Global Legal Group Ltd, London 104 Finland © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com been laid down in two governmental regulations. insuranceproducts, establishedas by Articleof20 Fi requirementsstandardisedspellingout information The implementation The Act. Contracts Insurance 2018. the in October 1 on implementingprovisions force addressing insurance compan into entered which InsuranceimplementedbeentheonDistributi Act by in their activities. Directive 2016/97/EU on insur company or companies so that these cannot be requir insurance divbrokers, and 2) insurance agents aretied to who intermediaries, insurance through place assu the attention. assurance The insurer marketing life and selling the (in of insurance insured between or mediationpolicyholder insurance of role The size ornatureofthebusinessactivity. any natural or legal person comparable to a consumer in terms of the mandatory in the relationships between the insurer and consumer or therefore are (543/1994) Contracts Act Insurance the of provisions to tendency arm’sat negotiating protection. needs party The weaker a the length, however, has, legislator recognise that in situations, The where the insurer and the assured are not impartial. being of aim the with drafted are laws that outset the at assume can We Ingeneralterms,isthesubstantivelawrelatingto 2.1 insurance requirements,e.g.forattorneysandbrokers. compulsory are There (484/1972). Act Liability Nuclear the and (81/1998) Act Insurance Liability Impairment Motor Environmental the the (354/1997), (585/86), Companies Act Injuries Patient the (279/59), Act Insurance Liability Insurance Pension on Act accident work insurance. Additional laws apply to and statutory insurance, such as the insurance, pension insurance, liability motor as such obtained, be and must that policies insurance concerns mandatory not, or or compulsory statutory be can which insurance, Mandatory between insurance. voluntary distinguish can One Arethereanyformsofcompulsoryinsurance? 1.6 covering the liability of their CEOs and board memb gross misconduct. In practice, companies procure l caused was damage the if employee, its to recourse c Theliability. vicarious of principles the under normal contract of employment, the company is officers, liabl and directors other regards As parties. b shareholders, its or company the to liable become m board and CEO the company, liability limited a In Finnish company law, but depends on the legal form partia is officersand directors Indemnificationof Arecompaniespermittedtoindemnifydirectorsand 1.5 to subject and setting asideoradjustedispracticallynon-existent. unbalanced as regarded be would terms contract the that risk the entities, business In between concluded are contracts Act. Contracts Insurance the reinsurance, therefore, to freedom of contract prevails. As reinsurance subject not is Reinsurance 43, C OJ sector, 16.2.2000, p.5)exceptwheninsuringlarge risks. insurance the in good general the and services railas attorneysltd. (Re)insuranceClaims 2 officers underlocalcompanylaw? insurance morefavourabletoinsurersorinsureds? ance distribution has products often takes ompany may have may ompany acertain insurance theDirective, has lly possible under possible lly h ae ne a under are who iability insurance ed to be impartial requirementsfor e to third parties of the company. ers. on (234/2018),on ut not to third to not ut wilfully or by or wilfully e) al for calls red) iesareplaced f h IPID the of dd no 1) into ided mes may embers

n the and nnish h gnrl iblt isrne a be mnind in mentioned been has insurance liability general the otherwise is or bankrupt declared been has ■ insured or the laws under out taken been has policy ■ insurance the claim ■ can insurance if ( liability general compensation under the under insurance contract directly from the insurer loss financial or damage property injury, bodily suffered has that person a Yes, bv sbet pls u mr dtie poiin o te above the on provisions requirements. detailed more out spells the subject on above 2358/2017 (EU) Regulation Delegated Commission The each insuranceproduct. targetof identified market and characteristics the understand to and place in have above to shall referred information the it obtain to arrangements adequate manufacture, not does it which products insurance proposes, or on, advises distributor insurance an Where the of market target insurance product. identified the which including process, intermediaries approval as all appropriate information on the insurance product well and the product as manufacture insurance products, shall make available to distributors undertakings, Insurance remains product the intendeddistributionstrategyremainsappropriate. the whether least at consistent with the needs of the identified target market assess and whether to market, target identified the to risk potential the affect materially could that event any account into taking markets, or offers it products insurance the review regularly and understand shall undertaking insurance The is intended product distributed totheidentifiedtarget market. insurance the that the ensure to steps that reasonable take and and assessed market, target identified the with consistent are is strategy such distribution to market risks relevant target all that identified ensure target product, identified each an for specify market shall process approval product The to thenatureofinsuranceproduct. The product approval process shall be proportionate and appropriate marketed or distributed to customers. prinsuranceexisting an significantadaptationsof insureach approvalof the forprocess a reviewand customers,shallto sale insurance forproduct any both Insurance undertakings, as well as for intermediaries w requirements governance and insurance companiesanddistributors. oversight product the Probably the most important requirements in the new legislation are The be policies. must verified bytheintermediary. customer given assurance a for product life insurance an of unit-linked suitability as such insurances The new legislation lays emphasis on the distribution of investment companies. insurance from remuneration receiving from prohibited that meet the needs of the insured. In Finland, insurance brokers are solutions more or one propose to broker the required only law old the whereas option insurance preferred the to as recommendation her or his giving broker the regulates law new The higher. much are ambitions and requirements it the broker, insurance When an to comes company. insurance the and intermediary the between relationship the and product the to relating matters several in client the advise to able be and disclose must intermediary insurance The . Canathird partybringadirectactionagainstan 2.2 section 67,InsuranceContracts Act marketing efforts launched to promote the insured’s business. insolvent; or regulations issuedbytheauthorities; insurer? iclg to: insurance &reinsurance 2019 ): oduct, before it is it beforeoduct, maintain,operate hich manufacture ance product,or ance Finland © Published and reproduced with kind permission byGlobal Legal Group Ltd,London nue hd pcfcly se aot hm Risrne largely Reinsurance follows internationalpracticeswhichmaybeinvoked. them. about asked specifically the not had whether albeit insurer of risk, irrespective information, to relevant material all matters necessarily disclose to duty positive a has been argued that in reinsurance contracts the insured would have significance. more have Accordingly,therefore it literature legal in law. The mutual loyalty duties between the insured and insurer may contract general under parties on imposed requirements the follow extent greater a to and respect this in differ contracts Reinsurance compl of requirement information The may in borderline cases create such a d about. asked specifically theinsured notisrequired discloseto information theymaydiscover theinformationin giventhei to insured shall without undue delay rectify any error Moreover,throughoutinsurance theperiod, poli the an ofissuance thebefore insurer the liabilityof assess the for importance of be may which questions insuredtheand shallgivetruecomplete and answer Pursuant to section 22 of the Insurance Contracts A on thebasisofmisrepresentationornon-disclosure. also detailed rules as to the right to terminate the insurance contract it had, on what it terms, and adjust the payment accordingly. had There are insurance if and non-disclosed, granted or misrepresented the of state true the have known would it whether consider, insurer may the person, the of insurance the of case non-life the In of case insurance. the in refused or reduced be may compensation that cannot be considered slight, but not amounting to bad faith, the negligence with or non-life wilfully non-disclosure or in misrepresentation a both applies rule This insurance and the insurance of the person. Where paid. the insured makes premiums the retain a view to gaining benefits), the insurer is free from liability and can with misrepresentations (giving faith bad in acted has insured the If very Only action. such bar would contract exceptionally hascaselawallowedexceptionstotherule. of privity of principle). fortune” doctrine the of equivalent However,law civil the that think would I the (“follow and contract terms insurance primary the the that argued be conditions of said contract nevertheless would follow the terms and conditions of could reinsurance specific it a of contract, conditions and terms the on Based it. independent an is contract to parties the solely concerning duties and rights both with reinsurance contract a Legally, subject. the on practice any there is neither and reinsurance, to apply not does Act Contracts Insurance the as law in provided not is matter This Cananinsuredbringadirectactionagainst 2.3 railas attorneysltd. iclg to: insurance &reinsurance 2019 subrogation upon payment by the insurer is transfer InsuranceContractsthe of section75According to Isthereanautomaticrightofsubrogation upon 2.6 Is there a positive duty on an insured to discl 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 whether the insurer has specifically asked about th misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer needaseparateclause entitlingsubrogation? payment ofanindemnitybythe insurerordoesan insurers all matters material to a risk, irrespecti s or deficiencies that theinsurer hasnot insurancecontract. ct, the policyholder uty. nsurer.However, red to the insurer cyholdertheand s to the insurer’stheto s Act, the right ofright the Act, et f the of ment ose to tns of eteness ve of em? strict conditionswhichhavetobesatisfied. be to are there matter and exception a an is this However, order urgent. as may considered Court District a request, party’s a At instance courtwouldmostlikelytakearoundoneyear. first the in case simple fairly a even but case the of circumstances the on depending and district, by district varies length average The subject tolegalprivilege. being documents such disclosure from withhold can party a Yes, their subject tocomplywiththeproductionorder. in documents the force to sanctions latent use courts situations, above the both In produce to proceedings, possession. the to parties Parties can also request an order from the court to persons, not being contains detailsofsucharequest. Code The proceedings. the to party another of request a case following the to relevance bear may that document a produce to a party order may courts Procedure, of Code Finnish the to According product regards as subrogation liability, motorliabilityandinsuranceoftheperson. of provisions special are There vicarious liability. b wouldpartyanother whom forthese, comparableto servantemployee,civil an individualorprivate a common. is limitations as to the subrogation possibility to contract for entitlings clause separate is a person third the if indemnification based on law irrespective or of neglig negligence; gross through only if the third person has intentionally caused t . Howlongdoesacommercialcasecommonlytaketo 3.2 Which courts are appropriate for commercial ins 3.1 . Canapartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 an also is There Insurance Board, which is procedure. a form of out-of-court dispute settlement. civil of law Finnish the under jury a before hearing a to right no is There disputes. insurance marine regards as procedures special are There dispute. the of value the Such disputes are resolved in the local District Courts, regardless of 3 Litigation – Overview Litigation–Overview 3 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? dispute? Is there any right to a hearing before a j disputes? Does this depend on the value of the course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin www.iclg.com ubrogation in cases of

he insured event; or or another personanother or ence. In practice, e liable underliable e Finland hr are There ibe for liable urance ury?

105 Finland railas attorneys ltd. Finland

the order, bring an action on the main issue before a court. Should the 4.3 Do the courts have powers to require witnesses to applicant fail to do this, the measures ordered cease to have effect. give evidence either before or at the final hearing? The applicant is required to deposit a security with the bailiff to compensate the person subjected to the measure for the loss that may Yes, courts have such a right. The Finnish civil procedure consists of be suffered. Only after this may the court order be executed with written preparations, i.e. exchange of affidavits, preparatory hearings binding effect. The court may, on application, grant the applicant a and the main hearing. Witnesses are heard at the main hearing. relief from providing the security if the applicant is found unable to Witnesses are named by the parties and may be summoned to appear. do so and if his or her right is deemed manifestly well-founded. There are sanctions available if the witness fails to appear or testify. The Code of Procedure exempts certain persons such as family Finland members of the parties from the duty to testify. There are also issues 4.7 Is there any right of appeal from the decisions of the courts of first instance? If so, on what general on which a witness may decline to testify. Nobody is required to grounds? How many stages of appeal are there? incriminate oneself by testifying. Business secrets may also be concealed unless there are reasons to deviate from the principle. In order to have a case tried at the Court of Appeal, a party must first Doctors, lawyers or priests of a party are not allowed to testify on state its discontent at the latest on the seventh day after the day when matters relating to their professional relationships with the party. the decision of the District Court was handed down or made There is an international dimension of this question based on the available to the parties. The deadline for filing the actual appeal is treaties concluded by Finland and so a person domiciled in another 30 days from the date of the judgment. Leave to appeal to the Court country may or shall in certain cases be heard as witness. of Appeal is required in the case of monetary claims where the value of the claim is less than EUR 10,000. 4.4 Is evidence from witnesses allowed even if they are A judgment of the Court of Appeal may be further appealed to the not present? Supreme Court. In order to have a case tried before the Supreme Court, however, leave to appeal is generally required in all civil Only in exceptional circumstances will Finnish courts allow the matters, except in marine insurance disputes between the underwriter production of written witness statements. Giving evidence may, and the assured. Leave may only be granted if it is important to obtain however, be allowed through video or phone conference, if the court a precedent with regard to the application of the law, or to constitute considers it appropriate, and other conditions are satisfied. For uniformity of legal practice. Leave to appeal may also be granted in a example, a witness residing 700 kilometres from the court was manifest procedural error so that the judgment can otherwise be allowed to testify by conference call in my practice. reversed or annulled; or if there is another important reason for granting leave to appeal. The time limit for requesting leave and filing an appeal is 60 days calculated from the date on which the Court 4.5 Are there any restrictions on calling expert witnesses? Is it common to have a court-appointed of Appeal’s decision was made available to the parties. expert in addition or in place of party-appointed experts? 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? The restrictions as regards court-appointed expert witnesses relate to the possible impartiality of the expert witness. A person who has Yes, interest is generally recoverable but must be claimed by a party. a relationship with the parties or a connection with the case so as the In cases where a claim with a fixed due date is not paid in time, call in question to his or her impartiality may not serve as an expert interest runs from the due date. witness. Courts seldom appoint expert witnesses in civil cases but if There is a statutory interest rate which consists of a reference rate they do, this happens at the expense of the parties. (from 1 July to 31 January 2018 this is 0 per cent). In commercial The parties can also appoint expert witnesses, who are heard contracts, the interest rate is 8 per cent above this reference rate. according to the provisions applicable to witnesses. A legal expert Also, legal expenses can be ordered to accrue an annual interest. is not considered an expert, but a legal advisor. The interest begins to accrue one month from the date when the court orders the party to compensate such expenses. The interest 4.6 What sort of interim remedies are available from the rate in the second half of 2018 is 7 per cent above the reference rate courts? of 0 per cent.

The Code of Procedure provides for attachment of real or movable 4.9 What are the standard rules regarding costs? Are property. The applicant must demonstrate that they hold a debt or there any potential costs advantages in making an another type of right and there is a danger that the other party may offer to settle prior to trial? hide, destroy or convey its property or take another action which endangers the fulfilment of that right in order to cause a court to Litigation costs in the district courts comprise court fees paid by order the attachment of the real or movable property of the other each plaintiff (claim/counterclaim), which are minimal and the party in the amount covering the (claimed) right of the applicant. parties’ costs, in particular the fees and expenses of their counsel. Under certain conditions, a court may also prohibit a party, The main principle is “costs follow the event” and the losing party sanctioned by a conditional fine, from performing or refraining from is ordered to pay the winner’s reasonable costs. If a party succeeds performing an act, to prevent the foreclosure or undermining of the only partially, costs are normally allocated in proportion to the applicant’s right, or the value or effect of such a right. parties’ degree of success. A settlement offer made prior to the Where an interim measure has been granted before the initiation of proceedings can be taken into consideration when determining legal proceedings, the applicant must, within one month of issue of liability for legal expenses.

106 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London railas attorneys ltd. Finland

4.10 Can the courts compel the parties to mediate 5.3 Notwithstanding the inclusion of an express disputes? If so, do they exercise such powers? arbitration clause, is there any possibility that the courts will refuse to enforce such a clause? The courts cannot compel the parties to mediate disputes, but, in cases which can be settled out of court, the court is required to Commercial insurance and reinsurance disputes are arbitrable. A encourage the parties to settle the matter. valid arbitration agreement invoked before responding to the pleadings in the matter of substance excludes the jurisdiction of the courts. However, disputes on the validity and scope of the 4.11 If a party refuses to a request to mediate, what arbitration agreement may be examined by courts at the time of a consequences may follow?

request to enforce or set aside an arbitration agreement. Finland

There are no sanctions, but the court may infer from the parties’ A party may bring its action before a court despite a valid arbitration conduct conclusions under the free evidence theory. agreement if the other party (i) refuses to refer the subject-matter to arbitration, (ii) fails to appoint his arbitrator in time despite a request by the party, or (iii) fails to pay his share of the advance or security 5 Arbitration for the compensation due to the arbitrators within a reasonable time. An unreasonable arbitration agreement can be set aside by the court in limited circumstances. An arbitration agreement between an 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party entrepreneur and a consumer concluded before a dispute arises is autonomy adopted by the courts? Are the courts able not binding on the consumer. to intervene in the conduct of an arbitration? If so, on what grounds and does this happen in many cases? 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give examples. The Finnish Act on Arbitration (967/1992) builds largely on the UNCITRAL Model Law on International Commercial Arbitration, A court may, before or during the arbitral proceedings, grant interim the principles of which are generally recognised in many countries. measures within its powers on application by a party or the arbitral A Finnish court cannot hear a matter, which is the subject of an tribunal. An arbitral tribunal may also order interim measures if the arbitration agreement, and shall refer the matter to arbitration, parties have so agreed. Interim measures ordered by an arbitral provided that the opposing party invokes the arbitration agreement tribunal are not enforceable. before he states his case on the merits in court. If the arbitration agreement is invoked in time, the arbitral tribunal is free to continue to hear the case. 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in Courts may also appoint arbitrators in given situations. In ad hoc the arbitration clause or subsequently) that a arbitration, a party may request the court to appoint an arbitrator if reasoned award is required? the opposing party has failed to nominate an arbitrator, if an appointed arbitrator is no longer available or if the parties have not The Arbitration Act does not impose an obligation on an arbitral been able to reach an agreement on a sole arbitrator. The court may tribunal to give reasons for its award or decision. In practice, also dismiss an arbitrator if he or she neglects his or her tasks or awards normally include reasoning, but detailed reasons are delays the proceedings without justifiable cause. sometimes excluded where there is a need for an expedited award. An arbitration agreement or even pending arbitration proceedings There is a set of rules of expedited arbitration under the Finnish do neither prevent a court from granting interim measures nor Arbitration Institute. evidentiary assistance/provisional relief in support of the The parties can also agree that a reasoned award is required but this arbitration. should be agreed during the constitution of the arbitral tribunal. During 2018, there has been discussion to revise the Finnish Arbitration Act in light of international developments in the field, 5.6 Is there any right of appeal to the courts from the such as the right of the arbitral tribunal to grant interim measures as decision of an arbitral tribunal? If so, in what provided for by the 2006 revision of the UNCITRAL Model Law for circumstances does the right arise? International Commercial Arbitration. The Ministry of Justice is currently considering the issue. Arbitral awards cannot be appealed on merits but may be challenged on the grounds established in the New York Convention. 5.2 Is it necessary for a form of words to be put into a Consequently, an arbitral award may be declared null and void, for contract of (re)insurance to ensure that an arbitration example, if the issue ruled is not arbitrable or is against the public clause will be enforceable? If so, what form of words policy of Finland as the seat. Moreover, an award may be set aside, is required? e.g. if the arbitral tribunal has exceeded its authority or the arbitral tribunal has not given a party a sufficient opportunity to present his An arbitration agreement must be concluded in writing, usually case. including any electronic form that can create a record. No specific form of words is required, however. An arbitration agreement must concern either an existing dispute or future disputes which may arise from a particular legal relationship specified in the agreement.

iclg to: insurance & reinsurance 2019 www.iclg.com 107 © Published and reproduced with kind permission by Global Legal Group Ltd, London railas attorneys ltd. Finland

Lauri Railas Railas Attorneys Ltd. Salomonkatu 5 C 00100 Helsinki Finland

Tel: +358 207 348 654 Email: [email protected] URL: www.railas.fi Finland Dr. Lauri Railas started his permanent working career in a Finnish insurance company in 1987, being responsible for marine and other corporate non-life insurance. A few years later, Lauri became the Secretary General of ICC Finland and the Secretary of Finland Arbitration Institute. From 1996 to 2002, Lauri served in the Legal Service of the Council of the European Union and prepared internal market legislation including insurance. After returning to Finland, Lauri became a member of the Finnish Bar Association in 2005. Lauri graduated in law in 1984 and defended his doctorate in 2004, both at the University of Helsinki. He also holds an LL.M. in international business law from the University of London and has studied maritime law in Oslo as well. Lauri is an Adjunct Professor (Docent) of Civil Law at the University of Helsinki and speaks several languages fluently. Since 2015, Lauri has been the statutory Average Adjuster in Finland. Lauri also acts as an arbitrator in both international and domestic disputes.

Railas Attorneys Ltd. was founded in 2014 and operates in the field of business law providing services especially in insurance and civil liability law, contract law, international trade, transport & logistics, as well as with the legal issues of e-business. The services also include assistance in regulatory & compliance issues, very often in the light of European law, as well as dispute resolution. The insurance law practice includes non-life (property, car, liability, etc.) and life insurance, marine insurance, primary and reinsurance, captives, compliance, establishment, insurance claims and dispute resolution. During its few years of existence, the firm has had clients in over a dozen countries as well as clients in the public sector.

108 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 19 France Bénédicte Denis

norton rose Fulbright orsolya Hegedus

1 Regulatory to conduct the company’s business (fit and proper requirements), (v) a business plan, and (vi) the financial, operational and human resources of the company. 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? The French regulatory body which regulates the insurance sector (including reinsurance and intermediation/distribution) is the French regulations prohibit the conclusion of a direct insurance “Autorité de Contrôle Prudentiel et de Résolution” (ACPR). contract in relation to a person, a property or liability located in The ACPR is attached to the French Central Bank and is responsible France with an insurance company other than those authorised to for ensuring the preservation of the stability of the financial system conduct business in France. as well as the protection of insureds, policyholders and customers. Hence, in order to be able to underwrite risks in France, a company As a result, the ACPR is principally responsible for (i) issuing must either be authorised by the ACPR or by its EEA home-country licences and authorisations of regulated entities (insurers and regulator through the European passporting process pursuant to the reinsurers), (ii) conducting on-going supervision of the financial freedom of services and/or freedom of establishment regimes. soundness and operating conditions of insurers/reinsurers, and (iii) There are, however, certain exceptions to this principle and ensuring that such regulated entities comply with conduct of derogations may be requested from the ACPR in specific cases. In business and other rules such as those applicable to insurance addition, inwards reinsurance activities carried out by an insurer are contracts, the protection of customers or the rules governing exempt from licensing obligations. acquisitions and equity investments. In order to carry out its mission, the ACPR has a right to access all 1.4 Are there any legal rules that restrict the parties’ relevant information needed concerning the regulated entities under freedom of contract by implying extraneous terms its supervision (notably through document-based and on-site into (all or some) contracts of insurance? inspections) and may impose safeguarding measures and/or disciplinary sanctions (including fines). French contract law is governed by the French Civil Code for general considerations applicable to all contracts and by the French 1.2 What are the requirements/procedures for setting up a Insurance Code (FIC) for specific insurance requirements (both as new insurance (or reinsurance) company? to formal requirements, mandatory provisions and respective duties of the insured and insurer). French (re)insurance companies must obtain a licence (“agrément”) The provisions of the FIC regarding insurance contracts are from the ACPR before undertaking any (re)insurance business in generally imperative provisions (i.e., parties are subject to such France. The licence is granted for specific classes of insurance provisions, regardless of those of the insurance contract) and are, activities. Unlike insurance companies, reinsurers may write both therefore, implied into the insurance contract even if not expressly life and non-life reinsurance business. stipulated. For example, the insured may not benefit from coverage Licence applications are submitted to the ACPR which has an if it voluntarily caused the harmful event covered under the overall period of six months from the date of receipt of the complete insurance contract, irrespective of the provisions of the contract. application to decide whether the licence will be granted to the On the contrary, reinsurance agreements are less regulated and applicant. In the context of Brexit, streamlined procedures have almost exclusively rest on contractual freedom. been put in place for the licensing of UK insurance companies in France. 1.5 Are companies permitted to indemnify directors and The application form to be filed with the ACPR must, in particular, officers under local company law? include (i) the signed instruments of incorporation, (ii) minutes of a meeting of the decision-making body seeking a licensing decision, Companies are permitted to indemnify their own corporate officers (iii) a certification of fully paid-up share capital ((re)insurance for acts (errors, omissions…) that are not separable from the corporate companies must comply with minimum capital and solvency officer’s functions (“faute non-séparable des fonctions”). In the event requirements), (iv) information relating to the persons empowered iclg to: insurance & reinsurance 2019 www.iclg.com 109 © Published and reproduced with kind permission by Global Legal Group Ltd, London 110 France © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com unclear termsareinterpretedinthe consumer’s favour. or ambiguous and a consumers against enforceable not are unfair at be into entered where (notably distance) for a longer period. In addition, contracts contractual terms found to insurance of types certain terminate to than at the annual anniversary date only) or cancel (cool-off) certain able (rather period be coverage the during time any will at contracts insurance consumers example, an As pro-consumer. is which regime legal standard a out set regulations French perspective, protection consumer/non-professional a From obligation (i.e.,theinsured). this of performance the of creditor/beneficiary the is who party the of favour in and insurer) the (i.e., obligation an of performance the doubt, a contract is interpreted against the party who is committed to of case in that, provide regulations French addition, In limited. and for requirements must (i) be set out in the general policy in very clear print, and (ii) be precise two contains exclusions to be enforceable against FIC the insured, namely, exclusions the instance, For to (ii) settingoutofobligationsbindinguponprofessionals. favourable more is contracts consumer’s(i) principles: two follows it as insureds and protection; insurance to relating law The Ingeneralterms,isthesubstantivelawrelatingto 2.1 for provide regulations French Arethereanyformsofcompulsory insurance? 1.6 (“ functionshis/her from consideredisit thatactionscorporatethe of offi norton roseFulbright o te aet opn a a ru lvl wih il er the bear will which – level premium inrelationthereto. group a at company parent the or – company the by out taken be may insurance Officers and Directors or criminal any of administrative finewouldbecontrarytopublicorder. company the by indemnification However, above. the with comply they that provided officers, corporate their with agreements indemnification into enter also may Companies potentially of any liability ow arising his/her out of such ofac costs the bear must officer corporate denied therequestedcoverbyaninsurancecompany. been has person such after cover insurance an seeking person a by Tarificationde With respect to certain compulsory insurances, the “ etc.). their third partyliabilityisalsocompulsory. covering architects, insurance an of intermediaries, hunters by subscription insurance Likewise, as (such professional insurance regulated the of most activities are subject to the subscription of a professional indemnity instance, For French regulations. other by provided are insurances compulsory Additional carrying outtheiractivityonanindependentbasis. professionals healthcare covering insurance, malpractice medical works (iv) and works; construction construction any commencing before respectively (iii) lessee; builders/constructors and owner the by both the (ii) subscribed insurance, parties; for third to insurance vehicles household by caused damages insurance, MTPL the (i) covering as: such activities and sectors of spectrum (“ Insurances” “Compulsory FIC, the of II Book under codified partly are which (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? ” is empowered to determine the premium to be paid be to premium the determine to empowered is ” suacs Obligatoires Assurances faute séparable des fonctionsdesséparable faute ca 20 oploy insurances, compulsory 200 . ) Bo I cvr a vast a covers II Book ”). tions. cer can be separatedbecancer Bureau Central dfne and defence n ”), then such then ”), against the reinsurer and contract insurance the enforce or action contractual a bring cannot insured the contracts, of privity of principle the with accordance In (“ insurer the against action have that parties incurred a third loss for which the insured would be policies, liable have a cause of insurance liability to relation In into andperformedingoodfaith. entered negotiated, be must law French by governed contract Any due premiumsasdamages. and outstanding all of payment the to paid entitled is all non-life he and keep premiums (for to entitled consequence is a insurer the As only), contracts insurance loss. the on influence no had declaration thereof, false even if the opinion risk omitted or insurer’s misrepresented by the the intentional insured has diminishes or risk the or of object the changes omission such when insured, the of part the on non-disclosure, or misrepresentation intentional of case in void and null be will contract insurance Conversely,the been risks the had payable accurately declared. been have would that premium the a such If in proportion to the rate of the premium paid runs. in relation to the rate of longer no insurance discovery has been made after a loss, the indemnity will be reduced the when period the for paid premium the of portion the returning by insured, the notifying after days 10 contract the terminate to or insured, premium the by increased accepted an of consideration in contract, the maintain to either right the has insurer the loss, a of occurrence the before discovered be declaration false or omission an such Should void. and null contract insurance the render not does established not is the of time faith bad whose insured the the by contract insurance the of conclusion at risk a of misrepresentation or Non-disclosure vn f h isrne opn risrs tef i rmis solely remains liable totheinsured. it itself, reinsures company insurance the if even . Cananinsuredbringadirectaction againsta 2.3 Canathirdpartybring directactionagainstan 2.2 . Isthereapositivedutyonaninsuredtodisclose 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 the insured). which caused a loss to the third party (for instance, a late payment to its obligations under the insurance policy and thus committed a fault liability claim against an insurer if the insurer failed to comply with civil a bring to party third a of right the recognises also law Case to delegation, express preferred ormortgagecreditors,accordingtotheirrank. for need the without allocated, principle, In relation to property insurance policies, insurance proceeds are, in invoked againsttheinsured. cover,have would it that policy of the under provided limitation limitations of statute third-party the deductible (unless provided otherwise by the law), exclusions or the against raise however, reinsurer? insurer? them? misrepresentation ornon-disclosurebytheinsured? whether theinsurerhasspecifically askedabout insurers allmattersmaterialto arisk,irrespectiveof iclg to: insurance &reinsurance 2019 vice versa cin directe action . Pursuant to French regulations, ) Te nue may, insurer The ”). France © Published and reproduced with kind permission byGlobal Legal Group Ltd,London “ under an insurance contract must be brought before the court of the of court the before brought be must contract insurance an under owed sums of payment the to relating disputes specifically, More complex commercialinsurancedisputes. cassation de and commercial courts, as well as the French Supreme Court (“ civil Nanterre and Paris The 10,000). EUR above or (below stake identity of the parties, possible jurisdiction clauses or the amount at The appropriate court will depend on a number of factors such as the ors wih r cmoe o nnpoesoa jde (usually (“ courts civil before or businessmen), skilled judges non-professional of composed are which courts, commercial before either heard are disputes insurance Commercial the insurerbecauseofinsured. against the insured when the subrogation cannot operate in favour of liability its of discharged fully or partially be also may insurer The not been compensatedbyitsinsurer. has what recover to as so party third the liable the against action to proportion an bring to authorised remains in latter the insured, the compensates only but party compensation third he received. For instance, if the insurer only partially liable the action against an bring to right his loses insured the compensated, Once discharge and subrogation wordings in their release documentation. subrogation a use systematically almost out insurers French Nevertheless, setting wording. clause separate or document specific any by payment such after subrogation to right “support” to need no liability.insurer’sis the there to such, rise As gave that loss the actions and of the insured against third parties rights who, by their acts, caused the in law” of “operation by subrogated automatically be would insurer the insured, the to indemnity an of payment Upon premium the insured the to corresponding totheperiodfollowingterminationofpolicy. refund must insurer the and policy the cancel to entitled be will insured the then request, a such reject insurer the Should reduction. premium a request to right the have In case of a decrease or in risk during the policy period, policy the insured will the terminating between offering anincreasedpolicypremium. opt to right the conditions, certain under have, will insurer the then occur, risk in increase an new declare Should knowledge). such acquiring insured the of days 15 (within must insured outdated or inaccurate insurer the to made answers the rendering or the period, circumstances likely to increase the risk or to give policy rise to new risks, was the During questionnaire such if spontaneous (trueandaccurate)statements. make however, may, insured established The precise. or clear be insufficiently cannot insured the in insurer the the of faith by bad the example, an as and, questionnaire underwriting asked questions the answering is to obligation limited such However, accurately. questions insurer’s the answer must policy,insured the the into entering upon that provide necessity.absolute specifically,More regulations insurance French an is insurer the and insured the both of loyalty consequence, a As norton roseFulbright iclg to: insurance &reinsurance 2019 Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 Tribunal de Grande Instance Grande de Tribunal 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the insurer needaseparateclauseentitlingsubrogation? dispute? Is there any right to a hearing before a j payment ofanindemnitybytheinsurerordoes ) ae rcgie eprec o daig with dealing of experience recognised a have ”) ”), staffed with professional judges. judges. professional with staffed ”), Tribunald’Instance ury? rance Cour ”, court expertsareappointed. whether or involved parties of number the case, the of complexity only and is therefore impossible for commercial ins France in available is jury by trial a to right The place wheretheinsuredeventoccurred. any nature, for which the insurer may be brought before the court of the of casualties to relating disputes (ii) and located, is property which the competent court is the court of the place where the insured for risks, (i) property-related covering of insurances to exception relating the disputes with insured, the of office head or domicile In any case, these periods will vary depending, vary will periods these case, any In several weekstomonths. take can proceedings Such exist. also proceedings fixed-date and Urgent proceedings, such as summary proceedings for interim relief fact) wouldaddatleastanother15to18months. cassation de and a half. half. a and A(“ appeal ultimate possible, take about a year and a possible appeal will usually add another year usually case insurance commercial a in proceedings instance First n dcmnain otiig omncto bten lawyers between communication containing documentation Any financial compulsion. to subject needed if document, requested the with court the provide a as (such court must he/she the secrecy), professional or privacy to personal of violation oppose to reason legitimate a has party that could have an influence and on the outcome of dispute the case. Unless the the non- to relevant elements contain might such evidence if action, the to non-party a from document a the of order production to case the hearing judge the request also may party of A methods and limit time the disclosure, ifnecessaryonpenaltyofadailyfine. indicate then would court The reasonable order.disclosure a for court the to apply to right the has party other a within and timeframe. properly For instance, if disclosure is not done spontaneously, conducted the are proceedings the that ensure to mission judge’s the is principle this to limit The (“ control overlegalproceedings. disposition” “party of dispositif principle the of application and arguments be obliged to disclose it to the other party spontaneously. such This is an support to which position. If disclosed a party relies decides upon a document in its submissions, it will be and position will and documents arguments its to respect of with duty any include not discovery. do The principle is that each party bears the burden courts of proof French before Proceedings . Howlongdoesacommercial casecommonlytaketo 3.2 . Can apartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c) producedinthe relating toadvicegivenbylawyers, or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin ) ne wih h pris xrie i picpe sole principle, in exercise, parties the which under ”) (which can only be based on issues of law and not of not and law of issues on based be only can (which

pourvoi www.iclg.com ”) before the before ”) in criminal cases criminal in inter alia inter urance disputes. France principe , on the on , Cour 111 France norton rose Fulbright France

(“avocats”) and their clients, regardless of its medium or form, are privileged and confidential. However, only the lawyer is subject to 4.6 What sort of interim remedies are available from the an obligation of absolute professional secrecy as the clients may courts? decide to disclose such documentation to third parties or to the court if they wish so. By contrast, confidentiality does not attach to Interim remedies can be sought by a party before trial in order to correspondence with or between in-house counsels. gather and/or protect evidence (“référé probatoire” – article 145 of the French Civil Procedure Code – FCPC). The request must be Communications between lawyers are also confidential, unless submitted before any trial and if the party proves a legitimate reason marked “official”. Therefore, any documents exchanged between (for instance if the fact at stake could determine the outcome of the lawyers in contemplation of litigation cannot be disclosed. As a future trial and is at risk of disappearance/alteration). In some cases,

France result, statements made while attempting to settle a dispute are it is possible to obtain such interim remedies without prior notice to privileged if the negotiations were handled by the parties’ lawyers, the defendant (“ordonnance sur requête”). unless specifically provided otherwise. Interim remedies may also be granted during trial in various cases including (i) where the matter is urgent, (ii) to avoid an imminent 4.3 Do the courts have powers to require witnesses to damage, (iii) to cease a manifestly illegal situation or (iv) to order give evidence either before or at the final hearing? the payment of a compensation or specific performance of an obligation which cannot seriously be challenged. The competent The parties usually argue their cases on the basis of written judge is the interim relief judge (“juge des référés”). However, as documentation supporting their submissions and rarely resort to interim injunctions are only enforceable on a provisional basis, the witness statements or oral evidence, although a court can take into claimant must initiate substantive court proceedings on the merits to consideration both oral and written evidence. obtain a final decision. Upon a party’s request, a court may however require a witness to Conservatory measures such as precautionary seizure (“saisies testify. The witness must comply with this legal obligation, unless conservatoires”) may also be awarded under specific circumstances. he/she has a legitimate reason to oppose, such as a violation of Those measures can only be granted if the party (i) provides professional secrecy (medical or bank secrecy) or privacy (if for evidence that its claim is grounded, (ii) specifies the amount of the instance the witness and one of the parties are family members). requested seizure, and (iii) demonstrates circumstances likely to threaten the recovery of the amount claimed. The precautionary 4.4 Is evidence from witnesses allowed even if they are attachment may apply to almost any properties, shares, stocks or not present? business owned by the other party.

French courts rarely require or allow witnesses to provide evidence 4.7 Is there any right of appeal from the decisions of the or make admissions in pleadings in civil proceedings. However, the courts of first instance? If so, on what general courts may rely on sworn statements setting out facts or grounds? How many stages of appeal are there? circumstances that a witness wishes to provide as testimony (although with a light probative value). Evidence obtained from A party has the right to appeal for final decisions to a court of appeal witnesses is therefore allowed even if they are not present. (“Cour d’appel”) for all claims above EUR 4,000. The court of appeal will be required to re-examine the entire case discussed in 4.5 Are there any restrictions on calling expert first instance. witnesses? Is it common to have a court-appointed There is one stage of “ordinary” appeal in French civil and expert in addition or in place of party-appointed commercial proceedings. In addition, the parties may under certain experts? circumstances, “appeal” (“pourvoi”) to the French Supreme Court (“Cour de cassation”). This appeal consists in an extraordinary Court experts are usually appointed by the court at the request of a legal remedy which can only be made against court of appeal party or on the judge’s initiative in cases/matters where technical decisions and judgments pronounced by a first instance court (if the input is required for the purposes of a decision on the merits of a claim is below EUR 4,000). case (examples: accident involving industrial equipment, aircraft The role of the Supreme Court is to review lower courts’ rulings on crash, calculation of financial losses). The expert will usually be the grounds of legal and procedural errors only, but not factual chosen by the court from a pre-established list of experts, and aspects. Should the French Supreme Court quash a decision issued appointed in a preliminary decision which sets out the scope of its by a lower court, the case will generally be referred for a rehearing mission. It would not be unusual for such expert proceedings in a of both fact and law, before a jurisdiction of the same level but construction or insurance context to last from six months to two or different from the one which issued the quashed decision. more years, at the end of which the expert would remit his final report to the court. Although the judge is never bound by the experts’ report, the court 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? usually relies on/ follows the technical conclusions of the court expert’s report in deciding upon the technical liabilities as well as the calculation of the financial loss. Interest is recoverable in respect of claims. It applies to any sum owed by a person as a result of a court decision. Interest generally In addition to, but separate from, the court appointed expert system, runs from the date of the decision (or any other date set by the court it is also common practice in France for an expert to be appointed by – for example, the date of loss or date of claim) and applies on the one of the parties, often by the insurance company of the principal amount awarded by the court decision. plaintiff. In such “amicable” context, the expert could not reliably be described as being independent, as having been appointed by one The calculation of interest may vary depending on the conditions set of the parties to support its own position. out in the decision, the date of actual payment of the amount due, and the parties at stake. For example, legal interest will be higher

112 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London norton rose Fulbright France for individuals (i.e., any natural person who is not acting in a professional capacity) than for professionals. As of first semester 4.11 If a party refuses to a request to mediate, what 2019, the legal interest rate is 3.40% for individuals and 0.86% for consequences may follow? professionals. While courts always encourage mediation, they have no power to The calculation of the interest is as follows: (amount due × number compel mediation. French regulations provide that the writ of of late days × rate) / number of days in a year × 100. The result summons must indicate all the diligences performed to resolve the constitutes the total interest, which is then added to the amount claim. However, in practice, in the absence of such diligences, the awarded by the court decision. parties face no sanctions. In any case, a party can always refuse to The legal interest rate may be increased when an amount due in a request to mediate (except where bound by a pre-existing respect of a court decision is not paid within two months following contractual obligation requesting the parties to attempt mediation). France the day on which the decision has become enforceable. The legal interest rate is in such case increased by five points. 5 Arbitration

4.9 What are the standard rules regarding costs? Are there any potential costs advantages in making an 5.1 What approach do the courts take in relation to offer to settle prior to trial? arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able The distinction between “dépens” and “frais irrépétibles” governs to intervene in the conduct of an arbitration? If so, on French civil procedure as regards standard rules regarding costs. what grounds and does this happen in many cases? The “dépens” consist of the costs and disbursements incurred throughout the proceedings, and as such include, inter alia, (i) the The French legal framework governing arbitration strictly limits fees and pecuniary entitlements charged notably by the court state courts’ involvement in arbitration proceedings. Thus, a state registry offices, (ii) the cost of translating documents, when such court must decline jurisdiction if it is requested to rule on a dispute translation is required by the law or an international act, (iii) court arising under a contract containing an arbitration clause, unless the experts’ fees, (iv) pecuniary entitlements of public officers, or (v) arbitral tribunal has not yet been constituted and the arbitration expenses incurred by the notification/servicing of an act abroad. clause is manifestly void or manifestly inapplicable. The court These costs are borne by the unsuccessful party, unless the judge cannot raise its lack of jurisdiction sua sponte and the defendant decides by a discretionary but reasoned decision that all or part of must raise this objection prior to discussing the merits of the case. these costs will be borne by another party. However, if the arbitral tribunal has not yet been constituted, either The “frais irrépétibles” mostly cover the fees not included in the party may seize a state court with a view to obtaining interim “dépens”, such as lawyers’ fees, travel expenses incurred for the measures (please refer to question 5.4 below). need of the trial or fees incurred for amicable expertise. Article 700 Furthermore, parties to an arbitration agreement can turn to a state of the FCPC allows the judge, at the request of a party, to order the judge (“juge d’appui”) to support the conduct of an arbitration, unsuccessful party to pay a lump sum intended to cover these costs. essentially for procedural issues. During the phase of constitution The courts have discretionary powers to set the amount of legal of the arbitral tribunal, such judge can appoint the arbitral tribunal costs to be paid by the unsuccessful party and the sums ordered are where the parties fail to reach an agreement and no arbitral rarely the full amount of lawyers’ fees charged. The court may take institution has been selected (which would solve the issue). In the into consideration equity and the financial situation of each party course of the arbitration proceedings, the judge has the power to (i) when awarding costs. deal with all issues pertaining to the revocation of an arbitrator, (ii) If a settlement agreement is reached before trial, the parties will extend the duration of the arbitral proceedings where parties fail to avoid paying the above-mentioned “dépens” (which, however, reach an agreement in this respect, and (iii) deal with issues in would have remained reasonable and limited). relation to documents held by third parties to the arbitral proceedings, subject to prior authorisation by the arbitral tribunal. With respect to domestic arbitrations, the juge d’appui is generally 4.10 Can the courts compel the parties to mediate the President of the Tribunal de Grande Instance of the seat of the disputes? If so, do they exercise such powers? arbitration. For international arbitrations, the juge d’appui is the President of the Tribunal de Grande Instance of Paris in specific Parties must specify the steps they have taken to reach an amicable circumstances, including when the arbitration is seated in France or resolution when referring a matter to a court. If the parties fail to is governed by French procedural law. demonstrate such an attempt, they cannot be sanctioned but the judge can propose to the parties to attempt mediation, although it has no power to compel mediation (except for some restricted 5.2 Is it necessary for a form of words to be put into a matters such as family or insolvency proceedings). contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words Despite the foregoing, the parties may have agreed on contractual is required? clauses requiring them to initiate a mediation procedure before going to court. In such case, these clauses are binding upon the The FCPC regulates domestic arbitration and international court. If the opposing party raises a breach of such clause, the court arbitration. Arbitration is deemed international when it involves will refuse to consider the claim (“fin de non-recevoir”). international commerce. It benefits from the application of more Specific to the insurance sector, potential disputes or claims may liberal principles. also be brought before the Ombudsmen of the French Federation of In domestic arbitration, arbitration clauses must be in writing, Insurance (“Médiateur de l’Assurance”). failing which they shall be void. Arbitration agreements may also result from an exchange of written documents or from a document iclg to: insurance & reinsurance 2019 www.iclg.com 113 © Published and reproduced with kind permission by Global Legal Group Ltd, London norton rose Fulbright France

to which the principal (re)insurance agreement refers. In such case, consent of the parties to the arbitration must be certain and effective. 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in In international arbitration, arbitration agreements are not subject to the arbitration clause or subsequently) that a any formal requirements. So long as the parties clearly express their reasoned award is required? intention to arbitrate their disputes, the clause will be valid. A written document can be used to prove the existence of such clause. The arbitral award must outline briefly the parties’ respective claims In any case, the best way to avoid potential issues is to draft an and their arguments. arbitration clause which is clear and specific. Therefore, it is In domestic arbitration, it must state the reasons upon which the advisable to address the following in the arbitration agreement: (i) decision of the tribunal is based, failing which it will be subject to France the number of arbitrators and the modalities of their appointment; annulment. (ii) the seat and language of the arbitration; (iii) the procedural rules In international arbitration, the parties may waive this requirement. applicable to the arbitration; and, where necessary, (iv) the governing law. It is also recommended to state whether the arbitral Many arbitration institutions, such as the French Reinsurance and tribunal may disregard strict rules of law and decide on an equitable Insurance Arbitration Centre (“Centre Français d’Arbitrage de basis (“amiable compositeur”) and which remedies are available Réassurance et d’Assurance” – CEFAREA), expressly provide in against the award. their arbitration rules that the award must state the reasons upon which it is based. International arbitration proceedings are not confidential by default. Therefore, the parties may wish to include a confidentiality agreement in their arbitration agreement. 5.6 Is there any right of appeal to the courts from the decision of an arbitral tribunal? If so, in what circumstances does the right arise? 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the courts will refuse to enforce such a clause? In domestic arbitration, a decision of an arbitral tribunal cannot be appealed on the merits unless the parties have agreed otherwise. The arbitral award may always be subject to annulment/setting aside If a dispute arising under an express arbitration clause inserted in a proceedings (“recours en annulation”). Appeal and setting aside (re)insurance agreement is brought before a state court, such court proceedings are initiated before the Court of appeal of the seat of the should decline jurisdiction, unless the arbitral tribunal has not yet arbitration within one month of the notification of the arbitral been seized and the arbitration clause is manifestly void or award. manifestly inapplicable. In international arbitration, a decision of an arbitral tribunal can Enforceability of an express arbitration clause may also be denied only be subject to annulment by the competent Court of Appeal on when such clause would apply to matters that are not arbitrable by limited grounds. Setting aside proceedings must be initiated within law. Arbitration of certain matters is prohibited, including, inter one month of the notification of the arbitral award (a two-month alia, family law matters, criminal law matters and more broadly, extension applies if the notified party is located abroad). The right matters relating to public order. to initiate setting aside proceedings may be waived by the parties by More specifically, although insurance and reinsurance are deemed means of an express and specific agreement. Parties can always arbitrable matters, an arbitration clause provided in an insurance appeal enforcement orders. contract entered into between an insurance company and a In both domestic and international arbitration, grounds for consumer/non-professional will be deemed unfair, as restricting the annulment are strictly limited. An arbitral award will only be set consumer’s right to initiate a legal action. Therefore, in such case, aside to the extent one of the following conditions is met: (i) the the courts will refuse to enforce such a clause. arbitral tribunal wrongly upheld or declined jurisdiction; (ii) the arbitral tribunal was improperly constituted; (iii) the arbitral tribunal 5.4 What interim forms of relief can be obtained in ruled in violation of its mandate; (iv) due process was not complied support of arbitration from the courts? Please give with; (v) the arbitral award is contrary to public order (international examples. public order in an international arbitration framework); and (vi) for domestic arbitration only, the arbitral award is not grounded or does If the arbitral tribunal has not yet been constituted, either party may not state the date on which it was rendered or the name of the apply to a state court for interim measures. Such measures include arbitrator(s), or does not include the required signature(s) or was not conservatory measures, provisional measures and investigative rendered by a majority vote of the members of the tribunal. measures. In addition, in the event a fraud is uncovered after the arbitral award In addition, urgent measures may be granted by state courts, where is rendered, the party alleging the existence of a fraud can, in both justified by the circumstances and in the absence of serious domestic and international arbitration proceedings, seek a review of challenge by the other party. Even if there is a serious challenge by the award (“recours en révision”). Such review is undertaken by the the other party, state courts may order urgent conservatory measures arbitral tribunal itself, unless it is no longer possible for the same to prevent imminent harm or to remedy manifestly illegal situations. arbitral tribunal to be constituted. In such case, in domestic Once the arbitral tribunal is constituted, arbitrators may order arbitration, state courts (Court of Appeal) rule on the issue. provisional measures. Arbitrators may compel parties to execute those measures by including a cumulative daily penalty (“astreinte”) Acknowledgment in the event of non-compliance. State courts retain exclusive jurisdiction to order conservatory Bénédicte and Orsolya deeply thank Janice Feigher and Constantin seizures and registration of judicial mortgages. Beytout, Norton Rose Fulbright associates, for their invaluable assistance in preparing this chapter.

114 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London norton rose Fulbright France

Bénédicte Denis Orsolya Hegedus Norton Rose Fulbright Norton Rose Fulbright 40, rue de Courcelles 40, rue de Courcelles 75008 Paris 75008 Paris France France

Tel: +33 1 56 59 53 65 Tel: +33 1 56 59 53 56 Email: benedicte.denis@ Email: orsolya.hegedus@ nortonrosefulbright.com nortonrosefulbright.com URL: www.nortonrosefulbright.com URL: www.nortonrosefulbright.com France Bénédicte Denis is a corporate and regulatory lawyer based in Paris. Orsolya Hegedus is an insurance lawyer based in Paris. Orsolya She specialises in corporate and regulatory advice to financial specialises in regulatory and corporate insurance advice to insurance institutions and insurance industry clients. industry clients and in insurance litigation. Bénédicte is Head of our Paris Corporate Team and Financial Orsolya advises French and international institutions in the insurance Institutions group. She advises French and international institutions sector. On the corporate insurance side, she has extensive across the insurance industry (insurers, reinsurers, intermediaries and experience in advising clients on strategic partnerships and insurance other market participants) on domestic and cross-border transactions, distribution agreements and on the regulatory side, she advises including share acquisitions and disposals, asset and business insurers, reinsurers and intermediaries, on a wide range of legal and transfers, portfolio transfers, joint ventures and corporate regulatory matters, such as product distribution, on-going business reorganisations. regulation, policy wordings and reinsurance. She also carries out non-transactional work for insurance industry Orsolya also has an extensive experience in litigation. Orsolya deals clients and provides advice on a wide range of legal and regulatory with a variety of litigation matters for insurers, in particular on policy matters relating to their businesses (including the setting up of new coverage matters, and her experience includes dealing with PD/BI, businesses, assisting in obtaining new authorisations, product product liability, professional indemnity, D&O and CAR/EAR classes of regulation and reinsurance issues). business. She has also developed a particular expertise in industrial risk (agro, automobile, aviation, heavy industrial equipment, and pollution) and construction liability.

Norton Rose Fulbright is recognised by market players as one of the largest and best resourced international legal practices specialising in the insurance sector. Our wide-ranging and diverse client base and the sharing of information and know-how between our lawyers give us a commercial knowledge and understanding of the sector which go beyond pure technical skill. Our approach consists in actively evaluating the market, its challenges and developments. This gives us a perspective on market trends and practices and enables us to offer comprehensive and top quality advice to our clients. Our multidisciplinary team, comprised of more than 300 lawyers dedicated to the insurance sector, serves our clients across the globe. In France, Norton Rose Fulbright LLP advises French and international insurance professionals, including insurers, reinsurers and intermediaries, on all legal and regulatory issues affecting their businesses. We also advise other industries facing insurance issues. We provide our clients with corporate, regulatory, compliance advice in relation to day to day and/or strategic matters and assist them in dispute resolution matters (contentious/arbitration).

iclg to: insurance & reinsurance 2019 www.iclg.com 115 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 20 germany Dr. Henning schaloske

clyde & co (Deutschland) llP Dr. tanja schramm

1 Regulatory arrangements, on estimated expenses for setting up administration and the sales network, as well as on the managers’ and directors’ reliability and qualification. 1.1 Which government bodies/agencies regulate Authorisation may only be granted to stock corporations, mutual insurance (and reinsurance) companies? societies and corporations and institutions under public law. The head office must be located in Germany. All private and public insurance undertakings which carry on private insurance and reinsurance business within the scope of the Insurance 1.3 Are foreign insurers able to write business directly or Supervision Act (Versicherungsaufsichtsgesetz, VAG) and have their must they write reinsurance of a domestic insurer? registered office in Germany are subject to supervision either by the Federal Financial Supervisory Authority (Bundesanstalt für In order to write German insurance and reinsurance business, Finanzdienstleistungsaufsicht, BaFin) or by the supervisory foreign insurers and reinsurers need to comply with preconditions of authorities of the Federal States. Insurance undertakings having their German insurance regulatory law. Under the EU single passport registered office in another EU Member State or in a state party to the regime, EEA-insurers and reinsurers are permitted to write German Agreement on the European Economic Area (EEA) which conduct (re)insurance business either via a domestic branch or under the business in Germany under the freedom to provide service are freedom to provide cross-border services without requiring separate primarily subject to supervision by their home country. BaFin does, authorisation in Germany. In contrast, primary insurers and however, consult the foreign supervisory authority if it identifies reinsurers from third countries, i.e. countries that are not EU breaches of general German legal principles. Member States or signatories to the Agreement on the EEA, are BaFin is an independent public law institution established in 2002 subject to authorisation by BaFin and must, as a general rule, and is subject to legal and technical oversight by the Federal establish a German branch office if they wish to carry on primary Ministry of Finance. insurance or reinsurance business in Germany. With regard to reinsurance business, the legal situation changed 1.2 What are the requirements/procedures for setting up a when the Act to Modernise Financial Supervision of Insurance new insurance (or reinsurance) company? Undertakings (Gesetz zur Modernisierung der Finanzaufsicht über Versicherungen, 10. VAG Novelle) came into force on 1 January Setting up a new (re)insurance company requires – subject to 2016. First, an exception to the licence agreement applies if the exceptions: first, under the EU’s single passport regime; and second, reinsurer is domiciled in a country whose solvency regime is in case of the equivalence of a foreign legal supervisory regime – the deemed to be equivalent to that of the EU. In other cases, a third- company to obtain authorisation with BaFin pursuant to Section 8 country reinsurer may conduct reinsurance business in Germany VAG. According to Section 9 VAG, the company has to attach an only by way of correspondence as explained in BaFin’s operating plan to its application, disclose the purpose and structure interpretative decision of 31 August 2016. In summary, insurance of the business, the region in which business is to be conducted and, by correspondence applies to reinsurance business if, at the in particular, clearly state the conditions which shall secure that the instigation of an undertaking domiciled in Germany, a reinsurance future liabilities of the undertaking may be fulfilled at any time. contract is concluded by correspondence with an insurer domiciled The operating plan shall include, inter alia, the articles of abroad without one of the parties being assisted by a professional association as well as information about the classes of insurance intermediary in Germany or abroad but acting as an intermediary in which the insurer tends to carry on and which risks of a class of Germany. insurance are to be covered. Further, the operating plan shall give Further, on September 22, 2017, the EU and the USA signed an evidence of the existence of own funds in the amount of the agreement addressing the US lack of equivalency concerning the minimum guarantee fund and provide estimates for the first three Solvency II directive, which entered into force on April 4, 2018. This financial years with respect to the expenses for commissions and agreement is aimed at making it possible for contracts to be other current operating expenses, expected premiums, expected concluded between a US reinsurer and an EU (re)insurer without the charges for claims incurred and the expected liquidity situation. US reinsurer being required to establish a branch in the respective Additional information is required for health insurance and EU Member State. Moreover, the agreement streamlines group coverage of certain risks, about the intended reinsurance supervision requirements for insurers and reinsurers operating in

116 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London ii n vrg o 20 mlye pr icl er I the If year. fiscal per employees 250 of average an (iii) EUR2.8millionnetturnover;and EUR6.2millionbalancesheettotal; (ii) (i) at leasttwoofthefollowingcharacteristics: exceeds policyholder the if insurances indemnity other and liability transport, liability and credit insurances, as well as certain property, policies. In line with European law, such large risks include certain freedom of contract shall not apply to so-called large risks or the to of open restriction such that provides Act Contract Insurance the of 210 Section However, insured’sdisadvantage. the to modified nor provisions, semi-mandatory meaning so-called that such provisions can neither be contractually precluded of number a for provides scenario of an insured an of scenario liability German a in applies same prerequisites. The narrow under director a indemnify only may company the established, is liability proceedings liability may and company criminal where a director or officer is held a liable to a third for party. However, if example, costs For defence reimburse exceptions. certain is this to however, (D&O); subject officers and directors its indemnify to company a law,for company allowed German generally Under is it ( Act Contract Insurance The Arethereanylegalrulesthatrestricttheparties’ 1.4 expected in 2022. implementing but require further legislation. Full insurance undertaking. The provisions responsib of the agree authority supervisory the to declarations t obligated are and requirementscapital risk-based both jurisdictions. US reinsurers must fulfil cert clyde &co(Deutschland)llP iclg to: insurance &reinsurance 2019 Insurance the is law 100 its On Contract insurance Act. German of source primary The Ingeneralterms,isthesubstantive lawrelatingto 2.1 and accountants advisors, tax lawyers, insurance intermediaries. of as number a such motor for professions, third-party insurance liability insurance, professional health and insurance are ones prominent most Germany.in insurance compulsory of forms various are There The Arethereanyformsofcompulsoryinsurance? 1.6 Are companiespermittedtoindemnifydirectorsand 1.5 acts. intentional for except permissible is indemnification officers, For company. the to duties his breached has director the if prohibited be typically Germany.will in indemnification scenario result, a As (Re)insurance Claims 2

freedom ofcontractbyimplyingextraneousterms officers underlocalcompanylaw? into (allorsome)contractsofinsurance? insurance morefavourabletoinsurers orinsureds? nepie s eemnd codn t te iue i the in figures the to consolidated financialstatement. according determined is the of enterprise size the statement, financial consolidated a prepare must which companies of group a to belongs policyholder

vs insured claim, which is the typical D&O typical the is which claim, insured th anniversary, the Insurance Contract Act Insurance anniversary,the Versicherungsvertragsgesetz

ain capital and local implementation is ment are not self- o submit certain submit o e o te EU the for le VVG) , of acut-throughclause. an of claim direct no insured against is a reinsurer, unless specifically agreed, e.g. by means there law, reinsurance German Under which canthenbringadirectclaimforpaymentagainsttheinsurer. company insured the the to person insured an from claim insurance the from directly indemnification of assignment the and insurance D&O demand to applies insurer.also This to entitled be shall party third the valid, is assignment the If Code. Civil the of rules the to according conditions and terms insurance general of scrutiny stand to have will case, latter the in and, risk large a of case the in Aor may,individually assignment agreed of be prohibition only thus, claim. damage the bringing party third the to indemnification insurance terms and conditions that the insured assigns its claim for Insurance 2 para. 108 Contract Act states Section that liability insurers may not rule out 2008, by general January 1 of as Moreover, ifthepolicyholder’s whereaboutsareunknown. (iii) if insolvency proceedings have been opened in respect of the (ii) third-party (e.g. insurance liability compulsory of case the in (i) action againsttheinsurer: of the Insurance Contract Act entitles the third party to bring a direct 1 para. 115 Section insurance, liability compulsory For insurance. the insurer. There are exceptions, however, in particular for liability against coverage for claim a has insured the only rule, general a As . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 305 Sections to subject are ( Code conditions and terms insurance autonomy,standard Civil party for room German the Gesetzbuch by governed further are contracts insurance Act, Contract Insurance the to addition In pre- Act servingconsumerprotectionaremandatory. risks Contract Insurance the of provisions material most Accordingly, process. the disclose of breach to contractually or to cooperate with the insurer in the claims handling of case obligations in sanctions policyholder’s restricted hand, other the policyholders before the formation of the insurance contract and, on advise and inform to insurers for duties extensive introduced hand, to promote consumer protection. intended For example, the legislator new law, the on the one Act, Contract Insurance the revising In insurance contracts asof1January2009. concluded previously and, to 2008 exceptions, year certain the to subject of beginning insurance the to since applies law concluded new contracts The 2008. January 1 of as effect taking version current its with revision comprehensive underwent also relevantforbusinessinsurance. is it insurance, consumer in rule predominant a plays scrutiny this While be insured. will the disadvantage terms unreasonably they business if ineffective standard in provisions Moreover, user. the against resolved are terms business standard of interpretation the in doubts any Furthermore, policies. German into pasted and the of part form not do contract. them This may, for example, apply to foreign provisions copied encounter to expect to not needs contract the to party other the that unusual so are which provisions reinsurer? insurer? assets ofthepolicyholder;or motor vehicleinsurance); , BGB). Even where the Insurance Contract Act leaves Contract Act Insurance the where Even BGB). ,

et seq et . of the Civil Code. Accordingly,Code. Civil the of .

www.iclg.com germany Bürgerliches 117 germany 118 germany © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com time and form applicable the with accordance in claim this safeguard to serving right a or damages for claim its safeguard to claim will be assigned this by law to the insurer.loss, The insured insured is required the regarding party third a from to damages entitled claim is insured the if insurer, the by indemnification Upon Isthereanautomaticrightofsubrogationupon 2.6 under specialcircumstances. positive a be question risk is might written respective a of absence there the It in duty disclosure extent what writing. to in and whether requested disputed has insurer the which information risk to refers only disclosure of duty policyholder’s the general, In Isthereapositivedutyonaninsuredtodisclose 2.5 are breach of case 19 in Sections by remedies governed insurer’s the and information risk material disclose pre-contractually to duty policyholder’s The Whatremediesdoesan insurer haveincasesofeither 2.4 clyde &co(Deutschland)llP Civil Code. 123–124 Sections to according misrepresentation/non-disclosure fraudulent the discovering upon year with one within contract effect retroactive insurance the avoid to entitled be also will insurer the non-disclosure, or misrepresentation fraudulent of event the in In addition to the remedies under Section 19 Insurance Contract Act, disclosure, though. non- or misrepresentation fraudulent of case the in apply not will liability.insurer’srestriction the The of extent the or event insured non-disclosure refers to circumstances causing the occurrence of the be obligated to provide coverage, provided that misrepresentation or not will insurer the event, insured an after rescission of event the In the that suspect to reason policyholder breachesitsdutyofdisclosure. has insurer the if circumstances and facts the investigate to obligated be will insurer the courts, German by held As non-disclosure. or misrepresentation the of knowledge actual gains insurer the when commences period The month. one The insurer must assert the remedy afforded to him in writing within the consequencesofanybreachdutydisclosure. of have correspondence separate must in writing insurer in policyholder the the warned apply, to remedies any for Furthermore, insurer. the of request the upon effect retroactive with contract the of part become shall conditions other such Instead, facts. disclosed non- the of with informed properly been although had it contract, if conditions, the different concluded have also would insurer notice a period of one to month. Rescission and termination subject are ruled out if the contract the terminate to of entitled be only duty will the breached insurer policyholder the negligently, grossly nor intentionally neither the disclosure if insurance the However, rescind may insurer contract. the rule, general a As fault. of degree policyholder’s the on depend remedies breach, of case In asked forinso-calledtextform. the to relevant are which insurer’s decision to conclude him the contract and which the insurer to has known factors risk the insurer the to disclose to has policyholder the contract, the of conclusion misrepresentation ornon-disclosurebytheinsured? insurer needaseparateclause entitlingsubrogation? payment ofanindemnitybytheinsurerordoes them? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof t seq et

Isrne otatAt Before Act. Contract Insurance . of duration the involved, proceedings mayandoftenwillbeaboveaverage. is evidence of taking extensive when Of cases. particular in matters, reinsurance and of insurance complex in course, cent per 14 approximately in years two than more and cases of cent per 55 in years two to one cases, of cent per 30 approximately in months 12 than less take Justice of Court Federal the to law of questions on otherwise. Appeals terminated those for months 10 and judgment by concluded proceedings for months 16 The months. 12 average duration within of first instance proceedings at a Regional Court is cent per 75 approximately and months six within resolved were Court Regional a at proceedings first instance of cent per 47 approximately 2017, year the for statistics on based example, For moderate. comparatively is proceedings court German of duration average approximate The case. individual the The duration of proceedings naturally depends on the complexity of Court of Justice ( Federal the – seniority of order descending in – are These matters. law civil for competent courts the in heard are disputes Insurance Which courts are appropriate for commercial insu 3.1 indemnification reduce to entitled according totheseverityofpolicyholder’s fault. be shall insurer the breach, negligent grossly a of event to the In party. third obligated the from recourse be not will insurer indemnify the insured insofar as the the insurer cannot, as intentionally a result, claim obligation, policyholder the this If breaches right. or claim such in necessary asserting whenever insurer the assist shall and requirements, order to prove certain facts if such documents are in possession of possession in are documents such if facts certain in prove to order documents specific produce to party other the requiring order International Arbitration. Accordingly, a party may apply for a court production according to the IBA Rules on the Taking of document Evidence in resemble somewhat restrictive, more still while evidence which, of taking the for exceptions certain are there However, Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Regional Courts ( Courts Regional ( dispute exceedsEUR5,000. in amount the if Court Regional a be will instance first of court the matters, insurance In instance. first of the courts are and Courts Regional Courts Local the Both matters. insurance for senates or from the Local Courts, all courts usually have specialised chambers and mustproduceanydocumentssupportingtherelevantfacts. position its support that facts the prove must party each that rule the follow proceedings civil Instead, litigation. US from particular, in German civil procedure does not know pre-trial discovery as known, Landgericht 3 Litigation – Overview Litigation–Overview 3 Litigation –Procedure 4 dispute? Is there any right to a hearing before a j disputes? Does this depend on the value of the to theaction? bring tocourtonceithasbeeninitiated? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin iclg to: insurance &reinsurance 2019 , LG) and 661 Local Courts ( Courts Local 661 and LG) , Bundesgerichtshof Oberlandesgericht

, BGH) in Karlsruhe, 24 Higher , OLG), 116 Regional Courts Regional 116 OLG), , Amtsgericht germany , AG). Apart ury? rance © Published and reproduced with kind permission byGlobal Legal Group Ltd,London of familyrelationshipswithapartyorincaseself-incrimination. case in such testimony,e.g. refuse to entitled follow is witness investigating the to unless order obligated for is witness relevant a general, be In will facts. disputed testimony whose party a by offered witnesses those by testimony witness order will court The into privilege or confidentiality of aspects consideration whenexercisingitsdiscretion. take will court another party. In case of a court order for producing documents, the under privilege does not extend to documents and in possession of the client or rules on professional evidence criminal law unless authorised to do so by the client. to However, this giving according refuse issues must confidential and may lawyers of particular, production Furthermore, In privilege. of rules procedural under rejected be may documents obligations. confidentiality from the other party may have defences against such claim, e.g. resulting law,civil Under documents. the of delivery for claim enforceable an has party applying the if order respective a issue only will court the party, other the by production document for applies party a If imposed withafine. into consideration in its evaluation of evidence. Non-parties may be this take will court the reason, good without order respective a with in its pleadings within a certain deadline. If a party does not comply to reference made has party a which documents specific produce to non-party a even or party a order to discretion have Further,courts non-party’s obligation. the enforce to action legal take time to required this be Withinmay produce party a frame, court. also the by must set deadline a non-parties within documents prerequisites, same the Under party the of allegations applying fordocumentproductionastrue. requested the the consider produce may not court the does documents, party other the the furnish If to obligated is documents. party other the if and party other the clyde &co(Deutschland)llP iclg to: insurance &reinsurance 2019 hearing. evidence the at questioning for expert The the summon then may court comment. may a parties render the which usually on will opinion expert expert written neutral The pleadings. the of part as reports their introduce will and experts own their have often will expert witnesses are appointed by the court. In addition, the parties party, a by application on evidence, of taking the for necessary If Are there any restrictions on calling expert wit 4.5 international in used as statements arbitration orinUSUKlitigationproceedings. witness written know not does procedure civil particular,testimony.German In by delivered be general, in must, evidence witness proceedings, civil ordinary In Isevidencefromwitnessesallowedeveniftheyare 4.4 Do thecourtshavepowerstorequirewitnesses 4.3 Canapartywithholdfromdisclosuredocuments(a) 4.2 give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? addition or in place of party-appointed experts? not present? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin Is it common to have a court-appointed expert in

nesses?

competent for appeals against judgments by Higher R Co Federal the stage, final the In Court.Regional filed be mayCourtsRegional judgmentsinstance by appeals Courts, Local by judgments against appeals by more than EUR 600. While the Regional Courts ar fact if the first instance court has deviated from A party may appeal a first instance judgment on que is matter the that urgent. and respondent the against claim substantive a has applicant the that evidence the of preponderance with show must applicant the protection, interim For party’sassets. other the of dissipation or removal preventing order attachment an for apply been finally resolved in the main proceedings. Second, a party may has dispute the until party other the by action certain a preventing relief. First, a party may apply interim for an interim of injunction requiring or kinds two for provides procedure civil on law German n ipt i, h hge te ot ae h mxmm mut in amount maximum The are. costs the higher the is, dispute in in dispute and the procedural stages covered. The higher the amount amount the to according calculated lawyers’are and fees court The no failure, of is tobepaidonthestatutoryremuneration incaseofsuccess. case in supplement appropriate an that agreed have parties the if paid be to that agreed is remuneration statutory the than amount be lower a or remuneration may it proceedings, court In cases. individual in and circumstances narrow very under damages. Under German law, contingency fees are only permissible unless the fees in excess of the statutory rates constitute recoverable generally has to bear the extra fees regardless party of the the court’srates, decision, hourly on based example for rate, higher a lawyer in its pay to is agrees party a lawyers If rates. of statutory by determined remuneration general recoverable fees, court like Just court or costs aresplitupandeachpartybearsitsownout-of-courtcosts. loss and success of degree the to reference by allocated partly wins and partly loses that case, costs are either proportionally general, in are, the losing party has to bear the costs of the litigation. If the plaintiff fees lawyers’ and Court recoverable in the event of success. Following the “loser front. pays rule”, up fees court the advance to has plaintiff The fees. lawyers’ particular in costs, parties’ of and expenses and fees court of consist costs Litigation is -0.88percent. Bank Central German the (Deutsche Bundesbank). by As of 1 July 2018, announced the basic rate of interest is interest of rate base The consumer. a percentage is party neither eight where rate base the and above points rate base the above points percentage five generally is rate interest The default. in being if as claim a justified on interest owe will defendant the commences, litigation Once . Isthereanyrightofappeal fromthedecisionsof 4.7 Whatsortofinterimremedies areavailablefromthe 4.6 . Whatarethestandardrulesregardingcosts? Are 4.9 Isinterestgenerallyrecoverableinrespectofclaims? 4.8 grounds? Howmanystagesofappealarethere? courts? offer tosettlepriortrial? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral there anypotentialcostsadvantagesinmakingan

www.iclg.com the party’s application stions of law and germany urt of Justice is Justice of urt e competent for egional Courts. with a Higher a with gis first against

119 germany clyde & co (Deutschland) llP germany

dispute for purposes of calculation of litigation costs is EUR 30 million, leading to maximum court costs of roughly EUR 330,000 5.2 Is it necessary for a form of words to be put into a and maximum statutory lawyers’ fees of roughly EUR 275,000 (plus contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words VAT) for first instance proceedings. In case of a settlement reached is required? in first instance and again based on an amount in dispute of EUR 30 million, court costs will be reduced to approximately EUR 110,000, In general accordance with the New York Convention on the whereas lawyers’ fees will be increased to approximately EUR Recognition and Enforcement of Foreign Arbitral Awards and the 310,000. UNCITRAL Model Law, the arbitration agreement must be in writing. 4.10 Can the courts compel the parties to mediate In consumer insurance, arbitration agreements are the absolute germany disputes? If so, do they exercise such powers? exception. Under German arbitration law, the arbitration agreement would have to be in a document personally signed by the parties. Under German law, mediation is voluntary and courts cannot Hence, a strict written form requirement applies. compel the parties to mediate disputes before or during court In business insurance, arbitration agreements are still rather the proceedings. Courts may suggest that the parties pursue mediation exception, yet on the rise, in particular for technical or international or other alternative conflict resolution procedures. If the parties risks, such as aviation or maritime insurance, but also for other risks, agree to mediation, the court may stay the proceedings. e.g. in D&O and W&I insurance. By contrast, cedants and Furthermore, the courts are obliged to encourage and facilitate reinsurers typically prefer settling any disputes in a private, amicable solutions during all stages of the proceedings and, in confidential forum and by self-chosen neutrals with the necessary particular, to conduct a settlement hearing before commencing the experience and know-how in the industry. In line with worldwide trial. practice, German reinsurance contracts therefore usually contain an arbitration agreement. While most agreements so far provide for ad 4.11 If a party refuses to a request to mediate, what hoc arbitration, parties increasingly use institutional rules. consequences may follow? In business insurance and reinsurance, the arbitration agreement must generally fulfil the written form requirement. However, the As mediation is voluntary, a refusal to mediate will not have any form requirements under German law are much more lenient than consequences for the parties. those under the New York Convention and the UNCITRAL Model Law. The arbitration agreement may not only be contained in a 5 Arbitration document signed by the parties but also in an exchange of letters, faxes or other means of telecommunication which provide a record of the agreement. Further, the form requirement is deemed to have 5.1 What approach do the courts take in relation to been complied with if the arbitration agreement is contained in a arbitration and how far is the principle of party document transmitted from one party to the other party or by a third autonomy adopted by the courts? Are the courts able party to both parties and – if no objection was raised in good time – to intervene in the conduct of an arbitration? If so, on the contents of such document are considered to be part of the what grounds and does this happen in many cases? contract in accordance with common usage. Moreover, reference in a contract complying with the written form requirements to a Over the past decade, Germany has become an increasingly document, e.g. standard insurance terms and conditions, containing significant venue for international arbitration proceedings. While an arbitration clause also constitutes an arbitration agreement 72 proceedings were commenced with the German Institution of provided that the reference is such as to make that clause part of the Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V., contract. DIS) in 2006, case numbers have been increasing to 155 In order to oust the jurisdiction of the courts, in the arbitration proceedings in 2010 and 172 proceedings in 2016 with a slight agreement, the parties must submit to arbitration all or certain decrease to 160 in 2017, while the highest amount in dispute disputes which have arisen or which may arise between them in increased from EUR 200 million in 2016 to EUR 270 million in respect of a defined legal relationship, whether contractual or not. 2017. In 55 of the proceedings in 2017, at least one foreign party In general, the parties should also specify the number of arbitrators, was involved (47 in 2016). the place of arbitration and the language of the proceedings as well This development is supported by a number of factors. In as the applicable law. Arbitration institutions such as the German comparison, German arbitral proceedings are recognised for their Institution of Arbitration or ARIAS Europe provide model clauses efficient and cost-sensitive organisation. Further, German which the parties may incorporate into the contract. arbitration law as well as court practice follow an arbitration- friendly approach. Having adopted the UNCITRAL Model Law on International Commercial Arbitration in 1998, Germany provides 5.3 Notwithstanding the inclusion of an express for a modern arbitration regime with rather detailed, well-structured arbitration clause, is there any possibility that the courts will refuse to enforce such a clause? and easily understandable provisions designed to protect party autonomy and to afford effective arbitral justice. If the parties have included an arbitration clause, German courts will Moreover, court intervention is limited. A court may not intervene enforce the clause unless the arbitration agreement is null and void, in arbitral proceedings unless expressly empowered under German inoperative or incapable of being performed. Hence, a court before arbitration law. In fact, courts are restricted to providing supportive which an action is brought in a matter which is the subject of the judicial assistance, e.g. in the enforcement of interim measures of arbitration agreement will, upon objection by the respondent prior to the arbitral tribunal or in the taking of evidence. Finally, the Higher the beginning of the oral hearing, reject the action as inadmissible. Regional Court at the seat of the arbitration will be competent for Further, as a German specialty, an application may be made to the setting aside an arbitral award under very narrow prerequisites. court to determine whether or not arbitration is admissible prior to

120 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co (Deutschland) llP germany the constitution of the arbitral tribunal. Once the arbitral tribunal has been constituted, it will rule on its own jurisdiction and, in 5.6 Is there any right of appeal to the courts from the relation to this, on the existence or validity of the arbitration decision of an arbitral tribunal? If so, in what circumstances does the right arise? agreement. Thus, German arbitration law follows the principles of separability and provisional competence-competence. However, the final decision on competence is reserved to the courts. Under German law, an arbitral award is final and cannot be appealed on the merits. In particular, while the parties could agree on second instance arbitral proceedings, no révision au fond can be agreed by 5.4 What interim forms of relief can be obtained in the courts. Instead, the Higher Regional Court at the arbitration seat support of arbitration from the courts? Please give will be responsible for recognising foreign and enforcing domestic examples. and foreign awards. Further, the Higher Regional Court is germany competent for applications for setting aside the arbitral award. In Unless otherwise agreed by the parties, the arbitral tribunal may, at line with Article V of the New York Convention on the Recognition the request of a party, order such interim measures of protection as and Enforcement of Foreign Arbitral Awards, the Higher Regional the arbitral tribunal may consider necessary in respect of the Court will only refuse to enforce or grant an application for setting subject-matter of the dispute. These interim measures can only be aside an arbitral award under very narrow prerequisites, though: enforced by the courts. For this reason, parties more often directly ■ if a party to the arbitration agreement was under some apply for interim measures with the courts which retain concurrent incapacity pursuant to the law applicable to it or the jurisdiction for granting interim relief. However, the courts are arbitration agreement is invalid; restricted to attachment orders and interim injunctions under the ■ if a party was not given proper notice of the appointment of ordinary prerequisites as applying outside arbitral proceedings. an arbitrator or of the arbitral proceedings or was otherwise unable to present its case; 5.5 Is the arbitral tribunal legally bound to give detailed ■ if the award deals with a dispute not contemplated by or not reasons for its award? If not, can the parties agree (in falling within the terms of the arbitration agreement, or the arbitration clause or subsequently) that a contains decisions on matters beyond the scope of the reasoned award is required? submission to arbitration; ■ if the composition of the arbitral tribunal or the arbitral The award shall be made in writing, be signed by the arbitrators and procedure was not in accordance with the (few) mandatory state the reasons upon which it is based, unless the parties have provisions of German arbitration law or the agreement of the agreed that no reasons are to be given or the award is an award on parties, provided that this contravention presumably affected agreed terms. the award; ■ if the subject matter of the dispute is not capable of settlement by arbitration under German law; or ■ if recognition or enforcement of the award leads to a result which is in conflict with public policy (ordre public).

iclg to: insurance & reinsurance 2019 www.iclg.com 121 © Published and reproduced with kind permission by Global Legal Group Ltd, London clyde & co (Deutschland) llP germany

Dr. Henning Schaloske Dr. Tanja Schramm Clyde & Co (Deutschland) LLP Clyde & Co (Deutschland) LLP Dreischeibenhaus 1 Dreischeibenhaus 1 40211 Düsseldorf 40211 Düsseldorf Germany Germany

Tel: +49 8822 8800 Tel: +49 8822 8800 Email: [email protected] Email: [email protected] URL: www.clydeco.com URL: www.clydeco.com

germany Recognised as a leading expert for insurance and reinsurance, Tanja has extensive experience in a wide range of insurance work, Henning maintains a broad practice focusing on complex and particularly in the areas of financial lines, professional indemnity and international claims, regulatory advice and arbitration. Admitted to the fidelity insurance. She is recognised as a leading expert for insurance Düsseldorf chamber of lawyers, he is admitted to practice in Germany. in Germany. Henning has a particular focus on advising (re)insurers in complex Tanja Schramm has more than 15 years of experience as an insurance domestic and international claims, either as monitoring, coverage or lawyer and acts for German and foreign insurers and reinsurers in defence counsel. His specialist areas include financial and most areas of insurance and reinsurance law. Her experience professional lines (D&O, E&O, PI, FI), product liability, and property includes acting as monitoring, defence and coverage counsel in large matters as well as warranty and indemnity, cyber, and other specialty and complex (international) insurance cases as well as litigation and risks. Further, Henning regularly advises on reinsurance matters. He dispute resolution work. Tanja particularly advises on financial and has extensive experience in litigation as well as domestic and professional lines (E&O, D&O, FI, PI), cyber insurance, fidelity international arbitration, including corporate and commercial disputes. insurance, specialty risks, subrogated recovery matters and multi- In arbitration, he is experienced as counsel as well as an arbitrator jurisdictional issues. Tanja has extensive experience in the monitoring (chairman/sole and party-appointed) and certified with ARIAS of E&O mass claims. Furthermore, she has acted in a number of Deutschland e.V. Besides claims work, Henning frequently advises on claims involving directors & officers and financial institutions as well as product development and in matters of insurance regulatory law. in several coverage lawsuits with fundamental legal importance. She also acts as defence counsel in court proceedings against Henning chairs the working group “PI Insurance/Financial Lines” of the professionals and directors. Further, her practice includes drafting and Committee Insurance Law of the German Bar Association. He is adapting insurance policies to German law. recommended as a leading expert for insurance/reinsurance in JUVE, WirtschaftsWoche, Chambers Europe, The Legal 500, Who’s Who Over the years, Tanja has undertaken secondments with an insurer in Legal and other publications. Germany and a reinsurer in London. Tanja has been recognised in the JUVE Handbook as lawyer frequently recommended in the field of insurance law.

Clyde & Co is a major international law firm specialising in insurance and reinsurance with more than 1,800 lawyers and over 50 own and associated offices. The insurance industry is at the core of Clyde & Co’s strategy. Our insurance practice is the largest globally and is truly unique in the range of claims and advisory services that we can provide. We handle claims across every line of insurance and reinsurance business. Furthermore, we have extensive know-how and experience in the field of product development. Our corporate insurance practice group advises insurers, reinsurers and other market participants in all aspects of regulatory and insurance distribution law, transactions and run-off solutions as well as in insurance legal and compliance matters. In addition to Clyde & Co's continental European offices in France, Spain and Greece, on 1 September 2016, Clyde & Co opened an office in Dusseldorf through the hire of two leading insurance partners, Dr. Henning Schaloske and Dr. Tanja Schramm and insurance counsel, Dr. Daniel Kassing. The Dusseldorf team and its members have been recognised as leading advisors for insurance litigation, insurance products and regulatory advice in The Legal 500, Chambers and others. In November 2018, the team was awarded Insurance Law Firm of the Year for Germany by JUVE, the most prestigious domestic award.

122 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 21 greece

christos chrissanthis & Partners Dr. christos chrissanthis & Xenia chardalia

1 Regulatory The BoG has no power to deal with anti-trust issues, consumer protection, or unfairness of standard policy terms. Consumer protection is enforced through the courts and Consumer Protection 1.1 Which government bodies/agencies regulate Department of the Ministry of Economic Development. insurance (and reinsurance) companies? Other bodies that have an impact on the financial conduct of insurers include the following: The Greek insurance market comprises 35 non-life insurers, six life ■ The Ombudsman Service, which deals with complaints insurers and 14 enterprises that still offer both life and non-life relating to consumer insurances. It is inefficient, mainly insurances, as they received a licence to operate before the because its decisions are not enforceable. introduction of the principle on the separation of life and non-life ■ The Consumer Protection Department of the Ministry of services. There are 36 insurance companies (both Greek insurance Economic Development. It has been heavily engaged with companies and Greek subsidiaries of foreign insurers), 16 licensed the issue of fairness of general terms and conditions of branch offices of foreign insurers and three mutual insurance insurance policies. It can also examine complaints relating to cooperatives. The total revenue from insurance premiums in 2017 consumer insurance policies and impose fines. was €3.89 billion (€3.7 billion in 2016). About 52% of revenue in ■ Consumer Associations. There is one major and very active 2017 derived from life insurances and 48% from non-life consumer association which has greatly influenced the local insurances. In comparison to 2016, total revenue decreased by 2% court jurisprudence on the issue of fairness of general terms for life insurance, while it increased by 2% for non-life insurance. and conditions, particularly in life policies. The life insurance market is rather concentrated, as the five leading These bodies adopt a restrictive approach on the concept of firms possess a collective market share of about 75%. In non-life “consumer”, which does not include micro and small businesses, or insurances, the collective market share of the five leading firms is professionals like accountants, doctors, architects, etc. However, about 40%. the courts have adopted a broader approach on many occasions. On 1st January 2016, Greece implemented the Solvency Directive Reinsurers are regulated by the BoG, only if they have their 2009/138 EU (Greek law 4364/2016), which greatly amended the registered office in Greece. Reinsurers with a licensed office in any law on licensing and regulation of insurance enterprises. 2017 was EU Member State are able to undertake reinsurance risks in Greece, the first year that insurance companies published Solvency and even if they do not have a local branch office. Financial Condition Reports under the Solvency II Regime. Insurance is a regulated business and requires an express prior 1.2 What are the requirements/procedures for setting up a authorisation (licence). The regulator is the Bank of Greece (BoG). new insurance (or reinsurance) company? The BoG supervises both credit/financial institutions, as well as insurance enterprises. However, supervision is carried out through An express prior licence has to be obtained by the BoG. The basic different departments. prerequisites for authorisation are: The main powers of the BoG with respect to insurance companies ■ the licensed entity must be either a société anonyme, or a are as follows: mutual insurance cooperative, or a societas europaea; its ■ to issue and revoke operating licences; corporate purpose must be deduced to (re)insurance only and should not include other activities; ■ to supervise macro and micro-prudential regulation, as well as financial conduct; ■ the licence is granted for specific insurance risks, or classes of risks only; ■ to issue secondary regulation; ■ a three-year business plan is required; ■ to carry on investigations, to adjudicate violations of regulation and to impose fines; ■ sufficient assets satisfying capital requirements, which are proportionate to the volume of the risks to be undertaken; ■ to license the operation in Greece of branch offices of insurers from third (non-EU) countries, and to supervise both ■ disclosure as to the major shareholders and executive officers; prudential regulation and financial conduct of such branch and offices; and ■ sufficient manpower and administrative resources (including ■ to certify insurance intermediaries and to supervise their information technology systems, risk management and financial conduct. internal control) to secure prudent management. iclg to: insurance & reinsurance 2019 www.iclg.com 123 © Published and reproduced with kind permission by Global Legal Group Ltd, London 124 greece © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com branch local a operating without Greece in business write may insurer EU/EEA an procedure, relaxed rather but similar a Under in Freedom ofservices only own A.2. its on action takes exceptional orurgent cases. regulator (Greek) national country.(home) foreign respective the The of regulator the contact to likely are they Greece, in operating insurer foreign a of conduct the If financial the regarding concerns any has regulator regulator.(Greek) national country’s home the by supervised are conduct Under the home passport regime, prudential regulation and financial file forwarded. An expresslicencebytheBoGisnotrequired. the of BoG the by receipt of date the from as months two of lapse regulator). The branch office may commence its operations after the country host (the BoG the to file and application above-mentioned the forwards country home the of authority regulatory national The officebranch the if special a in participation risks, life writes ■ services, assistance vehicle motor offers office branch the if ■ the risks, liability vehicles motor writes office branch the if certificationastothecapitalrequirements; ■ identificationofaregisteredaddressinGreece; ■ ■ to attorney and representative legal local a of appointment abusinessplanforthebranchoffice; ■ ■ accompanied by: branch office a in Greece by establish a filing a notification may to its home with State country regulator Member insurer EU an an in office regime, registered establishment of freedom the Under Freedom ofestablishment A.1. of system. freedom the or establishment, passport” (home) “single the applies Greece regime. legal services of freedom the from benefit may States Member EU other in office registered a with EU/EEA insurersInsurers A. Areforeigninsurersabletowritebusinessdirectlyor 1.3 freedom ofservicesregime. the under countries EU other in services providing for or regime, establishment of freedom branch the under operating countries EU for other basis in offices the is BoG the by Greece in granted licence the so, system; licence European single the applies Greece from thesubmissionofafullapplication. as months six of period a within denied or granted is licence The reinsurance businessinconnectiontothoserisks. covers also risks certain of insurance primary for Agranted licence may obtain a licence to reinsure both life and non- licenceeither for life risks only, orfor non-life legal a So, applied.is risksnon-life and life of In connection with primary insurance, the principle christos chrissanthis&Partners must theywritereinsuranceofadomesticinsurer? ud raie udr ainl a t poie euiy in security provide favour ofpolicyholdersincaseinsolvencyisrequired. to law national under organised fund vehicles assistance(GreekLaw3651/2008)isrequired;and motor on legislation national respective the with compliance (iii) and liability insurance; claims; of vehicles motor of terms the on law national with compliance settlement for out-of-court Insurers’ system local Motor expedite the to local participation (ii) the Fund; Auxiliary and Bureau local the Insurers’ to participation Motor (i) required: also are following receive serviceofprocess;

risks only. Reinsurers entity is granted a grantedis entity life risks. of strict separation proferentem “ the to according interpreted usually are policies Insurance provided; this is basically the case for motor vehi thelegislation describes the terms on which such i Freedomcontractofalsorestricted is compulsor in to qualify as consumers by many Greek court judgmen (i.e. accountants, surveyors, doctors, barristers, “consumer”; so, micro and small businesses, as wellt to as approach broad a adopt usually courts Greek and obligations to the detriment of the policyholde hence, void, if they cause a significant imbalance individually negotiated. General Therefore, they are conditions.deeme and terms general of fairness relatmainlyThis protectionlegislation.consumer also is insurances consumer in contract of Freedom the criteriasetby Art. 7(3)ofRegulation593/2008EC. not free to choose the law applicable to the policy and must abide to private Greek Moreover, 2496/1997). (Law law contract insurance of are parties the provisions the by insured the and policyholder the the to granted Hence, protection of level the reduce validly contract. cannot parties from derogated be is cannot law and Greek the mandatory risks”, “large than other risks to connection In uncertainty caus and court jurisprudence has This not settled law. local and EU “la in defined So, differently risks. suretyship and credit and insurance transit, in goods only including risks”, “large of narrow anddifferent a provides2496/1997 Law Greek 13(27)(c) of Dir. 2009/138. It is noteworthy thoug that the policyholder is a large company, as per th risks, such as fire, damage to property and general and suretyship risks. “Large risks” may also inclu avi marine; risks; transit in goods include: mainly 20 Dir. of 13(27) sec. in defined are risks” “Large applicable to the policy, as per Art. 7(1) of Regulation 593/2008 EC. of Freedom contract in richer). “large risks” also includes the freedom to choose insured the law the render not should and suffered so that a non-life policy should provide compensation only for a loss principle, indemnity the to deduced mainly is (which policy public Greek the by only restricted is contract of freedom risks”, “large In “other to risks”, thelawismandatory. connection in but prevails, contract of freedom risks”, distinction a makes “large with connection In law risks”. “other and risks” “large between contract insurance private Greek The . Arethereanylegalrulesthatrestricttheparties’ 1.4 similar to that for obtaining a licence for an insu bran local a establishingsuchrequirements for and of branchlicensed locally a establishthey if only Member State) country thirmay undertake insurance a busin in office registered a with insurers Thirdcountryinsurers Foreign B. local fund,providingsecurityincaseofinsolvency, isrequired. insurance policies. If life insurances are offered, participation to the motor on law local with compliance and claims of settlement court out-of- of expedition for system local the in participation Bureau, liability insurance include registration with the local Motor Insurers’ vehicle motor for requirements Additional covered. also are risks liability vehicles motor if only required, is representative local a of office. Submission of a business plan is not required. Appointment into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms iclg to: insurance &reinsurance 2019 ” principle,which greatlyfavourstheinsured.

cle liability insurance. etc.) have been found rance company. in the parties’ rights e criteria set by sec. nsuranceshould be de some additional h that sec. 33(1) of r. It is notable that liability, provided fice. The process The fice. this matter yet. d to be unfair and, y insurancey when es to the issue of issue the to es ation; and credit and ation; aie aviation marine, ch office is very isoffice ch (non-EU/EEA d as professionals 09/138 EC and EC 09/138 g rss are risks” rge he concept of concept he s ra legal great es em ae not are terms ess in Greece, ts. etitd by restricted er definition er greece contra © Published and reproduced with kind permission byGlobal Legal Group Ltd,London may notalwaysbemaintained. involve a level of unfairness to insureds because a continuous cover to seem sometimes which policies, made” “claims to connection in a highly developed protective jurisprudence in favour also of the insured, particularly have courts Greek The 2008. banks after for arisen have policies D&O to relating issues many crisis, financial rapidly developing markets during the past few decades. Due to the most the of one been have policies D&O and liability Professional co-insured directors. it but loss, innocent the other the with connection in unaffected and caused valid remains intentionally who director the to respect with inoperative is policy the directors, co-insured multiple of case the In losses. (malicious) intentional cover cannot policies D&O directors forlossescausedtothirdparties(D&Opolicies). itself for losses due to directors’ mismanagement and can indemnify insure can company a However, parties. third to losses intentional and malicious with connection in nor itself, company the towards incurred liability to connection in allowed not is Indemnification “basis ofcontractclauses”. and “warranties” with connection in 2.4 question in below also See the policyisdeemedtocorrespondproposalform. and inoperative is deviation such policy,any the from withdraw to right the regarding advice above the provide and form proposal the from deviations about notification this make to fails insurer the If policy. the of delivery of day the from as month, one within policy the from withdraw to right a have they that them advise to also and insured the notify to obliged is insurer the form, proposal the from policy the of deviation any is there If form. proposal the in insured the of proposal form and the specification type of insurance described and the sought by the to corresponding terms on policy a issue to obliged is insurer the addition, In insured. the to policy the of the policy (by way of rescission) within 14 days as from the delivery from withdraw to right the granted is insured the so, do to fail they Law of If policy. the of conclusion the before insured 2 the to guidance and Art. information i.e. certain provide to law, obliged is insurer contract The 2496/1997. insurance Greek the in with dealt expressly is conclusion contract of process the insurances), consumer (including risks” “large than other risks to respect With christos chrissanthis&Partners iclg to: insurance &reinsurance 2019 Compulsory insurance isalwaysgovernedbythelocal law. compulsory propertyinsurancein connection totheleasedassets. obtain to obliged are agreements leasing financial constructorswhoareassignedworksbytheState. under Lessees and financial of ■ providers and brokers investment certain various with ■ connection in operators ship and owners ship insurancebrokers; ■ publicaccountants; ■ ■ holidays package travel, package of retailers and organisers air, railwayandroadcarriers; ■ ■ Other formsofcompulsoryliabilityinsurancerelateto: third-party liabilityinsurance. vehicle motor is insurance compulsory of form common most The Are thereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 officers underlocalcompanylaw? investment services;and marine risks; and packagetours; etr scesul to te ntaie o sals legal establish to initiative the took proceedings againstinsurers. bank successfully So, banks). debtors the of subsidiaries were insurers cases, most were were Banks but policies such reluctant to raise their claims under against debtors. insurers for various reasons (in beneficiaries client the be their to mentioned of indebtedness the to banks cover by in arranged policies employed without group recently with them connection been in against practice has action This judicial justification. take appropriate to latter omits the if or debtor own delays their of debtors the against action a legal file may creditor a law, procedure civil Greek under However, creditors all third party, whohassuffered theloss,isleftratherunprotected. to allocated the is that means This claims. their of and volume the to proportionately property bankrupt the of part liability becomes compensation insurance for claim the third-party insured bankrupt, becomes the if vehicle insurance, liability of types motor other all In compulsory insurance. of case the in From the point of view of substantive law, a direct action exists only still greatlyfavourabletoinsurers. is law the overall, So, proceedings. judicial to relating difficulties the is many overcome to it has and proof still of burden the bears but who insured balanced, more is consumer and law risks” substantive “large insurances, than other risks with connection In and thelawcanbegreatlyfavourabletoinsurers. In connection with “large risks”, where freedom of contract prevails risks and consumer insurances, Greek insurance law has abandoned other to respect With contractually. remedies arrange may the parties and prevails contract of freedom risks”, “large to connection In required. is risks other and risks” “large between distinction A legal establish to not decide to insurer proceedings againstreinsurers. an for justification reasonable be usually will there that fact the to due fail in probably employed would actually action an such been that seems never it and reinsurers has against practice this However, so. do to the against action legal a debtors of their own debtor if the latter unjustifiably file delays or omits civil always of can view creditor of a point procedure, the from above, mentioned as However, reinsurer party to judicial proceedings, but the insured cannot do so. the make to power the has insurer primary The reinsurers. against insured the of action direct no is law,there substantive of terms In . Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantivelawrelatingto 2.1 . Whatremediesdoesaninsurerhavein casesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 in factor decisive a is This loss. interpreting thetermsofsuchpolicies. the suffered has who party third the protect to is compulsory insurance making for reason The (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosure bytheinsured? reinsurer? www.iclg.com greece 125 greece christos chrissanthis & Partners greece

the strict duty of disclosure by way of mandatory provisions and has not a matter of law, but a matter of fact; so, one has to establish in each adopted proportionate remedies since 1997. Remedies are particular case whether the broker or agent represents the insured or proportionate to the type of fault on the part of the policyholder (i.e. the insurer; that is, whether there is actual, ostensible or apparent whether misrepresentation or non-disclosure is innocent, negligent authority. Tied agents are treated as agents of the insurer. or fraudulent). Proportionate remedies are arranged as follows: 2.5 Is there a positive duty on an insured to disclose to ■ In case of innocent misrepresentation or non-disclosure, the insurers all matters material to a risk, irrespective of insurer is entitled to terminate the policy (subject to a 15-day whether the insurer has specifically asked about prior notice), or request its amendment. Claims already paid them? in the past cannot be recovered. greece ■ In case of negligent misrepresentation or non-disclosure, the With respect to “large risks”, freedom of contract prevails and the insurer has the same rights, as in the case of innocent parties may contractually adopt a positive and strict duty of misrepresentation. However, if the risk occurs before disclosure (i.e. an utmost good faith duty). termination comes into force, or before the policy is With respect to risks other than “large risks” and consumer amended, the insurer is entitled to pay compensation reduced on a proportional basis, i.e. according to the amount of the insurances, Greek law has practically abandoned the strict duty of premium that would have been charged otherwise. disclosure since 1997. In theory, a positive duty of disclosure still remains; however, if the insurer has used a questionnaire, then: ■ In case of fraudulent misrepresentation or non-disclosure, the insurer is entitled to terminate the policy with immediate ■ anything not covered in the questionnaire is deemed to be effect. Moreover, the insurer is relieved from liability, even if immaterial; the loss has occurred before termination; so, an insurer, who ■ the insurer cannot invoke that certain questions were not was able to detect the fraud only after the risk has occurred, is answered; not prejudiced and is also relieved from liability. ■ the insurer cannot invoke the insufficiency of the answers if ■ By way of exception to the aforementioned, life policies and the respective questions were not adequately specific and accident and health policies can be terminated only in the precise, unless there is fraud on the part of the policyholder; case of fraudulent misrepresentation or non-disclosure. and ■ The right of termination is waived if it is not exercised within ■ if an answer is unclear, the insurer has a duty to revert and one month, as from the date when the insurer became aware investigate further and cannot at a later stage invoke such of the misrepresentation or non-disclosure. If the risk occurs insufficiency, unless there is fraud on the part of the within the running one-month period, the insurer is relieved policyholder. from the obligation to pay compensation. ■ The insurer is entitled to insurance premiums until 2.6 Is there an automatic right of subrogation upon termination becomes effective. payment of an indemnity by the insurer or does an ■ No remedies arise, if the insurer had actual, accurate and insurer need a separate clause entitling subrogation? correct knowledge of the facts that were misrepresented or non-disclosed; however, ostensible knowledge does not Subrogation is automatic, i.e. by operation of law, even in the suffice. absence of an express clause to this effect, and occurs at the time ■ Remedies for misrepresentation and non-disclosure arise when compensation is paid. Subrogation extends to all substantive irrespective of causation; that is, it is immaterial whether and procedural rights of the insured up to the volume of insurance misrepresentation or non-disclosure actually contributed to the occurrence of the loss. compensation actually paid. ■ “Warranties” are fully valid and enforceable only in connection to policies relating to “large risks”. In connection with all other 3 Litigation – Overview risks, “warranties” are in principle valid, but they are enforceable only if: (a) they are proportionate (that is, the remedy provided for, i.e. exemption of the insurer from 3.1 Which courts are appropriate for commercial liability, is proportionate to the violation of the clause, meaning insurance disputes? Does this depend on the value of that the issue of materiality of the warranty is also examined); the dispute? Is there any right to a hearing before a (b) causation can be established between the violation of the jury? “warranty” and the occurrence of the loss; and, further, (c) violation of the “warranty” is due to negligence or fraud on the There are no jury courts in Greece. All courts consist of judges. In part of the insured. In case of an unenforceable “warranty”, insurers usually argue that they are still operative as contractual Greece, judges are appointed after their graduation from the National exemptions from cover, but the issue is highly controversial School of Judges, which they enter after examinations, usually and unsettled in court jurisprudence. shortly after their graduation from a law school. Unlike other ■ “Basis of contract clauses” are treated as warranties in both jurisdictions, senior barristers do not become judges. Judges are “large risks” and other risks. promoted from the first instance courts to the Appeal Courts and finally to the Supreme – Cassation Court. During their career they The involvement of intermediaries raises great difficulties. In are usually transferred to serve with different courts around the particular, it is highly controversial whether the fault and/or the country; they do not serve their entire career with the same court, or knowledge of intermediaries is attributed to the insured or the insurer. in the same city. Moreover, Greek judges serve before both In principle, insurance brokers are deemed to be agents of the insured civil/commercial and criminal departments of their court. So, during and their fault and/or knowledge is attributed to the insured; while their career they deal with civil, commercial and criminal cases. insurance agents are deemed to be agents of the insurer. This approach is greatly supported by specific provisions of the Greek law, Claims of insurers for an insurance premium up to €20,000 are dealt holding that brokers act on behalf of the insured, while agents act on with by magistrate courts, consisting of a single judge. If the claims behalf of the insurer. However, the correct approach is that agency is exceed €20,000, they are dealt with by first instance courts,

126 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London christos chrissanthis & Partners greece consisting of a single judge. The basic difference between confidentiality (i.e. as in the case of documents produced by doctors magistrate courts and first instance courts is that magistrate judges and relevant information retained by them). Compulsory disclosure serve their entire career with magistrate courts and are not promoted of documents containing sensitive personal data of individuals (i.e. to higher courts. Magistrate courts deal with minor disputes. such as a medical record) usually requires permission from the Claims for insurance compensation relating to motor vehicle liability National Authority for the Protection of Personal Data. insurance are dealt with by the first instance courts, consisting of a Internal reports of insurers, which are not specifically addressed in the single judge, irrespective of the volume of the claim involved. policy, are deemed to have been produced for the insurer’s own benefit All other claims for insurance compensation are allocated between and are not subject to disclosure. Survey reports, which are produced single-member and multi-member first instance courts. If they according to policy terms, are deemed to be prepared for the benefit of relate to claims up to €250,000, they are dealt with by single- both the insurer and the insured and are subject to disclosure. greece member courts; while, if they exceed this threshold, they are addressed to multi-member courts. Multi-member courts consist of 4.2 Can a party withhold from disclosure documents (a) three judges. One of those judges is more senior and serves as relating to advice given by lawyers, or (b) prepared in president. One of the other two judges serves as a reporting judge. contemplation of litigation, or (c) produced in the There is only one single judgment. So, each of the three judges does course of settlement negotiations/attempts? not submit a separate judgment or opinion. It is possible for a judge to dissent in a judgment, although this is rather exceptional. In such Communications with lawyers and other consultants (i.e. surveyors, a case, the dissenting opinion is also included in the judgment. loss adjusters, etc.) which have been produced for the purposes of In each first instance court there is a department for commercial the litigation process enjoy legal privilege, even if not specifically cases, in which judges serve for a period of about two years. In the marked as “legally privileged”, unless it can be established that they first instance court of Athens, judges, serving with this department have been produced according to the terms of the policy. and dealing with insurance claims, do have a certain level of Communications among the parties in the course of settlement expertise in insurance law. negotiations do not enjoy legal privilege, but the parties may validly agree that such communication will be confidential and will not be used as evidence before the court, although it will be quite difficult 3.2 How long does a commercial case commonly take to bring to court once it has been initiated? to adequately enforce such an agreement. Loss adjustment reports and other survey reports that have been In 2016, Greece implemented new law on civil procedure to expedite prepared according to policy terms are deemed to have been the judicial process. Legal actions (writs) under Greek law need to prepared for the benefit of both parties and are not privileged. be long and detailed, as they need to provide a fully substantiated and detailed statement of facts. After the filing of the legal action, the 4.3 Do the courts have powers to require witnesses to parties are granted a 100-day (130-day for non-residents) period to give evidence either before or at the final hearing? submit to the court written arguments and evidence. An oral hearing usually does not take place. A first instance court judgment is usually Under the new judicial process, which is applicable as from 1st issued after about two years, as from the filing of the legal action; January 2016, witnesses do not give oral evidence during a court whereas a judgment from the Appeal Court is usually issued after hearing. Instead, they make a written testimony under oath before a two years as from the filing of the appeal. notary public, a County Court, or a Greek consular officer (if the witness resides abroad), which is submitted to the Court. Such written 4 Litigation – Procedure statements take place before the trial and are disclosed to the other party. Each litigant is allowed to submit up to five testimonies to support its allegations, as well as up to three additional testimonies to 4.1 What powers do the courts have to order the challenge the testimonies submitted by its counter-party. Courts have disclosure/discovery and inspection of documents in discretion to examine, during an oral hearing, either the litigating respect of (a) parties to the action, and (b) non-parties parties themselves (in case of legal entities their legal representative), to the action? or one of the witnesses who are selected and proposed by the litigants. Only one witness for each litigant is allowed. However, courts Under the Greek law of civil procedure, the progress of the judicial exercise such discretion only on rare occasions. Otherwise, courts do proceedings and the submission of evidence depends on the initiative not have the power to examine, on their own initiative, a witness who of the litigating parties and not on the court. So, a duty of disclosure is not proposed by the parties. In practice, it is not possible for a party does not exist, as it appears in the US and the UK. There is only a to examine a witness, unless the latter is willing to give evidence. general duty of honesty, but in reality, the parties are allowed to decide which sort of documents they wish to submit to the court. 4.4 Is evidence from witnesses allowed even if they are However, a party may apply (either before the filing of a legal not present? action, or during court proceedings) for a court order against either: (a) its counter-party to a contract; (b) its counter-litigant; (c) a third Evidence by witnesses is not given in person, unless the court orders party; or (d) a public authority, to produce certain documents before an oral hearing (which is unlikely). the court, or to provide copies, provided that: (a) the applicant can adequately describe, identify and specify such documents; and (b) such documents are in the possession of the party against whom the 4.5 Are there any restrictions on calling expert witnesses? application is addressed to, and, further, provided: (i) either that Is it common to have a court-appointed expert in addition or in place of party-appointed experts? such documents have been issued for the applicant’s own benefit; or (ii) that such documents are not “privileged” (i.e. as in the case of communications with lawyers), or covered by a professional duty of Expert evidence is admissible whenever technical, or scientific iclg to: insurance & reinsurance 2019 www.iclg.com 127 © Published and reproduced with kind permission by Global Legal Group Ltd, London christos chrissanthis & Partners greece

issues are involved, or issues requiring some professional The creditor may also claim for compound interest with a separate experience or other special knowledge. In this context, it is always and distinct legal action and only in connection to default interest possible to submit to the court expert witness in the form of a written that has already accrued for a period of at least one calendar year. testimony under oath, or even a written statement not accompanied Under the Greek law, it would be unrealistic to claim against an by a formal oath. insurer damages for late payment (other than default interest), such The court may appoint, either on its own initiative, or following an as loss of profits, or loss of a rising market, or some other market application by one of the litigants, one or more technical experts opportunity. from a list of experts maintained in each court, if evidence as to technical issues is required. Hence, a court may appoint, e.g. 4.9 What are the standard rules regarding costs? Are

greece engineers, loss adjusters, accountants, doctors, etc. to give expert there any potential costs advantages in making an evidence. In the absence of an application by a litigant, courts only offer to settle prior to trial? rarely take the initiative to appoint a technical expert. The law as to judicial costs has been recently revised in an attempt 4.6 What sort of interim remedies are available from the to discourage unmeritorious or exaggerated claims, but it seems that courts? the law still remains unsatisfactory on this matter. If the plaintiff’s legal action is fully upheld in all its requests, they It is possible to apply for an interim-summary order for pre-trial are awarded legal costs ranging from 3% to 4% on the volume of the disclosure of documents, or even for a “search order” (i.e. an order amount that the judgment has awarded; while, if the legal action is to search the premises and files of a party in order to trace rejected in its entirety, the defendant is awarded legal costs at a rate documents). Such an application may be filed either before or after of 2% on the volume of claim raised against them. the filing of a legal action. In all such cases, the applicant needs to In the case that the legal action is partly upheld and partly rejected, show that, on a balance of probabilities, it is more likely than not the court has discretion to allocate legal costs according to the extent that: (a) they have a good arguable case; and (b) there is some of victory and defeat of each party. This means that courts cannot urgency, making an interim order necessary, or there is a risk that proceed with a full set off of legal costs between the litigants; evidence will be lost or destroyed, or that it will be difficult to trace instead, the court is obliged to award some legal costs to one of the it in the future. Greek courts are likely to grant orders relating to parties. In practice, courts usually award legal costs in favour of the disclosure of specific documents in the possession of other parties, plaintiff and against the defendant at a rate of 3–4% on the volume but they are highly unlikely to grant a “search order” in insurance of claim that has been judicially upheld and awarded. This may be cases. quite obscure because the plaintiff will be awarded legal costs, even A summary judgment against an insurer in connection with if the greatest part of the claim is rejected. insurance compensation (i.e. ordering freezing of assets to secure There is only one case in which courts may provide for a full set off payment) is highly improbable, as insurers are deemed to be of legal costs. This is when the outcome of a case depends on a supervised by the State and are, in principle, considered to be significantly difficult and complex issue of legal interpretation. creditworthy. The mentioned volume of legal costs is awarded even if the litigants do not specifically raise a claim as to legal costs. The parties, 4.7 Is there any right of appeal from the decisions of the though, are allowed to submit a list with the costs they incurred and courts of first instance? If so, on what general make a specific claim, but the courts do not award costs that are grounds? How many stages of appeal are there? either unreasonable or exaggerated. In practice, the rates mentioned above are hardly exceeded. A judgment issued from a court of first instance is under a full Depending on how well grounded a claim is, there is potential for review before the Court of Appeal. Such a full review includes both early settlement of a case because it will save the insurer from matters of fact and matters of law. The judgment of the Court of paying legal costs and default interest. However, in case of an Appeal is fully enforceable and is subject only to review by the unmeritorious or exaggerated claim, a settlement is usually not Supreme – Cassation Court (called “Areios Pagos” in Greek). The advisable. The overall legal process in Greece makes it rather review of the Cassation Court is solely deduced to matters of law. favourable to insurers to litigate because the insured has to The Cassation Court may issue an order to stay enforcement overcome great difficulties as to evidence. proceedings of an appeal court judgment. Although it is rather rare in practice, a court of first instance has discretion to provide that its judgment is immediately enforceable (fully or partly), before a 4.10 Can the courts compel the parties to mediate review by the Court of Appeal takes place. disputes? If so, do they exercise such powers?

There is no obligatory mediation under Greek law. However, 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? mediation agreements are enforceable and if there is such an agreement, which has not been fully followed, courts will stay proceedings. Under Greek law, unless a contractual clause provides otherwise, an insurer is liable to pay statutory (default) interest as from the date when the insured event occurred. The current rate of default interest 4.11 If a party refuses to a request to mediate, what is 7.25%. The parties are not allowed to agree for a higher rate. consequences may follow? Courts are obliged to award interest at this rate, unless it can be established that the debtor had genuine and reasonable grounds to As mediation is strictly voluntary, no specific consequences are believe that there was no valid and meritorious claim against them, provided in case one of the parties refuses to mediate. but this is rather exceptional and unrealistic in insurance claims.

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5 Arbitration 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give examples. 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able In case of arbitration proceedings, courts will provide support by to intervene in the conduct of an arbitration? If so, on way of injunction in connection with disclosure and preservation of what grounds and does this happen in many cases? evidence, as per question 4.6 above.

In Greece, national arbitration is overall rather rare and the parties 5.5 Is the arbitral tribunal legally bound to give detailed greece usually do not favour it, because it is not adequately efficient. reasons for its award? If not, can the parties agree (in International arbitration is common but relates only to international the arbitration clause or subsequently) that a disputes. As far as insurance cases are concerned, they are rarely reasoned award is required? referred to arbitration. However, international arbitration is standard practice in reinsurance policies, in which foreign reinsurers Unless otherwise expressly agreed in writing by the parties, arbitral are parties. awards are reasoned. Arbitration is not legitimate in consumer insurances. In connection to commercial insurances, international arbitration is 5.6 Is there any right of appeal to the courts from the common only in “large risks” policies (mainly marine and aircraft). decision of an arbitral tribunal? If so, in what With respect to “other risks”, the local substantive insurance circumstances does the right arise? contract law is mandatory and this makes international arbitration impractical. Unless otherwise expressly agreed in writing by the parties, arbitral awards are not subject to review or appeal. Greek courts are supportive of arbitration and not supervisory. They intervene only rarely and only on grounds specifically provided by However, they are subject to annulment by the court of appeal on the the relevant legislation, such as, if the parties cannot agree on the following grounds: (a) if the arbitration clause is invalid, or the appointment of arbitrators, if there are grounds to discharge an arbitration agreement expired or was terminated; (b) if the arbitrator from his duties, if the arbitration clause is invalid, etc. appointment of the arbitrators, or the arbitration proceedings, or the arbitral award does not comply with the respective specifications and prerequisites set by the arbitration clause; (c) if the arbitrators 5.2 Is it necessary for a form of words to be put into a exceeded the powers they were granted by the arbitration clause; (d) contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words if the arbitral award is unclear, vague, or inconsistent, or if it violates is required? public policy; and (e) if there are grounds for the re-opening of the case, i.e. if some evidence subsequently proved untrue, or new evidence appeared which was not available during the proceedings. The agreement on arbitration must be in writing. The language has Annulment is, however, rare and exceptional. to be clear and unambiguous, as well as precise and specific. A proper arbitration clause usually refers to a specific arbitration body (such as the ICC, or the London Court of International Arbitration) Acknowledgment and it identifies the arbitration procedure to be followed, as well as the language and place of the proceedings. The authors would like to thank Antonia Vasilogamvrou LL.B., MSc. for her invaluable contribution towards the preparation of this chapter. 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the courts will refuse to enforce such a clause?

An arbitration clause is illegitimate in consumer insurances. In addition, courts will be reluctant to enforce an arbitration clause which is not sufficiently clear, unambiguous, precise and specific. The “principle of separation” applies and an arbitration clause remains valid and enforceable, even if other clauses of the policy, or the policy as a whole, is invalid on some ground.

iclg to: insurance & reinsurance 2019 www.iclg.com 129 © Published and reproduced with kind permission by Global Legal Group Ltd, London christos chrissanthis & Partners greece

Dr. Christos Chrissanthis Xenia Chardalia Christos Chrissanthis & Partners Christos Chrissanthis & Partners 12 Solonos Street 12 Solonos Street Athens 10673 Athens 10673 Greece Greece

Tel: +30 210 362 0051 Tel: +30 210 362 0051 Email: [email protected] Email: [email protected] URL: www.chrissan.gr URL: www.chrissan.gr greece Dr. Christos Chrissanthis, LL.M., LL.M., Ph.D. is an assistant professor Xenia Chardalia, LL.B., LL.M., LL.M. studied law in the UK and she is of commercial law at the University of Athens, Faculty of Law and a admitted to practise law in Greece. She has extensive experience fully practising commercial law lawyer since 1994. His practice is dealing with insurance regulation matters, intermediaries and focused on complex commercial litigation in insurance and bancassurance agreements. Since 2008, has regularly advised reinsurance law cases. He has extensive professional experience in clients on D&O policies relating to officers of major Greek banking construction all risks and D&O policies. He has also been repeatedly institutions. She is also a member of the Greek chapter of AIDA. involved in mergers and acquisitions of insurance companies and has developed valuable expertise in legal due diligence on insurance firms. He is also a member of the board of directors of the Greek chapter of AIDA.

“Christos Chrissanthis & Partners” is a full-service law firm specialising in commercial law. The firm has substantial expertise in fields such as insurance & reinsurance, intellectual property, mergers & acquisitions and commercial litigation. With respect to insurance law, the firm has substantial expertise particularly in connection to “construction all risks” policies, professional liability and D&O policies, reinsurance and bancassurance agreements. In addition to law, all members of the firm have a strong background on accounting, management and negotiation strategies. Detailed information about the firm is available on its website: www.chrissan.gr.

130 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 22 india neeraj tuli

tuli & co celia Jenkins

1 Regulatory Non-admitted insurers who have registered with IRDAI as Cross Border Reinsurers can write reinsurance of Indian risks from overseas in accordance with the IRDAI’s regulations on the 1.1 Which government bodies/agencies regulate reinsurance of life and general insurance business. insurance (and reinsurance) companies? 1.4 Are there any legal rules that restrict the parties’ The Insurance Regulatory and Development Authority of India freedom of contract by implying extraneous terms (IRDAI) governs all insurance and reinsurance companies in India. into (all or some) contracts of insurance?

Indian insurers are given the liberty to decide their own policy terms 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? and conditions, but insurance products can only be offered if the terms and conditions have been approved by the IRDAI and/or filed with the IRDAI under the applicable product filing procedures. Insurance business in India can only be undertaken by an Indian insurance company or a reinsurance company/reinsurance branch Further, the extraneous rules that will impact policy terms are: (a) office that is registered with the IRDAI. Insurers registered in India the Insurance Act 1938 which gives policyholders a right to override can undertake life insurance business, general insurance business, contrary policy terms in favour of Indian law and jurisdiction; and and/or health insurance business in accordance with the terms of (b) Indian policyholders cannot be stopped from approaching their registration. Reinsurance companies/reinsurance branches can Consumer Courts. undertake reinsurance business in accordance with the terms of their registration. 1.5 Are companies permitted to indemnify directors and In order to secure registration, an applicant must, along with other officers under local company law? formalities, have a minimum paid-up equity capital of Rs.1 billion (circa US$13.6 million) in the case of life, general and health Under the Companies Act 2013, there is no ban on companies insurers, Rs.2 billion (circa US$27.3 million) in the case of a indemnifying directors and officers. The premium paid on such reinsurer and a minimum assigned capital of Rs.1 billion (circa insurance is not to be treated as the remuneration payable to the officer. US$13.6 million) in the case of a reinsurance branch. Moreover, However, if such a person is proved to be guilty of negligence, default, foreign investment in the Indian insurance sector is permitted up to misfeasance, breach of duty or breach in relation to the company, the 49%. premium paid on insurance will be treated as part of the remuneration.

1.3 Are foreign insurers able to write business directly or 1.6 Are there any forms of compulsory insurance? must they write reinsurance of a domestic insurer? The following insurance covers are examples of those that are Overseas, non-admitted insurers cannot write direct insurance compulsory by central law: business in India. As a general rule, the purchasing of insurance ■ Carriage by Air Act 1972: requires parties to maintain from overseas insurers by Indian residents is prohibited in India, adequate insurance covering any liabilities that may arise. unless the purchase falls within the general or specific approval of ■ Companies Act 2013: insurance of deposits accepted by the Reserve Bank of India (RBI). companies. However, Indian residents are permitted to purchase health ■ Deposit Insurance and Credit Guarantee Corporation Act insurance policies from overseas insurers provided the aggregate 1961: insurance taken by the banks functioning in India remittance (including premium) does not exceed the prescribed (DICGC is an RBI subsidiary). limit. Indian residents are also permitted to purchase insurance ■ Employees State Insurance Act 1948: for insurance to policies in respect of any property in India or any ship, vessel or employees in case of sickness, maternity and employment aircraft registered in India with an insurer whose principal place of injury. business is outside India only with IRDAI’s permission. ■ Inland Vessels Act 1917: insurance of mechanically propelled vessels. iclg to: insurance & reinsurance 2019 www.iclg.com 131 © Published and reproduced with kind permission by Global Legal Group Ltd, London 132 india ■ On 20 September 2011, the IRDAI issued certain guidelines certain issued IRDAI the 2011, September 20 On ■ © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com perm 2016 Regulations Insurance) (Health IRDAI The ■ extended recently been has interest penal of payment This ■ Interests) Policyholders’ of (Protection IRDAI The ■ The Insurance Act 1938 restricts the ability of insurers to call ■ For insureds. example: the to favourable more possibly is of than law interpretation applicable the more and insurers framework regulatory favours the but India insureds, in framework statutory The Ingeneralterms,isthesubstantivelawrelatingto 2.1 for 1943: Act Insurance) (Compensation Injuries War ■ for cover accidental 1991: Act Insurance Liability Public ■ of Protection Opportunities, (Equal Disabilities with Persons 1963: Act Insurance) (Compensation ■ Injuries gratuity Personal for insurance 1972: Act Gratuity ■ of Payment liability third-party ■ compulsory 1988: Act Vehicles Motor MerchantShipping Act 1958:onthelivesofcrewmembers. ■ MarineInsurance Act 1963:formarineadventures. ■ ■ IRDA 2018, Regulations Brokers) (Insurance IRDAI ■ tuli &co (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? for condoning delay in claim intimation and submission of submission and intimation claim in delay condoning for m fraud, of grounds on only policy insurance health general insurers and health insurers to decline the eea cno b dne o ohr rud; namely, grounds; other adverse claims history. on denied be cannot Renewal themisrepresentationnon-cooperationhazard,byor eus fr eud f rpsl eoi, n rfn of refund and deposit, proposal of outstanding proposaldeposit. withdrawal, refund surrender, for cancellation, request and including look benefit survival free policyholders, maturity, annuities, the to respect to with payments made payments other of settlement in delay to claims of settlement in delay from in casesofdelayedpayment,etc. beginning of the financial year in which claim has fallen due, the at RBI the by fixed rate bank the above 2% of rate the at claims obligations, certain interest pay and claims; process follow expeditiously to insured’sprocedures they etc.); conditions, provisions, warranties, cancellation as (such terms policy the any state clearly they insured; the hear of grievances to mechanisms and procedures proper have they the properly; terms its understand can insured the of that: so policy sale of point the at practices certain follow insurers that obligations, other amongst provide, 2017 Regulations grounds (includingfraud). any on years three after question into policy insurance life a workmen sustaininginjuryinwar. environmental and issues. substances hazardous handling those employees withdisabilities. Rights and full participation) Act 1995: insurance scheme for employer’s liabilityforworkerssustaininginjuries. payments toemployees. insurance. liability arisingfromlossofdocumentsorproperty. and employees by acts fraudulent and dishonesty omission, and errors covering insurance indemnity professional 2017: Regulations Regulations Aggregators) Web (Insurance Firm) and IRDA and IRDA 2015 Marketing 2015, Insurance Repositories Policies) of Insurance (Registration Insurance of Issuance on Electronic Guidelines (Revised IRDA2015, Regulations Corporate Agents) of (Registration renewal of a insured. insured. oral an it has beentestedbefore theIndianCourtssofar. clause such no although clause, through” “cut a through example, for it, permitted arrangements contractual the if be would reinsurer other exception where an of insured may bring a direct action against a privity no The made. be is may reinsurer a sue to attempts However, there contract. things, other a against amongst brought because, be can reinsurer action direct a that believe not do We the insuredfailstocontestclaim. against the insured if the tribunal believes action the claim is collusive third-party or if a in involvement insurers’ Claims the seek Accident to Motor Tribunal the empowers Act Vehicles Motor The the all for mandatory name it makes to 1988 Act Vehicles Motor parties The third for practice common ■ is It ■ to thenorm: exception the are however, cases, Motor insurer. an against action direct a bring to able be not should party third a thus and contract of privity of principle the recognises law Indian rule, general a As the fix that policy the of responsibility oftheInsuranceCompanymustalsobereadstrictly. terms the consequently and are they of the parties. The clauses of an insurance policy have to be read as affectadversely may same the as contract the of nature interests the strict towards policy have to be construed and applied the strictly, trend and without altering of the terms the a that terms held has Court seen policy Supreme The have interpretation. the we of concerned, interpretation is Court’s conditions the as far So act justly, fairly, andreasonably. to expected thus are and State the of instrument an considered are who insurers, government-owned the concerns This mentioning. There is one other feature of the Indian insurance sector that is worth in 2018, October 8 of Circular a issued has IRDAI The ■ for provisions introduce to insurers directed has IRDAI The health for definitions ■ form standard issued has IRDAI The ■ also have 2016 Regulations Insurance) (Health IRDAI The ■ . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 reinsurer? insurer? the eventofinsured’s insolvency. are transferred to a third party claiming against the insured in cover and provides that the rights of an insured under a policy liability third-party or insurance third-party have to vehicles defendant’s insurerinmotoraccident-relatedproceedings. Human the of HIV/AIDS. directing 2017, Act provisions insurers to not discriminate against the insured on account of Control) and (Prevention the Syndrome Deficiency Immune Acquired and Virus with Immunodeficiency harmony available forthetreatmentofphysicalillness. is as basis same the on illness mental of treatment covering insurance andcriticalillnesspolicies. Indian health other any previous or insurer under insurer. that with served policies the already insurance for period credit given waiting are policyholders whereby benefits portability offer policies insurance health all that stipulated claim the that would havebeenrejectedinanyevent. satisfied is insurer the unless unavoidable, was and delay the if reject notification delayed policies not of basis the should on of claims insurers that types effect the certain to to policyholders relation in documents iclg to: insurance &reinsurance 2019

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© Published and reproduced with kind permission byGlobal Legal Group Ltd,London the insurersorequires. also if proceedings, recovery 2017 in insurer its assist to Regulations insured an obligate Interests) an Policyholders’ and of (Protection letters” “subrogation obtain “assignment” of the third-party claim from the insured. The IRDAI frequently will insurers and clauses subrogation contain do policies practice, of matter a as separate No law. under contractual clause is required to trigger the right to subrogation, but recognised is subrogation to right The imp also 2017 obligation on the insured to disclose all material Regulations Interests) Policyholders’ (P IRDAI The form. proposal the through done be to disclosure prior to inception. The Supreme Court h makesinsured theInsurance requiresthat1963 Act information and documents sought in the proposal fo specific question is asked, but often what is mater The insured is required to disclose all material fa three years from the date of the issuance or the revival of the policy. of completion the after fraud) (including grounds any on question into called be cannot policy the however, policies, insurance life For policyholder. the to returned be must premium the fraudulent, initio ab or non-disclosure of a material fact, the insurer can avoid the policy misrepresentation a been has there if and inception to prior risk the of presentation fair a to entitled therefore are Insurers faith. good utmost of one be insurance of contract a that mandates law Indian Whatremediesdoesaninsurerhaveincasesofeither 2.4 tuli &co iclg to: insurance &reinsurance 2019 claims over Rs.2 million ( thatCommissionRedressalDispute Consumer State 35 can accept claims up to a value of Rs.2 million ( CommissRedressalDisputeConsumer District 629 are State and National Consumer Dispute Redressal Commi or ascending(in followusually Courts Consumer The CivilConsumerCourtTheandthree-ti Courts ahave defendant/cause of action and also the value of the need to be initiated keeping in mind the geographical locati pecuniary and territorial jurisdiction, so actions Court or a Commercial Court Cour for recourse. All the Consumer appr only a can insurer the (ii) whereas Court, Commercial qualifies), dispute the (if or The insured has an option to approach (i) a Court o Whichcourtsareappropriateforcommercial 3.1 Is thereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 million( 3 Litigation – Overview Litigation–Overview 3 insurer needaseparateclauseentitlingsubrogation? them? misrepresentation ornon-disclosurebytheinsured? jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof circa Uls te irpeetto o nndslsr was non-disclosure or misrepresentation the Unless . US$137,500) andalso appeals against theorder of circa US$27,000) and up to a value of Rs.10 circa brought before them information. cts whether or not a ial is guided by the f Civil Jurisdiction claim. three Courts have as said that this is US$27,000) and rm. The Marine a full and frankand full a ered hierarchy.ered der) District,der) oach a Civil a oach ssion. There , r ii a (iii) or t, rotection of rotection ions, which ions, can accept can on of the ss an oses

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Court ortheCommercial Appellate DivisionofaHighCourt. Commercial Appellate the either of orders the from appeals further any for allow not does 2015 Act Courts Commercial Commercial the and be), the may or case the (as Court High Courts concerned the of Division Appellate Appellate Commercial the lie instance before first Appeals of Courts Commercial up. the of set orders be the against to yet are however, mediation, facilitating mechanisms Proper obtained. be to required is relief urgent where cases such save instituted, is suit a before mediation compulsory ( Rs.300,000 at disputes commercial of threshold pecuniary minimum the fixed and reduced has 2015 Act Courts Commercial the to amendment recent The disputes. commercial adjudicate to respectively Court High the and Court District the at High judges designated various have Courts of Justices Chief the and/or governments state the Pursuant to the passing of the Commercial Courts Act 2015, most of and heard are cases decided bythejudges. the and abolished been has system jury the as India, in jury a before hearing a to right no is jurisdiction. There have Courts territorial their under falling dispute insurance any hear to District instance the of rest The unlimited pecuniary jurisdiction, as do the competent Courts of first limit. pecuniary higher a to due matters these thresholds, hearing from Courts pecuniary District the exempting certain above fall which matters hear and accept to jurisdiction original have which Courts) High Delhi and four are termed Charter High Courts (i.e. Calcutta, Madras, Bombay Courts, High 24 Amongst India). in court (highest Court Supreme comprises This similar. is too Courts Civil the of hierarchy ascending broad The the National Commission lies before the Supreme Cou decisionstheofState Commissions. appealAn from exceedingRs.10 million ( Nationa the mattersaccepts CommissionwhichRedressal Dispute lies apex the At Commissions. District ne alia inter pass may it where Hearing Management Case a hold to Courts Commercial the requires 2015 Courts Act Commercial The would takeanotherfiveyearsorsotoresolve. order such from appeal An years. 10 to eight exceed may period the litigation, contested strongly a of case the In cooperative. are a minimum of four to six years to reach a in decision if both the parties presently cases million Courts 30 across India. Usually it would around take the Court of first instance of pendency reported the to attributed is This time-consuming. and slow is litigation Indian ntne mtes ae rgesd t h uul ae en n the in seen pace jurisdiction. usual the at progressed have matters instances other in whereas quickly adjudicated been have disputes instances, some In uniform. been not has dispute a upon adjudicate to Court non-compliant the of Commercial rights a by taken time the regarding experience Our parties. forfeited even increasingly have have and Courts litigation the late, Of commercial in timelines statutory with compliance strict mandated months. six of period appellate the that states Courts must endeavour to dispose of appeals filed before it within a also 2015 Act Courts Commercial The arguments. of conclusion the from with judgment Hearing its pronounce Management to has Case Court Commercial the of date the from Court months Commercial no closed The are arguments the that ensure to required arguments. oral and arguments . Howlongdoesacommercialcasecommonlytaketo 3.2 bring tocourtonceithasbeeninitiated? fx h shdl fr iig f vdne fln w filing evidence, of filing for schedule the fix , circa circa S415. h aedet lo mandates also amendment The US$4,125). 600 District Courts, 24 High Courts and the and Courts High 24 Courts, District 600 circa US$137,500) andappeals against the www.iclg.com thedecision of t later than six six than later t rt of India. with a value a with Consumer l in 90 days days 90 in orders to, to, orders india . The The .

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4 Litigation – Procedure or interrogatories to the parties whose evidence cannot be obtained easily to determine the issue at hand.

4.1 What powers do the courts have to order the 4.4 Is evidence from witnesses allowed even if they are disclosure/discovery and inspection of documents in not present? respect of (a) parties to the action, and (b) non-parties to the action? As per the CPC, the examination-in-chief of a witness is required to be on an affidavit, but his attendance is necessary for the purposes of The power of discovery or summoning of documents is governed by cross-examination. In the case that the witness is unable to appear

india the Code of Civil Procedure 1908 (CPC), as amended by the before the Court, the Court may, in compliance with the provisions Commercial Courts Act 2015. The Courts, on a motion by either of the of the CPC, issue commissions or interrogatories to address this. parties to a litigation or of its own accord, direct the parties to summon The Supreme Court has even permitted cross-examinations to be documents which relate to any matter in the dispute at hand. The conducted through video conferencing in cases where witnesses, for relevance of the documents sought under the discovery would depend reasons beyond their control, are unable to appear before the Court; on the issue at hand. On a motion made for discovery of documents, for example, an infirm person residing outside India. the Court would direct the party who has made reference to produce the document, to give the same for inspection to the requested party or to answer its inability to produce such document. The Court can also 4.5 Are there any restrictions on calling expert witnesses? impose costs against a party refusing to produce such documents or for Is it common to have a court-appointed expert in not giving sufficient reasons for non-production of the document. addition or in place of party-appointed experts? Non-compliance with an order for discovery of documents can lead The Indian Evidence Act allows the Court to hear expert evidence to an adverse inference or even dismissal of the action or defence as on matters of foreign law, science or art. Appointment of an expert may be. is usually on an application filed by a party asking the Court to Non-parties to the action permit that party to call an expert to give evidence, or the Court may The CPC allows any party who would be in possession of also decide to appoint its own expert. The report/statement filed by documents to produce documents that are material to the dispute the expert will not automatically become evidence and an expert even if the person is not arrayed as a party to the ongoing litigation. must be examined as a witness. The contesting party will then have the opportunity to controvert his findings during cross-examination, or even file the evidence of its own expert witness. 4.2 Can a party withhold from disclosure documents (a) relating to advice given by lawyers, or (b) prepared in contemplation of litigation, or (c) produced in the 4.6 What sort of interim remedies are available from the course of settlement negotiations/attempts? courts?

The provisions under the Indian Evidence Act 1872 protect The CPC provides for a wide variety of discretionary interim communications between a lawyer and his client. Unless an express remedies which may be substantive or procedural. In terms of permission is given by the client, the lawyer is estopped from substantive remedies, temporary injunctions and interlocutory orders disclosing such communications unless the same is in furtherance of allow the Court to stop the commission of an act. Further, mandatory an illegal purpose. The Indian Evidence Act also specifies that a injunctions, available under the Specific Relief Act 1963, allow the person cannot be compelled to reveal information between that Court to ask a party to carry out a positive and overt act. In other person and his/her lawyer unless the same is produced with his/her words, a Court may use an injunction to direct a party to act or consent and is required to establish his/her testimony. restrain it from acting or omitting to act to the detriment of the The Supreme Court and various High Courts in India have issued contesting party. The amended Commercial Courts Act 2015 allows guidelines recognising the privilege of communications between a a party seeking an urgent interim relief to bypass the mandatory ‘pre- lawyer and his clients over documents made in furtherance of institution mediation’ and approach the Court directly. litigation. The privilege attributed to these documents is similar to In addition, a Court may also pass directions for a party to direct a the position in English law. deposit of an amount of money or provide surety in the Court in order In terms of documents prepared in the course of settlement to secure the interests of the contesting party, especially where that negotiations/attempts, it is common for the parties to mark them defaulting party is attempting to defeat a possible award or decree “without prejudice”, but these are not expressly protected as against it. This can be done by way of, inter alia, fixed deposits, privileged documents under the Indian Evidence Act and as a matter bank guarantees, demand drafts or a simple direction that a party of practice, are commonly produced before Courts. shall not dispose of its assets during the pendency of the litigation. These remedies are obviously discretionary and a grant of such a 4.3 Do the courts have powers to require witnesses to remedy is based on various factors which need to be satisfied and give evidence either before or at the final hearing? proved before the Court.

Yes, the Courts have the power to call for witnesses within their 4.7 Is there any right of appeal from the decisions of the jurisdiction to give evidence during the litigation before the final courts of first instance? If so, on what general orders are reserved. Any non-compliance with the Court summons grounds? How many stages of appeal are there? can even lead to arrest of the person evading such direction from the Court. The Court may not compel a person who is not a resident Appeal against decisions of the Court of first instance within its jurisdiction to be present for giving evidence. In such The Commercial Courts Act 2015 allows an appeal only in specified cases, the CPC recognises the Court’s power to issue commissions circumstances. This right will not be available when the decision of

134 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London tuli & co india the Court is with the consent of the parties. The first appeal can be made on any ground of error either legally, factually or procedurally, 4.10 Can the courts compel the parties to mediate by the Court of first instance. However, no appeal is allowed from disputes? If so, do they exercise such powers? any interlocutory order of the Commercial Court and this may be taken as grounds while appealing against the final decree of the Court. Section 89 of the CPC sets out the provision for settlement of disputes outside the Court, keeping in mind the delay in legal Subsequent stages of appeal procedures and the limited number of judges available. It has now A subsequent appeal from a first appeal is only available in specific become imperative for the Courts to encourage, though not compel, cases where there is a substantial question of law involved. Further, parties to explore the possibilities of an out-of-court settlement with no second appeal is available in suits for recovery of an amount which a view to end litigation between the parties at an early date. The india is less than Rs.25,000 (circa US$340). There are some High Courts Courts usually have an in-house mediation centre where experienced in the country which are the Courts of first instance where the subject senior lawyers are appointed on a confidential basis and parties matter of the proceedings is more than a fixed amount. These are the involved in contentious complex cases, which have the potential for Calcutta High Court, Madras High Court, Bombay High Court and an extremely delayed decision, are compelled to explore settlement the Delhi High Court. No second appeal is available from a decision at the mediation centre with the neutral experienced lawyers acting of these Courts. The first appeal from a decision of a single judge of as mediators. All proceedings at the mediation centre and settlement these Courts lies to a division bench of the same Court. In cases discussions are kept confidential from the Court and do not prejudice where an Appeal is not provided for and is not specifically barred by either party in case mediation fails. In certain circumstances, any statute, a Letters Patent Appeal is available. however, the mediator may file a report before the Court if directed Appeal to the Supreme Court to do so. Parties are of course free to return to the Court process. In civil disputes, the usual sequence is that the decision of a District However, the amended Commercial Courts Act 2015 now requires a Court is appealable before a single judge of the High Court. The plaintiff (to a suit) to mandatorily exhaust the remedy of ‘pre- single judge’s decision can be appealed before a division bench of institution mediation’ before it can institute the suit, provided that the High Court. In both these cases, a final stage of appeal is urgent interim relief(s) are not sought. provided under the constitution to the Supreme Court for which prior leave of the Supreme Court is required. 4.11 If a party refuses to a request to mediate, what consequences may follow? 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? Generally, consent of the parties is a condition precedent to be referred to the mediation. There are no formal sanctions if proceedings are not A Court has the discretion to award interest from the date when the followed through to their logical end. However, a dispute falling under cause of action arose to the date of actual payment of the claim. A the Commercial Courts Act 2015 will not be entertained by the Court rate of 9% to 12% is currently applied by the Courts. However, an if the statutorily required mediation has not been exhausted. arbitral award will carry interest at a rate which is 2% higher than the highest prevailing rate of interest on deposits, unless the 5 Arbitration Tribunal says otherwise. The Supreme Court has, in the recent case of Vedanta v. Shenzen Shandong, laid out guidelines to ensure reasonable exercise of the 5.1 What approach do the courts take in relation to discretion of arbitral tribunals to award interest on claims. arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on 4.9 What are the standard rules regarding costs? Are what grounds and does this happen in many cases? there any potential costs advantages in making an offer to settle prior to trial? The Indian Arbitration and Conciliation Act 1996 (ACA) is based on the UNCITRAL Model Law and was recently amended in 2015. The Court may award the successful party its costs of pursuing The amended ACA applies to arbitrations which have been litigation, but such an award is entirely at the Court’s discretion. It instituted after 23 October 2015, while the arbitrations instituted is common for costs awards to be made in favour of a successful prior to this date continue to be governed by the unamended ACA. party, but the principles of awarding costs are archaic and the level The ACA preserves party autonomy in relation to most aspects of of costs awarded is rarely sufficient to cover the actual costs arbitration, such as the freedom to agree upon the qualification, incurred. In a recent decision, while referring to a statutory upper nationality, number of arbitrators (provided it is not an even limit of Rs.3,000 (circa US$40) for costs awards in cases of number), the place of arbitration and the procedure to be followed vexatious litigation, the Supreme Court suggested that the by the arbitration tribunal. The principle of party autonomy was Parliament should consider raising the limit to Rs.100,000 (circa confirmed by the Constitutional Bench of the Supreme Court of US$1,375). In view of the low level of costs awarded, there are, as India in Bharat Aluminium Co v. Kaiser and the same was followed yet, no material advantages in making a pre-trial offer in civil in its subsequent decisions. litigation and Calderbank letters are hardly, if ever, used. The amended ACA allows the Indian Courts to intervene in The Commercial Courts Act 2015 has expanded the definition of international commercial arbitrations, to a limited extent of (i) costs and the factors to be taken into account by the Court while granting interim measures, (ii) providing assistance in taking awarding costs. Costs would now include the fees and expenses of evidence, and (iii) referring the parties to arbitration. Further, as far the witnesses, the legal fees and any other expenses incurred in as Indian-seated arbitrations are concerned, the ACA expressly bars connection with the proceedings. Further, the Commercial Courts the Courts from intervening in an arbitral proceeding, except to the are not bound by the aforesaid statutory upper limit for costs awards extent provided for in the ACA itself. For example: in cases of vexatious litigation. iclg to: insurance & reinsurance 2019 www.iclg.com 135 © Published and reproduced with kind permission by Global Legal Group Ltd, London tuli & co india

■ Where a party files an action before a Court in spite of an up and testamentary disputes, which ought not to be arbitrated. arbitration agreement, the other party can apply to that Court Further, the National Consumer Dispute Redressal Commission, in to refer the dispute to arbitration instead. its recent judgment in Aftab Singh v. Emaar MGF Land Limited & ■ A party can apply to a Court for interim remedies (please see Anr, held that disputes under the Consumer Protection Act 1986 the response to question 5.4 below for further details). cannot be referred to arbitration and an arbitration clause cannot ■ A party may also seek Court’s assistance in taking evidence oust the jurisdiction of the consumer courts. and summoning a witness.

■ A party can seek the Court’s assistance for the appointment of 5.4 What interim forms of relief can be obtained in support an arbitrator if the other party refuses to cooperate in the of arbitration from the courts? Please give examples.

india process. A party to an arbitral proceeding, before or during the proceeding, or 5.2 Is it necessary for a form of words to be put into a even after the arbitral award has been pronounced (but before it is contract of (re)insurance to ensure that an arbitration enforced), may apply to a Court for interim relief, seeking: clause will be enforceable? If so, what form of words is required? ■ the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; ■ the preservation, interim custody, or sale of any goods which An arbitration agreement, as per the ACA, must be in writing and are the subject matter of the arbitration agreement; signed by the parties. The agreement should reflect the intention of the parties to submit their dispute(s) to arbitration. There is no ■ the securing of the amount in dispute; prescribed form required for the purpose of an arbitration ■ the detention, preservation, or inspection of any property or agreement. In fact, it is not necessary for an arbitration agreement thing that is the subject of the dispute; and to be incorporated into an insurance/reinsurance contract at all. An ■ an interim injunction or the appointment of a receiver; and arbitration agreement can also come into existence if it is contained such other interim measure of protection as a Court may find in a subsequent exchange of letters, telex, telegrams or other means just and convenient. of telecommunications (including by electronic means) which However, pursuant to the amendment to the ACA in 2015, in the provide a record of the agreement. event that the Court grants interim relief prior to commencement of The reference in a contract to another document which contains an the arbitration, the arbitral proceedings have to commence within 90 arbitration clause also constitutes an arbitration agreement if the days of such order by the Court, unless extended by the Court. contract is in writing and the reference is such that it makes the Further, once the arbitral proceedings commence, the Court shall not arbitration clause part of the contract. entertain any application for interim relief unless it is satisfied that the arbitration tribunal will not be able to provide an efficacious remedy.

5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the 5.5 Is the arbitral tribunal legally bound to give detailed courts will refuse to enforce such a clause? reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a In relation to domestic arbitration, the ACA bars the intervention reasoned award is required? from the Courts except for some specific instances wherein the Courts are allowed to intervene – for example, for interim relief, As per the ACA, an arbitral award must state the reasons upon reference to arbitration when an action has been instituted before the which it is based unless: (a) the parties have expressly agreed that no Court and for the appointment of arbitrators, where parties have reasons are to be given; or (b) the award is made upon terms agreed failed to nominate arbitrators within the stipulated timeframe. between the parties. In relation to international commercial arbitration, the tendency of the Indian judiciary to intervene is now declining. The decision of 5.6 Is there any right of appeal to the courts from the the Supreme Court in Bharat Aluminium Co v. Kaiser has reversed decision of an arbitral tribunal? If so, in what the earlier authority which endorsed an interventionist approach circumstances does the right arise? under certain circumstances. However, there are exceptions to the non-interventionist approach. The ACA lays down the grounds on which an award can be For example, in N Radhakrishnan v. Maestro Engineering, the challenged before a Court. These grounds are narrow and limited and Supreme Court has held that cases involving allegations of fraud a Court is not allowed to reassess or re-appreciate the quality of and misrepresentation which go to the root of the agreement, evidence produced before the arbitrator. The Court cannot substitute involve adjudication upon substantial questions of law and the tribunal’s findings with its own findings or conclusions and will complicated facts, or that require detailed evidence ought to be set aside an arbitral award only if it is shown that a party was under decided by the Courts. Nonetheless judgments of the Supreme some incapacity, the tribunal lacked jurisdiction, there was a failure to Court in World Sports Group (Mauritius) Ltd v. MSM Satellite, follow principles of natural justice, illegal composition of the tribunal Swiss Timing Ltd v. Organising Committee, and Commonwealth and and/or if the award is in conflict with public policy. A Ayyasamy v. A Paramasivam have diluted the effect of the After the amendment to the ACA in 2015, the scope of “public judgment in Radhakrishnan and demonstrate a growing inclination policy” as grounds for a challenge has been reduced only to towards a pro-arbitration and non-interventionist approach in the situations where an award: context of Indian as well as foreign-seated arbitrations. 1. was induced or affected by fraud or corruption; or In addition to the above, the Courts have recognised a few additional 2. is in contravention of the fundamental policy of Indian law; categories of matters, such as cases involving disputes relating to: or criminal offences; matrimonial disputes; guardianship disputes; 3. is in conflict with the basic notions of morality or justice. insolvency; disputes under the Indian Trusts Act 1882; and winding

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Neeraj Tuli Celia Jenkins Tuli & Co Tuli & Co 7 Lotus Towers, Community Centre 7 Lotus Towers, Community Centre New Friends Colony New Friends Colony New Delhi 110025 New Delhi 110025 India India

Tel: +91 11 4593 4000 Tel: +91 11 4593 4000 Email: [email protected] Email: [email protected] URL: www.tuli.co.in URL: www.tuli.co.in india

Mr. Neeraj Tuli is the firm’s senior partner. Before setting up Tuli & Co Ms. Celia Jenkins handles the firm’s non-contentious practice, and in 2000, Mr. Tuli was a partner at Kennedys in London. Mr. Tuli’s specialises in product development, regulatory issues and corporate contentious work and coverage advice ranges across a variety of commercial work. policies including trade credit, MD, BI, CPM, E&O, D&O, DSU, ALOP, Celia has been involved in drafting, vetting and advising on insurance EAR, CGL, Cyber, Freight Forward Liability and CAR. He has handled contract wording and ancillary documentation across a range of litigation and arbitration in India, London, Paris, New York, San business and product lines and has reviewed more than 1,400 policies Francisco, , and Papua New Guinea, and including ULIPs, term life, whole life, rural-oriented, health-oriented currently manages claims on behalf of insurers and reinsurers in (for stand-alone health insurers and life insurers), personal accident, Australia, Chile, Dubai, Finland, Germany, India, Ireland, Italy, Japan, pension, gratuity, superannuation, leave encashment, travel, home Kuwait, , the UK and the US. contents, D&O, various E&O, marine/aviation liability policies, medical Mr. Tuli also acts as an arbitrator and has been invited to be the first complications liability, POSI and trade credit. President of the Insurance Law Association of India, being formed in Celia also assists insurers and insurance intermediaries in dealing association with the British Insurance Law Association. He is also a with disciplinary actions by the insurance regulator. member of the Confederation of Indian Industry’s National Committee on Dispute Resolution. In addition, Celia advises overseas reinsurers and Indian financial companies on a range of corporate issues in relation to investments in the insurance space and also advises clients on restructuring options, foreign direct investment issues and joint ventures in the insurance and financial space. Celia also advises foreign investors in relation to investment in Indian insurance companies and intermediaries and in establishing a presence in the Indian insurance sector. Recently, Celia has also been involved in assisting reinsurers in setting up branch offices in India. Celia has been recognised as a leading practitioner for insurance law in India for the past several years, including in 2017–18 by The Legal 500, the Asialaw Leading Lawyers Survey and Chambers and Partners.

Tuli & Co was established in 2000 to service the Indian and international insurance and reinsurance industry. Tuli & Co is an insurance-driven commercial litigation and regulatory practice and has working associations with firms in other Indian cities as well as globally via our association with Kennedys. We offer a “cradle to grave” service within the insurance industry from drafting and revising policy wordings, interpretation and handling of coverage disputes, to setting up distribution and service networks and providing industry-specific corporate and commercial advice. We also provide general advice on the impact of new or anticipated legislation and developments in the industry.

iclg to: insurance & reinsurance 2019 www.iclg.com 137 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 23 ireland elizabeth Bothwell

arthur cox David o’Donohoe

1 Regulatory addressed in the application and the supporting documents to be included in the application. The authorisation process takes between three and six months from the date the fully completed 1.1 Which government bodies/agencies regulate application is made. The process is iterative and typically there is a insurance (and reinsurance) companies? high degree of engagement with the CBI. It is advisable for applicants for authorisation to meet with the CBI in advance of The Central Bank of Ireland (the “CBI”) is responsible for submitting their application for authorisation. authorising and supervising all financial institutions in Ireland, The Checklist referred to above sets out the information to be including insurance and reinsurance companies. contained in the applicant’s business plan, as well as the broader information that the CBI require in assessing the application. Set 1.2 What are the requirements/procedures for setting up a out below are some of the key areas to be addressed in the business new insurance (or reinsurance) company? plan: ■ ownership structure of the company’s parent/group; In order to set up a (re)insurance company in Ireland, it is necessary ■ legal structure of the company; to incorporate a company and obtain authorisation from the CBI. ■ underwriting strategy, outward reinsurance, outsourcing and When establishing a new (re)insurance company, promoters are investment strategy; permitted to adopt different types of corporate organisations (e.g. a ■ capital and solvency projections; and public limited company, a private limited company in the form of a ■ governance structures (audit, risk management, compliance, designated activity company (“DAC”), a company limited by financial, management and internal controls). guarantee, an unlimited company or a European Company (SE)). The role of director and certain senior management positions in However, the most common form of company used is a private (re)insurers constitute “controlled functions” or “pre-approved limited company in the form of a DAC. The incorporation process controlled functions” under the CBI’s Fitness and Probity Regime, involves an application to the Companies Registration Office and a and any person who it is proposed will occupy a pre-approved company can be incorporated within five business days of an controlled function must complete an online Individual application being made. Questionnaire. DACs were introduced into Irish law in June 2015 by virtue of the Once the CBI is satisfied with an application, they issue an Companies Act, 2014 and are private companies limited by shares authorisation in principle with conditions to be satisfied. Once the that are similar in form and substance to limited liability companies conditions are satisfied and the CBI has granted formal approval, (“Ltds”). DACs have a “constitution” comprising of: (i) a the (re)insurer can commence writing business. memorandum of association; and (ii) articles of association. However, unlike Ltds, a DAC’s constitution has a main objects clause, which sets out the activities that the (re)insurance company 1.3 Are foreign insurers able to write business directly or has the corporate capacity to undertake. must they write reinsurance of a domestic insurer? To obtain authorisation from the CBI, the promoters are required to In accordance with the EU passporting provisions, an insurer submit certain information, including a “scheme of operations”, authorised in another EEA Member State can write business directly which comprises a detailed business plan for the proposed in Ireland on a freedom of services or freedom of establishment (re)insurer. The business plan should contain financial projections basis. Generally, non-EEA insurers cannot write business directly in for a three-year period on a pessimistic, realistic and optimistic Ireland; however, they may apply to the CBI for authorisation under basis. It should also include comprehensive details of the nature of the European Union (Insurance and Reinsurance) Regulations 2015, the (re)insurance products that it is proposed the (re)insurer will which enable third country insurers to establish a branch in the state write, the intended market for the products and distribution (“Third Country Branch”). Third Country Branches do not have channels. Draft policy documentation should be submitted as part the right to passport into other EEA Member States and so a Third of the application. The CBI has issued detailed guidance on the Country Branch that has been authorised by the CBI can only carry authorisation process, i.e. explaining the process and timing for the on business in Ireland. submission of the application for authorisation, together with a “Checklist” (discussed below) of the matters that should be

138 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London rvdr, nldn isrr, hn hy r daig with insurers conductbusinesswithconsumers. dealing are adhered to and detailed they provisions in relation to the manner in which when be to principles overarching certain contains CPC The consumers. insurers, service financial including regulated by providers, met be to requirements detailed opne ae emte t prhs drcos ad officers’ and directors’ purchase (“ to permitted are Companies proceedings defending taken againsthim/her. successfully of result a as a incurred costs for possible legal of is respect in officer it and/or director However, a reimburse to company trust. of breach or default duty, of breach negligence, of respect in or officers or liability directors from indemnity exempt to companies permit not does law Irish “ (the Code Protection Consumer CBI’s The Contracts Directive. Consumer Termsin Unfair the and Directive Services Financial of is the basis for some of the restrictions, e.g., the Distance Marketing legislation implementing EU law in relation to consumer protection Irish consumers. protecting at aimed largely are which law Irish under contract of freedom parties’ on restrictions some are There Arethereanylegalrulesthatrestricttheparties’ 1.4 arthur cox iclg to: insurance &reinsurance 2019 “ of principle contracts the insurance include to apply which principles law common The of avoidance on law the out insurance policiesformaterialnon-disclosure offacts. sets which 1908, Marine Act, the under Insurance example for statute, in out set principles legal more be the applying strictly by approach pro-insured to a take to tend courts tends Irish the that insurance is however, perception, The to insurers. to favourable relating law substantive The Ingeneralterms,isthesubstantivelawrelatingto 2.1 (re)insurance certain indemnity insuranceasaconditionofmembership. law, for Irish under professional maintain to members “compulsory” their require bodies insurance professional not whilst addition, indemnity In professional certaintypesofaircraftandshippinginsurance; ■ solicitors’ professionalindemnityinsurance; ■ third-partymotorvehicleinsurance; ■ ■ Yes. The followinginsurancesarecompulsory: Arethereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 fines. annual any or injury bodily for liabilities dishonesty, and fraud of authorities. D&O insurance generally contains exclusions in respect incurred by a director in respect of an investigation by the regulatory costs circumstances, certain in and, awards of payment costs, legal ate t dsls al aeil nomto i rlto t the to relation in information material all disclose to parties D&O (Re)insuranceClaims 2 freedom ofcontractbyimplyingextraneousterms officers underlocalcompanylaw? into (allorsome)contractsofinsurance? insurance morefavourabletoinsurersorinsureds? intermediaries. ”) insurance. Such policies may include the advancement of bria fidei uberrimae

, hc olgs both obliges which ”, CPC ) contains ”) usat o h lw o aec o tut o atraiey n an on alternatively or trust, or assignment. agency of laws the to pursuant contract insurance an under rights acquire also may parties Third Section 7 of the Married Woman’s Status Act 1957 – allows a (c) Road Trafficthe of 76(1) Section a – amended) (as 1961 Act (b) party third a – 1961 Act Liability Civil the of 62(1) Section (a) this generalprinciple: to exceptions statutory three are There it. enforcing from contract a to party a not is who person a prevents which contract, of privity of principle the to due is restriction This insurer. an against action direct a bring to party third a of ability the on restriction a is There ate t mk dslsr. t s osbe o rah h dt by duty the breach to omission orsilence inrelationtoamaterialfact. possible is the It on disclosure. obligation make positive to a parties imposes faith good utmost of duty the as misrepresentation, on rules law common usual the beyond goes This all made. is disclose contract the before to other the duty to facts overriding material an have parties both faith: good utmost of duty the to subject are insurance of contracts to Parties an innocentnon-disclosureclausewiththiseffect. the claim for policy honest proposer. An insurer is not a entitled to opt to decline cover of avoid to insurers material misrepresentation where an incorrect permitted answer is given by an not have material is courts policy or Irish The 18) the that noted insured. be should It inception. (section from insurer the the by voidable by non-disclosure 20) for (section misrepresentation remedy the is Pursuant to the Marine Insurance Act 1908, avoidance of the policy the reinsurancecontract. principle restricts the insured’s rights as the insured is not a party to contract of privity The reinsurer. a against action direct a bring to There is no general right in this jurisdiction which allows an insured . Canathirdpartybringdirectaction againstan 2.2 . Isthereapositivedutyonaninsuredtodisclose 2.5 Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 non-disclosure offactbytheinsured. in support of the insurer avoiding an insurance contract for material insurance contract. The principle is generally invoked by the insurer insurer? them? misrepresentation ornon-disclosurebytheinsured? reinsurer? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof pue r hl nmd s bnfcay o plc o life of policy a assurance orendowmenttoenforcethepolicy. to beneficiary a as named child or spouse incident an insurer. from arising damages involving a motor vehicle can submit his claim directly to the claiming party third before insured the against proceeding againsttheinsurer. judgment obtain to required a or is dissolved, respectively. under Generally, the third party will be insured up wound is dies), (or bankrupt becomes is and policy liability partnership/association or company, person, a where insurer an against action direct a bring may in lieu

of avoidance, unless the policy in question contains

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ireland 139 ireland 140 ireland insurer also. the to faith good utmost of duty the of application the by and any) the through duty (if this insurer an by raised questions the of of nature the of consideration impact the moderated have Ireland in courts the that suggest decisions Irish recent of However,number a the risk. to material is which matter every disclose also must but correctly, Court held that an insured must not only complete the proposal form © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com where contentious issuesrelatingtodiscoverymayexist. particularly longer; significantly take may cases complex entry into the Commercial List to conclusion is 20 weeks. However, from Court Commercial the by heard case a of length average The Howlongdoesacommercialcasecommonlytaketo 3.2 or insurance sitting judge for a jury alone. by heard a are before disputes hearing such disputes; a reinsurance to right no is There the CommercialCourt. are Cases in judge head the nature. before hearing a following list in this into admitted commercial inherently is dispute the that claim or counterclaim exceeds €1 million; or (ii) the court considers the of value the (i) that: namely criteria; certain meet they if Court Court. High the of Commercial the in heard be can disputes reinsurance and Insurance division specialised fast-tracked a is which Court, the of division Commercial the or Court High the by heard Court Circuit monetary jurisdiction. unlimited the Typically,an commercial has insurance of disputes which are Court, excess High the in by heard are value jurisdiction a with Claims is €75,000. limit Court Circuit the and €15,000 is limit Court District The Whichcourtsareappropriateforcommercial 3.1 the right. extending and asserting clauses subrogation express include should discharges its indemnity on foot of a valid contract insurer of indemnity,the but once subrogation of right automatic an has insurer An Isthereanautomaticright ofsubrogationupon 2.6 In the contractonparticularterms. make to it influenced breach the that probabilities) of balance a (on If a breach of the utmost good faith is alleged, the insurer must show most significant. practice, therefore, the duty owed by the insured In to the insurer is the void. contract the declare to is duty of breach for remedy The arthur cox 3 Litigation – Overview Litigation–Overview 3 hro In Ld Ascrzoi eea S.P.A General Assicurazioni v Ltd Inns Chariot

bring tocourtonceithasbeeninitiated? jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes

te Supreme the , ahr hn ata ifrain ocrig h cmiso o a of commission wrong. the concerning information factual than rather wrongdoers of identities and names the are sought information the where and exists wrongdoing of proof clear a where cases in made of commencement the to proceedings. The likelihood is that such orders are prior only likely to be order to court possible by is discovery it obtain circumstances limited In defence. defendant’s Normally, parties seek voluntary discovery following delivery of the might suffer also incomplyingwiththeorder. will court non-party the The which oppression or prejudice possible discovery. the consider the of costs the against such person indemnify must discovery non-party the seeking party The the proceedings. to relevant are which documents power or custody possession, its non- in had has or have to likely is person the that appears it where party a against discovery for order an make may Court High The not need tobedisclosed. do privilege to subject are which documents of contents The of discovery and not only those documents which support their case. Parties must disclose all documents which fall within the categories categories of discovery voluntary request first must party A (b) A party to proceedings in the High Court may seek discovery (a) a iiain rvlg aie ol atr iiain r other or litigation after only arises privilege Litigation (a) legal privilegeare: to compelled of types be principal two The communication. reason, this of details disclose any for can, solicitor the nor client the and his solicitor. When legal privilege has been established, neither client a between communications certain of disclosure from itself The concept of legal professional privilege enables a party to protect . Whatpowersdothecourts havetoorderthe 4.1 . Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 ii asolicitorandthirdparty. (iii) asolicitorandhisnon-professionalagent; (ii) asolicitor and hisclient; (i) to theaction? course ofsettlementnegotiations/attempts? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin an orderfordiscoverycanbesoughtfromthecourt. reached, not is discovery on agreement if and documents of is request the whether from amorereadilyavailablesource. obtained consider be may documents the also whether and proportionate will Court The costs. save and fairly matter the of dispose to necessary and issues the to relevant are which documents of categories of in connectionwithit. or defence of the case or the seeking or giving of legal advice prosecution the advancing of purpose dominant the for made The communications over which privilege is claimed must be privilege Litigation includes allcommunicationsbetween: question. in litigation the of purpose dominant or sole the for produced documents all protects it adversarial proceedings are contemplated or commenced and

iclg to: insurance &reinsurance 2019 ireland © Published and reproduced with kind permission byGlobal Legal Group Ltd,London witness in a place other than the court by an independent lawyer commissioned bythecourttotakeevidence. independent an by court the than other place a in witness the of questioning the involves This commission. by given be can evidence witness, the of illness as such circumstances, limited In subsequently becross-examinedonthecontentsofaffidavit. may they although evidence, affidavit, primary as sworn presented a be may of which way by evidence give also may witness A where thecaseissuitable. that system court video-link of way by evidence oral give to circumstances certain in adversarial the of rule witnesses are examined orally in open court. fundamental However, it is possible a is It in exchanged are advance ofthefinalhearing. which statements witness provide to required are witnesses the Court, Commercial the In to admitted proceedings application). interim an for necessary where (except hearing final the at evidence give to required only are Generally,witnesses can attend to Failure action. amount tocontemptofcourt. an of hearing final the a at as witness attend to person a requiring subpoena a obtain may party A Dothecourtshavepowerstorequirewitnesses 4.3 relate withheld be may Awhich documents of category third (c) a between communications protects privilege advice Legal (b) arthur cox iclg to: insurance &reinsurance 2019 granted are injunctions Interim jurisdiction. this in available relief interim Interim injunctions or interlocutory injunctions are the main form of Whatsortofinterimremediesareavailablefromthe 4.6 number ofissuesbetweentheparties. directions Such regularly include a pre-trial expert reports. meeting in an effort to reduce the expert to relation in directions include will directions pre-trial and trial, the of advance in reports expert exchange to parties the require Court Commercial the of rules The There arenogeneralrestrictionsoncallingexpertwitnesses. duty tothecourtgiveobjectivejudgmentonmatterathand. a have witnesses Expert own litigation. its property intellectual appoint in expert to chosen has Court High the where incidences However, witness. expert an appoint rarely courts the and are there litigation the to party a by retained generally are witnesses Expert Are there any restrictions on calling expert wit 4.5 Is evidencefromwitnessesallowedeveniftheyare 4.4 there whether is a serious/fair issue to be 1) tried, 2) whether damages would is be application in injunction court interlocutory the an by considering applied generally test The place. take can party other the involving injunction interlocutory an for hearing a until not present? give evidenceeitherbeforeoratthefinalhearing? courts? addition or in place of party-appointed experts? Is it common to have a court-appointed expert in from disclosureoradmissibilityasevidenceincourt. protected is mediation, including settlement, a negotiating to communications made without prejudice for the purpose of purpose ofseekingorgivinglegaladvice. the for and confidential is communication the that provided client, his and capacity, professional his in acting solicitor, ex parte (without notice to the other party) for a short period

nesses?

where a court orders the payment of a sum of money (damages), the proceedings in that provides 1961 Courts Act, the of 22(1) Section the by heard been have would date Supreme Court,nowliewiththeCourtof Appeal. above the to prior which Court of Appeal. Appeals in civil proceedings from the High the Court, of 2014 October 28 the on establishment the with appellate jurisdiction Court’s Supreme the to made were changes significant Court, Supreme the in backlog significant a of consequence a As be ultimatelyappealedtotheSupremeCourt). may (which Court District the from Court High the to directly law the Supreme Court. However, either party may appeal on a point of to appealed be cannot Court Circuit the from appeal on Court High District Court) may be appealed to the High Court. Decisions of the Court and decisions of the Circuit Court (including appeals from the Circuit the to appealed be may Court District the in decided Cases High Court and the submissions of the parties. evidenc the of transcripts the of consideration the on appeal to the Supreme Court and the hearing is p It is generally not possible to adduce oral evidenc interpretation andapplicationofthelaw. have been correct. Successful appeals tend, therefore, to turn on the reasonably not could on acted was that evidence the that satisfied to overturn a finding of fact arrived at by the High Court, unless it is of law and fact. However, the Supreme Court will generally be slow matters of respect in Court) Commercial the (including Court High The Supreme Court has appellate jurisdiction from a decision of the . Is interestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 ■ ■ of injunctionincludethefollowing: types Specific something. do to person a require will or something doing from person a restrain/prohibit will injunction an Generally, he isultimatelyunsuccessfulintheproceedings. which he may be liable as a result of the injunction in the event that will be required to provide an undertaking to cover any damages for in granting or refusing an injunction. An applicant for an injunction an adequate remedy, and 3) whether the balance of convenience lies not honestly obtained with full and frank disclosur resultingfromthe freezing theofdefendant’s asse action. The plaintiff in such an application is rethe to prior judgment evading of intention the with jurisdiction and there is a serious risk of those a hasdefendant the thatestablished be can it where assets pending judgment. An application for an ord o attachmentinterim an make maydiscretion, its at individual’san onhaveonerous mayimpactthey rig granted rarely are orders of types particular These ■ ■ If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral Mareva legal right; TimetQuia e ogt o rvn a eedn fo laig the leaving from defendant a prevent jurisdiction. to sought be of items WritRegno Exeat Ne of removal and inspection evidence; and the for defendant Piller Anton : usedtopreventtheremovalordisposalofassets; : used to prevent an anticipated infringement of a of infringement anticipated an prevent to used : Orders: allow for entry onto the premises of a of premises the onto entry for allow Orders: and Bayer Injunction: these orders can orders these Injunction: www.iclg.com sponsible for any loss ssets being dissipated e (or new evidence) ts if theiftsorder was e.

e provided in the in provided e rimarily based on er can be brought assets within the withinassets

eas o the of because rder to preserve to rder hearing of the of hearing hts. The court,The hts. ireland 141 ireland 142 ireland a certificate accordingly, confirming that they hav clients, prior req to initiating are proceedings, solicitorsto consid Act, the Under disputes. family civil, resolving in mediation of use the facilitate enc to aims 2017 Act Mediation enacted recently The refuse tomediate. unreasonably who parties for sanctions costs are there addition, In di or orders any considers make necessary also to facilitate may effective courts use of The process. © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Alternativean engageinDispute partiesRestothe application by either party to the action or oflegaladjourn itsmay judge a Court,Circuitand Court The courts cannot compel the parties to mediate. H Canthecourtscompelpartiestomediate 4.10 offer tender a make to permitted are Insurers otherwise. orders court the unless onwards, date that from defendant’scosts the discharge also have to bear their own costs from the date of lodgment onwards and will plaintiff the Generally, costs. to as penalised be will plaintiff the action, the of hearing the at lodgment the of excess sum in is which a awarded not is and lodgment the accept to fails or refuses plaintiff the If claim. plaintiff’s the of settlement final and full in A trial. full plaintiff the to offer of a way by court in money lodge can defendant in involved time court and expense the avoiding thereby cases, of settlement early encourage to procedure lodgment (High and Supreme Courts) (Order 22, rule 1(1) RSC) provide for a and tenders lodgments, including offersCalderbank offers.open or Courts Superior the of Rules The costs”, for risk “on plaintiff the put to use can defendant a which tools of number a are There a where as such exceptions, party’s conduct in the to proceedings is deemed improper by the court. subject is rule this any rule, with general As party. unsuccessful the against costs their awarded This means that the party in whose favour judgment is given will be event”. the follow “costs that is rule general the jurisdiction, this In Whatarethestandardrules regardingcosts? Are 4.9 interest appliesonthemonetarysumawarded. Courts awarded, is judgment Act Once appropriate. it deems judge trial the where cases in awarded only is it and discretionary is This date of judgment. This rate of interest currently stands at 8 per cent. the and accrued action of cause the when dates the between period the on entire the or part a of respect interest in damages such of part any or whole of payment the order to discretion has also court arthur cox not be effective where a lodgment or tender could h same was made on a without prejudice basis. A Cald settlementnotwithsofreasonable offer a been have ultima what refuses who plaintiff a onconsequences impo of desirability the recognised have courts The part losing the pay to made beingparty winning the the that costs otherwise courthave been legally for entitled to, awardand in som any reduce severely declined, and the plaintiff does not beat the Calde 99of the Rules of the Superior Courts. Wherethe prejudice save as to costs” and has a statutory bas A Calderbank offer is an offer to settle the procee in offer tosettlepriortrial? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan

lieu oflodgingthemoneyintocourt. own initiative, to allow the mediation process.

er mediation and sign dings made “without rbank offer, this can is pursuant to Order e cases can result in owever, in the High e been so advised. settlementoffer is omril and commercial ave been made. olution(“ erbank offer will tanding that the thattanding ie t advise to uired proceedingson y’s legal costs. costs.legaly’s ey rvs to proves tely ig financial sing at might party uae and ourage etos it rections ADR ”) International Commercial International “ (the Arbitration on Law Model UNCITRAL the adopted 2010 The Arbitration Act, penalised astocosts. be can court the of direction a following mediate to failing Aparty rcial psil t oti a ijnto restra injunction an obtain to possible practically the restrictions on the court’s role, it may no lon of insurance is repudiated for non-disclosure of a clause forms part, is void. This would include a c arbitrationclausecofindingsurvivewill athata 2010 ArbitrationAct, The arbitration. of respect significantlyLawModel restrictsthe of Article5 arbitral the the to only given tribunal andtothecourt. be not to include powers the which but issues procedure arbitration of parties the range gives a it over that is autonomy Act 2010 the of feature particular A to referred be come withinthemeaningof Arbitration Act, 2010. will to writing arise in made be must arbitrate may to agreement An arbitration. which differences or disputes where parties the between agreement an reflect must it minimum, a At used. be to words of form the or agreement arbitration an of the parties. The Arbitration Act, 2010 does not prescribe the content award to be binding there must be an agreement to arbitrate between It is an essential prerequisite that for arbitration and any subsequent . Whatapproachdothecourts takeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 . Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 ups o te rirto ad eonsn/nocn a interim an recognising/enforcing measure orfinalawardissuedbyanarbitrator. and arbitration the the of for orders purpose interim making arbitration, the pending litigation the or High Court. Further, the courts agreement) have a role in, of default the to functions, his out carry to failure for arbitrator (in an of removal arbitrator an the as of such matters, appointment refer may parties The Law. Model the and High Court has a limited supervisory role under the The Arbitration Act, 2010 Law. Model the by provided where except arbitration Article 5 of the Model Law provides that no court shall intervene in although date, Act, 2010mayremainsubjecttothepreviousregime. all that Arbitration the to of after commencement the applies pre-date which into 2010 agreements Act, entered Arbitration agreements The arbitration 2010. June in law Arbitration 5 what groundsanddoesthishappeninmanycases? consequences mayfollow? courts willrefusetoenforcesuchaclause? is required? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration iclg to: insurance &reinsurance 2019

Model Law Model inter alia ger be theoretically or

material fact. Given ase where a contract ntract,whichtheof the court’sthein role rvds ht an that provides , staying any ireland ”) into Irish into ”) nn the ining © Published and reproduced with kind permission byGlobal Legal Group Ltd,London be providedorifitisaconsentaward. and writing must provide reasons unless the parties in agree that no reasons should award his provide the must and arbitrator 2010 an Law, Act, Model Arbitration the of provisions the to Pursuant of documentation. discovery or costs of security the for order any make parties, the by agreed otherwise unless not, may Court High the that provides Act without the express agreement of the parties. Section 10 of the 2010 discovery to regard with jurisdiction no has it however, evidence; of provision the to relation in party a or tribunal arbitral the assist further can Court High The dispute. in goods or monies securing and injunctions interim of grant the as such measures interim order to power default a has tribunal the example, for tribunal; arbitral the by granted be also now may measures interim most although measures, interim granting from precluded not are courts Irish The fit inrespectoftheproceedings. and arbitrate, to agreement an should they fail to so agree, the court reaching may make such order as it sees consider to parties the for proceedings adjourn may Court Circuit the or Court High The Whatinterimformsofreliefcanbeobtainedin 5.4 it may be reached before or after a dispute has ari restriction as to when an arbitration agreement mus appointment of an arbitrator or the conduct of arbi arthur cox iclg to: insurance &reinsurance 2019 Is thearbitraltribunallegallyboundtogivedetailed 5.5 support ofarbitrationfromthecourts?Pleasegive reasoned awardisrequired? examples. the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in

sen. tration. There is no t be concluded and

ne atce 3 te wti tre ots f h dt we a when date the of months decision ontherequesthasbeenmadebyarbitraltribunal. three within then 33, article under tribunal arbitral the to made been has award the of interpretation application has received the award, or if a request for correction and the making party the which on date the from months three within in not An application to set aside the award under article theawardisinconflictwithpublicpolicy.34 must be made was tribunal arbitration the (e) of composition the the of scope the beyond (d) matters with deals decision the the of notice proper (c) with provided not was applicant the some under was (b) agreement arbitration the to party a (a) in theModelLawandincludefollowing: out set are and limited are decision a aside setting for grounds The Court. under which the decision may be reviewed and set aside by the High may 2010 generally not be Act, appealed to the courts. Arbitration However, there are grounds the under arbitrator an of decision A for itsaward. reasons give to arbitral otherwise, agreed the have parties on the unless requirement tribunal, a places Act 2010 the of 31 Section . Isthereanyrightofappealtothe courtsfromthe 5.6 circumstances doestherightarise? decision ofanarbitraltribunal?Ifso,inwhat accordance withthearbitrationagreement;or arbitration agreement; arbitration orwasotherwiseunabletopresenthiscase; otherwise was agreement arbitration invalid; the or incapacity

www.iclg.com ireland 143 ireland 144 ireland © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com arthur cox knowledge of the regulatory space”. to space”. According regulatory the of knowledge to According border activities,productdevelopmentandregulatoryenforcement. including advice cross- arrangements, business, of conduct capital, regulatory governance, corporate regulatory and prudential providing reinsurance in extensive experience has She ventures, outsourcing, arrangements. distribution and joint reorganisations matters, transfers, on and contractual clients amalgamations advising court-sanctioned includes practice Her establishment and authorisation, M&A transactions, portfolio transfers, matters. regulatory and transactions reinsurance and insurance non-contentious of range wide a on sector both insurance the advises in clients and international and Group domestic Insurance firm’s the of Head is Elizabeth acting for major insurers. advice”. She focuses on transactional projects and regulatory environment and process. She provides qu kno“excellenther for lauded is BothwellElizabeth Other Endorsements and issolution-oriented. and excellent all problem-solver” round: she provides very practical and commercial advice thorough and calm knowledgeable, very “a as 2018 Business, for Lawyers Leading Europe’s very stronggraspoftheindustry.’” ‘a has and practice, non-contentious the heads Bothwell “Elizabeth ■ Ranked asa“LeadingIndividual”. ■ class domesticandcross-borderservice. complex transactions, regulatory and commercial matters, disputes, litigation and financing. Our practice is made up of expert lawyers offering a first- on groups reinsurance and insurance world’sleading the of some to adviser trusted a Weare practice. insurance leading market a has Cox Arthur – boththechallengesandopportunities. sound on emphasis judgment and an a practical with approach to requirements solving complex clients’legal and our commercial issues. of We understanding partner with thorough our clients in a preparing to skills, meet what professional lies ahead proven on founded is reputation firm’s The York andSiliconValley. 100 almost including lawyers, 350 has Today,firm partners and a the total staff firms. of almost 850. law Arthur innovative Cox is an most “all-island” firm, with officesand in Dublin and leading Belfast. Ireland’sThe firm also has of offices in London, one New as regarded widely is Cox Arthur ■ Recommended asanExpertinInsuranceandReinsurance. ■ Chambers Europe: Europe’s Leading Lawyers for Business, 2017 The Legal500:Europe,MiddleEast& Africa, 2016 The Legal500:Europe,MiddleEast& Africa, 2016 Who’s WhoLegal2015 The Legal 500 Legal The R:www.arthurcox.com URL: [email protected] +35319201670 Email: Tel: Ireland D02 T380 Dublin 2 Ten Earlsfort Terrace Arthur Cox Elizabeth Bothwell . , Elizabeth Bothwell has an “outstanding an has Bothwell Elizabeth , , sources describe her describe sources , compliance matters, Chambers Europe Chambers wledge of the Irish the of wledge ick and pragmatic . . : . vr koldebe n rsosv” n i rcgie a a “very experienced andpleasantindividualtoworkwith”. a as recognised is and responsive” and knowledgeable “very 2018 Business, to According General LiabilityInsurance. the its extensive experience in the areas of Medical, Personal Injuries and in disputes for recognised particularly is Group Resolution Dispute and Litigation commercial Our defendants. and plaintiffs litigating both for Ireland in Court Commercial in litigation, experience has David extensive property litigation. services financial and intellectual indemnity professional including disputes disputes, commercial of range insurance/policyholder wide a on advises David Department. Resolution Dispute & Litigation the in Partner a is David iclg to: insurance &reinsurance 2019 hmes uoe Erp’ Laig ayr for Lawyers Leading Europe’s Europe: Chambers Dvd ’ooo i pasd y ore fr being for sources by praised is O’Donohoe David : R:www.arthurcox.com URL: [email protected] +35319201148 Email: Tel: Ireland D02 T380 Dublin 2 Ten Earlsfort Terrace Arthur Cox David O’Donohoe ireland chapter 24 israel

gross orad schlimoff & co. Harry orad, adv.

1 Regulatory In considering the application, the Commissioner must, by law, take into account the following considerations: (a) the applicant’s business plan and estimated prospect of 1.1 Which government bodies/agencies regulate success; insurance (and reinsurance) companies? (b) the company’s officers’ suitability to their functions; (c) the applicant’s financial means; minimal capital requirements Insurance business in Israel is regulated by the Commissioner of the apply pursuant to the line of business which the new Capital Market, Insurance and Savings, appointed by the Minister of company wishes to write; Finance. (d) the financial means of the applicant’s controlling Two advisory bodies advise the Commissioner – an Advisory shareholders; Committee (four members) and the Advisory Council (15 members (e) the applicant’s plans regarding reinsurance and regarding the – no more than six government employees). team of employees and the estimated prospect of success in carrying them out; The Commissioner operates pursuant to the Supervision over Financial Services (Insurance) Law, 1981. (f) whether granting the licence will enhance competition in the financial market, in particular in the insurance market and the level of client service in this field; 1.2 What are the requirements/procedures for setting up a (g) government economic policy; and new insurance (or reinsurance) company? (h) considerations concerning the public good.

A new insurance company could be either a company incorporated in Israel or a foreign insurance company registered in Israel as a 1.3 Are foreign insurers able to write business directly or foreign company, which is subject to supervision by a regulator in must they write reinsurance of a domestic insurer? its country of incorporation. Writing insurance in Israel requires a licence. Foreign insurance With the objective of increasing competition in the insurance companies cannot write insurance business in Israel, but Israeli industry to lower premiums for consumers, the Commissioner citizens may buy insurance abroad. Reinsurance business by a reduced the minimal capital requirements for establishing new foreign insurer does not require a licence. insurance companies in Israel. As a result, two new insurance companies commenced business lately and it is anticipated that The Commissioner is authorised to license a foreign company if the additional insurance companies will be registered in the near future, latter is registered in Israel and subject to regulation in the country some of these digital. of origin. An application for an insurer’s licence must, by law, include the In a unique act, the Israeli Government enacted a regulation in following: December 1951 exempting Lloyd’s Underwriters from the (a) the classes of insurance requested; stipulations of the law of Controlling Insurance Service. The main practical effect of this is that Lloyd’s Underwriters are permitted to (b) details of the insurance programmes and terms suggested; write business directly in Israel. (c) details of the insurance premiums and other charges; (d) examples of insurance policies, proposal forms and other forms that the insurer will use; 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms (e) details of the suggested reinsurance arrangements; into (all or some) contracts of insurance? (f) company registration documents; (g) details of all the company’s officers; In 1981, the Insurance Contract Law was enacted and applies to all (h) details of all controlling shareholders of the company; and classes of insurance except marine, aviation, diamonds and precious (i) details of the applicant’s financial means. metals and reinsurance. The Insurance Contract Law is a consumer protection-oriented law and many of its provisions override Note: (f)–(h) must be supplied by a foreign applicant, regarding the contradicting stipulations unless the contract broadens coverage. local company that will serve as the local representative.

iclg to: insurance & reinsurance 2019 www.iclg.com 145 © Published and reproduced with kind permission by Global Legal Group Ltd, London 146 israel c cs omte wt te neto o giig unlawful fines and penalties, including civil fines and monetary levies. gaining of intention the (d) with committed acts (c) actscommitted intentionallyorrecklessly; (b) unless company, the towards duty fiduciary of breach the (a) against officer or director a following matters: as of well exemption) (as and indemnification insurance the prohibits Law Companies The © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com on requirements ■ insurance compulsory professionals and/orindividualsin severalareas,suchas: imposes law Israeli Arethereanyformsofcompulsoryinsurance? 1.6 legal expenses with regards to proceedings or in (d) claim a of defence in expended costs litigation reasonable (c) criminal a to due expended costs litigation reasonable monetaryliabilityinfavourofathirdparty; (b) (a) ho such; as mat following the in only provided be can indemnity capacity fr their arising in out indem liability carried to omissions against company officers a and allows directors Law Companies Israeli The Arecompaniespermittedtoindemnifydirectorsand 1.5 impose termsinvariousclassesofinsurance. Furthermore, there are several types of compulsory insurance which provisions regardingpolicyconditions. and insureds the towards duties their the regarding Commissioner the care, medical Insurance companies are also required to adhere to the directives by in advances to Commissioner canimposeanamendeddefinition. due impractical become has event insured the of definition the where example, for cases; some in intervenes Commissioner The reliability. their ensure to especially regarding health, life and long-term care policies in order coverage, limit insurers’Variousto the freedom restrict regulations policy, unlesstheseextendcoverage. auto and health and life – which overrides contradicting terms in the Standardised policy wording applies to personal insurances – home, policy coverage, of limits, periodofinsurance,premiumratesandallexclusions. scope basic the policy-owner, the of details clauses. The policy must be presented in clear language, stating the place them adjacent to the clauses dealing with the related coverage and exclusions and limitations accentuate textually must Insurers text. policy the of presentation visual the on put is emphasis Great regarding rules creating specific typesofinsurance. general, in policies insurance of layout The legislature has set forth detailed rules regarding the content and gross oradschlimoff&co. eutd ihu ete a rmnl nitet r a or indictment criminal a either without resulted an authorised authority, against the directors or o liability as an alternative to criminal prosecution on itsbehalforbyathirdparty; or itself company the by officer or director the against filed not requireproofofcriminalintent; does which offence an of convicted or acquitted was officer or director the if only indemnifiable otherwise are filed, costs and was indictment no where them against investigation officers underlocalcompanylaw? personal benefit;and company’s interests; the prejudice to not would grounds action the reasonable that with believe and faith good in committed netet dies n dsrbtr; netet portfolio investment distributors; and advisers investment The capital market : insurance requirements are imposed on

vestigations by ters: ters: om acts and and acts om against them. fficers, which wever, such such wever, monetary nify nify

with thereinsurer. include a cut-through clause which affords the insured direct privity reinsurance contract, unless the parties to the reinsurance agreement the the under beneficiary and the considered insured not is insured the The reinsurer. between privity no is there that determined other than to afford an automatic right of subrogation. Israeli courts have reinsurance to apply not does Law Contract Insurance The are retained fordefenceinthethird-partyaction. have may insurer the that pleas Defence insured. the against the by annulled or policy and limited will prevail over receivership or bankruptcy proceedings be cannot and independent is which privity,statutory parties third provides Law Contract Insurance The insurance contractunlesstheyfavourbroadercoverage. relationship. These limitations and conditions override contradicting terms insurer-insuredin the the concerning topics other various for remedy invoke to and notification late premiums, of rights non-payment misrepresentation, insurers’ and contract of freedom the limiting rules specific stipulates Law Contract Insurance The which favourstheinsured. law,protection-oriented consumer a is Law Contract Insurance The ■ ■ . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantivelawrelatingto 2.1 policy. alia Cost the if ( definition relevant the that with complies Transportation Sharing paper position a issued recently Commissioner the Regulations, Transportation the to amendment an was by defined which Transportation Sharing Cost regarding Interestingly, (Re)insuranceClaims 2 no profits and not a business), it does not require a designated a require not does it business), a not and profits no ■ ■ ■ ■ reinsurer? insurer? insurance morefavourabletoinsurersorinsureds? the followingfields: in injury bodily of coverage the for requirements insurance coverage injury acquire Bodily to banks requires which employee dishonestyinsurance. directive a issued has compulsory insurance; however, the Commissioner of Banks underwriting Banks and companies acts andomissionsinfidelityofemployees. negligent against clients protect managing to order in all – companies their funds, provident and trustees; and managers fund mutual managers, iclg to: insurance &reinsurance 2019 insurance bythelocalauthorities. children School accident insurance. activities sport Organised all vehicleowners. for insurance compulsory by enforced is law The itself. accident accidents, the regarding fault of motor question the of regardless of victims all for compensation rule, subjects human accidents Motor in requirements areimposedontheclinicaltrialsponsor. trials Clinical :

there is no statute which compels banks to acquire to banks compels which statute no is there r cvrd y oploy accident compulsory by covered are : the Israeli non-fault law provides, as a as provides, law non-fault Israeli the : Irei a ipss compulsory imposes law Israeli : r sbet o compulsory to subject are insurance : israel inter © Published and reproduced with kind permission byGlobal Legal Group Ltd,London disclosure regarding such a subject and no sanction for deemedimmaterialas proposaltherefore andno therebe can the on mentioned not subject any form: in conjunction with the questions regaposed by the insu is aware, untruthful was and incomplete insuredanswer. Israeli courts theh which of materiality The law further stipulates that fraudulent concealm general or to assume it under the terms specified b reasonableinsurer’saffectcoulda willingness to la by defined is matter material A truthfully.and mater a of respect in form proposal a on questions, The Insurance Contract Law imposes the duty to answ disclosure wasfraudulent. non- the policy,unless the of inception after years three to limited disability,life, Regarding is remedy – insurance accident or disease insurer’s the on or occurrence liability ortheextentthereof. its on effect no had or occurred event the when existed longer no fact undisclosed the if or insurer, was non-disclosure the have been should known to the insurer or or if the unless non-disclosure known was caused by the were facts – undisclosed the if apply – fraudulent not will remedy The the insurancecontractevenforahigherpremium. entered have not would insurer” “reasonable a if or fraudulent was non-disclosure the if only apply will Totalliability from exemption would havebeencollectedhadthefullfactsdisclosed. by the ratio between the premium paid and the higher premium that the after detected occurrence of an insured is event, the insurer’s liability will be non-disclosure reduced or misrepresentation where policy. rule: a relative a promotes law the and remedy automatic no is There in terms contradicting any over prevail non-disclosure or misrepresentation for remedies Law’s Contract Insurance The Whatremediesdoesaninsurerhaveincasesofeither 2.4 gross oradschlimoff&co. iclg to: insurance &reinsurance 2019 insured, whomay thenremitproceedingstotheforeign insurer. the of name the in filed be should claim subrogation a this, of view subrogation of right no has Israel) in insurer Recent case law determines that a foreign insurer (not licensed as an a being there to due family oremployer-employee relationship. against action bring not would insured the whom party third a by unintentionally caused allowed was event the not where is Subrogation to insured. the and of insurer cooperation the promote against contentions prevent to order in claim for the insured, but it is customary to offer the insured to join such a sums excess these claim must insurer the that state specifically not as interpreted does law The be collection. for may right primary insured’s the This affording received. the benefits insurance impairs the that of way a in exercised insured’s right to collect compensation from be the third party in excess not may Subrogation benefits paid. the of amount the to up be can and name insurer’s the in made is The right of subrogation is automatic by law. The subrogation claim Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 insurers all matters material to a risk, irrespecti whether the insurer has specifically asked about th misrepresentation ornon-disclosurebytheinsured? insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes

in its own name. In name. own its in for non-disclosure. aveinterpreted this rer on the proposal ent of a matter, the assume the risk in riskthe assume y the policy. a oe which one as w ial matter, fullymatter, ial positivedutyof er the insurer’s hs been has m dd s an as rded se to ve of em? claims review to handling procedurestomeetthenewrequirements. have will who insurers, of departments claims the of attention particular the warrant rules new The defence. and proceedings preliminary for limits time stricter to due proceedings accelerate to expected are Procedure Civil of Rules reformed The regarding casemanagement. court’sdiscretion the expanding while litigants on constraints time severe places procedure new The with. dealt are they which with speed and efficiency the improving while cost proportionate a at Woolf Lord the reform in England, to is to enable the similarly court to deal with reform, cases justly and this of The objective overriding 2019. September from effect into come will which reform, undergosignificant to about is Procedure Civil of Rules Israeli The the court file. systemhasbeenfully computerised, allowing partie becomemoreefficient today’sin managemtechnological age Case arbitration. or mediationsettlement, out-of-coseekactivelyencouraged tolitigants are The Israeli judiciary court system is severely back not includingpausesformediationorsettlementefforts. years, 3.5 approximately is judgment final to filing from time The appeal totheSupremeCourt). of right (with court district the to instance first at brought are value this of excess in million claims court); district the to NIS2.5 appeal of right (with to courts lower up the of jurisdiction the at within fall approx.) ($720,000 valued insurance) (including claims Commercial Justice. of Court High the as and court appellate an as serves Jerusalem in Court Supreme The court. appeal an as and district court. Each district court serves both as a first instance court one and courts (magistrate) lower eight and two between are there elected until retirement age. There are six districts, adversary in each of which English the on system, based but without a jury. is Presiding judges are professional and system are judiciary Israeli The h cus o te ra. h cut a ise res o official to orders issue may court The trial. the of course the at the pre-trial stage and mitigate surprise discovery which can delay of provision details demand regarding pleadings. Current policy is to promote disclosure or questionnaire a to response documents, of discovery demand to litigants enable Rules Procedure Civil The . Howlongdoesacommercialcasecommonlytaketo 3.2 Whichcourtsareappropriate forcommercial 3.1 . Whatpowersdothecourtshavetoorder 4.1 party ofitsintentiontoclaimatleast30daysinadvance. third the inform must proceedings subrogation execute to wishes that company insurance an that stipulates law approved Arecently 3 Litigation – Overview Litigation–Overview 3 Litigation –Procedure 4 bring tocourtonceithasbeeninitiated? jury? to theaction? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

www.iclg.com logged. As a result, urt resolutionsbyurt s directs access to and the judiciarytheand n hs also has ent israel 147 israel gross orad schlimoff & co. israel

authorities for discovery of reports and records, such as police or fire-brigade investigation reports, National Insurance Institute data 4.5 Are there any restrictions on calling expert witnesses? and similar. The court also has the authority to summon non- Is it common to have a court-appointed expert in addition or in place of party-appointed experts? litigants to court as witnesses in order to present documents in their possession. Where expert testimony is necessary, each party appoints its own expert at its own expense. Party-appointed experts are ostensibly 4.2 Can a party withhold from disclosure documents (a) independent and cannot have any interest in the outcome of the case. relating to advice given by lawyers, or (b) prepared in The courts will usually appoint an independent expert who is contemplation of litigation, or (c) produced in the considered an extension of the court itself. Ex parte meetings or israel course of settlement negotiations/attempts? correspondence by the court-appointed expert with parties are not allowed subject to mutual agreement. Costs of the court-appointed The answer to all these questions is affirmative. Israeli law upholds experts are usually to be shared equally. After the court-appointed the principle of the privileged attorney-client relationship. The expert’s opinion is issued, the parties are entitled to amend their privilege is statutorily protected and unlike other privileges pleadings with regard to new evidence and/or file a supplementary (physician/patient, journalist/source, etc.), is absolute and can be expert opinion relating to the court-appointed expert’s opinion. waived only by the client. The privilege applies to documents kept Regarding motor accident injury cases, Israel has adopted a no-fault within the confines of the attorney-client relationship and does not regime focusing on effective and quick remedy for all injured extend to settlement or negotiation correspondence with a third parties. The court proceedings have also been facilitated and do not party. These will be privileged or inadmissible as evidence only by allow for parties to introduce expert opinions. The court has sole agreement by the parties on a purely contractual basis. Case law has discretion to appoint an expert. extended the privilege to the work product of the lawyer, which encompasses reports and documents contracted by the lawyer for the benefit of the client’s representation regarding ongoing or 4.6 What sort of interim remedies are available from the anticipated court proceedings contingent on this being the essential courts? aim of the document. Regarding settlement negotiations, in order to promote litigants to settle disputes out-of-court, the courts will Interim remedies are rarely sought regarding tort and insurance uphold the customary privilege regarding negotiation offers. In cases. Civil Procedure Rules allow for pre-action orders for conjunction with this policy, all aspects of mediation proceedings disclosure of documents, mainly accounting documents. Temporary are privileged by law, unless both parties waive the privilege. injunctions and freezing orders in respect of assets can also be Case law determines that the only insurance-related documents that obtained subject to post of a bond in order to ensure payment of are privileged are those created and collated for the main purpose of costs should the remedy be retracted. preparing for anticipated litigation. Other insurance documents, such as those prepared for examining policy coverage as part of 4.7 Is there any right of appeal from the decisions of the insurer’s routine claim examination, are not privileged. courts of first instance? If so, on what general grounds? How many stages of appeal are there?

4.3 Do the courts have powers to require witnesses to give evidence either before or at the final hearing? There is an automatic right of appeal of the judgment from the court of first instance to the appeal court (from Magistrate to District and from District to Supreme) within 45 days. The grounds for an appeal are True to the adversary system, Israeli courts are not active in factual or legal mistakes. As a rule, the appeal court will not intervene determining which witnesses or evidence will be heard. The courts on points of fact unless a severe and obvious error is evident, nor will retain the authority to determine whether particular evidence or it intervene in decisions regarding the credibility of witness. testimony is admissible. The courts do have the power to order any person present in the courtroom to give evidence if this seems Leave to appeal is required to allow access to a second appellate necessary. Furthermore, the courts may issue witness summonses in instance and to appeal interim decisions. As a rule, the appellate order to compel witnesses to appear in court. The summons may be court will only allow such appeals in exceptional cases. With regard enforced by the police but can only be issued within Israeli to appellate judgment, the petitioner must show severe injustice or jurisdiction territory. that the issue is one of importance to the public. The petition for leave to appeal must be filed within 30 days of the handing down of the subject decision. 4.4 Is evidence from witnesses allowed even if they are not present? Most District Courts will now complete hearing of an appeal within six months to a year. At the Supreme Court, however, a case may take much longer. Hearsay is inadmissible as a rule, subject to common-law exceptions and all witnesses must appear in court to present evidence. Evidence is now commonly presented as a written 4.8 Is interest generally recoverable in respect of claims? statement in the form of an affidavit and the witness must be present If so, what is the current rate? to allow the counter-party the opportunity to cross-examine the witness. In special circumstances, the courts may allow hearing The Interest and Linkage Law authorises the courts to award interest testimony via a video conference or, in rare cases, testimony can be regarding monetary award. The court is further authorised to award heard outside the courtroom; e.g. by the hospital bedside of a sick linkage (to the monthly cost of living index) and interest, either by witness or at the scene of the event. the full statutory rate (which is published quarterly by the Ministry of Finance, lately around 1%) or less. Linkage and/or interest can be awarded from the date of occurrence of the cause of action or from any later date.

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The Insurance Contract Law states a mandatory award of linkage 5 Arbitration from the date of occurrence and interest at the rate defined by the Interest and Linkage Law from 30 days after the occurrence. A recent amendment to the Insurance Contract Law stipulates that in 5.1 What approach do the courts take in relation to personal insurance (life, auto, home, health – but not liability) the arbitration and how far is the principle of party court is obliged to award, and in non-personal insurance the court autonomy adopted by the courts? Are the courts able may award, an additional interest award of up to 20 times the basic to intervene in the conduct of an arbitration? If so, on interest rate, when an insurer did not indemnify the insured the what grounds and does this happen in many cases? amounts not in dispute in good faith on the appropriate date (in long-

term care insurance – up to 10 times). If the court decides not to The Israeli Law of Arbitration determines the narrow boundaries of the israel apply this special rate, the court should explain the reasons for its court’s authority to intervene in arbitration. The statute emphasises the decision. principle of party autonomy and the courts practise self-restraint With respect to bodily injury claims, in calculations of future loss regarding intervention in arbitration proceedings or rulings. the fixed annual interest rate was for many years 3%. Due to the The courts are authorised to make several procedural decisions very low inflation rate, the amended figure in the regulation regarding arbitration, such as to appoint an arbitrator, to remove an (October 2017) is 2%. However, the courts have not fully adopted arbitrator deemed as unworthy of the parties’ confidence or where this new figure and are waiting for the decision of the Supreme the procedure is unjustly prolonged or is being ineffectively Court. The eventual decision is especially important for insurers’ conducted. The court can also intervene if witness summonses have risk calculations and liability reserves. been issued in bad faith. The law provides an exhaustive list of grounds for more substantial 4.9 What are the standard rules regarding costs? Are intervention, including the authority to annul an arbitration ruling, there any potential costs advantages in making an to amend or supplement it, or to instruct the arbitrator to make such offer to settle prior to trial? amendments. This authority is exercised with restraint. The main statutory grounds for such intervention are where it is found that: The courts distinguish between lawyers’ fees and other costs and are there was no binding arbitration agreement; the arbitrator was not authorised to award either or both to the winning party. Lawyers’ properly appointed or acted without or beyond the scope of the fees are usually awarded as a percentage of the judgment (between powers granted by the parties; a party was not granted reasonable 5% and 20%). opportunity to bring evidence or pleadings; the arbitrator did not rule regarding one of the questions requiring ruling; the ruling was Positive incentive for early settlement is afforded by rules regarding not given according to the provisions of the agreement regarding payment and refund of court charges. Court charges are levied on ruling by law or was not reasoned as required; the ruling was given monetary claims at the rate of about 2.5% of the claim. Half of the after the required time; and the ruling was against public policy. If court charges are paid on filing the claim and the second half is paid there is a stay of court proceedings when there is an arbitration only if the case goes to trial. Furthermore, the first half of the court agreement, but nevertheless one of the parties initiates a court claim, charges will be refunded automatically to parties that settle before the court may assist the arbitrator by summoning witnesses, service three pre-trial hearings have been held and the court is authorised to of documents, various injunctions and other orders. refund the entire charges paid if a resolution is reached, at any stage, by mediation or arbitration. It should be noted that a bill proposed by the Ministry of Finance in 2018, stipulated the establishment of an Insurance Arbitration Institute and compulsory arbitration of insurance claims in this 4.10 Can the courts compel the parties to mediate institute (except for claims by big companies (according to turnover disputes? If so, do they exercise such powers? and number of employees) and claims against third parties). If and to what extent this proposed bill will be approved is yet to be seen. The Civil Procedure Rules mandate referral of all litigants in all claims for over NIS 75,000 (excluding damages for victims of motor vehicle accidents) to hold a meeting with a mediator to 5.2 Is it necessary for a form of words to be put into a contract of (re)insurance to ensure that an arbitration discuss holding mediation talks. This is a pre-condition for clause will be enforceable? If so, what form of words continuing to trial, but the court is not authorised to penalise parties is required? for not agreeing to mediation or for not making an offer to settle. As stipulated by the Commissioner, an insurance policy may not 4.11 If a party refuses to a request to mediate, what include a clause binding the insured to arbitration, in case of a future consequences may follow? dispute. Such a clause is considered to be prejudicial to insured’s rights. In Israel, mediation requires the agreement of both parties and is This stipulation does not apply when the insured specifically agreed non-binding. There are no consequences for a party who refuses to the arbitration clause. mediation or declines a settlement offered by the mediator.

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In case the insured agreed to include the arbitration clause, no specific wording is required, and the court will examine the essence 5.4 What interim forms of relief can be obtained in of the parties’ agreement in each case. Limitation to specific issues support of arbitration from the courts? Please give examples. will be upheld by the court and can be concluded; for example, from the arbitrator’s specified qualifications. For example, in a case where the parties agreed to appoint an engineer to arbitrate a future The arbitrator or a party may apply for an interim relief such as: dispute, the court concluded that the arbitration could not be (a) an injunction; enforced regarding a question of law. (b) an appointment of a receiver; In re-insurance the parties are free to include an arbitration clause. (c) stay of exit from the country of a party to the arbitration;

israel (d) writs for freezing orders in respect of assets; 5.3 Notwithstanding the inclusion of an express (e) writs for seizing documents; arbitration clause, is there any possibility that the (f) alternative service of documents; and courts will refuse to enforce such a clause? (g) penalty actions regarding witnesses that refuse to appear or testify. See question 5.2 above.

The law provides the court limited discretion to decide that the 5.5 Is the arbitral tribunal legally bound to give detailed dispute will not be determined by arbitration despite the arbitration reasons for its award? If not, can the parties agree (in agreement. Where a party petitions to stay the court process in order the arbitration clause or subsequently) that a to refer the dispute to an arbitrator, the court may “in extraordinary reasoned award is required? circumstances” decline. Such has been the decision where it was obvious that the arbitration would not settle the dispute and would The statutory rule is that, unless the parties expressly stipulate inevitably have to be followed by a complex court procedure. otherwise, the award must be reasoned. A non-reasoned award may Furthermore, where the State is bound by an international be annulled by the court if the parties did not expressly agree to convention to determine the issue in the courts, this will prevail. waive this rule. Finally, if the arbitrator has been deposed by the court, the court may refrain from appointing an alternative arbitrator and rule on the 5.6 Is there any right of appeal to the courts from the dispute in court. decision of an arbitral tribunal? If so, in what In insurance matters, courts are more inclined to grant relief to an circumstances does the right arise? insured who objects to participation in arbitration proceedings. The reasoning for this is usually based on a finding of prejudicial A party to an arbitration award does not have the inherent right to provisions in a standard contract. appeal the decision to the courts. However, if the arbitration agreement provided that the arbitrator must decide pursuant to the law, the parties may also agree that the decision may be appealed to court, with leave of the court, in cases where a fundamental error occurred in applying the law which caused travesty of justice. The parties may agree to allow an appeal to an additional arbitrator. The appellant arbitrator must reason his decision. He may not hear witnesses and his decision should be based on the material which was in front of the first arbitrator with the addition of the parties’ position in the arbitration.

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Harry Orad, Adv. Gross Orad Schlimoff & Co. Gibor Sport Building 7 Menachem Begin Road Ramat Gan 5268102 Israel

Tel: +972 3 6122 233 Email: [email protected] URL: www.goslaw.co.il israel

Harry began his legal career in 1976 as a commercial lawyer specialising in corporate and property law. He also served as a municipal court justice. In 1983, he joined the highly acclaimed National Fraud Unit of the Israeli Police, rising to the rank of chief superintendent, where he investigated complex financial institution fraud and white-collar crimes. Since 1986, Harry has specialised in insurance and reinsurance law. Harry drafted some of the first D&O policies in Israel and later redrafted these policies to comply with new legal provisions. He has lectured on corporate governance issues in Israel and abroad. Between 1988 and 1989, Harry worked in London as a consultant to one of the major insurance law firms. Harry’s expertise in insurance law includes directors’ and officers’ liability, banking insurance (bankers’ blanket bonds), financial institutions, crime insurance, credit insurance, product liability, pollution and contamination. Harry has acted for underwriters and insurers worldwide on complex financial insurance matters.

Gross Orad Schlimoff & Co. (GOS) is a leading international boutique law firm specialising mainly in exclusive commercial insurance and reinsurance areas (D&O liability, financial institutions, professional and product liability, diamonds and jewellers block, aviation and cyber insurance and aviation) and legal advice to international life science and pharmaceutical companies. GOS has substantial reputation and is ranked by The Legal 500 as a top-tier firm in the insurance sector. Both founding partners Harry Orad and Sigal Schlimoff are named as The Legal 500 top-tier individuals in the insurance area and have recently been inducted into its Hall of Fame. Sigal is also Lloyd’s representative in Israel. Most of the firm’s clients are foreign companies, including some of the largest insurance and reinsurance companies in the world that are involved in providing large-scale, unique and high-risk insurance policies in Israel. The firm also represents Israeli insurance companies as well as foreign clients interested in developing business in Israel, including pharmaceutical and hi-tech companies.

iclg to: insurance & reinsurance 2019 www.iclg.com 151 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 25 italy gian Paolo tagariello

legance – avvocati associati Daniele geronzi

1 Regulatory 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company?

1.1 Which government bodies/agencies regulate Companies intending to exercise insurance business in Italy must be insurance (and reinsurance) companies? authorised by IVASS. In particular, IVASS issues the authorisation to exercise insurance activity when the following conditions are The supervisory authority of the insurance and reinsurance sector is met: (i) the company is set up in the form of a joint stock company, the Istituto per la Vigilanza sulle Assicurazioni (“IVASS” – mutual insurance company (whose stakes are represented by shares formerly, Istituto per la Vigilanza sulle Assicurazioni Private e provided with the requirements contemplated by the IIC), European d’interesse collettivo, “ISVAP”), set up by Law no. 135 of 7 August company pursuant to Regulation (EC) no. 2157/2001 or European 2012, converting Law Decree no. 95 of 6 July 2012. cooperative company pursuant to Regulation (EC) no. 1435/2003; In accordance with the provisions of Legislative Decree no. 209 of (ii) the general and administrative office is located in the territory of 7 September 2005, as subsequently amended and integrated (the the Italian Republic; (iii) the company is provided with the eligible “Italian Insurance Code”, “IIC”), IVASS carries out its supervisory basic own funds necessary to cover the Minimum Capital functions by exercising, inter alia, powers having an authorisation, Requirement (“MCR”) in an amount not lower than those set forth prescriptive and sanctioning nature in accordance with the by the IIC; (iv) the company demonstrates that it will be able to hold provisions of the IIC. eligible basic own funds in order to prospectively cover the According to the same IIC, the main purpose of IVASS’ supervision Solvency Capital Requirement (“SCR”) and the MCR; (v) the is the adequate protection of insureds and persons entitled to company files, along with its deed of incorporation (atto costitutivo) insurance benefits. To such purpose, IVASS pursues the sound and and articles of association (statuto), a business plan in line with the prudent management of insurance and reinsurance undertakings, the requirements set forth by the IIC; (vi) holders of qualified transparency and fairness of the latter vis-à-vis customers, as well shareholdings in the company are provided with the Fit & Proper as, on a subordinated basis, the stability of the financial system and requirements and the conditions for the authorisation set forth by the markets. IVASS’ supervisory powers over transparency and IIC are met; (vii) the company demonstrates that it will be able to fairness towards customers of insurance and reinsurance companies comply with the corporate governance system set forth by the IIC; are exercised jointly with the Commissione Nazionale per la Società (viii) individuals carrying out management and supervisory e la Borsa (“Consob”), each according to its respective functions as well as key officers are provided with the required Fit competences, as set forth by applicable provisions. & Proper requirements; and (ix) no “close ties” (stretti legami) among the companies or the entities of the relevant group exist The Italian Minister of Economic Development is also provided which may hinder the actual exercise of supervisory functions. with certain functions related to the insurance sector. In particular, Further conditions are necessary in case a company intends to said Minister adopts the provisions set forth by the IIC within the exercise Motor Third Party Liability (“MTPL”) insurance or life framework of the dedicated policy laid down by the Italian insurance jointly with accidents and disease insurance. Government. Inter alia, the Minister of Economic Development is empowered to order, upon IVASS’ proposal, the revocation of the Companies intending to exercise business exclusively for authorisation to exercise insurance business or the extraordinary reinsurance in Italy must be authorised by IVASS. In particular, administration of insurance and reinsurance companies. pursuant to the provisions set forth by the IIC, IVASS issues the authorisation to exercise reinsurance activity when a number of Other authorities provided with certain functions relating to the conditions are met, most of which appear to be generally in line with insurance sector are: (a) the Commissione di Vigilanza sui Fondi those referred to above in the previous paragraph. Pensione (“Covip”, i.e. , the Italian supervisory authority for pension funds), with particular reference to individual pension plans The procedure and further documents for the obtainment of the and other integrative pension schemes; and (b) the Autorità garante authorisation by IVASS are regulated (i) for companies requesting per la Concorrenza ed il Mercato (“AGCM”, i.e. , the Italian authorisation to exercise insurance business in Italy, by ISVAP Antitrust Authority), in relation to, inter alia, consumers protection, Regulation no. 10/2008, as subsequently amended and integrated unfair commercial practices and distance selling. (“Regulation 10”), and (ii) for companies requesting authorisation to exclusively exercise the reinsurance business, by ISVAP Regulation no. 33/2010, as subsequently amended and integrated (“Regulation 33”).

152 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London services regime, or (ii) through a branch set up in Italy, in up set branch a through (ii) or regime, services provisions (i) directly, implementing national and may EU Italy,to in according business write Italy than other State Member a in located insurers Foreign communicates ittothecompany. denial are still in place, the IVASSfor issues the reasons final negative decision the and the the or observation instead any provide If for not does company IVASS. to term provided are the observations said which interrupts communication Such upon date the from again lapsing starts that procedure authorisation any). if documentation, may supporting (and observations its company writing in provide the communication), the of receipt the from days denial. such avoid 10 IVASSthan by fewer indicated not term Withincase the any (in to order in documents or data to useful company said provide invites and denial interested the for the reasons the to company communicates IVASS authorisation, of denial of decision formal a adopting before outcome, negative a of case In its after activity insurance/reinsurance enrolment withthecompetentRegisterofCompanies. the start may the case, company such In company. the to decision and relevant suspension) the transmit or interruption authorisation either complete of the cases for of (save receipt request of date the from days 90 In case of a positive outcome, IVASS issues the authorisation within automatically beconsideredwithdrawn). will request authorisation IVASS,the by days request relevant 90 the from with integration requested the provide not company the should (or, authorisation information/documentation the integrative until the said suspended of is receipt of procedure such case, context such In the procedure. within filed documentation the to relation IVASSin clarifications and information request may legance –avvocatiassociati iclg to: insurance &reinsurance 2019 contracts. Such rules can be “mandatory”, insurance and including rules contracts, specific to and applicable general principles of set a others, among contains, The Italian civil legal system is based on the “civil code”. The code Arethereanylegalrulesthatrestricttheparties’ 1.4 Areforeigninsurersabletowritebusinessdirectlyor 1.3 and regulatoryprovisions ofmandatoryapplication. always verify that the relevant agreement does not conflict with civil should they and contract insurance an of conditions and terms the Therefore, the parties do not enjoy complete freedom in determining governing fairdealingwithconsumers. regulatory requirements (in terms of form and provisions) and rules satisfy also must contract insurance an addition, In law. Italian to policy nature or apply irrespective of whether the contract is subject the whether of irrespective parties specifically refer to them. applicable Some rules can also have a public are they and them, from applicable provisions. EU with line in regulations, implementing relevant and IIC the by services and on a right of establishment basis are regulated in detail provide to freedom under Italy in operate to procedures the Both latter shouldnotconstituteamere“fronting”domesticinsurer. they can also write reinsurance of a domestic insurer. However, the course, Of Italy. in up set branch a write through only Italy may in business Union European the outside located insurers Foreign the rightofestablishment. must theywritereinsuranceofadomesticinsurer? into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms

i.e. , if passported under a freedom to provide i.e.

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153 italy 154 italy nue i sc a a ta te nue i pt n h psto of if so,underwhich conditions. position the in put is insurer correctly evaluating whether or not to cover the concerned risk and, the that way a such in insured be to risk the to to relating insured circumstances the the insurer the on to duty disclose positive a for provide Code Civil Italian the of 1893 and 1892 above, Arts. 2.4 question under described As © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Is there a positive duty on an insured to disclo 2.5 of themisrepresentationornon-disclosure. policyholder within three months from the date it gained knowledge the to made be to declaration a of of means by contract the terminate case to entitled is in insurer the negligence, Code, serious or misconduct without Civil wilful policyholder Italian the by the non-disclosure or of misrepresentation 1893 Art. to Pursuant for the annulment of the concerned contract. misrepresentati the of disclosure,itdoes not declare knowledgetothe policyholder gained has it date request the annulment of the contract if, within th seriousn insurercase,thesuchnegligence.isIn is conditions, same annulment the when the policyholder on has itacted with givenwilf not have would if known by the insurer, the latter would have not non-disclosure by the policyholder relevant to such PursuanttoItalian the Art.1892ofCivil Code,mi Whatremediesdoesaninsurerhaveincasesofeither 2.4 means of which the reinsurer binds itself of basis the on specific contractual provisions forth – existing in the market practice set – by be may relationship such Nonetheless, any create not does contract relationship betweentheinsuredandreinsurer. reinsurance a Code, the of Civil 1929 Art. Italian by forth set principle general the to According Cananinsuredbringadirectactionagainst 2.3 party shouldtheinsureddemandtodoso. injured the of favour in payment the with directly proceed to bound is insurer the event, any in and, party third injured the due to directly compensation the pay to right the has insurer the Moreover, directly againsttheinsurer. For actions bring may parties third damaged boats, and vehicles motor provided. are by caused damages concerning principle claims to reference above with example, the to exceptions Certain has nocontractualornon-contractualrelationship. party third the whom with insurer, the against action direct no has As a general principle governing civil liability, an injured third party Canathirdpartybringdirectaction againstan 2.2 stability ofthesystemandfinancialmarkets. fairness the of that and basis, subordinated a on only transparency and, – customers towards their and companies of management benefits legance –avvocatiassociati that thecedinginsuredisnotableto( to pay the sums due by the latter directly to the insureds in the event insurers all matters material to a risk, irrespecti insurer? whether the insurer has specifically asked about th misrepresentation ornon-disclosurebytheinsured? reinsurer? – ht s prud hog te on ad prudent and sound the through pursued is, that – ” e.g. vis-à-vis , duetoitsinsolvency).

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provide for further duties of disclosure on the policyholder, the on disclosure of duties further for provide Code Civil Italian the of 1898) and 1897 (Arts. provisions Other non-disclosure of information lacknot specifically requ a implying misconduct or thus serious negligence circumstances, of the prospective such regards as may be interpreted as symptomatic of the “indiffere t insurerin the includedcircumstancesby notwere tha fact the law, case Italian certain to according filltoquestionnaireain fortheevaluation thof whether or not to enter into the policy, requests t particularwith respect tocases where the insurer, highly debated in the last few years by Italian sch positivethedisclosurescopeofTheofduty the on occurrence ofsuchcircumstances. the insurer the to communicate to bound is policyholder the case which in risk, insured the of worsening or reduction of either event Under Italianlaw, nocivildisputescanbesubmittedbeforeajury. limits totheparties’ choiceofjurisdiction. certain for provides insurance also 1215/2012 to No. Regulation EU relating disputes, litigations transactional to reference With properly negotiatedbetweentheparties. if the insurer proves that the relevant clause has been previously and the consumer has residency or is domiciled may be enforceable only the choice of a court different from that located in the district where between insurance company and consumers, as the insured may be), ( agreements B2C in criterion, territory the to reference With other insurancedisputes. over competence general has instance) first of (court tribunal The from October31,2021). starting 50,000.00 (EUR 20,000.00 EUR exceeding not value a for traffic boat and vehicles by caused damages over disputes (ii) and 2021), 31, October from starting 30,000.00 (EUR 5,000.00 EUR exceeding not value a for disputes insurance (i) over competence ii Cd, h isrr ht a pi te nuac bnft is insured the benefit of rights insurance the the paid in paid, benefits the to equivalent has amount an to up subrogated, that insurer the Code, Civil In relation to non-life insurance, pursuant to Art. 1916 of the Italian evidence-gathering on phase, number of witnesses depends to be strongly proceedings circumstances(forexample, courts’the the workload, c of duration The damage. h lwr or o frt ntne (“ instance first of court lower The the valueofdispute;andterritory. dispute; the of matter the criteria: three of basis the on determined is territory Italian the within court instance first the of venue The Isthereanautomaticright ofsubrogationupon 2.6 . Howlongdoesacommercialcasecommonlytaketo 3.2 Which courts are appropriate for commercial insu 3.1 3 Litigation – Overview Litigation–Overview 3 insurer needaseparateclauseentitlingsubrogation? bring tocourtonceithasbeen initiated? dispute? Is there any right to a hearing before a j disputes? Does this depend on the value of the payment ofanindemnitybytheinsurerordoes iclg to: insurance &reinsurance 2019 vis-à-vis the third parties responsible for the for responsible parties third the idc d pace di Giudice he prospective insured e risk.suchIne cases, olars and case law, in inorder toevaluate ested by the insurer. nce” of the insurer insured in case of insuredbeenhas cran specific certain t omplexitytheof he questionnairehe examined, etc.). f wilful of several italy ury? ) has ”) i.e. rance e.g , in , .,

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London acts anddocumentsofthesamePA. its consent. gives party other the unless procedure, mediation the of failure the after continued or commenced are which matter, subject same the to – partially only even – relating proceedings ordinary in used be not must procedure mediation the during acquired information The their professionalactivities. of virtue by or clients their from obtained information any disclose attorney-client to to subject judge the by requested/ordered is be cannot lawyers and correspondence privilege clients their any and (ii) lawyers and or between confidential, negotiations as settlement marked to attempts relating correspondence as well as lawyers, other with exchanged correspondence any producing the from prevented are lawyers reasons, deontological for (i) Moreover of execution the claims who agreement mustproduceacopyofthesame). party the writing, be in must proved agreements insurance since example, an (as allegations its proving documents the disclose shall its party each have upheld, and claim case its support judicial to order within in document However, any proceedings. above-mentioned disclose to no the party is a there for for above), obligation except 4.1 (question and, powers judges’ disclose extraordinary to willing is it documents produce to right the has party law,each Italian Under certain that strict requirements are met. provided In particular, necessary,the requesting party (i) deems he/she admission whose documents certain disclose to proceedings the to non-party third a or party other the party’sorder a may upon judge Also, the request, privilege). client-attorney as (such activities professional their to non- third and relating information certain disclose to parties required be not may parties the circumstance, any In assets. their on the proceedings and third non-parties to consent inspections on them or to parties the order may judges circumstances, certain Under general introducing allegationsandevidenceinjudicialproceedings. the to exception an for responsible exclusively are parties which to according principle represent powers are such phase as evidence-gathering limited, the to relation in powers Judges’ Whatpowersdothecourtshavetoorder 4.1 the for and years, proceedings beforetheCourtofCassation,adurationtwoyears. three to two of duration a estimate we phase, appeal the For months. 18–30 around be first to of proceedings instance duration the estimate we experience, our of basis the On legance –avvocatiassociati iclg to: insurance &reinsurance 2019 Canapartywithholdfromdisclosuredocuments(a) 4.2 h Pbi diitain (“ Administration Public the from request may judge the request, party’s a from Independently the samepartyhadadutytohold. the burden to prove that such documents were not among those that has (ii) party,and other the by held documents specific identify to Litigation–Procedure 4 respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin PA ) rte ifrain concerning information written ”)

has eety At 257- Recently, Art. Witnesses areexaminedduringtheevidence-gatheringphase. the witness to pay a fine between EUR 200.00 and EU accompanied to the same hearing the or a following hear at appear not scheduled for his summoned examination, the judge may order duly witness the Should be applied in order for the examination of witnesses residing abroad. Moreover, the 1970 Hague Convention provides for specific rules to judge, who has the power to ask witnesses further q to the proceedings. The examination shall only be witness spe the are admit relating out then to those circumstances willhe/she deems carried admiss judge be The to identified. has examination f the request which a file to circ the and witness right/burdenthe that providedexamination, the has party Each witness require to powers examination. no have courts remark, general a As ezrs amd t nuig h csoy f seii asset specific a of custody the ensuring at aimed seizures, ■ and, inparticular: measures, interim various obtain may party a pending, is dispute a while also and commenced, is law,dispute Italian a Under before the activitiesperformedbyexpert. vis liable severally and jointly are proceedings the to parties All a reportdraftedbythecourt-appointedexpert. can participate in expert tests who and activities and provide consideration expert, in an appoint may party Each require. may he/she shall who provide the judge expertise with any technical assistance and clarification specific that with expert independent an appoint Likewise, the judge, also upon the parties’ request, has the power to right tofileexpertreports. the have parties the However, examination. witness expert an of proving at admission the for request a file to entitled not are parties Therefore, aimed is examination historical facts witness and events only, and does not include expert opinion. law, Italian Under with theexaminationatwitness’ residence. proceed shall judge the hearing, the attend to not him/her authorise conventions international or provisions law applicable or hearing, the attend to able be not justifiably witness the should Moreover, used in practice, since it requires the prior conse this instrument – that should be authorised by the introduced, providing for written examination of wi . Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowers torequirewitnesses 4.3 . Whatsortofinterimremediesareavailablefromthe 4.6 Are there any restrictions on calling expert wit 4.5 the court-appointed expert for paying the consideration due for due consideration the paying for expert court-appointed the Is it common to have a court-appointed expert in not present? give evidenceeitherbeforeoratthefinalhearing? courts? addition or in place of party-appointed experts? hs onrhp r ossin s iptd o amd at aimed or disputed, freezing realandpersonalassetsof thedefendant;and is possession or ownership whose bis f h Iain oe f ii Poeue was Procedure Civil of Code Italian the of

www.iclg.com nt of all parties.

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vis-à- 155 italy legance – avvocati associati italy

■ urgent precautionary measures aimed at limiting or avoiding In principle, the unsuccessful party shall refund to the successful serious damages, also considering the timing for the party legal costs and expenses. Yet, under certain circumstances, conclusion of ordinary proceedings (for example, prohibiting courts may decide to set off legal costs and expenses between all someone from doing something). parties. The provisions of the ministerial regulation concerning In urgent cases, upon a party’s request, the judge may issue interim legal fees have been changed recently in order to, inter alia, reduce measures without prior notice to the defendant. In this case, a judges’ powers in determining the amounts of costs and expenses to hearing shall take place for the urgent measure to be confirmed or be awarded and provide specific rules in relation to the fees due for revoked, considering the defendant’s position and defence. the mediation and negotiation procedures. Other interim remedies are provided in order to allow the Courts may also order (i) one party to pay a sum of money to the italy acquisition of evidence before ordinary judicial proceedings start other party in case of procedural misconduct or frivolous claims, when it is likely that the evidence could not be effectively taken and (ii) the successful party to refund costs to the unsuccessful party once the evidence gathering phase formally commences (such as if the final judgment reflects – or recognised an amount equal to or witness evidence or technical inspection). less than – the settlement agreement proposed by the judge or by the other party during the mediation procedure, and rejected by the 4.7 Is there any right of appeal from the decisions of the successful party with no justified reason. courts of first instance? If so, on what general grounds? How many stages of appeal are there? 4.10 Can the courts compel the parties to mediate disputes? If so, do they exercise such powers? Generally, first instance decisions (which are provisionally enforceable) can be challenged before the courts of appeal (“Corti di In certain matters, including insurance agreements, parties shall try Appello”). Under a general point of view, there is no specific limit to settle the dispute by mediation before commencing judicial on the grounds for appeal that a party may propose, since appeal proceedings (mandatory mediation). Otherwise, recourse to proceedings may lead to a complete re-examination of the case. mediation is a voluntary choice of the parties. Decisions of courts of appeal may generally be challenged before The judge has also the power to refer the parties to mediation the Italian Supreme Court (“Corte di Cassazione”) on the basis of whenever he/she deems it necessary or appropriate (delegated limited grounds. The Italian Supreme Court essentially verifies mediation). Also in this circumstance, the mediation represents a issues concerning jurisdiction and the proper application of the law mandatory procedure. by the court of appeal, but cannot overrule the interpretation of facts and evidence given by the court of appeal. Like mediation, the assisted negotiation procedure represents a mandatory attempt to settle disputes out of court, which must be The parties to the proceedings may also agree that the decision by used by the parties before commencing judicial proceedings relating the court of first instance will be challenged directly before the to compensation for damages caused by motor vehicles and boat Italian Supreme Court in relation to proper application of the law by traffic, or to the payment of amounts not exceeding EUR 50,000 the court of first instance. (mandatory negotiation procedure).

4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? 4.11 If a party refuses to a request to mediate, what consequences may follow?

Yes, interest is generally recoverable in judicial proceedings, usually upon the parties’ request. In case of mandatory mediation, or a mandatory negotiation procedure, should the party who intends to start the judicial proceedings fail to Should the agreement provide for an interest rate to be applied in commence the relevant procedure, and such a failure be ascertained case of late payment, then the agreed interest rate will be applied within the first hearing, judicial proceedings cannot be continued and (please note that Italian legislation prevents the application of will be declared inadmissible (“improcedibile”). In this case, the judge interest rates equal to, or higher than, rates periodically set by may give the parties a deadline for starting the relevant mandatory specific law provisions). procedure. Should no interest rate be agreed by parties, the legal interest rate Similarly, in case of delegated mediation, the proceedings cannot be established by the Ministry of the Economy will apply (starting from 1 pursued when the party fails to comply with the judge’s request. January 2019, the legal interest rate is established at 0.8% per annum). In any circumstance, parties’ refusal to mediate or to participate in a Also, a higher legal interest rate shall apply in case of late payment mediation or assisted negotiation procedure may be taken into relating to commercial transactions. For judicial or arbitration account by courts in awarding legal costs and expenses. proceedings commenced at the end of 2014, if no interest rate has been previously agreed by parties, interest accrued from the date on which the judicial proceedings is commenced shall be calculated on 5 Arbitration the basis of the higher interest rate provided for late payment on commercial transactions. 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party 4.9 What are the standard rules regarding costs? Are autonomy adopted by the courts? Are the courts able there any potential costs advantages in making an to intervene in the conduct of an arbitration? If so, on offer to settle prior to trial? what grounds and does this happen in many cases?

Each party bears its own legal costs during proceedings. At the end Unless the parties have made specific reference to the regulation of of judicial proceedings, the judge awards costs and expenses an arbitral institution, arbitration is regulated by Arts. 806–832 of applying a ministerial regulation establishing fees due for each the Italian Code of Civil Procedure. Parties may agree to arbitrate phase of the proceedings, on the basis of the value of the dispute.

156 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London legance – avvocati associati italy contractual and non-contractual disputes (excluding those involving the parties’ inalienable rights), unless a specific provision of law 5.4 What interim forms of relief can be obtained in states otherwise (see question 5.3). support of arbitration from the courts? Please give examples. In general terms, Italian courts have no power to intervene in arbitration proceedings with an Italian seat. Nevertheless, some Arbitrators do not have the power to issue interim measures; exceptions are provided. In particular, judicial courts: therefore, the party seeking interim relief shall in all cases resort to ■ may intervene in the appointment of arbitrators (when a party the judicial authority. Courts can issue in principle any type of fails to do so): the President of the Tribunal may refuse to interim measures (see question 4.6 above). appoint the arbitrator if he considers the arbitration clause manifestly non-existent or if the arbitration clause manifestly Under a de jure condendo perspective, the Panel appointed by italy provides for foreign arbitration; Parliament for the review of arbitration law (“Commissione Alpa”) ■ shall decide on a party’s request relating to rejection of has submitted the text of a proposed reform of arbitration arbitrators; proceedings where arbitrators, under certain circumstances, are ■ may be requested by arbitrators to order the appearance of provided with powers to issue interim and precautionary measures. witnesses before them; and ■ have competence in adopting urgent or interim measures 5.5 Is the arbitral tribunal legally bound to give detailed (which cannot be issued by the Arbitral Tribunal). reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required? 5.2 Is it necessary for a form of words to be put into a contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words Arbitral tribunals have to state the reasons for the award, which shall is required? contain at least a brief description of the legal grounds of the decision. Should the arbitral tribunal not comply with the above In order to be valid, the arbitration agreement/clause shall be in rule, parties may challenge the award before the court of appeal of writing. No specific form of words is required, provided that the the arbitration venue (see question 5.6 below). parties’ will to submit disputes to arbitration appears clearly and unequivocally from the arbitration clause, with the exclusion of the 5.6 Is there any right of appeal to the courts from the courts’ jurisdiction. decision of an arbitral tribunal? If so, in what circumstances does the right arise? Unless otherwise provided for by law, parties may agree to submit to arbitration (i) pending disputes (to be specifically indicated), or (ii) future disputes, either contractual or non-contractual (provided that Arbitration awards are always challengeable and any parties’ waiver the non-contractual relationships are specifically referred to). It is to this right is null and void. Three forms of judicial recourse forbidden for the parties to submit to arbitration disputes concerning against arbitral awards are available: rights which a party could not alienate (“diritti indisponibili”). ■ challenge for annulment; In B2C agreements (as insurance agreements may be), the arbitration ■ challenge for revocation (e.g. where there has been fraud, clause is enforceable provided that the business party proves that the collusion or corruption by arbitrators or one of the parties); clause was previously and properly negotiated between the parties. and Also, if the arbitration clause is included in the general terms and ■ third-party challenge (when award damages rights of a party conditions of one party, it has to be specifically approved in writing which has not participated in the arbitral proceedings). with a so-called “double signature”. Under a de jure condendo Challenge proceedings for the annulment of the award shall be perspective, a Panel appointed by Parliament for the review of commenced before the court of appeal of the arbitration seat, within arbitration law (“Commissione Alpa”) has submitted the text of a 90 days from the service of the award, or, if no service occurred, proposed reform to the Consumer Code aimed at encouraging the within one year from the last signature of the award. enforceability of the arbitration clause in B2C agreements. Parties may claim the annulment of the award on the basis of very In re(insurance) agreements, it is advisable that the arbitration limited grounds (for example: invalidity of the agreement to arbitrate; clause perfectly matches (and has the same wording) of the or the award concerns matters which could not be submitted to arbitration clause contained in the insurance agreement. arbitration by law or by the arbitration clause/agreement). No challenge on the merits of the decision is allowed, except in case it involves application of law provisions and the parties expressly 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the agreed to it, or it is provided by law. courts will refuse to enforce such a clause?

Italian courts may refuse to enforce the arbitration clause/agreement should the same not comply with the requirements indicated under questions 5.2 and 5.1 above.

iclg to: insurance & reinsurance 2019 www.iclg.com 157 © Published and reproduced with kind permission by Global Legal Group Ltd, London legance – avvocati associati italy

Gian Paolo Tagariello Daniele Geronzi Legance – Avvocati Associati Legance – Avvocati Associati Via Broletto, 20 - 20121, Milan Via Broletto, 20 - 20121, Milan Via di San Nicola da Tolentino, 67 – 00187 Via di San Nicola da Tolentino, 67 – 00187 Rome Rome Italy Italy

Tel: +39 02 896 3071 Tel: +39 02 8963 071 +39 06 931 8271 +39 06 9318 271 Email: [email protected] Email: [email protected]

italy URL: www.legance.com URL: www.legance.com

Gian Paolo Tagariello is senior and founding partner of Legance. He Daniele Geronzi has almost 20 years’ experience in complex assists private and listed companies as well as private equity firms in commercial, financial, corporate and insolvency litigation. He represents M&A, joint ventures and other corporate transactions and clients in court and in national and international arbitration, both reorganisations. He is particularly specialised in banking and financial institutional and ad hoc. and insurance industries, where he ensures a global approach dealing Daniele Geronzi is also very active in the field of bankruptcy, also with regulatory issues on a day-to-day basis. He has acted also insolvency and restructuring law, advising primary banking institutions, as arbitrator for commercial litigation and corporate secretary of the investment funds and multinational companies on some of the largest boards of industrial and family groups. He is co-head of the financial extraordinary administration, bankruptcy and composition with institution group and head of insurance department. creditors procedures. He is the author of several articles published in European legal Prior to joining Legance, Daniele Geronzi worked for a leading reviews and has been speaker in different occasion at conferences, international firm, in both their London office and Rome office. In seminars and masters. Rome, he headed the litigation and insolvency practices. He was admitted to the Italian Bar in 2001 and is a Supreme Court barrister.

Legance is an independent law firm with offices in Milan, Rome, London and New York. Founded in 2007, by a group of acclaimed partners who began their careers in the same law firm, Legance distinguishes itself in the legal market as a point of reference for both clients and institutions. Legance’s rapid growth is undisputed evidence of its strength in legal services, and its achievements are the result of a consistent strategy focused on creating value around the institutional nature of the firm. Legance, thanks to the firm’s constant attention to clients’ needs, and an unconventional approach, has positioned itself at the top of the national and international market. The name Legance evokes unity and excellence: these fundamental principles have been at the foundation of the law firm and have supported its standing. Legance, thanks to a strong international practice, can support clients from several different geographical areas, and organise and coordinate multi- jurisdictional teams.

158 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 26 Japan Hironori nishikino

chuo sogo law office, P.c. Koji Kanazawa

1 Regulatory 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Other than as listed below, foreign insurers may not conclude insurance contracts with persons having an address or residence in Japan, property located in Japan, or vessels or aircrafts with The Financial Services Agency (“FSA”) regulates insurance and Japanese nationality (pursuant to rules for oversees direct insurance reinsurance companies. in Article 186 (i) of the Insurance Business Act), unless they have opened a branch and obtained the applicable licence (this restriction 1.2 What are the requirements/procedures for setting up a does not apply to a case where a licence applicant has, in advance of new insurance (or reinsurance) company? its application for insurance, obtained an acknowledgment from the FSA as set forth in Article 186 (ii) of the Insurance Business Act): Foreign insurers may run an insurance business in Japan either by (i) reinsurance contracts; (1) setting up a subsidiary insurance company in Japan (the local (ii) marine insurance contracts pertaining to objects such as subsidiary method, “Method A”), or (2) opening a branch in Japan vessels with Japanese nationality used for international (the branch method, “Method B”). maritime transportation; Under Method A, a foreign insurer must obtain a life insurance (iii) aviation insurance contracts pertaining to aircrafts with business licence or non-life insurance business licence as set forth in Japanese nationality used for commercial aviation; Article 3 of the Insurance Business Act (the same business operator (iv) insurance contract pertaining to launching into outer space; may not obtain both licences). Under Method B, a foreign insurer (v) certain insurance contracts covering cargo located within must obtain a foreign life insurance business licence or foreign non- Japan which is in the process of being shipped overseas; and life insurance business licence as set forth in Article 185 of the (vi) overseas travel insurance. Insurance Business Act (the same business operator may not obtain both licences). The rules mentioned above thus preclude foreign insurers from directly assuming risks within Japan, requiring them to procure The licence application procedure is governed by (a) under Method reinsurance from insurers licensed in Japan. Under the Insurance A, Articles 4 and 5 of the Insurance Business Act, and (b) under Business Act, there is no express restriction on the rate ceded in Method B, Article 187 of the Insurance Business Act. Examination reinsurance for insurers in Japan. standards for licence application under either Article are almost identical and choosing either Method A or B will not significantly affect the complexity of the licence application process. 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms The FSA endeavours to complete its review of licence application into (all or some) contracts of insurance? procedures within 120 days after a licence application reaches the FSA (which is a standard processing period under Article 246 of the ■ Mandatory or unilaterally mandatory provisions in the Order for Enforcement of the Insurance Business Act). Foreign Insurance Act (the latter is a series of provisions making void insurers who lay out a plan for obtaining a licence, however, cannot any agreement that, contrary to such provisions, adversely normally rely on this standard processing time, first, because it only affects policyholders); and obligates the FSA to make an effort to meet that time-period, and ■ invalid provisions under the Consumer Contract Act. second, because their negotiations with the FSA begin by an For example, Article 10 of the Consumer Contract Act stipulates that: exchange of drafts preceding the formal filing of documents for the licence application – in fact, in common practice, no formal “Any consumer contract clause that restricts the rights or documents for the licence application are filed before obtaining an expands the duties of the consumer beyond the application of acknowledgment from the FSA. provisions unrelated to public order in the Civil Code, the Commercial Code (Act No. 48 of 1899) and any other laws and This depends largely on the level of preparation of a foreign insurer. regulations, and that unilaterally impairs the interests of the However, in our opinion, it would be desirable to start negotiating consumer in violation of the fundamental principle provided in with the FSA one-and-half years or two years prior to a scheduled the second paragraph of Article 1 of the Civil Code, is void.” date of the establishment of a company or branch. iclg to: insurance & reinsurance 2019 www.iclg.com 159 © Published and reproduced with kind permission by Global Legal Group Ltd, London 160 Japan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com by caused not damage for except and, contract insurance the cancel may insurer duty,the such violates insured the or policyholder a If and-answer). question- of duty (the insurer the by disclosed be to requested are which risks regarding matters material to respect with disclosure of duty a insured the or policyholder a on imposes Insurance Act The Whatremediesdoes aninsurerhaveincasesofeither 2.4 No, theycannot. Cananinsured bring adirectactionagainst 2.3 insurance with claims, carryinglegalpriority. connection in lien statutory a party aggrieved an grants Insurance Act the hand, other the On claims. direct making for provide not does contract insurance liability damage typical A damage liabilityinsurance). further covering any part not covered by the compulsory automobile to respect insurance (voluntary Japan in insurance liability automobile typical with agreements in for provided be make may to claims right direct the system, legal insurance the of non-life part being relevant Not company. the against damages claim directly the Automobile Liability Security Act permits an aggrieved party to insurance, liability damage automobile compulsory to Withrespect Canathirdpartybringdirectactionagainstan 2.2 invalidprovisionsundertheConsumerContract Act. ■ the in provisions mandatory unilaterally or Mandatory ■ Ingeneralterms,isthesubstantivelawrelatingto 2.1 oilpollutiondamageliabilityinsurance. nucleardamageliabilityinsurance;and ■ compulsoryautomobiledamageliabilityinsurance; ■ ■ The following are the examples of forms of compulsory insurances: Arethereanyformsofcompulsoryinsurance? 1.6 Act, including obtaining the unanimous consent of a li company, from it officersmust satisfy strict its requirements set exemptfo to seeks company a that third Howeve to contract. indemnity prior damages a with accordance for them indemnifying or officers insuranc liability officers and directors providing compa preclude necessarily not does Act Company The Arecompaniespermittedtoindemnifydirectorsand 1.5 chuo sogolawoffice,P.c. (Re)insuranceClaims 2 officers underlocalcompanylaw? misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer? policyholders); and agreements that, contrary to such provisions, adversely affect Insurance Act (the latter is a series of provisions making void insurance morefavourabletoinsurersorinsureds? rth in the Company e (D&O) to their to (D&O) e ll shareholders. blt t the to ability r, in the case the in r, ate in parties is from nies special provisions. additional providing for allowed are and provision foregoing the of who application the of scope individual the from excluded are business, an a operates or organisation other or person juridical a by insurance non-life activities business in arise may (iv) which damages covering contracts, and contracts; insurance energy nuclear (i) insurance: non-life affect (iii) contracts; insurance of aviation (ii) contracts; insurance maritime adversely field the provision, in such however, policyholders); to contrary that, agreements This is a unilaterally mandatory provision (a provision making void answer). is requested to be disclosed by an insurer (the duty of question-and- The Insurance Act limits the scope of the duty of disclosure to what the filing of a lawsuit. It usually takes six months to one year to reach ajudgment. year one to months six takes usually It lawsuit. a of filing the after month one around scheduled is date hearing first Generally,a limit set forth therein (Articles 24 and 25 of the theinsuredby through insuredan event,theext to insurance,the right to seek damages or other compe subrogatedis operationsalvageanybyto lawof of Underthe Insurance Act,an insurer that makes an i eemns hc cut ol ha dsue i rlto t the to relation in disputes insurance policies. hear policies would insurance court in which clause determines jurisdiction a practice, In the of value dispute. the on depending courts summary or courts district insurance in resolved commercial generally are disputes insurance Commercial resolving disputes. for courts special no are There Isthereapositivedutyonaninsuredtodisclose 2.5 after thetimeofconclusioncontract. after the time the insurer knew the cause of month cancellation or and one five years extinguished be agent will cancellation of insurance right insurer’s An an by non-disclosure of solicitation (c) obstructionofdisclosurebyaninsuranceagent;and insurer’s badfaithornegligence; (b) (a) of right the cases: have principle, in following the in disclosure of duty the of violation for not, cancellation will insurer an However, for insurancepayments. liability dischargedfrom be will disclosure, of duty the of violation . Howlongdoesacommercialcasecommonly taketo 3.2 Which courts are appropriate for commercial ins 3.1 Isthereanautomaticrightofsubrogationupon 2.6 3 Litigation – Overview Litigation–Overview 3 them? bring tocourtonceithasbeen initiated? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? disputes? Does this depend on the value of the whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof others. payment ofanindemnitybytheinsurerordoes iclg to: insurance &reinsurance 2019 Insurance Act). ent of therateentofand nsurancepayment nsationrecovered the objectthetheof Japan urance ury? © Published and reproduced with kind permission byGlobal Legal Group Ltd,London 3. If non-parties to the action do not comply with an order to order an with comply not do action the to non-parties If 3. to order an with comply not does action the to party a If 2. 1. Under the Code of Civil Procedure, when the court finds a finds court the when Procedure, Civil of Code the Under 1. Whatpowersdothecourtshavetoorder 4.1 chuo sogolawoffice,P.c. iclg to: insurance &reinsurance 2019 produced inthecourseofsettlement negotiations/attempts. or litigation, of contemplation in prepared lawyers, by given advice to relating documents disclosure from withhold not may party A Can apartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 (iv)In addition to the cases listed (iv)In in the preceding three items, of interest the in prepared been has document the (iii)Where to request a makes evidence offers who party the Where (ii) that document the possesses personally party a Where (i) respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin to theaction? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin a non-criminalfineofnotmorethan200,000yen. submit a document, the court may, by order, punish them with the concerning allegations statements inthedocumentaretrue. opponent’s the that recognise may court from the it, submit to obligation his/her despite it opponent using the prevent to order in unusable otherwise or lost be to document the caused has or document, a submit h dcmn. n h floig ae, h hle o the of holder the cases, document maynotrefusetosubmitthedocument: following the In document. the grounded, it must order the holder of the document to submit petition for an order to submit a document by the parties well- e ocrig si prann t a rmnl ae r a or case criminal a to pertaining suit a concerning (e) thereof holder the by use for exclusively prepared (d) paragraph 197, Article in prescribed fact the stating (c) officer’s public a to relation in secret a concerning (b) with 196 Article in prescribed matters the stating (a) in caseswherethedocumentisnotadocument: the holderofdocument. and evidence offers who party the between relationships legal the to regard with or evidence offers who party the of thedocument. inspection or delivery the for document the of holder the he/she hascitedinthesuit. cases. record of a juvenile case, or a document seized in these organisational purpose);and an for local officer public a a by used is or entity,which public State the by held document a (excluding from thedutyofsecrecy; released are which of neither (iii), item (1), paragraph 197, Article in prescribed matter the or (ii) item (1), of performance his/her publicduties; the hinder substantially or interest duties, which is, if submitted, likely to harm the public Article withtheholderofdocument; said of items the in listed relationships the of any has who person a or document the of holder the to regard pno a dcmnay vdne n cnut examina indep of lack its of because expert court-appointed conduct and evidence probati same the have not may However, opinion such documentary suc as submit may opinion party a and experts, party-appointed f concern great is It of person. related closely or witness nominated matters or possi prosecution, is criminal relative, close related or closely spouse as person such or witness, witness nominated a which witnes expert rel testimony if his/her as witness an serve expert an Procedure, Civil of Code the Under may have a witness submit a document it parties, the by made is objection no and appropriate it finds court the when that, provides Procedure Civil of Code the of 205 Article more than100,000yen. not of fine non-criminal a by him/her punish and non-appearance, the from incurred costs court any bear shall effecthe/she the that to not appear without justifiable grounds, the court must make an order does witness a If witness. a as person any examine may court The annum 5% claims; of respect in recoverable generally is Yes,interest any of firstinstance. There aretwostagesofappeal. on based court upper the court the of decisions the with satisfied not is party such if grounds to appeal may party losing The difficult due tochangestheexistingstateofsuchsubjectmatter. likelihood that an exercise of rights will be impossible or extremely is there where matter subject disputed a to regard with disposition difficult. A party also may extremely file a petition or for an order impossible for provisional be will money of payment for claim a to assets if there is likelihood that a compulsory execution with regard party’s other the over seizure provisional for order an for petition a file may party a issued, been not has judgment final the if Even . Are there any restrictions on calling expert wi 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 . Isinterestgenerallyrecoverableinrespect ofclaims? 4.8 Isthere any rightofappealfromthedecisions 4.7 Whatsortofinterimremediesareavailablefromthe 4.6 n uh cs, h cut a alw h opnn t sbi a submit made inadocumenttobesubmittedbythewitness. to opponent response the a have to desire allow they which for matters may stating document court the case, a such In addition or in place of party-appointed experts? Is it common to have a court-appointed expert in not present? give evidenceeitherbeforeoratthefinalhearing? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts? courts offirstinstance?Ifso,onwhatgeneral o nncmeca cam ad % 6% and claims non-commercial for in lieu www.iclg.com of examining him/her. ates to matters for to ates matters common to have have to common e annum per endence. endence. bly subject to to subject bly ve value as a ve value or such a a such or s may not not may s expert’s h tnesses? Japan to such such to for in tion. per 161 Japan chuo sogo law office, P.c. Japan

commercial claims. However, a revision of those interest rates to 3% per annum with subsequent reviews every three years to reflect 5.2 Is it necessary for a form of words to be put into a market interest rates is now being discussed in the Japanese Diet. contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words is required? 4.9 What are the standard rules regarding costs? Are there any potential costs advantages in making an The Arbitration Act provides that an arbitration agreement must be offer to settle prior to trial? in writing but does not require that any specific words be put into writing. The losing party bears court costs. Such court costs do not include

Japan fees for attorneys retained by the winning party. Early settlement prior to trial may save court costs, especially in relation to the costs 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the for witnesses, but it would not be a substantial amount. courts will refuse to enforce such a clause?

4.10 Can the courts compel the parties to mediate The Arbitration Act provides that a consumer who has accepted an disputes? If so, do they exercise such powers? arbitration clause may, in general, terminate such a clause, and, upon such termination, the courts will refuse to enforce an Courts cannot compel the parties to mediate disputes. However, the arbitration clause. Code of Civil Procedure provides that courts may recommend that the parties settle their disputes regardless of a stage of a lawsuit, and 5.4 What interim forms of relief can be obtained in it is very common for courts to make such recommendation before support of arbitration from the courts? Please give judgment. examples.

4.11 If a party refuses to a request to mediate, what Under the Arbitration Act, upon the petition of parties, the courts consequences may follow? will have the power to appoint an arbitrator. In addition, upon the petition of parties or an arbitral tribunal, the courts may examine A party may refuse a request to mediate and no sanction will be evidence, including examination of witness, expert testimony, issued with respect to such refusal. examination of documents and observation.

5 Arbitration 5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required? 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able Under the Arbitration Act, an arbitral tribunal is required to state the to intervene in the conduct of an arbitration? If so, on reasons for its award unless otherwise agreed by parties. what grounds and does this happen in many cases?

5.6 Is there any right of appeal to the courts from the The Arbitration Act (Act No. 138 of 2003) provides that the court decision of an arbitral tribunal? If so, in what may exercise its authority only in the case provided for in the circumstances does the right arise? Arbitration Act with respect to an arbitration procedure. Article 14 of the Arbitration Act provides that, when a court action is filed Parties to the arbitration may not appeal to the courts from the concerning a civil dispute which may be subject to an arbitration decision of an arbitral tribunal. However, the Arbitration Act agreement, the court in charge of the case must dismiss the action provides that the parties may file a petition to set aside the arbitral upon the defendant’s petition. award to the court in some situations, such as invalidity of the arbitration award due to the limited capacity of a party.

162 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chuo sogo law office, P.c. Japan

Hironori Nishikino Koji Kanazawa Chuo Sogo Law Office, P.C. Chuo Sogo Law Office, P.C. U-1 Hibiya Building U-1 Hibiya Building 11th floor 1-1-7 Uchisaiwaicho, Chiyoda-ku 11th floor 1-1-7 Uchisaiwaicho, Chiyoda-ku Tokyo 100-0011 Tokyo 100-0011 Japan Japan

Tel: +81 3 3539 1877 Tel: +81 3 3539 1877 Email: [email protected] Email: [email protected] URL: www.clo.jp/english URL: www.clo.jp/english Japan

Hironori Nishikino graduated from Kyoto University in 1997, the Legal Koji Kanazawa graduated from Kyoto University in 2003 (LL.B.), and Training and Research Institute of the Supreme Court of Japan in Northwestern University School of Law in 2012 (LL.M. with honours). 1999. He worked at the Insurance Business Division of the He was admitted to practise law in Japan in 2004 and in the state of Supervisory Bureau of Financial Services Agency of Japan from 2005 New York in 2013. He has advised financial institutions, including to 2007. He served as a member of the “Working group on the insurance companies, on all aspects of their operations, with a focus provision of insurance products and services” of the Financial System on financial regulatory matters and transactional works. With his Council, Financial Services Agency of Japan in 2012, “Safety nets of experience working inside the Financial Services Agency of Japan, he Housing Warranty Insurance System” study group of Ministry of Land, has assisted with compliance issues of financial institutions, including Infrastructure, Transport and Tourism (Jun. 2017 – Mar. 2018) and AML/CFT, countermeasures against Anti-Social Forces, and personal “Study Group Formed to Discuss the State of Affairs Ten Years after data protection. He has also worked for clients in multiple litigations in the Implementation of Procedures Aimed to Ensure Performance of Japan, and dispute resolution. His recent publication includes Obligations under Warranty against Housing Defects” established by “Practical Methods for Insurance Compliance” (2017; Keizai Hourei). the Ministry of Land, Infrastructure, Transport and Tourism (Jul. 2018 – present). With such insurance-concentrated background and expertise, he has been working with many domestic and foreign insurance companies on insurance regulatory issues, corporate matters, and dispute resolutions/litigations. He frequently writes articles and appears as a lecturer at public seminars on insurance regulatory issues.

For more than 50 years, we at Chuo Sogo Law Office have assisted insurance companies with compliance issues, corporate, complex litigation/dispute resolution and other matters that require legal analysis. Many of our lawyers have experience working at the Financial Services Agency of Japan and have deep practical insight into insurance regulations which may have significant impact on the insurance operations in Japan. We are a dedicated group of professionals, committed to providing clients with excellent legal services necessary to support their success in a wide range of areas. We remain acutely aware of the need to constantly innovate and improve our services, and continuously strive to achieve it.

iclg to: insurance & reinsurance 2019 www.iclg.com 163 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 27 Kazakhstan Homi motamedi

cis risk consultant company (insurance brokers) llP (cis) Valentina Pan

■ when seeking a licence in the ‘general insurance’ sector and a 1 Regulatory reinsurance licence – 450 (four hundred and fifty) million tenge; 1.1 Which government bodies/agencies regulate ■ when seeking a licence in the ‘life insurance’ sector and insurance (and reinsurance) companies? reinsurance licence – 690 (six hundred and ninety) million tenge; and Insurance and reinsurance in the Republic of Kazakhstan is regulated ■ when seeking a reinsurance licence, with reinsurance being the only line of business – 530 (five hundred and thirty) by the National Bank of the Republic of Kazakhstan. The National million tenge. Bank of the Republic of Kazakhstan is the central bank of Kazakhstan and represents the upper (first) tier of the banking system The timeframe for granting permission is within three months of the of Kazakhstan. All other banks comprise the lower (second) tier of date when the applicant filed the last documents requested by the the banking system. As well as the banking system, the National authorised body, as per the law on insurance, but no later than six Bank is also a government regulator for the insurance sector. months from the date of receiving an application.

1.2 What are the requirements/procedures for setting up a 1.3 Are foreign insurers able to write business directly or new insurance (or reinsurance) company? must they write reinsurance of a domestic insurer?

An insurance company is set up in the form of an open joint stock The market is restricted. Foreign insurers can only reinsure the risk company and requires registration with the Ministry of Justice and a of a domestic insurer. However, there are certain requirements licence for insurance activity. Insurance companies operating in which local insurance companies should follow. general insurance cannot combine their activity with life insurance. 1) Local retention. Each insurer should follow prudential The majority of shares should always belong to residents of standards set by the law; among which is the solvency margin Kazakhstan. An insurance company is a commercial organisation indicator. Previously, there was a minimum retention which performs its activity in accordance with the law on insurance requirement on each insurance agreement of not less than 5% of that which the solvency margin indicator calculated for the and other normative legal acts of Kazakhstan. month in which the insurance agreement was issued. However, The Committee for the control and supervision of the financial starting from the beginning of 2017, this requirement has been market and financial organisations of the National Bank of the waived. Now the risk can be 100% reinsured. Republic of Kazakhstan grants permission to establish and license 2) Reinsurers’ rating requirement. According to the law on an insurance/reinsurance organisation. They provide a list of the insurance, there is a requirement whereby if the risk is documents necessary to obtain permission to establish and grant a reinsured to a foreign insurance company, it should be rated. licence, as well as other qualifying requirements. The minimum rating requirement is ‘A-’ as per the S&P rating agency. Ratings from A.M. Best and other Fitch rating According to the order of the Board of the Agency of the Republic agencies are also recognised. However, if the risk is reinsured of Kazakhstan on the regulation and supervision of the financial to a foreign reinsurer with a lower rating of financial stability, market and financial organisations, dated August 22, 2008 #131 ‘On the insurance company transferring the risk should increase approval of the Instruction on standard values and calculation their capital reserve as shown in the following table. methods for prudential standards of insurance (reinsurance) % of increase of the Rating as per international organisations, forms and terms of presenting of the reports on Reinsurer minimum amount of rating agency fulfilment of prudential standards’. solvency margin The minimum authorised capital for a newly created Group 1 ‘АА-’ or higher 0% insurance/reinsurance organisation must equal: ■ when seeking a licence in the ‘general insurance’ sector – 430 Group 2 From ‘А+’ to ‘А-’ 0% (four hundred and thirty) million tenge; Group 3 From ‘ВВВ+’ to ‘ВВВ-’ 0.21% ■ when seeking a licence in the ‘life insurance’ sector – 670 (six hundred and seventy) million tenge; Group 4 From ‘ВВ+’ to ‘ВВ-’ 0.75%

Group 5 From ‘В+’ to ‘В-’ 3.8%

164 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London directors andofficers. indemnifying company a to relating restrictions no are Yes.There bodies’ supervising the with line guidelines. in independently company insurance each by developed insurance of rules internal are There Arethereanylegalrulesthatrestricttheparties’ 1.4 Kazakhstan cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 will enable the Insured to take action against the reinsuraa attachedto isclause a suchHowever, if Cut-throughclauses arenotpopular withlocal insu and the Insured has no right to go directly to the issues the insurance contract is fully responsible insurancelegislation,frontinginsurancperthe As Cananinsuredbringadirectactionagainst 2.3 cannot bringadirectactionagainsttheinsurancecompany. agreement insurance the in title any have not does which party A Canathirdpartybringdirectactionagainstan 2.2 make to Insured the enable complaints withrespecttotheirpoliciesandrelatedclaims. will which sections ombudsmen the of interest the insurance company. The National Bank is protect in the process of creating agreements (re)insurance general, In In generalterms,isthesubstantivelawrelatingto 2.1 to dedicated insurance of types specific other are There ObligatoryEnvironmental LiabilityInsurance. 5) HazardousObjects’ LiabilityInsurance. 4) Obligatory Third PartyMotorLiabilityInsurance. 3) 2) which Insurance, Accident Personal Employees’ Obligatory 1) The followingformsofinsurancearecompulsory: Are thereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 Group 6 Reinsurer (Re)insuranceClaims 2 freedom ofcontractbyimplyingextraneousterms officers underlocalcompanylaw? into (allorsome)contractsofinsurance? reinsurer? insurer? insurance morefavourabletoinsurersorinsureds? crop agent/operator, (travel activities production, etc.). of types specific labour their performing duties. while employees for required is

Lower than‘В-’ ornorating rating agency Rating asper international

22% solvency margin minimum amountof % ofincrease ofthe reinsurance company. in front of the Insured reinsurer, if required. e company whichcompany e rancecompanies. nce contract,thisnce

insurance an within clause standard agreement unlessotherwiseagreed. a is clause subrogation A reject theclaim,ifany, andnotreturnthepremiumaswell. can company insurance the Otherwise cover. the of and, inception the company insurance at stated those from the change circumstances the case in period policy the during to company insurance the transferred update should he be furthermore, to going are that risks the regarding of, aware is he which information, material Yes. As per the principles of insurance, the client has to disclose all the Insured. against action legal take required, if and, not premium claim, the the return reject can company insurance the law, the per As specialised ininsuranceaffairs. lawyers or firm law a appoint parties the Usually months. six and three between take may it dispute, the of value the on Depending for proceedingsofaparticularcategory. the to parties the adopted which proceedings and their representatives build of their tactics and strategy has basis Court the on Supreme resolutions, the normative manner, a uniform in laws and the apply the correct to in order in that, cases, their noted of types be these in should of majority It guided contract. were other or procurement parties opposing the relationship, whether a supply, construction, insurance, government which by laws substantive the with associated are disputes business of category the in cases prosecuting of specifics The attorney,etc.). of powers of certificates delivered, provided/goods bills, performed/services work of acceptance (invoices, documents accounting primary only.documents on include documents these contracts, with Along based is sides opposing of argument the proving of process the and courts economic inter-district specialised of jurisdiction the within arising in business activities, lie in the fact that cases of this kind are disputes i.e. disputes, business of cases in consider to specifics The . Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsured todisclose 2.5 Whatremediesdoesan insurer haveincasesofeither 2.4 . Howlongdoesacommercialcasecommonlytaketo 3.2 Whichcourtsareappropriateforcommercial 3.1 3 Litigation – Overview Litigation–Overview 3 insurer needaseparateclauseentitlingsubrogation? them? misrepresentation ornon-disclosurebytheinsured? bring tocourtonceithasbeeninitiated? jury? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof

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165 Kazakhstan 166 Kazakhstan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com accepts amaximumofbetweenthree andfiveappeals. appeal of court the usually on; go can appeal the and is Yes,there Is thereanyrightofappealfromthedecisions 4.7 confinement, orimprisonment. of period the of instead fine a pay to right the with imprisonment fine, a include may vary,and can remedies case, the on Depending Whatsortofinterimremediesareavailablefromthe 4.6 common tohaveacourt-appointedexpert. not is It in. called be can witness expert an case, the on Depending Are there any restrictions on calling expert wit 4.5 the sending then and public notary legalised versiontothecountrywherecaseisinprocess. a to referring by evidence No. In cases where the party is not present, he is able to provide his Isevidencefromwitnessesallowedeveniftheyare 4.4 bodies areusedbythecourttoenforcethis. enforcement law local and evidence their provide a to on date specific court attend to parties request can court the Kazakhstan, of an him to provide his evidence. send In cases where the parties are to residents territory his in embassy for order in court the to him inviting court, local the via application the ask to able is court the Yes, they do. In cases where one party is reluctant to give evidence, Dothecourtshavepowerstorequirewitnesses 4.3 No. A partycannotwithholddocumentsfromdisclosure. Canapartywithholdfrom disclosuredocuments(a) 4.2 the concernedparties,etc. question to and evidence, the all and documents the all examine to deep a involves court in analysis of all the circumstances of the representation case. For this, it is necessary Legal objections. and claims their for grounds the as to refers it circumstances the prove shall party each 65, Code, Article Procedure Civil the of virtue By The courtshavefullpowerinthisregard. Whatpowersdothecourts havetoorderthe 4.1 Kazakhstan cis riskconsultantcompany(insurancebrokers)llP(cis) Litigation–Procedure 4 Is it common to have a court-appointed expert in to theaction? grounds? Howmanystagesof appealarethere? courts offirstinstance?Ifso,on whatgeneral courts? addition or in place of party-appointed experts? not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

nesses?

with adeadlinetomediate. application court a receive will it request, a such refuses party a If enforcement authoritiestomakeaparty/partiesobey. legal use can court The mediators. their introduce to them ask and invite them to the court, to advise them on have the purpose of the they invitation involved, parties all or party one for either mediator a use to decides court the However,if practice. usual a not is This general trendistorefercasescourt. be will there case in trial to benefits for the prior parties due to the settled status of the claim. be But usually, can the Cases tariffs. regulated the per as clients chargetheir solicitors and lawyers Civil Yes, itisrecoverable. The currentrateisbetween0.1%and0.5%. applied totheDomestic Arbitration Lawin2013. unenforceable. was Abe patch to similar agreement arbitration the dispute even if there was an arbitration agreement, if the court found a over jurisdiction take to court the allowed which Law Arbitration In International the to amendment an introduced Parliament the 2010, circle. vicious another in result could it obtain to attempt An be could done only by means of a decision of clause the court or an arbitral tribunal. arbitration defective the of invalidation because resolution, sensible a of chance a without limbo legal in stuck get could dispute the result, a either. As arbitrate to able parties be not would the court. named, been the has institution arbitration in non-existent a dispute the of adjudication because commenced be cannot proceedings arbitration However,if the to objection an raises agreement arbitration an to parties the of one if arbitration to used to create a legal conundrum. The court should refer the parties this institution, arbitration non-existent a indicated have or clause arbitration the in institution arbitration an identify to fail parties the when practice, in and, disputes their refer they which to institution The law does not instruct the parties to specify a concrete arbitration .1Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrules regardingcosts? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 . Whatapproachdothecourtstakeinrelationto 5.1 Arbitration 5 consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? If so,whatisthecurrentrate? what groundsanddoesthishappeninmanycases? there anypotentialcostsadvantagesinmakingan to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty iclg to: insurance &reinsurance 2019

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London ihn 5 as rm eep o te eiin n ete ise an issue either and petition the of receipt from days 15 award within the duly of enforcement for a petition the language, review must foreign court The attached. a be must in Russian or issued Kazakh to is translation authenticated award the If award. The documents). these enforcement may be sought within of three years of the issuance of the copies authenticated duly (or award arbitral the and agreement arbitration the of originals the attaching court the with on petition a file must enforcement Convention seeking party The European the and International Commercial Arbitration. Awards Arbitral Foreign of Enforcement and Recognition the on YorkNew Convention the through enforced be court. can A foreign arbitral award may be enforced in accordance with Law Arbitration Domestic the or Law Arbitration International the under either issued award arbitral An be should inserted withintheinsuranceagreement. clause arbitration an of insurance, concerning However, exchange an of based onthegeneralrulesofcontractformation. way by apply should principle same the details, these contain not does Law standalone Arbitration formed Domestic the although a means; any by be such correspondence that may and agreement, agreement standalone a of form the in or contract a in clause arbitration an of The form the in be may arbitration. to dispute the refer International Arbitration Law the specifically to states that such agreement specify parties and the writing of in be consent must agreement an Such future. an into the in enter arise may or arisen already has either which relationships parties, between law civil can to related dispute parties a arbitrate to Tribunals’), agreement Arbitration ‘On 28, December 2004 dated #22-III Kazakhstan of Republic the of Law ‘On 2004 (The Law Arbitration Domestic 28, the and Arbitration’) International December dated the #23-III of Kazakhstan Law of (The Republic Law Arbitration International the both Under Isitnecessaryforaformofwordstobeputinto Kazakhstan 5.2 cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 Notwithstandingtheinclusionofanexpress 5.3 clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration courts willrefusetoenforcesuchaclause? is required? arbitration clause,isthereanypossibilitythatthe en rpry omne i odr o te or t r to court the request. for order in commenced properly been arbitration the that confirmation a with court the Do and the court for interim security measures. The petit Law Arbitration International ArbitrationLaw,arbitration partiestoproceedthe the both Under by bothparties. the However, decision. appointed head arbitral an by challenged the be can conclusion arbitral appeal cannot court domicile The arbitration tothetribunal. be can this However, foreseen within the documents before submitting details. the application for provide must tribunal The Yes. of thecourt. the and grounds; issuance of the same award as a result the of a crime as on confirmed subject by a verdict parties, same same the the between on matter, award arbitral or judgment enforceable an of existence the grounds: additional of couple a and enforcement of denial for grounds arbitration’same ‘On the law includes draft The Enforcement ofForeign Arbitral Awards. the to New the in Yorklisted grounds and Recognition the on correspond Convention generally and laws, arbitration both and Code The proven. Procedure Civil the are in listed denial are enforcement denying for for grounds grounds deny the or of individuals, any and if entities enforcement all and any by with complied be must and act judicial a of power the has which writ, execution . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofrelief canbeobtainedin 5.4 . Isthereanyrightofappealtothecourtsfrom 5.6 examples. circumstances doestherightarise? reasoned awardisrequired? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat

www.iclg.com ioner must provide ings may apply toapply mayings proceedings have proceedings ve the eview mestic 167 Kazakhstan 168 Kazakhstan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Kazakhstan cis riskconsultantcompany(insurancebrokers)llP(cis) identification, analysis and assessment of our clients’ business activities are central to our operations and our Risk Management Directors are Directors Management Risk our and operations our to available tobecalleduponassistinidentifying,securing,planningandprovidingriskmanagementadvice/solutionsminimiseexposure. central are activities business clients’ our of assessment and analysis identification, Risk programmes. ‘hedging’ or derivatives as generally described instruments financial complex and sophisticated the to insurance vehicle basic As a progressive organisation, we are proud to have built up a wealth of knowledge on the subjects of insurance and reinsurance, from the essential known internationally other as core well The as school) MBA risks. universities here. leading of (Kazakhstan’s assessment KIMEP from and Management/Finance reinsurance in insurance, graduates of MBA are knowledge members extensive with personnel experienced diverse comprises team Our London andotherprimeglobalInsurance/ReinsuranceMarkets. The Directors and Shareholders of CIS have over 20 years of experience in Kazakhstan’s Insurance Market and 40 years of direct involvement in the courses withinvariousuniversitiesforMBA departments. management risk and insurance teaches also He 2005. in member Kazakhstan in 1994. He started working with Willis again as a network and risk management consultant in prime markets until he relocated to broker insurance as acted then He years. four for JV Grassvoye and Hubener and Jauch Higgins, and Johnson Faber, Willis a in worked His experience of working with Willis goes back to early 1971, when he LL.D. graduateinInternationalLaw. an is He etc. Arabia, Saudi in Gas British and UAE; Dugas Neka, in plant power their in Berger+Babcock of ABB+Bilfinger consortium the such as: Floor Thyseen in their oil and gas refinery in the Middle East; places various in companies multinational for services provided has He etc. France, in Grasavoye and Germany; in Hubener and Jauch USA; the in Marsh UK; the in Willis as: such years 30 last the during Brokers brokers Reinsurance Insurance and Management Risk the international major with of member worked has He a 1989. since London been in (IBRC) Counsel Registration has He 1970. since consultant insurance and manager risk a been has Motamedi Homi mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Homi Motamedi

Consultant Company. Bank National examination and has been approved the to act as the passed CEO of the CIS Risk successfully has and insurances liability and property risk, locally all construction medical, energy,aviation, in expert per as them harmonised and approved legislations and internationally similar lines regulations. She is an insurance the servicing of of most capable became and company the within grew rapidly She clients. international and local with dealing executive, account Valentina Pan joined CIS Insurance Brokers in September 2008 as an iclg to: insurance &reinsurance 2019 mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Valentina Pan chapter 28 Korea Jai Young Kim

Bae, Kim & lee llc Dal Jae Park

1 Regulatory 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Except for the cases listed below, foreign insurers cannot write business directly from a resident of Korea: Korea has adopted a two-tier regulation system. The Financial ■ life insurance contract, export/import cargo insurance contract, aviation insurance contract, travel insurance contract, hull Service Commission (the “FSC”) assumes the primary responsibility insurance contract, long-term accident insurance contract or in respect of rulemaking and licensing on the financial sector reinsurance contract; including insurance business. The Financial Supervisory Service ■ where the policyholder has been rejected by at least three (the “FSS”) supervises, secures consumer protection, oversees other insurance companies; matters and enforces activities as delegated by the FSC. ■ where the policyholder concludes a contract with a foreign insurer with respect to the types of insurance not being sold in 1.2 What are the requirements/procedures for setting up a Korea; new insurance (or reinsurance) company? ■ where the policyholder has concluded an insurance contract in a foreign country; or In order to set up a new insurance company, a licence to conduct ■ where the policyholder obtained prior approval from the FSS. insurance business in Korea must be obtained from the FSC. The following are the requirements that must be met for obtaining the licence: 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms ■ a minimum capital requirement of KRW 30 billion; into (all or some) contracts of insurance? ■ to be fully equipped with physical facilities, including experts and computer facilities that are necessary for carrying out the Generally, the parties’ freedom of contract is respected in Korea. insurance business; However, in the following cases, the parties’ freedom of contract ■ a feasible and sound business plan; and can be restricted: ■ a large shareholder shall not fall under the causes of 1. The Korean Commercial Code (the “KCC”) provides for disqualification and must have sufficient investment capability detailed rules in respect of insurance, e.g., requirements for and sound financial standing with no previous record of termination in case the policyholder fails to pay a premium disturbing sound economic order. (i.e. the insurer having to notify the policyholder to pay a In addition to the above, if a foreign company is intended to be a large premium within a reasonable time specified), requirements shareholder of an insurance company in Korea, the foreign company for termination based on breach of duty of disclosure/notice, shall obtain approval thereof from the FSC. For approval, the foreign and conditions for payment of the insurance proceeds, etc. company must carry out the insurance business in its main place of In case of consumer insurance contracts, the conditions set business. If the intended large shareholder is a foreign company but out under the KCC cannot be modified in a way which is also a holding company which does not carry out the insurance more disadvantageous to the insured. Any condition of the insurance policy which is more disadvantageous to the business, the company in control of the holding company or the insured than the condition set out under the KCC is invalid. company controlled by the holding company must carry out the insurance business in order to satisfy the aforementioned requirement. 2. The Act on the Regulation of Standard Terms and Conditions renders terms and conditions that are unreasonably Alternatively, a foreign insurance company can carry out the unfavourable to customers null and void and such principle is insurance business in Korea by setting up a local branch rather than applied to all contracts incorporating standard terms and setting up a new insurance company. However, the type of conditions by a corporation, including insurance contracts. insurance business which can be carried out is restricted to the type Thus, even though a condition is not more disadvantageous of insurance business the foreign insurance company carries out in than the condition under the KCC, conditions which are its main place of business. However, there is no real difference found by the court to be unreasonably unfavourable to between the requirements for setting up a local branch and the customers may be held to be null and void. requirements for setting up a new insurance company. iclg to: insurance & reinsurance 2019 www.iclg.com 169 © Published and reproduced with kind permission by Global Legal Group Ltd, London 170 Korea © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com favourable totheinsured. more is insurance to relating law substantive the terms, general in As can be seen from the explanation provided in question 1.4 above, Ingeneralterms,isthesubstantivelawrelatingto 2.1 the employees. suchinsurance cover forthe employees orpaypara emp requi andare Employerscompulsory. also are insurance insurance, compensation worker’s insurance, suchwelfare, public to relatedpoliciesinsurance Automobile liability insurance is also a compulsory cargo and pilots, ship carriers, tramways,etc. carriers, air operators, nuclear including business, the of operation the sufferedfrom parties third to damage and/or loss possible for covering insurance liability commercial get It is mandatory for business owners of around 20 business sectors to Arethereanyformsofcompulsoryinsurance? 1.6 incorporation: of articles the under Provision ■ their by shareholders, the shareholders: all of Consent ■ two Those company. the to methods aresetoutbelow: liability their from released be can officers the and directors which in methods to two are There negligence. damage or misconduct wilful indemnify their by caused to was damage the if liable company are officers and Directors Arecompaniespermittedtoindemnify directorsand 1.5 condition material a explain to fails agent its or insurer an If 3. Bae, Kim&leellc (Re)insurance Claims 2 officers underlocalcompanylaw? insurance morefavourabletoinsurersorinsureds? company’s business opportunity. a of appropriation director’s/officer’s a wilful (iii) or (i) company, by the and directors/officers the between caused transaction a (ii) directors/officers, was of negligence gross damage or misconduct the or where apply loss not company’s does of this articles However, the in effect incorporation. that by to option) provision (including stock a of incorporating exercise remuneration from profit his/her the and bonuses times) three directors, in liability their from respect of an amount exceeding six times (in cases of outside relieved be may directors/officers of settingoutunderthecompany’s articlesassetoutbelow. the company. There is no exception to this unlike the method unanimous consent, can relieve directors’/officers’ liability to been has explanation such that prove provided. to fails insurer the and policyholder the to provided be been material not has condition the the on not explanation where necessary may contract that alleges insurance insured condition the of a part as insured, incorporated the to unfavourable important to note that even if a condition is not unreasonably condition is not incorporated into the insurance contract. It is material such policyholder, the to contract insurance the of

as national healthnational as insurance. Some tialpremium for red to acquire to red loyment underlying pos insurance the contract and on reinsurance based allowed contr be not might reinsurer the Therefore,generalthisunderstanding,basedon dir accord rein applicabletoreinsurance arethe in characterof are which insurance liability to relating consensus among (re)insurance reinsurance practitioners to applies is liability that the against action beenan ongoing debate as to whether the article gi h peim ad p o h pit f emnto, s termination as termination, affects onlyfutureobligations. of point the to up paid future premium the affects termination the insurer,return proceeds. The to insurance however,obligated not of is portion Although paid a for reclaim can insurer an only, obligations coverage. future any denying thereby contract, insurance the terminate may insurer An relatin articles that providedinsurance apply to reinsurance is it KCC, the Under against theliabilityinsurerofpursuanttoKCC. action direct bring can party third a action, direct for rights party Even if there is no clause in the insurance contract specifying third- an expressrightofasubrogationclause ornot. be can incorporates right contract insurance the whether of regardless exercised such and KCC the to pursuant automatically arises subrogation of right foregoing The party. third the against insured proceeds, acquires, to the extent of the amount paid, the rights of the insurance the of payment after insurer, an KCC, the to According contract the based ontheinsured’s terminate failuretonotify. to insurer the for difficult be will it Thus, notify. to failure the in negligent grossly be or intentional to as regarded unlikely is insured the fact, material such of insurer the by insurer.the However, asked specifically been not has insured the if intentionally or by gross negligence failed to notify a material fact to insured the that shown be to notify,needs to it insured’sfailure the on based contract insurance the terminate to insurer an for order In to theriskinsured. matters the which of were not asked insurer by the insurer, the if it is notify considered to be material to obligated be may insured the Thus, non-material. as regarded necessarily not are insurer the by are assumed as a material fact, but the matters which were not asked insurer the by asked specifically matters the KCC, the to Pursuant . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectaction againsta 2.3 Canathirdpartybring directactionagainstan 2.2 . Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer? insurer needaseparateclauseentitlingsubrogation? them? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof iclg to: insurance &reinsurance 2019 mutatismutandis

. However,. there has only the provisions vingright to direct surance contracts.surance act are different. bt h general the but , ect actionagainstect ne ih the with ance t liability to g to ta the that ition Korea

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London the suituponparty’s request. of filing before submitted be to documents certain order can the court utilised, fully be to evidence the for necessary is evidence of documentsfortheexclusive useofitsholder. If the court finds there are circumstances in which early examination ■ public certified public, notary lawyer, a of documents which on ■ based information contains which documents ex-public or official public a of ■ documents confidential ■ the holding person the below, document(s) cannotrefusetosubmitdocumentswhichare: mentioned cases the for Except submit thedocument(s). finds such request to be reasonable, the court can order the person to a non-party of the action under the Civil Procedure Act. If the court document(s) submit it, regardless of whether the person is a party or A party can file a request for an order to make the person holding the order, assetoutbelow. such make to not or whether decide discretion its in will court the which upon document(s) specific a of submission order to court the to request a make can party a contrast, In litigation. US or English in as process disclosure/discovery no is there litigation, Korean In or more(butusuallylessthanthreeyears)toobtainafinalverdict. the on years three to up months several from take can it case, the of merits depending Court), Supreme (the instance third the for As year, whilethesecondinstancetakesfromsixmonthstooneyear. one to months eight about takes instance first the cases, simple for Typically, case. the of complexity the on depend will it since take, It is difficult to give an estimate on how long a commercial case will Korea of system judicial the in juries concerning insurancedisputes. of system no is There jurisdiction toheartheinsurancedispute. have both insured, the of domicile the as well as business, officeor in specialising principle insurer’s the court of place commercial the separate at courts The for no cases. insurance is court There appropriate the disputes. is insurance court civil typical A Whichcourtsareappropriateforcommercial 3.1 Bae, Kim&leellc iclg to: insurance &reinsurance 2019 Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Litigation–Procedure 4 Litigation–Overview 3 and secrets; professional or trade contains which post religious or pharmacist care, medical in engaged persons accountant, be may guardian or relative prosecuted orheldliable; his/her or himself/herself official; the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof to theaction? bring tocourtonceithasbeeninitiated? jury? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

court despitebeingsummoned. the before non-attendance. appear not does for witness a that case fine the often is it administrative Thus, an or lawsuit a of costs However, in practice, it is very rare for a court to order the additional an after court mayputhim/herindetentionforamaximumofsevendays. even him/her reason justifiable on any receiving an order of an administrative without fine as mentioned above, the again impose appear to and fails witness the If thereto, million. 5 KRW exceeding not fine relation administrative lawsuit in the of costs incurred additional bear to him/her order may court the reason, justifiable any without appear to fails witness a When doing soandsuchdocumentwillbeadmittedasvalidevidence. document, a party would not be able to prevent the other party from such submits and document such holds party other the However,if other party requests for such documents to be submitted to the court. the that case the in documents, such submitting to object can party are negotiations/attempts a Therefore, secrets. settlement professional lawyer’s (c) containing as regarded of or course litigation, the of in contemplation produced in prepared by (b) given advice or to lawyers, relating (a) documents speaking, Generally the unsuccessful party. by borne be should witness expert an of appointment the for Costs expert testimony, thepartiesmaychallengehim/her. give faithfully to unable is witness expert an which under exist circumstances any If appropriate. most be to considers court the recommended experts and can make a decision on whomever the the court, the court is not obligated to choose an expert witness from to candidates witness expert possible recommend can parties While evidence inmakingafindingonthefacts. that on rely will court the the reasonable, it finds court by the if and party evidence as submitted be also may proceedings court the expert Any document or report written by a party-appointed expert outside an give to expert court-entrusted testimony. a for common more to be more credible than that of a party appointed expert. Thus, it is believed is expert court-entrusted a of testimony expert practice, In There arenospecialrestrictionsoncallingexpertwitnesses. deemed if evidence. or party other the from necessary, the court may require the witness to appear and give oral objection an witness is written there when a allow Nevertheless, evidence. oral reasonable, his/her for substitution in deemed statement, if may, court A . Dothecourtshavepowerstorequire witnessesto 4.3 Canapartywithholdfrom disclosuredocuments(a) 4.2 . Arethereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? experts? not present? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed

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171 Korea Bae, Kim & lee llc Korea

but typically only part of the lawyer fees incurred are recoverable. 4.6 What sort of interim remedies are available from the On the other hand, a court may, depending on the circumstances, courts? order the successful party to bear whole or part of the costs arising from the successful party’s unnecessary acts to delay or defend. Interim measures, such as provisional attachment to debtor’s assets The costs of a lawsuit borne by the parties in cases of a partial defeat and pre-judgment injunction (provisional dispositions) to maintain are determined by the court. The court usually determines the costs the status quo, are possible. Provisional attachment is easily to be borne by each party in proportion to the success ratio, but it has recognised upon proof of the existence of credit, but pre-judgment a wide discretion and may decide otherwise depending on the injunction is ordered only in the case where it is shown that without circumstances. it the applicant will suffer serious harm if no pre-judgment Korea injunction is ordered. As for evidence preservation, if the court finds that there are 4.10 Can the courts compel the parties to mediate disputes? If so, do they exercise such powers? circumstances where urgent examination of evidence is necessary due to the risk of the evidence losing its evidential value prior to the filing of a lawsuit, the court can order an examination of the The court cannot compel the parties to mediate, but may evidence before the lawsuit is filed upon a party’s request (including recommend mediation to the parties. If the parties do not oppose to interrogation of witnesses, expert witness and examination of the recommendation, the decision made in mediation has the same documents). effect as a final and conclusive judgment.

4.7 Is there any right of appeal from the decisions of the 4.11 If a party refuses to a request to mediate, what courts of first instance? If so, on what general consequences may follow? grounds? How many stages of appeal are there? The parties may refuse to mediate, and there are no disadvantages There are three instances in the Korean litigation system, so there for such refusal. are two stages of appeal. A party has an automatic right of appeal and no approval from court is required for appeal. 5 Arbitration As for appeals from the first instance court to the second instance court, there are no limits for the cause for appeal where the losing party can appeal based on error in law and/or fact. However, for 5.1 What approach do the courts take in relation to appeal from the second instance to the Supreme Court, the grounds arbitration and how far is the principle of party for appeal are limited to error in law only. So, if the grounds for autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on appeal do not include issues regarding interpretation of law, the what grounds and does this happen in many cases? Supreme Court can dismiss the appeal without a trial.

Except for cases explicitly listed in the Arbitration Act, a court 4.8 Is interest generally recoverable in respect of claims? cannot intervene in arbitration proceedings. The cases in which the If so, what is the current rate? court can intervene in the conduct of arbitration are as follows: ■ appointment of arbitrators (if no agreement has been made by Statutory interest rate for non-commercial claims is 5% per annum, the parties regarding the appointment); while that of commercial claims is 6% per annum. Such rate is ■ a court’s decision on the acceptance of a request for applied even if there is no agreement between the parties on the challenging an arbitrator (when there is any circumstance interest rate to be applied. Where there is an agreed interest rate likely to give rise to justifiable doubts as to the arbitrator’s between the parties, such agreed interest rate will apply. impartiality or independence to the parties); Where an order or judgment to perform all or any monetary obligations ■ a court’s decision on the existence or validity of the is made, interest accrues at the statutory interest rate of 15% per annum arbitration agreement; and from the day after the day on which a written complaint demanding the ■ revocation of an arbitral award: the court may revoke an performance of such monetary obligation was served on the obligor. arbitral award if: However, if the court finds the dispute about the existence and/or scope (i) a party to an arbitration agreement was under incapacity of monetary obligation to be reasonable, the court may rule that the under the law applicable to him/her; or the said agreement obligor should pay interest at the interest rate of 15% per annum from is not valid under the law to which the parties have the day after the day which an order or judgment is made, but may not subjected; order an interest rate lower than 15%. (ii) the party seeking the revocation of the arbitral award was not given proper notice of the appointment of arbitrators or of the arbitral proceeding or was otherwise unable to 4.9 What are the standard rules regarding costs? Are present his/her case; there any potential costs advantages in making an offer to settle prior to trial? (iii) the award has dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration; Costs of legal proceedings are borne by the unsuccessful party. (iv) the composition of the arbitral tribunal or arbitral proceedings were not in accordance with the agreement of Lawyer fees are recognised as costs of legal proceedings and are the parties, or in the absence of such agreement, were not in recoverable subject to the limit of the amounts as prescribed by the accordance with this Act; Supreme Court Regulations. Pursuant to such regulation, (v) the subject-matter of the dispute is not capable of resolution recoverable costs are calculated in proportion to the claim amount, by arbitration under the law of the Korea; or

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(vi) recognition or enforcement of the award is in conflict with the good morals and other forms of social order of the 5.4 What interim forms of relief can be obtained in Republic of Korea. support of arbitration from the courts? Please give examples.

5.2 Is it necessary for a form of words to be put into a As in the case for court proceedings, provisional attachment and contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words pre-judgment injunction (provisional dispositions) can be obtained is required? from the court before or during the course of arbitration. Also, a request for preserving evidence relevant and essential to the resolution of the dispute can be made (please refer to question 4.6

Arbitration agreements must be made in writing according to the Korea above). Arbitration Act, apart from which there are no special conditions. Korean courts generally view arbitration agreements as valid when mutual consent to resolve matters by arbitration is stated, even if 5.5 Is the arbitral tribunal legally bound to give detailed there is no agreement on seat of arbitration, arbitration language, or reasons for its award? If not, can the parties agree (in arbitral institution. the arbitration clause or subsequently) that a reasoned award is required?

5.3 Notwithstanding the inclusion of an express Each arbitral award should state the reasons upon which it is based, arbitration clause, is there any possibility that the courts will refuse to enforce such a clause? unless the parties have agreed that no reasons are to be given.

When there is an arbitration agreement between the parties, such 5.6 Is there any right of appeal to the courts from the agreement will be upheld by the court unless a party to the decision of an arbitral tribunal? If so, in what agreement was under incapacity at the time of entering into the circumstances does the right arise? agreement. An arbitration award is final and there is no right to appeal to the An optional arbitration agreement where one party may select a court. Causes for revocation of an arbitral award by the court are dispute resolution procedure between arbitral proceedings and the recognised under the Arbitration Act in very limited circumstances court proceedings is not effective if one party, in responding to the (see question 5.1 above). other party’s request for arbitration, argues that there is no arbitration agreement between the parties and opposes to resolve such dispute by arbitration (Supreme Court judgment of 22 August 2003, 2003Da318).

iclg to: insurance & reinsurance 2019 www.iclg.com 173 © Published and reproduced with kind permission by Global Legal Group Ltd, London Bae, Kim & lee llc Korea

Jai Young Kim Dal Jae Park Bae, Kim & Lee LLC Bae, Kim & Lee LLC 133 Teheran-ro Gangnam-gu 133 Teheran-ro Gangnam-gu Seoul Seoul Korea Korea

Tel: +82 2 3404 0168 Tel: +82 2 3404 0294 Email: [email protected] Email: [email protected] URL: www.bkl.co.kr URL: www.bkl.co.kr Korea Mr. Jai Young Kim is a partner of the Insurance and Maritime Team. Mr. Dal Jae Park is an attorney at Bae, Kim & Lee LLC. His practice His practice mainly focuses on insurance, marine commerce, trade area mainly focuses on insurance business and the financial industry. and general criminal affairs. He earned an LL.B. degree from Seoul National University and completed the Judicial Research and Training Institute course in 2014. He has three years’ work experience as a public prosecutor and began to Prior to joining BKL in 2018, he worked in the legal team of Samsung practice as a lawyer in 1999. He has advised domestic/foreign insurance Life Insurance as an In-house Counsel and advised on insurance companies, insurance-related organisations, financial supervisory business, corporate governance and taxation. His expertise lies in authorities, etc. on insurance, insurance industry regulation, insurance financial regulatory issues advising insurance companies. industry M&A, and has handled numerous litigation cases relating thereto. Also he has provided various public agency including Financial Supervisory Service, Korea Communications Commission, Korea Consumer Agency, Korea Insurance Development Institute, etc. with legal advice as an advisory committee member.

Founded in 1980, Seoul-based Bae, Kim & Lee LLC (“BKL”) is one of the few premier law firms in Korea. BKL provides market-leading legal services in all areas of practice, with over 600 attorneys and other professionals located throughout our offices in Seoul, Beijing, Hong Kong, Shanghai, Hanoi, Ho Chi Minh City, Yangon and Dubai. Throughout our history, BKL has had a highly active insurance practice group, advising in all the facets of insurance business in Korea. Our group of 13 specialists, led by veteran Jong Ku Kang with 30 years of experience, regularly advise US- and EU-headquartered insurers and reinsurers, as well as a number of leading local insurance firms, on all insurance matters including regulatory matters of dealing with the financial supervisory authorities and their rules and recommendations, contractual matters involving coverage disputes and compliance with asset management regulations.

174 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 29 malta malcolm Falzon

camilleri Preziosi advocates Diane Bugeja

■ sufficient information is made available on persons having 1 Regulatory any proprietary, financial or other interest in, or in connection with, the company; 1.1 Which government bodies/agencies regulate ■ all qualifying shareholders, controllers, and all persons who insurance (and reinsurance) companies? will effectively direct the business of (re)insurance are fit and proper to ensure its sound and prudent management; The Malta Financial Services Authority (the “MFSA”), established ■ a scheme of operations has been submitted in the form prescribed by the MFSA; and under the Malta Financial Services Authority Act (Chapter 330 of the Laws of Malta), is the competent authority designated to carry ■ the applicant discloses any close links that it may have with out the functions assigned to it by or under the Insurance Business any other person. Act (Chapter 403 of the Laws of Malta) (the “Act”), and to ensure that persons authorised to carry on the business of insurance or 1.3 Are foreign insurers able to write business directly or reinsurance in or from Malta comply with: the provisions of the Act; must they write reinsurance of a domestic insurer? any regulations made thereunder; any insurance rule promulgated by the MFSA; and the conditions specified in such undertakings’ An undertaking having its head office in a Member State or EEA respective authorisation. State other than Malta pursuing the business of (re)insurance, which The Financial Intelligence Analysis Unit (“FIAU”) established has received authorisation in its home jurisdiction (a “European under the Prevention of Money Laundering Act (Chapter 373 of the (Re)Insurance Undertaking”), may provide services or establish a Laws of Malta) is the authority responsible for the collection, branch in Malta by exercising its European passport rights (as collation, processing, analysis and dissemination of information defined in the European Passport Rights for Insurance and with a view to combatting money laundering and the funding of Reinsurance Undertakings Regulations (Subsidiary Legislation terrorism. Certain classes of insurance business (that is, long-term 403.14 of the Laws of Malta)). European (Re)Insurance insurance business carried on by an insurer or an intermediary and Undertakings are exempt from the authorisation requirement in any business of affiliated insurance) are obliged to comply with the terms of the Act where they satisfy the services or establishment anti-money laundering and countering of financing of terrorism conditions, as the case may be, set out in the said Regulations. regime, which is enforced by the FIAU. The European (Re)Insurance Undertaking would be required to notify the supervisory authority of its home jurisdiction of its 1.2 What are the requirements/procedures for setting up a intention to provide services in or from Malta, or establish a branch new insurance (or reinsurance) company? in Malta, as the case may be, and the MFSA would subsequently be notified of such intention from the said home supervisory authority. In terms of the Act, no person may carry on, nor hold itself out as The MFSA may also grant authorisation to a third country carrying on, in or from Malta, the business of (re)insurance, unless (re)insurance Undertaking (i.e. an undertaking which is not authorised by the MFSA. The MFSA may grant authorisation to established in Malta or which is not a European (Re)Insurance companies having their head office in Malta to carry on the business Undertaking) provided that this undertaking: of (re)insurance in or from Malta, or in or from a country outside (a) is permitted in the country where its head office is situated to Malta; or to a company whose head office is in a country outside carry on the business of (re)insurance which forms the object Malta to carry on the business of (re)insurance in or from Malta. In of the application; order for an applicant company to obtain authorisation in terms of (b) has in Malta at all times (i) a general representative in the Act, the MFSA must be satisfied that: accordance with the provisions of the Act, and (ii) a branch; ■ the applicant has submitted the application in the form (c) undertakes to set up at the place of management of the prescribed by the MFSA; branch, accounts specific to the business of insurance which ■ the applicant satisfies the prescribed minimum own funds it carries on in Malta, and to maintain there all the records requirement; relating to the business carried on; ■ the applicant’s objects are limited to the business of (d) undertakes to cover the solvency capital requirement and the (re)insurance and operations arising directly therefrom; minimum capital requirement in accordance with the requirements stipulated under the Act;

iclg to: insurance & reinsurance 2019 www.iclg.com 175 © Published and reproduced with kind permission by Global Legal Group Ltd, London 176 malta that werenotthoseagreedto. effects create to contracting or contemplate, not did the they relationship a between parties establish to intervene not Maltese would the policy,courts public or law mandatory of issues or Malta) the with accordance in provisions terms of the Consumer Affairs Act, Chapter 378 of the Laws of contract unfair constitute which terms contractual to relation in instance, (for intervention court for unambiguous, in the absence of a specific provision of law that calls in terms of Maltese law, when faced with a contract that is clear and vr prnrhp f conat o adtr ad every and auditors or accountants of partnership every ■ notaries are required to be adequately insured aga ■ be must Malta in services providing professionals healthcare ■ their in maintain to required are intermediaries insurance ■ © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com VehiclesMotor Ordinance the Risks) (Third-Party Insurance ■ compulsory inMalta: are which insurance of forms main the amongst are following The Arethereanyformsofcompulsoryinsurance? 1.6 purchase insurance for its officers against such li Furthermore, a company, or the company’s officers t h which in or favour his in given is judgment which off auditor such against any indemnifyliability incurred in defending may company rel a in However, guilty company. be may he which of otherwise or duty, defa negligence, of respect in him to attached been which by virtue of any rule of law would in the abs aforementionedcompany,againstindemnifyingthe or officeranyexempting provision any invalidrenders Article 148 of the Companies Act (Chapter 386 of th Arecompaniespermitted toindemnifydirectorsand 1.5 of doctrine the of application The Arethereanylegalrulesthatrestrict theparties’ 1.4 fulfilsthegovernancerequirementsstipulatedby Act. (f) submits a scheme of operations in the form prescribed by the (e) camilleri Preziosiadvocates professional liability for a minimum amount of €250 ne te eii c (hpe 30 f h Lw o Malta) of Laws the or engineers) civil and structural architects, regulates of (which 390 (Chapter Act Periti the under registered partnership or holder warrant every and Malta, of laws the of 281 Chapter Profession Act, the Accountancy of warrant holder or a holder of a practising certificate, in terms providing when undertaken risk healthcare servicestopatients; the of extent policy, and nature insurance indemnity professional guarantee or similar arrangement, which is appropriate to the a by covered such mattersastheMFSA mayfromtimeto determine; of respect in and manner such in amount, such to agents or comparable guarantee indemnifying them or their employees other or insurance indemnity professional of policy a favour vehicles, shipsandaircraftrespectively; motor for insurance compulsory out set Malta) of Laws the of 449.41 Legislation (Subsidiary Order Operators) Aircraft and Carriers Regulations for Air Requirements Civil Aviation(Insurance Claims) Maritime (Subsidiary Legislation 234.50 of the Laws of Malta) and the for (Insurance Shipping into (allorsome)contractsofinsurance? (Chapter 104 of the Laws of Malta) (“ officers underlocalcompanylaw? freedom ofcontractbyimplyingextraneousterms Act; and pacta sund servanda sund pacta MVIO ability. any proceedings in ence thereof have e Laws of Malta) ”), the Merchant hemselves, may ult or breach of breach or ult or auditor of a of auditor or e is acquitted. acquitted. is e inst all risks of , any liabilityany , is such that, such is to t the to ation ,000; and cr or icer o-icoue f mtra fc b te nue. rve of law isgenerallymorefavourabletoinsurers. review substantive A Maltese that view insured. the supports the jurisprudence Maltese by fact material a of non-disclosure of basis the on contract insurance an avoid to seeking it, invokes which insurer the generally is it insured, the and insurer material the to both all applicable is of principle this disclosure While the thereto. related through information faith good in contract a

foreign bureauformspartofthegreencardsystem. designated State or if the accident occurred a in a third country whose or Malta in occurred accident the if Malta in insurer authorised the against action of right direct a has party such State, designated a of territory the or Malta in based normally and insurer authorised accident caused by the use of a motor vehicle which is insured by an an from resulting injury or loss any of respect in compensation to is party injured an entitled and EEA), and (EU Where State designated a or Malta in resident MVIO. the such in One contained thereto. is party instance a not person a against, or of, favour in enforceable be contract a may law the in provided expressly where only and contract, of privity of doctrine the upholds law Maltese law principle of “ common the of importance the established has jurisprudence Local was false in some material particular. non-disclosure of a material fact or by a represent entitled to avoid the policy on the ground that it judicialinsurerobtainsdeclaratiothea paying if Pursuant to article 10 of the MVIO, an authorised i to contracts of insurance are bound by the duty of pricardinalreiteratedthe havecourts Maltese the Theonus of proof of fraud would lie with the insur ha not would party other the them without that such th of one by pretencesmade theagreement, whenthe must not be vitiated. Fraud, on the other hand, is contractinsuranceofaconsent void, sincetheof insured the by non-disclosure or Misrepresentation not have beenapartytothecontractofreinsurance. would insured the as reinsurer a against action the direct a of bring basis the on 2.2, question doctrine of privity to of contract, an insured would not answer have the right to the in outlined As . Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantive lawrelatingto 2.1 . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 (Re)insuranceClaims 2 gis ay iblt wih h wrat odr r the error oromissioncommitted. or holder damage to any warrant person or thing as a result of any negligent act, the or loss of which respect in compensation for incur may partnership liability any against of Laws the of 321 Malta), is also required to be covered by indemnity insurance (Chapter Act Engineering the under insurer? insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? iclg to: insurance &reinsurance 2019 uberrima fidae ” obliging both parties to enter into a cause of nullity of was obtained by the n that the insureristhethat n ation of fact which party to a contracta partyto utmost good faith. nciple that partiesthat nciple nsurer may avoid er.Judgments of ve contracted. contracted. ve e parties wereparties e a rne a render may malta © Published and reproduced with kind permission byGlobal Legal Group Ltd,London ih opans ie b eiil csoes gis financial MFSA) andhasthecompetencetograntawardsup€250,000. against customers eligible the by authorised providers insurance (including providers services by filed complaints with deals Malta) of Laws the of 555 (Chapter Act Services Financial for Arbiter the to pursuant appointed services, financial for arbiter are the addition, thereto In agreement. parties arbitration an the by bound be and to deemed Malta) of Laws the Act of Arbitration 387 the (Chapter of terms in arbitration mandatory to subject Certain classes of disputes (such as collisions between vehicles) are the if Court Civil €15,000. exceeding amount an for claim money the a to relates dispute of exceed Hall not First does the before which (iii) claim and money €15,000; a to relates dispute the if Magistrates of Court the before (ii) €5,000; exceed not does which claim money a to relates dispute the if Tribunal Claims Small the before (i) brought: be may disputes insurance Commercial dispute. the to parties the on as well as dispute, the of nature the on depend heard will dispute the decide and jury.hear a be to before forum proper The to dispute insurance commercial a for possible not is It conditions thereof. in insurer and terms the prudent and contract a the underwrite to of whether determining judgment the influence would it where material considered be to likely is fact A contract. such into entry a have particular, in insured to prior other the to facts material all disclose to obligation positive the but insurance, of contract a to Yes, on the basis of the principle of utmost good faith. Both parties be may requested intermsoftheconditionspolicyinsurance. insured the of cooperation The insured. the of name the in party third the against recourse seek would latter insurer,the her or his to brought claim a to further compensated being insured the in a contract of insurance providing for subrogation. Subsequent to clause specific a have to typical and desirable indemnity,is an it of of Laws Malta), an the insurer has an automatic right of of subrogation on payment 16 (Chapter Code Civil the of terms in Although Is there a positive duty on an insured to disclo 2.5 camilleri Preziosiadvocates iclg to: insurance &reinsurance 2019 would action commercial a guideline, general typically takebetween twoandfiveyears,barringan appeal. a As case. the the practices employed by the particular court and the judge hearing on depend ultimately will frame time Accordingly,the concluded. procedural law does not Maltese stipulate a time within which a case held. must be be would sittings quarterly or bimonthly monthly, Subsequently, delay. little relatively with hearing first a for commercial date a appoint to generally courts the relating completed, been have procedures proceedings written preliminary When Howlongdoesacommercialcasecommonlytaketo 3.2 Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 3 Litigation – Overview Litigation–Overview 3 insurers all matters material to a risk, irrespecti disputes? Does this depend on the value of the dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? whether the insurer has specifically asked about th bring tocourtonceithasbeeninitiated? payment ofanindemnitybytheinsurerordoes se to ve of ury? rance em? eteet eoitos s ndisbe s vdne s not is evidence as inadmissible is a negotiations that rule settlement the the if Although court of context the prejudice’in ‘without basis a on materialise. produced document in to them not against were used settlement be would negotiations the of context the in disclosed anything that fear without them between issues the discuss openly can parties the unless fruit bear to likely less are negotiations but encouraged be to ought disputes settle to effortsthat is principle underlying the – evidence as inadmissible is ih epc t dcmns rdcd n h cus o settlement of a on produced document any negotiations, course the in produced documents to respect With investigating acriminaloffence orabreachofduty. authority regulatory or enforcement law competent a by or offence criminal a for prosecution a of course the in jurisdiction criminal of court a by so do to required when secret a disclose to compelled be may person a where including rule, this to exceptions of number (Chapter 12 of the Laws of Malta, the “ the Malta, of Laws the of 12 (Chapter Procedure Civil and Organisation of Code the to pursuant although In practice, the Maltese Courts do not follow a process of discovery, offence punishable by a fine, imprisonment or both. or imprisonment fine, a by criminal punishable offence a to liable public be conviction, a on to shall, information person the give authority, to law by compelled when except the becomes officesecret, such discloses and him or in confided secret any of profession depositary calling, his of reason by who person Generally,any if secrecy,relevant. professional are of duty the to relation in the Malta) of Laws as the of well 9 (Chapter Code as Criminal Malta), of Professional Laws the the of 377 of (Chapter provisions Act Secrecy the respect, this in Additionally in reference tothecause. confidence professional in advocate the to client the by been stated have may as circumstances such on client’s questioned the be without consent, cannot, advocate an that is rule general The . Whatpowersdothecourts havetoorderthe 4.1 . Canapartywithholdfromdisclosuredocuments(a) 4.2 that stage. stage of the proceedings, so long as evidence may still be adduced at in the possession of other persons. This demand may be made at any are which thereof) production the demanding party the of property the are which documents as (such documents certain of production It is possible, by means of the of means by possible, is It evidence thatmaybeproducedinthecircumstances. best the constitute must and parties the between issue in matter the to relevant the be must tendered evidence all of rule, general a As claim. support in necessary be may as documents such initiated, are proceedings the which of virtue by application sworn the with The claimant in litigation proceedings is bound to produce, together not alwaystheprocedureadoptedbycourts. it however,practice, is In this sitting. each at presented be submissions to expects and evidence what on parties the direct also shall and judgment, of date projected the as well as held, be to sittings the all parties, the of advocates the with consulting after advance, the first hearing of both the pre-trial stage and the trial stage, plan in Litigation–Procedure 4 to theaction? course ofsettlementnegotiations/attempts? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin actio ad exhibendum ad actio COCP ‘without prejudice’‘without www.iclg.com ”), the court must at must court the ”), , to demand the demand to ,

There are a are There malta basis 177 malta camilleri Preziosi advocates malta

encapsulated in a written provision of the law, it is supported by two draw up a report of his findings. Submissions may be made, by the principles: the first is that settlements are encouraged by public parties or their lawyers, to the referee and the referee may also hear policy rules; and the second is that contracts legally entered into witnesses. The referee may be examined and cross-examined on the shall have the force of law for the contracting parties. Furthermore, report in the same manner as witnesses. The court is ultimately not the COCP provides that a compromise (or settlement) shall have as bound to adopt the report of the referee against its own conviction. between the parties the effect of a res judicata (that is, a final The court’s decree ordering the appointment of the referee must judgment which is not subject to further appeal). The principle has state the party by whom the fee of the referee shall provisionally be been recognised by the Maltese courts (Joseph Grech et vs John and paid or deposited. Filippa spouses Amato et (decided by the First Hall, Civil Court, 31 When the reference is required by the plaintiff to prove a fact upon

malta January 2001)) and is encapsulated in the Code Of Ethics And which he relies for his claim, the fee of the referees shall provisionally Conduct For Advocates (which rule, although binding only on the be paid or deposited by the plaintiff. In all other cases, it is at the advocates and not on the parties, has been interpreted as meaning court’s discretion to determine whether, and if so, in what proportion, that when lawyers are involved in settlement negotiations, it is not each of the parties shall provisionally bear a part of such fee, regard only the parties that cannot use the content but also their advocates). being had to the respective interest of the parties to the action.

4.3 Do the courts have powers to require witnesses to give evidence either before or at the final hearing? 4.6 What sort of interim remedies are available from the courts?

A witness is bound to appear in court on the date and time prescribed A person, in order to secure his rights and without the necessity of in the subpoena issued through the Registry of Courts, provided that any previous judgment, may apply for the issue of one of the he is served with the said subpoena four days before such date precautionary acts listed in the COCP. The precautionary acts which (although in urgent cases the court may order any witness to appear may be sued out are the following: within a shorter time). If any witness duly summoned fails to appear when called on, he may be found guilty of contempt of court and ■ the warrant of description, used for the purpose of securing a right over movable things over which the applicant may have punished accordingly. Furthermore, the court, by means of a an interest that such movable things remain in their actual warrant of escort or arrest, may compel such witness to attend for place or condition; the purpose of giving evidence. ■ the warrant of seizure by virtue of which the movable Throughout the proceedings, the court may, at any stage of the property indicated in the application is seized from the examination or cross-examination, put to the witness such questions debtor; as it may deem necessary or expedient. ■ the warrant of seizure of a commercial going concern, which may solely be issued to secure a debt or claims which could 4.4 Is evidence from witnesses allowed even if they are be frustrated by the sale in part or in whole of the going not present? concern and, for this purpose, no other warrant may be issued against the going concern, unless it is this warrant of seizure; ■ the garnishee order, whereby moneys or movable property Pursuant to the rules of the COCP, if a witness resides abroad, due or belonging to a debtor of the creditor are attached in the evidence need not be given in person but may be introduced into the hands of a third party; acts of the proceedings by virtue of letters of request (also known as ■ the warrant of arrest of sea vessels or aircraft, used in order to letters rogatory), affidavits or, if the court allows, by audio secure a debt or claims which could be frustrated by the recording or video recording means. departure of the said ship or aircraft, and no other warrant Furthermore, pursuant to the provisions of Council Regulation (EC) may be issued against a sea-going vessel unless it is a warrant No 1206/2001 of 28 May 2001 on cooperation between the courts of of arrest; and the Member States in the taking of evidence in civil or commercial ■ the warrant of prohibitory injunction, which is used for the matters, the court of a Member State may request: (i) the competent purpose of restraining a person from doing anything court of another Member State to take evidence; or (ii) to take whatsoever which might be prejudicial to the person suing evidence directly in another Member State. The Convention on the out the warrant. Taking of Evidence Abroad in Civil or Commercial Matters, which provides for the taking of evidence by letters of request or through 4.7 Is there any right of appeal from the decisions of the diplomatic officers, consular agents and commissioners, has also courts of first instance? If so, on what general been incorporated into Maltese law. grounds? How many stages of appeal are there?

4.5 Are there any restrictions on calling expert Decisions of the First Hall Civil Court are subject to appeal before the witnesses? Is it common to have a court-appointed Court of Appeal (“COA”) within 20 days from the date of the expert in addition or in place of party-appointed judgment. An appeal may be entered against any of the heads of the experts? judgment delivered by the court. Judgments delivered by the COA cannot be appealed from. There is, therefore, only one stage of appeal. Either party may call a witness to give his opinion on any relevant The first hearing of an appeal to the Inferior COA may take up to matter on which he is qualified to give expert evidence – such two years to be appointed, while the first hearing of an appeal to the evidence will only be admissible if, in the opinion of the court, he is Superior COA may take up to three years to be appointed. Once the suitably qualified in the relevant matter. appeal is appointed, however, the process is relatively expeditious Furthermore, the court has the power to appoint an expert, referred to and one can generally expect the COA to deliver judgment around as a referee, agreed upon by the parties and, if the parties fail to agree, one year from the date of appointment. This is partly due to the fact the court will appoint a referee of its own choice. The referee must that at appeal stage, the evidentiary process is more limited than it is

178 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London camilleri Preziosi advocates malta at first instance (for example, if a witness was not produced before stayed for such period as it considers appropriate, and refer the the court of first instance, that witness cannot be produced on appeal parties to a mediator in accordance with the Mediation Act (Chapter except in very limited circumstances, such as if the party producing 474 of the Laws of Malta). This power is rarely used by the court. the witness proves that he had no knowledge of the witness or was unable to produce the witness). 4.11 If a party refuses to a request to mediate, what consequences may follow? 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? When a party, without just cause, refuses or fails to participate before or collaborate with a mediator, depending on the outcome of Interest is recoverable at the maximum rate of 8% per annum. The the proceedings, the Court may award double costs in the other malta damage which consists in depriving a person of the use of his own party’s favour due to such refusal or failure. money is made good by the payment of interest at the aforementioned rate. Interest will continue to run prior to a judgment 5 Arbitration being obtained until the effective date of payment. Certain transactions may also be subject to the provisions of the Commercial Code (Chapter 13 of the Laws of Malta), regulating late payments in 5.1 What approach do the courts take in relation to commercial transactions carried out between private and public arbitration and how far is the principle of party undertakings and between undertakings and public authorities. autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on Pursuant to Article 1142 of the Civil Code (Chapter 16 of the Laws what grounds and does this happen in many cases? of Malta), interest fallen due may bear compound interest either from the day of a judicial demand to that effect, or in virtue of an Arbitration in Malta is regulated by the Arbitration Act (Chapter 387 agreement entered into after the interest has fallen due. In either of the Laws of Malta) (the “Arbitration Act”). Court intervention case, interest must be due for a period of not less than one year. in arbitration matters is restricted to the instances specified in the Arbitration Act, which include the possibility of a party to an 4.9 What are the standard rules regarding costs? Are arbitration agreement which has commenced legal proceedings in there any potential costs advantages in making an court against the other party to apply to the court to stay said offer to settle prior to trial? proceedings. The Court, unless satisfied that the arbitration agreement has become inoperative or cannot proceed, shall make an Costs are taxed and levied in accordance with the tariffs set out in a order staying the proceedings and arbitral proceedings may be schedule annexed to the COCP, as amended from time to time. The commenced or continued. The arbitral tribunal may not take any aforementioned tariffs do not necessarily represent the fees charged steps until the Court decides on the application, except where failure by the party’s advocates. The taxed judicial costs must be paid by to provide a remedy would result in irreparable harm to any party to the party ordered by the court to do so – typically, it is the losing the arbitral proceedings. party who is ordered to pay judicial costs, although the court may Moreover, in terms of article 32(5) of the Arbitration Act, where nonetheless, at its discretion, direct the winning party to bear a proceedings are filed before any court for a declaration relating to proportion of the costs. the jurisdiction of an arbitral tribunal, these proceedings will be There are cost advantages to settling a case before judgment. With dismissed and the parties referred to the arbitral tribunal for its respect to the fees paid to the Registries of the Superior Courts of decision on such issue, unless the court considers that any party will Justice and the Courts of Magistrates in Malta and Gozo: (i) if a case suffer irreparable harm if it were not to determine the issue itself. in a court of first instance is settled after the contestation of the claim but before the first hearing, fees will be rebated by 75%; (ii) if a case in a court of first instance is settled following the first hearing of the 5.2 Is it necessary for a form of words to be put into a contract of (re)insurance to ensure that an arbitration cause but not later than the third sitting thereof, fees will be rebated by clause will be enforceable? If so, what form of words 50%; and (iii) if a case in a court of first instance is settled following is required? the third hearing of the cause but before the cause has been put off for judgment, fees will be rebated by 25%. If a case which is before the In terms of the Arbitration Act, certain classes of disputes are subject to COA is settled, the aforementioned rebates apply to a limited extent mandatory arbitration and the parties thereto are deemed to be bound with respect to the registry fees paid for the appeals procedure. by an arbitration agreement. Motor traffic disputes, not arising in With respect to the fees payable to advocates, where the tariff is connection with a claim for damages for personal injuries, are subject applied: (i) if the case is settled at any stage of the proceedings to mandatory arbitration where the dispute arises from the following: subsequent to contestation but prior to the hearing of the cause, one ■ a collision between vehicles; half of the fees will be allowed; (ii) if the case is settled after the ■ involuntary damage to property involving vehicles; or commencement of the hearing of the cause, two thirds of the fees will be allowed; and (iii) if the case is settled after the cause has been ■ any such claim against an authorised insurer, assurance adjourned for judgment, the whole fee shall be allowed. company, approved underwriter or the person who in accordance with the MVIO or any policy may be liable therefor, 4.10 Can the courts compel the parties to mediate provided the value thereof does not exceed €11,646.87. disputes? If so, do they exercise such powers? A contract of (re)insurance would typically include a jurisdiction clause; however, it is important that an arbitration clause be properly The court has the power, at any stage of the proceedings, to, drafted to ensure its enforceability. Wording to the following effect amongst other things, either on its own motion or further to a note is generally adopted in Malta: “In the event of any controversy, filed by any party to the proceedings, direct that proceedings be iclg to: insurance & reinsurance 2019 www.iclg.com 179 © Published and reproduced with kind permission by Global Legal Group Ltd, London camilleri Preziosi advocates malta

disagreement or dispute arising in connection with this agreement, the parties shall attempt in good faith to settle the dispute amicably. 5.6 Is there any right of appeal to the courts from the Where however, despite their best efforts, the parties have been decision of an arbitral tribunal? If so, in what circumstances does the right arise? unable to resolve the dispute amicably, the Parties shall jointly appoint a single arbitrator, or in default, either party may refer the matter to the Chairman of the Malta Arbitration Centre to determine On a general note, recourse against an award may be made in the matter, in which case the arbitrator’s decision shall be final and accordance with any procedure of appeal which may be expressly binding on the parties.” It is also quite common for each party to agreed to by the parties in the arbitration agreement. Recourse appoint one arbitrator, with the two appointees jointly appointing against a domestic arbitral award may be made to the COA on any of the following grounds: praying that the award be set aside;

malta the third as chair of the arbitration tribunal. appealing on a point of law (except in the case of mandatory arbitrations); or appealing both on points of fact and on points of 5.3 Notwithstanding the inclusion of an express law, provided that recourse on a point of law arising out of a final arbitration clause, is there any possibility that the award may not be brought where the parties to arbitration have courts will refuse to enforce such a clause? either expressly excluded such a right or have agreed that no reasons for the award are to be given. Article 742 (3) of the COCP provides that the jurisdiction of the Recourse against an international commercial arbitral award may be Maltese Courts is not excluded by the fact that there exists an made to the COA by an appeal on a point of law only if the parties arbitration agreement among the parties, whether the arbitration to the arbitration agreement have expressly agreed that such right of proceedings have commenced or not, in which case the court, saving appeal is available to the parties. the provisions of any law governing arbitration, shall stay proceedings without prejudice to the court’s power to issue Notwithstanding the aforesaid, where any law provides for an precautionary acts and to give any order or direction. Generally, arbitration board, tribunal or other authority and contemplates a therefore, whilst the courts should uphold any arbitration clause, specific right of appeal, review or other recourse, the provisions of they would still have the competence to examine and scrutinise the the Arbitration Act with regard to recourse against awards will not validity and execution of the arbitration agreement. be applicable and the provisions of such other law shall alone regulate the right of recourse against awards of such board, tribunal or authority. 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give In order for an award to be set aside by the COA, the applicant is to examples. prove to the satisfaction of said court any of the following: ■ the incapacity of the party to enter into arbitration or the The courts may be requested to issue any of the precautionary acts invalidity of the arbitration agreement; referred to in the answer to question 4.6 above. Such acts remain in ■ proper notice as to the proceedings or the appointment of an force until they expire or are revoked, or until the arbitral tribunal by arbitrator was not served upon the party against whom the an award given for that purpose orders the withdrawal of the act and award is being invoked, or the party was otherwise impeded the issue of the relative counter-warrant. Unless otherwise agreed from presenting his case; by the parties, the arbitral tribunal may, at the request of a party, ■ the award deals with a dispute not contemplated by or falling order any party to take such interim measures of protection as the within the terms of the submission to arbitration; or tribunal may consider necessary, and may require any party to ■ the composition of the tribunal, or the arbitral tribunal was provide adequate security in connection with such measures. not in accordance with the agreement of the parties. Moreover, the court may, on the application of any party, order the Alternatively, the COA may set aside an award where the subject- enforcement of aforesaid measure and shall have all ancillary matter of the dispute is not capable of settlement by arbitration powers to amend or revoke such orders, after hearing the parties and under Maltese law or where the award is in conflict with public the arbitral tribunal, as it deems necessary. policy. A party to mandatory arbitration has a right to appeal to the COA on 5.5 Is the arbitral tribunal legally bound to give detailed both points of fact and on points of law arising out of a final award. reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required?

In terms of the Arbitration Act, an award is to be given in writing and, unless the parties have agreed otherwise, the tribunal is to state the reasons upon which the award is based. Either party has the right to request that, within 15 days from receiving the award, the arbitral tribunal provide an interpretation thereof. The party requesting interpretation is required to give notice to the other party to the arbitration. The interpretation is to be provided to the parties in writing within 45 days from the receipt of the request.

180 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London camilleri Preziosi advocates malta

Malcolm Falzon Diane Bugeja Camilleri Preziosi Advocates Camilleri Preziosi Advocates Level 3, Valletta Buildings Level 3, Valletta Buildings South Street South Street Valletta VLT 1103 Valletta VLT 1103 Malta Malta

Tel: +356 2123 8989 Tel: +356 2123 8989 Email: [email protected] Email: [email protected] URL: www.camilleripreziosi.com URL: www.camilleripreziosi.com malta Malcolm Falzon forms part of the Corporate & Finance practice group Diane Bugeja is a Senior Associate at Camilleri Preziosi Advocates, at Camilleri Preziosi. His areas of specialisation comprise insurance, practising primarily in the fields of financial services regulation and pensions, capital markets, M&A, corporate finance, asset finance and anti-money laundering regulation and advising local and overseas gaming. Malcolm leads the firm’s insurance practice, assisting local clients on the impact of the current and forthcoming regulatory regime and international clients on regulatory, corporate, licensing and on their business models. She also assists in advising clients on the dispute resolution matters. Recent engagements including the regulatory aspects of a wide range of transactions, including licensing- licensing of a captive insurance company, transfer of insurance related matters and capital markets initiatives. Prior to joining the firm, business portfolio, M&A deals involving licensed operators, and Diane was a risk and regulatory consultant at one of the Big Four audit dispute resolution involving insurance operators. Malcolm joined the firms, before moving on to the enforcement departments of the UK and firm’s traineeship programme in 2003. Following completion of his Maltese financial services regulators. She is a qualified accountant, LL.D. studies at the University of Malta, he read for a LL.M. in holds a Master’s in Accounting and Finance from the London School of Corporate & Commercial Law at University College London, and Economics and Political Science and is currently reading for a Ph.D. in returned to Camilleri Preziosi as an Associate in late 2005. Malcolm Law at King’s College London. was admitted to partnership in 2013.

Camilleri Preziosi is a leading commercial law firm based in Valletta, Malta. It is consistently ranked by leading legal directories as a top-tier firm in multiple areas, including insurance and dispute resolution. The firm seeks to offer a combination of innovation in thought and technical excellence in the law, and the delivery of solution-driven advice to clients. The firm is organised into two practice groups: Corporate & Finance; and EU, Regulatory and Litigation. The former focuses principally on domestic and international transactions including M&A and capital markets – it advises the financial services and insurance sector and provides tax advice and compliance services. The EU, Regulatory and Litigation practice group handles competition law matters, commercial dispute resolution as well as regulatory advice and support. The level of specialisation within the firm, and its lawyers’ constant exposure to commercial consideration, enable it to advise on the most complex commercial transactions and disputes.

iclg to: insurance & reinsurance 2019 www.iclg.com 181 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 30 mexico leonel Pereznieto del Prado

creel, garcía-cuéllar, aiza y enríquez, s.c. carlo oliver romero meza

1 Regulatory 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? As a rule, foreign insurance companies are prohibited from offering and selling insurance products in Mexico. The LISF sets forth the lines of insurance business and scenarios where the participation of In Mexico, insurance and reinsurance companies are mainly foreign insurers is expressly prohibited. However, this prohibition regulated by Mexico’s Treasury Department (SHCP), through its is not absolute: a foreign insurer may coordinate with its prospective Insurance, Social Security and Pension Funds Unit. The National insured to request a waiver with respect to the applicable Insurance and Bonding Commission (CNSF) is the governmental prohibition. This waiver mechanism is limited to those cases where body responsible for the authorisation of Mexican insurance the insurance offered or provided by the foreign insurer is not companies as well as supervising their day-to-day operations. The otherwise available in the Mexican insurance market. Also, a National Commission for the Protection and Defence of Financial waiver may be obtained by foreign insurers when the type of Services Users (CONDUSEF) is the agency responsible for insurance offered in Mexico covers losses that may only occur in the receiving complaints from financial services consumers, including country where the foreign insurer is authorised to conduct its policyholders. Mexico’s central bank issues monetary policies business. Unlike the insurance business, the offering and sale of regarding insurance activities. reinsurance in Mexico is open to foreign reinsurers, provided they are registered with the General Registry of Foreign Reinsurers kept 1.2 What are the requirements/procedures for setting up a by the CNSF. new insurance (or reinsurance) company?

1.4 Are there any legal rules that restrict the parties’ According with the Insurance and Bonding Companies Law (Ley de freedom of contract by implying extraneous terms Instituciones de Seguros y de Fianzas) (LISF), the process for into (all or some) contracts of insurance? setting up a new insurance (or reinsurance) company in Mexico must be followed before the CNSF. As an initial step, a submission Non-negotiable insurance products must be registered with the must be filed enclosing detailed financial information and forecasts, CNSF prior to their marketing. The registration process requires the technical guidelines (i.e., underwriting, risk management), filing of a technical note corresponding to the product, the relevant corporate governance information (i.e., directors, manuals) and the contractual documentation, an analysis executed by a certified draft charter documents to be adopted by the insurance/reinsurance lawyer and a certified actuary to the effect that the former and the company. Once the filed documents and information are approved latter are consistent and compliant with Mexican law and by CNSF’s Governing Board, the CNSF shall issue an official regulations. CONDUSEF may impose a fine for abusive insurance communication authorising the formation of the company as a stock wordings and may request amendments of such wordings. As of corporation, which shall be published in the Official Gazette of the 2017, non-negotiable insurance products must also be registered Federation. This approval is verified ex-ante by the notary public with the CONDUSEF. responsible for issuing the corresponding deed of incorporation and by the Public Registry of Commerce prior to recording such deed. Once the incorporation of the company is evidenced before the 1.5 Are companies permitted to indemnify directors and CNSF, it will issue the insurance licence authorising the company to officers under local company law? start operations and requiring it to do so within the following 90 days. During such 90-day period, an operational audit must be Yes, under the General Law of Commercial Companies (Ley carried out by CNSF. Failure to obtain the CNSF’s sign-off and General de Sociedades Mercantiles), companies can indemnify commence operations within the 90-day period will result in the their directors and officers. D&O liability insurance is available in cancellation of the licence, which means that the process will need Mexico for that purpose. to be restarted. The approval process for a new Mexican insurance/reinsurance company takes approximately nine months, from the relevant filing date.

182 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London h afce tid ate cn li pyet iety rm the from directly payment claim insurer. can parties third affected the occurrence loss the of date the since beneficiary, as considered be will who party, thirdaffected the to directlyindemnified shall be to right the confer or e Cnrt d Seguro de Contrato el sobre ( Law Contract Insurance Mexican the of 147 article However, have onlyaremotechanceofsucceeding. coverage for insurer an against parties third by actions therefore, and, upheld strictly is contract of privity of doctrine the Mexico, In and to CONDUSEFhavereinforcedinsuredrights obtaining misrepresentations for on required afforded attributions greater the Also, facts. questionnaire relevant based of disclosure the be in made must inaccuracies cover the avoid of the duty of utmost good faith of the insured, the insurer’s right to more context the in is instance, For insurers. of discretion the narrows law insurance to relating favourable to insurers. There are some aspects, however, law where the substantive the Generally, mexico cases, failuretoobtaincompulsoryinsuranceissubjectafine. mandatory for all private vehicles using Federal highways. In most insurance for vehicles using intra-state roads). Liability coverage is liability (i.e. insurances compulsory maintain must that activities specific the regulate can state Each material. and waste hazardous for damages such as public transport concessionaries or handling of claims third-party cover to insurance liability compulsory maintain must that activities and industries some are there Mexico in Yes, Arethereanyformsofcompulsoryinsurance? 1.6 creel, garcía-cuéllar,aizayenríquez,s.c. iclg to: insurance &reinsurance 2019 the insurerwouldbeestoppedfrom exercisingitsrighttorescind. otherwise misrepresentation; the of knowledge having of days 30 within rescind to decision its of insured the notify must insurer The actionable misrepresentationhasnobearingontheloss. the if even misrepresentations questionnaire, or application on relevant the in based contained obligations contract insurance the In accordance with the Insurance Contract Law, an insurer can avoid What remediesdoesaninsurerhaveincasesofeither 2.4 direct a bring action againstareinsurerforcoverage. cannot agreement reinsurance a to non-signatory or policyholder a that is authority express and clear is there which for law Mexican under principles reinsurance few the of one No, Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantivelawrelatingto 2.1 (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? ”. Consequently, in the case of liability insurance, liability of case the in Consequently, ”. , rvds ht “ that provides ), vis-à-vis iblt insurance liability insurers. Ley goods of the insurer. Mexico does not have a jury fast-trackresolutionprocedurea theon stated on an executive title, this means that the insured may of a resolution by the CONDUSEF. This resolution c be imposed and the insured may gain the right to re certainfiledocuments requestedCONDUSEF, by pen a Ifaninsurer does not attend tothe conciliation m pro insurance three disputes leastover may be solved through such mechanisms at register must Insurers by managed SystemArbitral the of part be to agree ( Units mechanism is only for claims that do not exceed 6 m th to orCONDUSEF withprocedurearbitral an either conciliation with the insurer before CONDUSEF prior insuredwill have the right (but CONDUSEFnot the obligation the to Pursuant contracts. insurance with Especializadas opne ms hv seil let teto units attention client special have must companies Financieros curne f uh icmtne uls sc rqieet is contract obligations. requirement such unless waived, failure to notify insurer gives it the right to avoid insurance circumstance, the upon such knowledge having of of occurrence hours 24 within risk the varies materially that circumstance any disclose to duty a has insured the questionnaire that may be requested by the insurer. After inception, the in contained specifically questions the to limited is risk the to material matters disclose to insured the of duty the inception, its At upon thepaymentofanindemnity. insured the of rights the to respect with insurer the by subrogation of right automatic an for provides Law Yes,Contract Insurance the evcs ( Services Use of Protectionthe for Additionally,Law Federal ordinary courts. (MXN), must be pesos brought before oral trial courts, which tend to million be faster than 1.5 exceed not do that disputes Insurance dispute hasbeenbrought. one the be will judge the where office CONDUSEF the of domicile the to corresponding competent the case this in CONDUSEF more the of office any cases before complaints insurance bring commercial can plaintiffs handle they are frequently.LISF,the with accordance in that, note to important is It courts as State preferred plaintiff. the generally of election the or at state courts before federal brought be may disputes insurance Commercial . Whichcourtsareappropriateforcommercial 3.1 Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to discl 2.5 3 Litigation – Overview Litigation–Overview 3 insurers all matters material to a risk, irrespecti insurer needaseparateclauseentitlingsubrogation? whether the insurer has specifically asked about th jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof payment ofanindemnitybytheinsurerordoes unidades de inversionunidadesde e d Poecó y ees a Uuro e Servicios de Usuario al Defensa y Protección de Ley – the “CONDUSEF Law”) provides that all insurance all that providesLaw”) “CONDUSEF the – fr eevn cam ad opans n connection in complaints and claims receiving for ) (UDIS)) in value. 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183 mexico 184 mexico © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com and present fortestifying beforethecourtconducting proceedings. ill are be to need not that do rogatory letters international or domestic through persons citizens, obtained is testimony senior whose witnesses officials. Also, government from allowed only As a rule, witnesses must be present to testify. Written testimony is Isevidence fromwitnessesallowedeveniftheyare 4.4 exercise itssubpoenapowers. that are ready to leave the country, in which case the judge may also those or death imminent an awaiting are that those are examined be to able not may that witnesses only is the trial, the Before it witness. such present that oath under swears party the witnesses that such provided offering trial, the of stage evidentiary the during evidence give to witnesses require to powers have courts Mexican Dothecourts havepowerstorequirewitnesses 4.3 of course the in produced settlement negotiations/attempts,ifsoorderedbythecourt. (c) or litigation, of contemplation in in its possession (a) relating to advice given by lawyers, (b) prepared documents withholding for basis legal no have principle, in would, to privilege party the a thus, party; a extends of possession in product that work attorney-client however, rule, no is There the to client. relate that possession their in information and documents delivering or clients against testifying from counsel legal exempt Mexico in secrecy professional to applicable provisions Statutory Canapartywithholdfromdisclosuredocuments(a) 4.2 the powersofMexicancourts. beyond however,is documents, of production general the for order An complaint. the in alleged facts specific of evidence as parties third by held records or documents of inspection the request may the of records the party office.a government Also, a of files the in or party opposing in are that documents identified specifically A party to the action can request the court to order the production of The concept of discovery does not exist in Mexican procedural law. Whatpowersdothecourtshavetoorder 4.1 mexico is and limited very is optional. Mexico in the procedures pre-trial once of However, scope The court. frivolous. the before commences trial the notoriously admitted, is complaint is it if complaint the the of admission complaint. refuse the may of court admission The once court to the on decide to brought days few a take may court The filed. is complaint immediately is case commercial A Howlongdoesacommercialcasecommonlytaketo 3.2 creel, garcía-cuéllar,aizayenríquez,s.c. Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin over theamountofrelevantclaimconvertedintoUDIS. admit appeals. It is worth mentioning that decisions made by oral trial courts do not against thefederalconstitution. allegedly are that decisions court final against courts federal before relevant proceedingsareconducted. the whilst litigation the of subject-matter the preserve considered, the broadly that, injunctions under include to Code available Procedures Civil Federal remedies interim of types the expanded has precedent court binding a foregoing, the Notwithstanding assets. other be any own may not does same defendant the the when or that concealed wasted, fear a is there when temporary assets the of attachment (ii) and proceedings; the follow to representative a appointing without jurisdiction the leaving of risk at be to feared is who person a of curfew the (i) to: limited strictly are proceedings commercial for Code Commerce the in available remedies Interim expert witness. third a appoint shall court the matter, given a on testify the to parties between conflict a the of is each by called witnesses there expert the by If rendered testimonies certificate. not or does title experts, a or require proficient are they which in profession the unless certificate, or title professional a hold must witnesses Expert eadn css s ht hy il e wre aant ate that parties against awarded be will they that rule is costs standard regarding the Accordingly, process. judicial for fees, the fees conducting any witness charging from expert prohibited are (i.e., Courts fees). proceedings notarial the with connection in In Mexico, costs refer to attorneys’ fees and other expenses incurred ( liabilities” attracting for “cost as identified index the by multiplied 1.25 of rate a at claims insurance of respect in interest calculating for rules the forth sets LISF The process, legality), may start a constitutional action ( due (i.e., incurred have appeals of court the or judge instance first in the which in violations constitutional identifies and decision appeal and proceedings the with the agree not does that party A conducting conclusions. his/her reaching when observe must judge the that requirements statutory the or Constitution Mexican the in contemplated rights constitutional of violation in are that judgment instance first the in defects are appeal for grounds The instance. first of courts the of decisions the from appeal of right a is There . Whatsortofinterimremediesareavailablefromthe 4.6 Arethereanyrestrictionsoncallingexpert 4.5 . Whatare thestandardrulesregardingcosts? Are 4.9 Isinterestgenerally recoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 courts? experts? offer tosettlepriortrial? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed there anypotentialcostsadvantagesinmakingan courts offirstinstance?Ifso,onwhatgeneral iclg to: insurance &reinsurance 2019 costo de captación de pasivos de captación de costo amparo directo ) ) © Published and reproduced with kind permission byGlobal Legal Group Ltd,London xcto o anlet f h abta aad s e frh n the in forth set as Commerce Code( award arbitral the of annulment or execution and evidence, of production arbitrators, appoint measures, interim granting in procedure arbitration however,the assist may courts the arbitration; an of party.conduct the in any intervene not of will courts Mexican request the at arbitration be to must court matter the the by clause, submitted arbitration valid a is there If courts. Mexican by respected generally is autonomy party of principle The be compelled,besidesthescenarioforeseeninquestion3.1. As outlined in question 4.10 above, the mediation of disputes cannot to dispute mediation. the resort parties the that suggest may City Mexico in reinsurance and insurance disputes cannot compel the parties to mediate; entertaining however, local courts courts commercial No, mexico percentage oftherecovery. a on out paying not and incurred actually fees legal negotiating of possibility the include settle to offer an making of advantages Cost money amounts. instance. award not do that judgments declaratory for caps specific are There second at award the of amount the depending cent, per 12 and 8 between and instance; first at award the of amount the on depending cent per 10 and 6 between capped are costs venues City Mexico at example, for jurisdiction; local each for approved rate a at capped are Costs grounds. consistent on instance second and first the in loses that party the against or claim frivolous a pursue creel, garcía-cuéllar,aizayenríquez,s.c. iclg to: insurance &reinsurance 2019 Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 Arbitration 5 what groundsanddoesthishappeninmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty Código deComercio ). n hc rle my e band Mxcn ors a gat the grant may interim reliefidentifiedinquestion4.6above. courts Mexican obtained. be may relief which in forms the limit not do arbitration to applicable provisions Statutory noc sc a lue s niey nes t s rvn ht the that proven is it unless unlikely arbitration agreement is null, ineffective is or is impossible to enforce. clause a such enforce to court a by refusal a arbitration, to submit to agreement parties’ the of ambiguity no is there if above, 5.1 question in explained As and thechoiceoflaw. arbitrators, the seat of the arbitration, the language of the arbitration of any,number if the administrator the appointing rules, arbitration courts. It is suggested that other information is included such as the to go to option the establishing without and arbitration to dispute the of resolution definitive the submitting expressly by writing in out laid clearly be to need will agreement arbitral or clause arbitral the of terms essential The required. is words of form specific No before thecourtwhereawardisfiledforenforcement. grounds limited on award arbitral an of enforcement resist to right the is there case, any In limited Code. Commercial on the in based stated grounds award the of annulment the request may party a Mexico, within is arbitration the of seat the If tribunal. arbitral an of decision the from courts the to appeal of right no is there No, agreed be giveninwritingandsignedbythearbitrator(s). have parties the unless otherwise, or award, the parties have reached a settlement. The award shall its for reasons detailed give to bound legally is tribunal arbitral the that is rule general The . What interim forms of relief can be obtained in 5.4 Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaform ofwordstobeputintoa 5.2 . Isthereanyrightofappealtothecourtsfrom 5.6 Isthearbitraltribunallegallyboundtogivedetailed 5.5 of arbitration from the courts? Please give example courts willrefusetoenforcesuchaclause? is required? circumstances doestherightarise? reasoned awardisrequired? arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration decision ofanarbitraltribunal?Ifso,inwhat the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in www.iclg.com support s. 185 mexico 186 mexico © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com mexico creel, garcía-cuéllar,aizayenríquez,s.c. Comparative LegalGuideto:Insurance&Reinsurance Insureds of Interest the Protecting for Mandate New AOmbudsman: Financial contentious aspectsofinsuranceandreinsurance. and regulatory transactional, the in experience substantial with professionals of talent the together brings Practice Reinsurance and Insurance Our service providertothembyoffering thetypeoflegaladvicethatgivesclientscertaintyandpeacemind. strategic a become endeavour such in and projects, and transactions demanding most the with clients for choice of firm law the be to is goal Our that aclientisbestservedbylegaladvicedesignedtoanticipateandavoidproblems,ratherthanrespondthem. philosophy the on based is practice Our excellence. to commitment unwavering an with coupled advice, legal responsive and sophisticated depth, in- providing for reputation established an with firm, law corporate full-service a is and 1936 in founded García-Cuéllar,was Creel, Enríquez y Aiza Regulatory Framework in Mexico: A Year in Retrospect “ articles the authored Pereznieto Mr. of the Insurance Committee of the International Bar Leonel global is admitted to practise as in Mexico and New Yo well as countries American in reinsurance brokersontheirregionalbusiness. Latin represents issues other contract he in and front, and contentious Mexico reinsurance with the connection On in reinsurers market. Mexican the for arrangements business and lines product innovative for structures creating on emphasis an with aspects, direct regulatory and transactional in contentious, through expertise cuts – insurance broad marine including His – insurance a by clientele. Mexican driven international outlook into global demanding a insight and laws unique reinsurance a and insurance together brings practice Leonel’s y practice Aiza reinsurance García-Cuéllar,group. and insurance Creel, firm’s the of heads and Partner Enríquez a is Pereznieto Leonel fr h 21 ad 07 dtos f of editions 2017 and 2016 the for ” R:www.creel.mx URL: [email protected] +525547480660 Email: +525547480614 Fax: Tel: Mexico 11040 MexicoCity Pedregak 24,24 Torre Virreyes Creel, García-Cuéllar, Aiza yEnríquez,S.C. Leonel PereznietodelPrado The New Insurance Legal and Legal Insurance New The th floor, MolinodelRey Association. rk and is a member h International The ” and “ . Mexico’s al as avss olwd isrne institutions insurance includes advice in insurance claims and complex cov worldwide advises establishment of presence, within Mexican territory also Carlo various and Insurance before Mexican Bonding Commission. the companies as such foreign agencies, regulation and Mexican domestic for reinsurers, governance, licensing process of direct insurers, corporate insurer’s brokers and compliance, regulatory in specialises practice His practice group. reinsurance and insurance firm’s the of member a is Carlo law. private in degree Master's a pursuing currently is he where and 2015 in Bonds and Insurance in course diploma the studied also he where 2014 on Derecho de Libre Escuela at degree law his obtained Carlo Romero is an Associate of García-Cuéllar, Aiza y Enríquez, who iclg to: insurance &reinsurance 2019 R:www.creel.mx URL: [email protected] +525547480660 Email: +525585251997 Fax: Tel: Mexico 11040 MexicoCity Pedregal 24,24 Torre Virreyes Creel, García-Cuéllar, Aiza yEnríquez,S.C. Carlo OliverRomeroMeza th floor, MolinodelRey , and his experience erage disputes. n the on chapter 31 netherlands Daan Baas

Dirkzwager legal & tax niels Dekker

1 Regulatory funeral expenses and benefits in kind insurers are exempted from the authorisation requirement. The following key principles apply. All life and non-life insurance companies come under the scope of 1.1 Which government bodies/agencies regulate the Solvency II regime, unless they meet specific requirements, in insurance (and reinsurance) companies? which case they may qualify for Basic authorisation. Reinsurers always come under the scope of the Solvency II regime In the Netherlands, insurance and reinsurance companies are and must apply for Solvency II authorisation. regulated by both the Dutch Central Bank (De Nederlandsche Bank Funeral expenses and benefits in kind insurers never come under the (DNB)) and the Netherlands Authority for the Financial Markets scope of the Solvency II, and can apply for Basic authorisation. (Autoriteit Financiële Markten (AFM)). A “Basic insurer” or an “exempted insurer” is not permitted to DNB exercises the prudential supervision of insurance and pursue activities abroad (no single licence). reinsurance companies and decides on admission to the financial markets. DNB regulates and monitors (re)insurance companies in The application process for an authorisation comprises several steps. the Netherlands and their compliance with the applicable rules. On its website, DNB has published a factsheet providing for some guidance on the application process. The requirements for a licence AFM performs conduct-of-business supervision on financial application can be found in article 2:26b (for a reinsurer), article 2:31 markets for (re)insurance companies. AFM also supervises the FSA (for the Solvency II authorisation for an insurer), article 2:49 integrity of advisers and intermediaries. FSA (for the Basic authorisation for an insurer) and the Market Access for Financial Undertakings (Financial Supervision Act) Decree 1.2 What are the requirements/procedures for setting up a (Besluit Markttoegang financiële ondernemingen Wft). The process new insurance (or reinsurance) company? starts with filling in a standardised application that can be accessed via the DNB website. The application includes submitting a scheme The statutory basis for conduct of business supervision of financial of operations. The details of the scheme of operations depend on the undertakings (e.g. (re)insurers)) is the Financial Supervision Act nature of the business of the (re)insurer. In general, the scheme of (Wet op het financieel toezicht, (FSA)). Under the FSA, insurance business has to include: the nature of the risks or commitments which companies must meet certain requirements in order to offer life the insurance or reinsurance undertaking concerned proposes to insurance, non-life insurance, prepaid funeral services insurance or cover; the kind of reinsurance arrangements which the reinsurance reinsurance services in the Netherlands. The authorisation undertaking proposes to make with ceding undertakings; the guiding requirements for insurance companies having their registered principles as to reinsurance and to retrocession; the basic own-fund offices in the Netherlands are laid down in the FSA and in the items constituting the absolute floor of the minimum capital applicable subsidiary regulations. The statutory requirements have requirement; estimates of the costs of setting up the administrative been worked out in greater detail in the Decree on Prudential Rules services and the organisation for securing business; the financial for Financial Undertakings (Besluit prudentiële regels Wft). resources intended to meet those costs; and the resources at the Insurers must obtain an authorisation (licence) from DNB in order disposal of the insurance undertaking for the provision of the to be able to engage in their operations unless they have been assistance promised – in which the nature of the insurance business – exempted from the licensing requirement. Non-life insurers and and the risks which should be covered, are described. funeral expenses and benefits in kind insurers with limited risk may An insurer wishing to extend its operations must apply for an be exempted from prudential supervision under certain conditions. extension of the scope of its licence. Aforementioned licensing The conditions of the Exemption Regulation are set out on the DNB requirements apply; however, most of the required information website (http://www.toezicht.dnb.nl/en/2/51-234334.jsp). might already be in the possession of DNB. There have been two types of authorisation (licences) since the Solvency II Directive (2009/138/EC) entered into force. Insurers 1.3 Are foreign insurers able to write business directly or under the scope of the Solvency II regime require Solvency II must they write reinsurance of a domestic insurer? authorisation, while limited risk insurers can apply for Basic authorisation only. However, they are free to apply for Solvency II Insurers having their registered office in an European Economic authorisation on a voluntary basis. Only the smallest non-life and Area (EEA) country can set up a branch office in the Netherlands or iclg to: insurance & reinsurance 2019 www.iclg.com 187 © Published and reproduced with kind permission by Global Legal Group Ltd, London 188 netherlands © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com company the ( towards liability internal against both officers and directors indemnify to permitted are companies law, Dutch Under Arecompaniespermittedtoindemnifydirectorsand 1.5 DCC Code, Civil Dutch the ( of section law insurance the with comply should contracts insurance However, contracts. insurance to comes it when contract of freedom the is principle guiding The Arethereanylegalrulesthatrestricttheparties’ 1.4 perform activities(fromabranchoffice) intheNetherlands. (Re)insurers located outside the EEA require a licence from DNB to a through go must notification procedureandmeetspecificrequirements. EEA the outside office the an in from activities Netherlands perform to intend Insurers who EEA EEA. the outside the located inside those as requirements same the meet to must officeand branch Netherlands a the from in activities perform DNB from licence a require EEA the outside located Insurers Member StateratherthanwithDNB. home the in services supervisor the with rests – Netherlands the in provided cross-border its and/or Netherlands the in office branch In principle, the supervision of a foreign (EEA) (re)insurer – and its the in procedure. Netherlands) notification the in the included were that (in classes insurance business do only may insurer EEA notified A directly. products insurance its write and market insurer may EEA an (procedure) notification the of completion After of informationonadditionalconditions. two operations its start months may after DNB’s confirmation officeof receipt, or directly upon receipt branch The interest. public the in observed be to conditions additional supervisor,any home of its through insurer, EEA the informed has it after or notification, full the of receipt confirmed has DNB after months two until start not may office cross- branch a of to activities the provision, Contrary service border notification. the submitting after operations EEAits start can it services, cross-border provide to intends insurer their home supervisors and submit a notification form to DNB. If an through procedure notification a follow must States Member EEA other from insurers Netherlands, home the in activities their up taking its to from directly Prior provision). Netherlands service cross-border so-called (the State Member the into services provide Dirkzwager legal&tax ( rules. contract isallowedcontrarytofundamentalpublicpolicyrules. general the on limit the freedom also of contract for Insurers exceptions insurance contracts. for In addition, no Conduct of some Code the and FSA the and Furthermore, insured) the of detriment the to deviate cannot insurer the which (from provisions shareholders bythe annualaccounts. the to known made facts and activities to extends which company), the of affairs internal the of terms in preceding validity (with year accounting the for responsibilities usually their meeting from general directors discharges a accounts, annual the adopting When by thecompany. An excessusuallydoesnotapply. given indemnity the for coverage provide also insurers D&O Many the articlesofassociationorinacontract. in officers and directors indemnify companies Most void. and null declared be can indemnity the conditions, specific under although vrijtekening Wetboek Burgerlijk vrijwaring officers underlocalcompanylaw? into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms . o pcfc rvsos pl i Dth legislation, Dutch in apply provisions specific No ). ad gis etra laiiy oad tid parties third towards liability external against and ) . hs eto cnan sm mandatory some contains section This ). asd y mtr eil o i cs o dmgs eutn from resulting damages pollution causedbyanoiltanker. of case in or vehicle motor a by caused accident an of case in brought be also can action direct a Besides, defences same the given bylawandpolicyterms. invoke can insurer The insured. the towards notified the insurer of the claim or when the insurer denied coverage a As insurer. an not has insured the when claim cannot party third the consequence, against has insured the right right a the is from It derived account. his to directly payment request to is entitled he that means This damages). financial or material excluding (thus injury bodily or death from resulting damages suffered has A third party may bring a direct action against a liability insurer if he interests bythesubstantivelaw. their of protection fair a on count may insurers than rather insureds Dutch Generally, insureds. and policyholders to protection better (semi-)mandatory,a are give which to of aiming many DCC, the in law insurance on provisions for provides Insurance Act Dutch The true stateofaffairs. not have concluded the insurance contract if it had been aware of the would insurer the if or insurer the misleading of intention the with acted insured the if allowed only is effect immediate with contract insurance the of Termination increases. premium the that or due be will payment less or no that be might consequences the of One this termmightbesubjecttodiscussion. non-fulfilment, pointing out the consequences. The starting point of such of discovery the from months two within insured the notifies insurer have the if invoked may be only may insured These consequences. the serious by misrepresentation or Non-disclosure latter canbringitscontractualclaimagainstthereinsurer. a contractual matter between the reinsurer and the insurer. Only the Areinsurer.a against brought be cannot action direct solely is This . Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantive lawrelatingto 2.1 certain professions, e.g. lawyers and civil-law notaries) and marine. (for indemnity professional party), (third vehicle motor healthcare, which we note of only a few. insurance, mandatory Mandatory insurances are of social security, types various for provides law Dutch Arethereanyformsofcompulsory insurance? 1.6 . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 eiul ngiet anr o h etn ta i qaiis as qualifies it that extent the intentional ordeliberate. to a manner in committed negligent acts to seriously relating DCC the in conditions specific of breach of case in possible be to not deemed is Indemnification (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? iclg to: insurance &reinsurance 2019

netherlands © Published and reproduced with kind permission byGlobal Legal Group Ltd,London nue sol ntf te nue o te curne f n insured event assoonheknowsoroughttoknow. an of occurrence the of insurer the notify the should stage, insured precontractual a in disclose to duty the of Irrespective of information. all obtain to aiming lack the resolve not does question general in circumstances or facts relevant catch-all A insurer. the prospective mislead the of detriment the to insured. An exception be to this rule is made in case there was not intent to will this been disclosed, not have for asked those than other facts if or properly, not or answered, been not have questions if that extent the to disclose to duty the limits which questionnaire, a with work insurers Most to duty of breach a to due disclose byanotheroftheinsureds. use might insurer the remedies the against insureds of protection other,in the resulting to attributed be cannot insured one the of knowledge the that means which clause, severability a include to policies D&O some in tendency a Wesee third party, thesameappliestodisclosureofhisinformation. known a of interests to relates cover the the If terms. its and insurance write to insurer the of decision the to material be the may and which know concluding to ought to or knows prior he information all insurer policy insurance the to disclose should insured Under the Dutch Insurance Act (included in the DCC), a prospective ol hv be siuae o i te o-icoue or the realisationofrelevantrisk. non-disclosure in resulted not have which the facts to relates non-disclosure the when if or full in due is Payment conditions. and terms those on based due be stipulated only might payment place, taken been have not would misrepresentation have would conditions and terms other If insured. sum higher lower the the or premium to proportion be in to reduced be sum can lower payment a the insured, offers or premium higher a requests insurer informed the insured acted with the intention been of misleading the insurer. If the it when had goes same The coverage. all, refuse fully may it then correctly, at contract have insurance not would the insurer the concluded If affairs. of state true the of aware insurer to only pay in accordance with the situation that he had been the allows loss occurred the after non-disclosure the of Discovery Dirkzwager legal&tax iclg to: insurance &reinsurance 2019 compensatedthird party may be preferred above subr Under circumstances, contractual assignment of righ on culpableliability, suchastort. of grounds strict liability.certain on This limitation is not applicable liable to subrogation based is that party a against insured the of close recourse of rights in subrogation a limits DCC The relatives. degree in first- or spouse persons a employer, an as or such insured the to insureds relationship other policyholder the rights against assume not will insurer the general, In recovery. possible the of the on all privilege a has insured the case cover which insured’sin damages, not does insurer the of payment the if exercised fully be cannot rights subrogated The party. third a against claim insurer’s the to detrimental be may which act any from withhold to required is insured the risk, the of realisation After insurer. the by loss the of payment upon insurer insured the to the transfers automatically to loss insurance an caused that party third a against According to article 7:962 DCC, a claim for damages by the insured Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 insurers all matters material to a risk, irrespecti whether the insurer has specifically asked about th insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes ts (cession) of the ogationin order se to ve of em? Cession should be arranged before payment to the th to avoid detrimental contractual clauses such as an choose tobringacasetheNCConbasisoffixedfees. voluntarily may Parties English. is NCC the of language working of Court Amsterdam the law, the while procedural Dutch under operates NCC The of Appeal. and Court District Amsterdam the Dutch court system, the NCC is a special and specialised chamber of the of part Being 2018. in (NCC) Court Commercial Netherlands or civil in resolution dispute commercial matters with an international aspect alternative is the launch of The for possibility new A and may besolvedviaalternativedisputesettlementprocedures. insurers between (non-consumers) disputes largepolicyholders and insurers between disputes policy insurance Furthermore, and followedbythepartiesinvolved. Services Complaints Board (KIFID), which rulings are generally binding for Financial the before their matters policy against insurance in complaints insurer bring may consumer the Additionally, trial byjuryand/orlaypersons. the accelerate involve not do procedure criminal Dutch and procedure civil Dutch and simplify to meant settlement of(alleged)lossanddamage. is and procedure), the a of costs the bears party liable the rule, a (as procedure court regular than time-consuming less and costly less is procedure friendly only part of the dispute (e.g. only the alleged liability). This victim- allegedly liable party in a personal injury case in order to determine Since 2010, a victim may start so-called sub-proceedings against an (and subsequentlySupremeCourtappeal)maybepossible. five or three with sits judges. Appeals from decisions at generally the first instance in district courts Court Supreme the and judges three by heard are appeal of courts five the of one before appeals generally are dealt with by contracts subdistrict courts (with a single employment Cantonal judge). Civil or rent on cases and 25,000 EUR to up Cases judges). three of panel courts a by or judge single a district by 11 the of one by (depending on the size and complexity of the case, the case is heard heard are cases instance First ouet. ea poedns r iiitd ihr y rt of writ by written either in initiated summons conducted ( are proceedings extent Legal large a documents. to are proceedings Civil years. Appeal or Supreme Court cases may take an additional two or more of Court years. two to one about take usually cases instance First . Whichcourtsareappropriatefor commercial 3.1 . Howlongdoesacommercialcasecommonlytaketo 3.2 of summons, after which the defendant will need to file its (written) writ a serve will claimant a proceedings, summons instance first In or provision a grant to appropriate measure). requested is court the which in jurisdiction (matters voluntary for used is petition a and parties) between dispute a resolve to has court the (where jurisdiction contentious although the general distinction is that a writ of summons is used for jurisdiction, of types two these between distinction clear and hard 3 Litigation – Overview Litigation–Overview 3 jury? bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof dagvaarding ) or by petition ( verzoekschrift www.iclg.com netherlands exoneration clause. ird party is made. ). There is no 189 netherlands 190 netherlands © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com law conductfor ofrules Dutchbetweenlawyers, the (verbal negotiations settlement out-of-court for As contemplation for litigation and/or for invoices fr protec request) 843a professional article privilege. anThis may also apply into doc (e.g. document a offence. It is generally held that a party cannot obj theclearly aredocuments thatexception of the betweenlawyera andtheclient arealsoprotected leg (article professional 165(2)(b) DCCP) their when requested on to testify. rely may lawyers However, 21 (contracts, reports bypartyexperts,etc.)ormeansofwitnesses. writing (article in substantiate forward brought truth be and can the Evidence with testify DCCP). accordance to in obligation and general comprehensively a have Parties Canapartywithholdfromdisclosuredocuments(a) 4.2 the of basis the on body government Government Information (Public Access) Act ( that from documents or information such for request specified a file may party interested an body, government a at available documents or information For may drawtheconclusionsonmatterhedeemsappropriate. judge the evidence, requested the disclose not does party a if event, or documents any certain In grounds. compelling on refuse of only may Parties evidence. disclosure the ordering by statements prove to litigation pending a in party a order may judge a Besides, requested the and predecessors areparty). legal his or interest he which to relationship legitimate legal a to pertains a document has party to requesting insight gain to party a documents that are not at his disposal (if – among other things – enables the DCCP 843a article short, In party.(third) another against request separate a as or (counter)party a against proceedings pending in made be can documents certain of Dutch Code on Civil Procedure (DCCP). The request for disclosure the to order a party as to disclose documents pursuant to article 843a of the proceedings discovery for UK/USAHowever, court do. the systems request legal may parties provide not does law Dutch Whatpowersdothecourts havetoorderthe 4.1 hold untilfurthernotice. to on Due put been largely statements). has programme the filing problems, implementation for terms digitalise, and rules to procedural some aims KEI-programme so-called improve, accelerate and simplify civil procedures (e.g. by amending The conducted be will digitally. proceedings civil that is development new A court deliversitsfinaljudgment. the before ordered be may pleadings oral with hearing a that, After with (sequentially) a statement of reply and a statement of rejoinder. round written second a or hearing post-defence a order judgment) interim an after (mostly then may court The defence. of statement Dirkzwager legal&tax decision-making orreports. the request Dutch Healthcare Inspectorate may for access to information used for its party interested an matter, liability product a in Litigation–Procedure 4 course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin be required to produce WOB-verzoek om a party’s lawyer. uments prepared in Communications by privilege,by with ect of a criminala of ect n i writing) in and yers also applyalso yers e b legal by ted l privilege al ). E.g., default andthatthewitness’ hearingwillbeenforced. his by incurred costs the bears witness the that order may court the pending excuse, sufficient without hearing the attend to refuses witness a in If or proceedings to (prior proceedings). parties be the also by may opinion requested expert an or witnesses of examination An cross- highly technicalmatters. for possibility in The example, for required; is opinion expert an if expert independent questions. ask an appoint limited. also is may witnesses court of The examination also may parties will ask the questions. At the discretion of the judge, the counsel of testify truthfully. During a hearing of witnesses, the judge leads and from Apart witnesses. limited exceptions, a witness is obliged to of appear and in any case to examination an order may court The r gnrly o se a sfiin eiec t poe certain prove to evidence sufficient statements ifthestatement isdisputedbytheotherparty. as seen not generally are opinions party Such evidence). counter introducing party the and proof of burden the bearing party the for (both pleadings the of part as reports witness expert own their introduce to allowed are Parties stronger as seen generally witness is practice, evidence thanawitness’ writtenstatement. testimony In personal writing. by by evidence also and testimony personal examination by made be may witnesses (party) from evidence provisional that, from Apart separate a as procedure), awitnessneedstobepresent. or litigation pending a of part (as procedure witness a of hearing formal a Generally,in proceedings andtheprivacyinterestsofdatasubjects. court the in sanctions possible and justice of test interests the balancing between a perform to as well as upfront data irrelevant the in put this place safeguards, such as anonymising to the data upfront and filtering important extent is the it However, to necessary. actually proceedings, is court sharing of case in countries third EU-based an that with data personal share recognise to interest legitimate a have can company basically authorities the which in litigation, document civil cross-border for working discovery pre-trial about a (WP158) issued have authorities protection data the 2009, In claims. legal of defence or exercise establishment, the for data outside the EU is allowed to the extent the transfer is necessary the principles of the GDPR in those cases. Even transfer of personal of court proceedings. It is, to some extent, allowed to derogate from recognises that it can be necessary to exchange personal itself data in case in GDPR The 2018. May 25 from as applicable is (GDPR) Regulation Protection Data General the EU the within addition, In relatives (article165DCCP). (close) certain against testify to not privileged are persons Private disc they if measuresinformation without consent. disciplinary face may lawyers (tolawyers; thecourt notisbound theseby rules) . Dothecourtshavepowerstorequirewitnesses 4.3 . Arethereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 give evidenceeitherbeforeoratthefinalhearing? experts? not present? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed iclg to: insurance &reinsurance 2019 netherlands , which, means that oe such lose © Published and reproduced with kind permission byGlobal Legal Group Ltd,London Court forapreliminaryrulingonlegalquestions. Supreme the request also can appeal of courts and courts District decision. its for grounds the stating when consideration this to itself the confine warrant not does and answering of questions of law or the development of the cassation law, it may in result cannot complaint further resolution of the case. If the Supreme Court considers that a for Appeal of Court a to back case the refers generally it so, does Court can quash a judgment of a lower court. If the Supreme Court Supreme The only). law of (points appeal in judgments of review restricted seeking for cassation, of court a is Court Supreme The reference backtothefirstinstanceisnotrequired). is allowed to deal with the case itself (after setting aside a judgment, of required. not is of court Court the The of Leave Appeal. Appeal Court the to taken be can 1,750, EUR exceeds involved amount the where decisions), judge’s Cantonal (including cases instance First bank balances). of attachment prejudgment (e.g. measures attachment prejudgment take to permission court necessary the obtain to easy relatively is It measures (e.g.third-partyattachment). may party a proceedings, request the President of the District court Court leave to take conservatory during or to prior Furthermore, or payment advance receive precautionary measurestosecurefutureexecutionofaverdict. to request a include may measure 223 (article merits interim the DCCP) if such measure is on certain connected to the case on the merits. litigation Such apply pending may a court during measures a motion, upon that, Besides have an obligation to start proceedings on the meri from some exemptions, neither of the parties in sum taken in summary proceedings can have quite a final However, in practice, the consequences of prelimina nature,their proceedingsbySummary are, media). pub unwanted an stop to or attachment measures lift interest,matterthemustrequire immediate remedy District Court. A claim in summary proceedings Presi mus the before brought be may proceedings Summary Whatsortofinterimremediesareavailablefromthe 4.6 court-appoin opinion a is generally Such important for the comment.outcome of ( may parties the which writtene arender tospecific answerquestions and in highly technical matters. The court will then s do research on the facts and/or answer certain ques It is also fairly common for courts to appoint an i Dirkzwager legal&tax iclg to: insurance &reinsurance 2019 transactions is2% and8%forcommercialtransactions. The non-commercial for rate interest statutory The interest. compound payment). final and full of statutory interest rate is determined by date governmental decree and is a the until claim liability over the period that the debtor is in default (generally the date of the sum the of basis the on calculated is interest statutory The DCC). Statutory interest is due if payment of a sum is delayed (article 6:199 Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Is thereanyrightofappealfromthedecisions 4.7 grounds? Howmanystagesofappealarethere? courts? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral ndependent expert (to ummon the expert to tions); for example, ts. parts of) the case. mary proceedings ry relief measures xpert opiniononxpert character. Apart (e.g. a request(e.g.ato t serve an urgent not conclusive. not iain n the inlication et f the of dent e expert ted nie h U, h Ntelns a n fraie poeue to procedure formalised make apre-trialsettlementoffer withcertaincostadvantages. no has Netherlands the UK, the Unlike (e.g. fees legal attorneys’ feesforassistancepriortocourtproceedings)islimited. out-of-court of allowability The amounts. fixed (limited) certain the on based and limited during are These procedure). assistance court for fees (attorneys’ fees legal his awarded be will party successful the judgment, final the in Whilst US. the in than lower considerably generally are fees legal (awarded) The their courtfeespaidfor. awarded be (also) will party successful the judgment, final the In 100,000. EUR over of claim a with company a for Court Supreme the at party per 6,000 EUR to up 100,000, EUR than less is claim the when person private a for instance first the at 900 EUR around of type the person or on legal entity) of the parties. Court fees currently vary from depend fees court (private capacity the and stake at interest financial the proceedings, These proceedings. court the of costs to contribution a as defendant) the and claimant the by (both payable are fees lawyer,court a for fees legal the from Apart n efreet f rirto aad. h DC as DCCP The awards. arbitration of enforcement and whic mandatory (of law) applying rules to specific arbitration sets procedures DCCP a The Netherlands. Arbitration is a fully recognised alternative to co the if or refuses party a mediation fails. if consequences specific no parties. are the all There by participation voluntary on based is Mediation mediation, acourtmayproposemediation. for eligible seems matter the If mediate. court to a parties oblige but cannot parties the to mediation propose may court Dutch A settlement a between the parties without a arrange final judgment of the court. to possibilities the hearing) post-defence a during (e.g. early an at stage, but settlement it is common practice (formal) that a court a of first instance attempt explores to compulsory not is It . Whatarethestandardrules regardingcosts? Are 4.9 . Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 court hasnodiscretionarypowertoawardinterest. The explicitly. interest contractual or statutory claim must Parties statutory interest,contractualinterestisdue. valid the than more is interest contractual the If interest. statutory of date effective the no out sets is DCC the there date, If payment final agreed date. payment final agreed the following day the In a trade agreement, the contractual rate may be applicable and due Arbitration 5 offer tosettlepriortrial? what groundsanddoesthishappen inmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan to interveneintheconductofan arbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty www.iclg.com netherlands urt proceedings in the nd the recognition ue party sumes sm are some h 191 netherlands 192 netherlands © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com tribunal on the merits to take provisional measures Firstly,caparties relief.interim of typesthree distinctiv provisionsdisThese measures. interim torelating quite contains Act Arbitration Dutch The Whatinterimformsofreliefcanbeobtainedin 5.4 cannot be granted, or not in a timely manner, in ar Dutch court is also competent to handle a case if preliminary evidencet or conservatory measures order clausevalidlyis agreedcase, anyIncotheupon. to its other defences, the court should dismiss the arbitration partyclause andthe other party one files compa the by initiated are proceedings court If Notwithstandingtheinclusionofanexpress 5.3 dispute toaregularcourt. the submit to month one least at for option the given is consumer the if made is exception An entrepreneurs). smaller to apply also and voidable if the agreement is concluded with a consumer terms (which may general is therefore and in onerous unreasonably be to regarded is included conditions clause arbitration DCCP). an the However, in specified (as met be should conditions and terms such of validity and applicability the for requirements general the clause is allowed to be included in general terms and conditions, but clause, which makes a written clause recommended. An arbitration on arbitration has to be proven by the party making an appeal on the to the formation of contracts in general. The existence of agreement special impose applicable rules the beyond agreements arbitration on requirements not does Act Arbitration Dutch The arbitration. on agreed have or agree parties if initiated be only can Arbitration Isitnecessaryforaformofwordstobeputinto 5.2 for refusal. grounds limited and award the of review court limited relatively a party needs permission from a Dutch court. This is a procedure with a Netherlands, the in award partial) or (final a of execution Before annulment ofawards. more the on parties and execution the on things, sets other among rules, act new certain grants The fit. deem and they as arbitration rules the shape to autonomy mandatory fewer contains act and 2015 January 1 on applies to arbitrations commenced as from that date. In general, the force into entered 1020–1076) articles under DCCP the in (implemented Act Arbitration Dutch new The respective a makes parties the motion referringtoarbitration. of one if matter the on decide to validly agreed on arbitration proceedings, the court is not competent If a case is brought before a regular court, although the parties have making no distinction moni in arules offor basisnational the and on provisions int contains DCCP The Netherlands tribun r Arbitration arbitrationthe toInstitute or(NAI) permanent refe a by of often rules procedure, arbitration the of outline the arrange autonomycontractualand freedom, enablingparties Dirkzwager legal&tax examples. support ofarbitrationfromthe courts? Pleasegive courts willrefusetoenforcesuchaclause? arbitration clause,isthereanypossibilitythatthe is required? clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration n request the arbitraltherequest n ernational arbitration. case if the arbitration he requested measure bitration. etencemotion prior urt is competentisurt to at any stage of the ules of the DCCP.the of ules tinguish betweentinguish n pt o an of spite in l uh s the as such al to contractuallyto measures. A measures. provisions e rn t the to rring tc system, stic reasons foritsaward. detailed give to bound not is tribunal arbitral the that commenced court has arbitration the in after writing in agree aside parties when differs This set being award the in proceedings. result may award the in reasoning such of Absence decision. the for reasons the contain Article 1057 of the DCCP provides that the award shall in any event of an arbitral award by a court is a true a is court a by award arbitral an of New York1958 the annulment in and down Convention) laid those Annulment is only possible on specific limited grounds (resembling of Supreme Courtappeal. out opt to parties enables Act law Arbitration Dutch of the (points and only) grounds limited on possible only Supreme is appeal annulment. Court for request a such hear to jurisdiction has Appeal of Court The merits. the on hearing one to limited is This Article 1064a sets rules for possible annulment of an arbitral award. provide forthis);settingaside;andrevocation. parties the between rules arbitration applicable the if (only appeal Three legal remedies are available against an arbitral award: arbitral arbitral proceedingsonthemeritsisnotcompulsory. the of to possibility constitution render a summary judgment in an the arbitral award, and a follow-up of enables await Act Dutch cannot the Furthermore, sought tribunal). relief the that prove here, to urgencyneed of not requirement do (mere) (parties the including features specific (similar some contains Act Act Arbitration Dutch The Arbitration Dutch been revised now provisions wereincludedinthe2012ICC Arbitration Rules). has the that in arbitration NAI incorporated of feature successful and unique fairly a are proceedings arbitral summary stand-alone The or attachment pre-judgment for precautionary seizure. provide can courts state Only be obtained, or not in a timely manner, through arb courtscanprovide interim measures iftherequeste pending. are merits (s the on proceedings no arbitration where measures provisional for request relief to authorise a stand-alone arbitral tribunal to rul proceedings. Secondly, parties to an arbitration a . Isthearbitraltribunallegally boundtogivedetailed 5.5 arbitral awards. of aside setting partial the for provides Act Arbitration Dutch The public policy. violates award the or rules; procedural fundamental with comply not does award the mandate; its with complied not manifestly has tribunal the rules; the with violation in constituted was tribunal the agreement; arbitration valid no aside: setting for grounds available The setting aside of arbitral awards is a restricted legal remedy. The request ofthecourtoroneparties. annulment procedure before the possible Court of Appeal at an the a discretionary of part as repair place take may to referral Such tribunal annulment. for ground arbitral an the of to referral back for award procedure arbitral a introduces DCCP 1065a Article very common. Isthereanyrightofappealtothecourtsfrom 5.6 reasoned awardisrequired? circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in decision ofanarbitraltribunal?Ifso,inwhat iclg to: insurance &reinsurance 2019 ultimum remedium ultimum e on an urgent interim netherlands greement may agree itration. d measured cannot hrl, states Thirdly, imultaneous) and not and © Published and reproduced with kind permission byGlobal Legal Group Ltd,London Arbitration Act enablespartiestooptoutofSupremeCourtappeal. only possible on limited grounds (points of law only) and the Dutch addressed directly to the Court of Appeal. Supreme Court appeal is be must award arbitral an of aside setting the for Amerits. request the on hearing one to limited is awards arbitral of aside setting The Dirkzwager legal&tax iclg to: insurance &reinsurance 2019 persons) andinsurancelaw(coveragedisputesreviewofpolicyconditions). liability, medical liability and construction industry liability), compensation law (damage/loss estimate), trading loss and damage/loss of self-employed liability,professional and (corporate law liability,liability D&O include operates department liability,the government which in trafficroad and product The Liability and Insurance department advises and conducts legal proceedings for Dutch and foreign insurance companies and businesses. Areas This positionhasbeenachievedduetothecontributionofalargeexpertgroup ofspecialisedattorneyswitharesults-orientedapproach. Netherlands. the in operations three top the of one is and level international and national both at operates department Insurance and Liability The in whichitsclientsoperate. of the law. Besides up-to-date knowledge of legislation and case law, it also demonstrates good judgment of character and knowledge of the markets With offices in Nijmegen and Arnhem and more than 275 staff members, Dirkzwager legal & tax has specialist legal knowledge in almost every area publishes and teacheswithinhisfieldofexpertise. frequently He law. disciplinary and (notaries/lawyers/ doctors/brokers/etc.) liability professional to attention special pays He and in Amsterdam. Discipline of Board the at Registrar liability Deputy was Daan civil in) (litigating on insurance mattersonbehalfofinsurersandbrokers. experience extensive has He liability, in cross-borderandinternationaldisputes. medical liability, professional corporate liability insurance and D&O liability. He is regularly involved liability, product coverage, resolution. He focuses on (international) dispute disputes relating to complex insurance and law liability law, insurance in specialises Daan of University the as anattorney-at-lawatVan Doornein Amsterdam. and A+) an Dirkzwager,(South joining Stellenbosch Before worked Daan Africa). with graduated Netherlands, University (the Maastricht the at studied He Dirkzwager. at Insurance department and Liability the in attorney/partner as works Baas Daan mi:ba@ikwgrn www.dirkzwager.nl URL: [email protected] +31263538416 Email: Tel: Netherlands 6824 BZ Arnhem Velperweg 2 Dirkzwager legal&tax Daan Baas ou o cnrcul ipts pout iblt ad h professional liability oflawyers,civillawnotariesandmedicaldoctors. the and liability particular product disputes, a contractual with on matters, focus liability complex on focuses practice His and inarbitrationvariousliabilityinsurancematters. Niels is highly experienced in commercial litigation before Dutch courts (Sweden). at studied He Uppsala of University the and Netherlands) (the University Maastricht Amsterdam. in Westbroek Blackstone Brauw De at since attorney-at-law an department as worked Dirkzwager,Niels joining Before Insurance 2012. and Liability Dirkzwager’s in attorney senior a been has and 2007 in Bar the to admitted was Dekker Niels R: www.dirkzwager.nl URL: [email protected] +31263538416 Email: Tel: Netherlands 6824 BZ Arnhem Velperweg 2 Dirkzwager legal&tax Niels Dekker www.iclg.com netherlands 193 netherlands chapter 32 norway alexander Plows

Dla Piper norway Da linn Kvade rannekleiv

1 Regulatory The entity must also have an experienced and qualified management and a board that is clearly capable of managing the business within the Norwegian legislative framework. The Norwegian FSA may 1.1 Which government bodies/agencies regulate always ask for additional information. An application is usually insurance (and reinsurance) companies? written in the Norwegian language, but it may be acceptable to do so in English. The Norwegian Financial Supervisory Authority (Nw. Finanstilsynet) (the “Norwegian FSA”) is responsible for the 1.3 Are foreign insurers able to write business directly or supervision and regulation of insurance and reinsurance companies must they write reinsurance of a domestic insurer? as well as insurance intermediaries. The Norwegian FSA is an independent government agency whose powers and activities are To the extent the insurer is authorised in one Member State of the founded on legislation from the Norwegian Parliament (Nw. European Union/EEA to carry out insurance activities, then it may Stortinget), the Government and the Ministry of Finance (Nw. carry out those insurance activities in Norway through a branch or Finansdepartementet) as well as on international standards for on a cross-border basis into Norway, provided a notification financial supervision and regulation. The Ministry of Finance is the procedure is complied with and certain terms are met. If the insurer complaints body for the Norwegian FSA. is incorporated in a third country outside the EU/EEA area, it may write business in Norway through a Norwegian subsidiary provided 1.2 What are the requirements/procedures for setting up a that the subsidiary holds a local licence to conduct the insurance new insurance (or reinsurance) company? activities in Norway. There is also limited access to operate through a branch provided that certain terms are met. Non-life and life insurance activities cannot be carried out in the There is no mandatory requirement for a foreign reinsurer to write same undertaking, as an entity may only obtain a licence to perform reinsurance of a domestic insurer under Norwegian law. one type of insurance activity. Separate sets of rules apply to non- life and life insurance companies. 1.4 Are there any legal rules that restrict the parties’ An undertaking may apply to the Norwegian FSA for a Norwegian freedom of contract by implying extraneous terms licence to conduct insurance activities pursuant to the Financial into (all or some) contracts of insurance? Undertakings Act Chapters 2-12 to 2-14. If granted, a licence may be restricted to a certain geographical area, category of client or in Yes, there are legal rules according to which extraneous terms may other ways. In practice, licence are often restricted to certain classes be implied into contracts of insurance. Of most significance are the of insurance. provisions of the Norwegian Insurance Contracts Acts (the “ICA”), Irrespective of the type of insurance licence being sought, an whose provisions are generally of mandatory application to application for a licence must contain all information relevant to contracts of insurance. process the application. The information to be provided is extensive The provisions of Part B (Life Insurance) of the ICA may not be and includes a description, among other things, of the ownership contracted out of to the detriment of insureds. However, the structure, management, organisation, management and control provisions of Part A (Non-Life Insurance) may be contracted out of, systems, funding of the business, capital and solidity of the entity, other than in respect of an injured third party’s direct right of action including a three-year financial forecast, a three-year operational plan, against an insolvent tortfeasor’s liability insurer. budget(s), internal routines and anti-money laundering procedures, as It should be noted that the right to contract out of the remaining well as descriptions of the types of insurance the undertaking intends provisions of the ICA applies only to the extent the insured entity is to offer. Further the application must account for the principles for a commercial insured; i.e. entities satisfying two of the following premium calculation and reinsurance as well as target customers. The three conditions: application must also include information about the incorporation of ■ having more than 250 employees; the insurance undertaking and its draft articles of association. ■ having sales income of at least NOK 100 million; or It will be important in the application to demonstrate that the entity ■ having assets of at least NOK 50 million. is adequately organised, sufficiently capitalised, including having coverage for the minimum capital requirements.

194 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London is thepartnershipmeeting( ietr i apoe b te or. n h cs o general of case the In board. the ( partnerships by approved if directors managing their indemnify may companies Such shareholders. of meeting general the is members board to indemnities such approve allmennaksjeselskap aksjeselskap, ( companies liability limited public and private of case the In relevant corporatebody. Further, the granting of any such indemnity must be approved by the cannot becontractedoutof. of that board remuneration on rules the mandatory to indemnify subject be may to directors public able which are to companies extent liability the limited Therefore, value. financial their In to faith. bad due remuneration as considered or be will indemnities such negligence addition, gross misconduct, wilful of cases to purporting Agreements indemnify directors or limit their liability may be deemed invalid in limitations. certain to subject claims, albeit third-party against officers other and directors managing members, board their indemnify to permitted are Companies Yes. terms contract unfair Norwegian the regulations containedinsection36oftheContracts Act. under on based considerations basis case-by-case a reasonableness of out as well as on law contract of principles ordinary extends insurance of insurance contracts into damage nature. of acts fire other Finally, by Norwegian courts have the caused power to imply property extraneous terms damage cover to all automatically addition, In will overridethefirstoftheseimpliedterms). limit policy a to as statement contractual clear a example, for (so, three terms are, however, subject to the the express terms of the contract (iii) and money.These in place; out paid compensation have to entitled is takes insured replacement or or reparation reparation whether of of cost where the (ii) by policy; replacement, measured the insured is entitled to such compensation regardless be insurance to an is under compensation insured loss financial its of entirety the recover to entitled is insured the that (i) include: law background Norwegian from implied be may that terms Other by theICA. regulated is that issue an on silent is policy a where apply still will ICA’s terms the exception, insureds commercial the under of out contracted ICAbeen the has where even that note to important is It to shipping,aviationorinternationaltransport. relates insurance the where or abroad, mainly place take operations whose entities to applies also exception insureds commercial The Dla PipernorwayDa iclg to: insurance &reinsurance 2019 compulsory liabilityinsurance(e.g. lawyers). maintain to required also are professions certain of members The form a approved bytheNorwegianauthorities. in insurance have must plants nuclear and more or petrol of tons 2,000 carrying vessels cargo instance, for operations, risk high- certain with connection in compulsory is insurance Liability motor liabilityinsurance. their of course the employment. Likewise, car owners are required to have third-party in employees their by suffered sickness and injury covering insurance maintain Yes.to required are Employers Arethereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 officers underlocalcompanylaw? Nw. ansvarlig selskap Nw.ansvarlig Nw. selskapsmøte ), the body with the authority to authority the with body the ), ), the relevant authorising body authorising relevant the ), ).

Nw. Please seequestion4.8belowforfurtherdiscussion. to obtain a favourable settlement from insurers in high value claims. bargaininga as interest payment late to right the use or claims, chip covered on interest payment late in amounts considerable earn may efficient handling of usually low-value claims, commercial and insureds quick the ensuring is by this insureds consumer While protect to claim. designed a of notification after months two as early 8.75% at (currently interest to right the has insured an example, of way By consumers. insureds are able to take advantage of provisions designed to protect A practical result of this in commercial insurance is that commercial for thatreasonbeperceivedasmorefavourabletoinsureds. may and jurisdictions other certain in than extent greater the a to lines However, insureds. and consumer along developed Contracts has Insurance Act Norwegian insurers of interests the between Substantive law relating to insurance strikes a relatively fair balance for in the contract, for instance by way of a cut-t may bring a direct action against a reinsurer if su contractualrelationsno has a it whomreinsurer with direct a bring to right general no has insured an Inthe absence of any comprehensive Norwegian law o with an ordinary, natural understanding of the contractual wording). accords practice and law foreign that of application of the extent the sources other as well (to practice as and law reinsurance international as such interpretation contract reinsurance contractual a specific of the wording on emphasis place will tribunal arbitral or court Norwegian a and apply will interpretation contractual and contracts. As a result, general principles of Norwegian contract law little Norwegian case law or market practice concerning reinsurance Norwegian The is law.there and reinsurance to apply not Contracts does Insurance Acts Norwegian by regulated not is issue This be not may insurer liability contracted outof. tortfeasor’s insolvent an against action direct a bring in to right insureds party’s noted third injured also an commercial As 1.4, question above. the 1.4 question within in described comes as exception insured an extent the This right may be excluded by clear and express terms in a policy to a liability insurertobejoinedasapartyproceedings. for courts Norwegian in practice normal is it result, a As first. from insurers without having to establish the insured tortfeasor’s liability direct compensation claim can party third injured An Yes. . Ingeneralterms,isthesubstantive lawrelatingto 2.1 . Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 damage causedbyotheractsofnature. cover also must damage fire covering insurance Property wrecks. of removal and pollution facilities, their loss to damage from things, resulting other among covering, insurance have must gas and oil of development and exploration the for licences holding Those (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? reinsurer? insurer?

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195 norway 196 norway the insurertoaskabout. It concerns circumstances that the insured cannot reasonably expect jurisdictions. other in disclosure of duty the to compared narrower be may disclosure of duty active the of scope The it. to exception The passive duty is seen as the general rule and the active duty as an signific material of underwriter’s be assessment of tothe risk. understand must it c which special concerning information disclose to accord placement or renewal. The active duty raised requires questions the to answers exhaustive and correct passiveandactive.Thepassive have duty requires the to said be can disclosure of duty insured’s An O 1500 r f n o te ate i nt ersne b a by represented not is parties the Norwegian lawyer (irrespectiveofthevalueclaim). of be one must if or Cases 125,000 NOK settlement. achieving commenced in the Conciliation Boards in claims valued at less than at aimed discussions © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Which courts are appropriate for commercial insu 3.1 regulated bythetermsofpolicy. the be normally in will losses, this practice, party In first Act. Compensation of Norwegian case the in e.g. legislation, specific Insurers’ rights of subrogation are in some instances provided for by and takesoveritsclaimagainstthewrongdoer. ( party aggrieved the of position the claim into steps claimant the claim, a recourse a has loss party’sregresskrav another for pays insurer) who an (including party any that principle general a is There Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 if the misrepresentation or non-disclosure concerned essential facts. policy the terminate to able be limited also may insurer the In circumstances, circumstances. other and events of chain the insured, to the underwriter’s assessment of the risk, the degree of fault by the information undisclosed/misrepresented the of significance the on depending entirely, away fall or reduced be may liability insurer’s the negligent, was insured the If liability. from free is insurer the insured’sthe If fraudulent, was non-disclosure or misrepresentation insured. the of part the on fault of degree the on depend disclosure non- or misrepresentation for insurer an to available remedies The Whatremediesdoesan insurer haveincasesofeither 2.4 Dla PipernorwayDa n oe icmtne, h vne f is isac wl b the be will instance first ( Board of Conciliation venue the circumstances, some In instance incommercialinsurancedisputes. omril ors ht ade nuac dsue. h District specialist, The ( Courts no disputes. are insurance handle there that and courts commercial Norway in generalists are Judges 3 Litigation – Overview Litigation –Overview 3 disputes? Does this depend on the value of the insurers all matters material to a risk, irrespecti misrepresentation ornon-disclosurebytheinsured? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes whether the insurer has specifically asked about th Nw . ) against the party that caused the loss. In bringing such tingrettene Nw ) are therefore the appropriate courts of first of courts appropriate the therefore are ) . forliksrådene ), where lay judges facilitate judges lay where ), insuredprovideto insured of its own y nues at insurers by w aspects: two ircumstances ne o the to ance se to ve of ury? rance em? Nw.

There arenolongerjurytrialsinNorway. will normallyaccepttheBoard’s findings. parties the However, binding. not are Board Complaints Financial low-cost a offers which alternative and to proceedings in the Norwegian courts. members Decisions of the specialised highly with owga cut hv pwr t cme bt pris n non- and parties tocomplywiththeseduties. parties both compel to powers have courts Norwegian and objects to access as documents thatmayconstituteevidence. well as clarifications to factual duty a provide under are Norway in proceedings court to Non-parties supportive oftheoppositeparty’sor case. case its to detrimental are documents such if even possession, their in not are which but of aware are they documents material of dispute. the In addition, parties are of required to notify the opposite resolution party court’s the to relevant be can that documents to access provide and duty,disclose that to of required part are parties and completely to explain and elucidate the dispute to the court. As correctly duty statutory a under are parties that noted be should It in redactedform. for example, business secrets, a court will often order its production contains, document a If volition. own its of the so do to if refuses party documents produce to party state a order or may court business the secrets, contain they because example for production, amount to a “fishing expedition” or documents are not exempt from not does request the extent the To documents. of classes defined of narrowly or documents, specific of production the for pleadings the inspection or in disclosure/discovery requests make normally parties Instead, Norway. for in documents process no is There in longer of the hearing unless the case is particularly complex and be extensive. may period close the of weeks six to two within issued normally are Judgments this However, disputes. complex large, in typically circumstances”, “exceptional filed. is claim of a case to in take place within hearing six months of oral the date on main which a statement the requires Act Disputes Norwegian The b There is no separate ground of “privilege” that would allow a (b) containing documents disclosure from withhold can Aparty (a) or ( Board Insurance disputes may also be referred to the Financial Complaints . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercial casecommonlytaketo 3.2 . Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 to theaction? bring tocourtonceithasbeeninitiated? scope of the principle of legal advice confidentiality referred confidentiality advice legal of principle the of scope the within fall must they withheld, be to documents such For litigation. of contemplation in prepared were they that fact party to withhold from disclosure documents by reason of the advice legal and lawyers its provided byitslawyers. to entrusted it information course ofsettlementnegotiations/attempts? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin iclg to: insurance &reinsurance 2019 Nw . Finansklagenemnda , hc i a us-uiil body quasi-judicial a is which ),

norway © Published and reproduced with kind permission byGlobal Legal Group Ltd,London h dsue osn. o patcl esn, h cut frequently courts allow witnessevidencetobegivenbyvideoortelephonelink. for the reasons, practical court For in consent. dispute appear the not does who examination may only be adduced in evidence if all of the parties to witness a from statement pre-prepared of a form Apractice. witness As in rarity a are statements witness consequence, influence. the to scope have in may parties than other courts that statements rather the by orally, “received” and be legal directly well-established should a evidence on all based that is tradition rule general This orally. submitted if admissible only is evidence witness rule, general a As compel suchawitnesstodoso. may court a evidence, give to attend indeed will witness a whether ordinarily secured by parties’ counsel. However, where it is unclear is attendance Witnesses’court hearings. final and interim both at Yes, the courts have the power to require witnesses to give evidence lawyers Norwegian to applies which Code Ethics The (c) Dla PipernorwayDa iclg to: insurance &reinsurance 2019 and arrests; proceedings: civil with connection in relief interim of categories broad two order to power the have courts Norwegian Whatsortofinterimremedies areavailablefromthe 4.6 evidence fortheparties. witnesses deemed be will testimony such matters factual to relates evidence their extent the to but experts, as appointed being parties the to connection certain a with witnesses for unusual not also is It parties. by used frequently are witnesses expert Party-appointed evidence beforethecourt. there is a balance between the parties with respect to all other expert the of ensure to appointed be also may determination witnesses Expert parties’ dispute. court’s the to for necessary basis be reasonable would a so establish doing Expert if appointed parties. be the may of witnesses one least at or by initiative application own an their following on witnesses expert appoint may Courts the or courts the by parties. appointed be either may witnesses Expert Are thereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 ofdnilt ad r poiie fo big due in adduced being evidence undertheprovisionsofDisputes Act. from court- prohibited are of and confidentiality of course duty a by case. protected are the mediations any private or sponsored in in redacted offers/negotiations be Settlement normally could which offers, settlement side’s other the of information no contain offers offers settlement (unless agreed otherwise between the parties) as long as such own client’s his/her to refer may lawyer proceedings. of course the in counsel its or party other the A prevents a lawyer from referring to settlement offers made by not present? give evidenceeitherbeforeoratthefinalhearing? business orstatesecrets,etc.). e.g. Act, Disputes Norwegian the under disclosure of duty the to exceptions narrow other the of one (or above (a) at to courts? experts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed

Court. other are Supreme the by there case the of consideration merit that where reasons strong or importance public Selection value, high Appeals precedential of cases the in only ordinarily of given is leave leave Such by Committee. only available final of is court (the instance) Court Supreme the to Appeal of Court the of where permission value, to appeal is low required). very An of appeal from cases a judgment in (except right of as available is appeal an Such procedure. or law fact, of questions on Appeal of Court a to appealed be may Court District a of Judgments instance). first the Conciliation Board may in certain circumstances be the court of most above, explained in as (although disputes instance civil value high to first medium of courts the normally are Courts District and which sitsinOslo. appeal of court final Norway’s is which Court, Supreme the and Courts Appeal regional six Oslo), in based Court Bankruptcy is that system court one and Courts District (62 instance first of courts 63 of federal) comprised than (rather unitary a has Norway and abovethelimit ofindemnityinapolicy. It should be noted that interest on an insurance claim is payable over issue forinsurerstoconsiderwhen handlingclaims. significant a is claim a on interest late that so low relatively is duty this with compliance for threshold the that suggests law case recent Nevertheless, payable. compensation insurance any calculate and information with insurer the necessary to assess provide the extent of coverage available under the policy to duty its with complied having insured the on contingent is interest to right insured’s The rate ofinterestisadjustedbi-annuallyandcurrently8.75%. Such The policy.loss. a of notification insurance after months two from an accrues interest under payable amounts on to right interest a with insured an provides Act Contracts Insurance The . Isthereanyrightofappealfromthedecisions 4.7 . Isinterestgenerallyrecoverableinrespectofclaims? 4.8 result ofthereliefgiven. a as suffers it loss unjustifiable any for party other the to awarded be subsequently may that compensation to any relief for such security provide requesting party the order may courts Norwegian the relief, on interim granting to established condition a As are probabilities. of necessary balance is relief interim why the for and basis proceedings interim the underpinning claim substantive the both if granted be only may measures interim and arrests Both interim reliefavailable. the in So, claim. absence of a monetary claim, interim measures are the only form of monetary a involving cases in only available arrests and to interim measures, as set out below. applicable However, arrests equally are are available is relief such when governing before the main proceedings are commenced. Most of the principles Both of these categories of relief are temporary and may be obtained of, forexample,anenforcementofficer. an act or directing the defendant to transfer an asset into the custody carry out an act, requiring the defendant to refrain from carrying a out to defendant the include compelling order an typically is circumstances, measure interim exceptional in also, restriction on an individual’s right to travel outside of Norway). An may (but lien judicial or freeze asset an of form a is arrest An measures. interim grounds? Howmanystagesofappealarethere? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral

www.iclg.com norway 197 norway Dla Piper norway Da norway

Courts are able to assist the parties in the conduct of an arbitration 4.9 What are the standard rules regarding costs? Are only in the circumstances expressly provided for in the Norwegian there any potential costs advantages in making an Arbitration Act, which broadly reflect those set out in the offer to settle prior to trial? UNCITRAL Model Law. Court intervention in arbitration proceedings is rare. Courts have the power to order a party to a dispute to pay costs of its opponent. Such cost orders are made primarily on the basis of the degree of success experienced by the parties in obtaining the 5.2 Is it necessary for a form of words to be put into a outcome sought. In ordering costs, courts take into account a broad contract of (re)insurance to ensure that an arbitration range of factors, including the general importance of the questions clause will be enforceable? If so, what form of words is required? norway litigated and whether it was appropriate of the parties to have their dispute determined by the courts rather than settled amicably. Arbitration agreements are not required to be in written form. So, an Courts may also take into account a refusal to accept a reasonable oral arbitration agreement will be enforceable. Having said that, it settlement offer in ordering costs. So, there is a potential cost may be more difficult for the parties to prove that an arbitration advantage in making a reasonable offer to settle. agreement had indeed been entered into without such an agreement existing in writing. 4.10 Can the courts compel the parties to mediate Moreover, an arbitration agreement concerning future disputes must disputes? If so, do they exercise such powers? be limited to such disputes that can arise from a specific legal relationship. In addition, it is possible to enter into an arbitration Courts have no power to compel parties to mediate their disputes, agreement concerning a dispute that has already arisen. other than in certain family matters, and in claims of low value (under NOK 125,000), which would be referred to the Conciliation Board (see question 3.1 above). 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the However, courts are under an obligation to consider the possibility courts will refuse to enforce such a clause? of mediation at each stage of proceedings. As a result, courts encourage parties to consider mediation in all claims and judges act Courts may refuse to enforce an express arbitration clause only in as mediators in court sponsored mediations. exceptional circumstances (such as where a party’s consent to the In addition, all parties are under an obligation to explore all clause was obtained by way of duress, fraud or undue influence, or possibilities for amicable resolution of their disputes, including by where at least one of the parties lacked capacity). Unreasonableness way of mediation. Failure to comply with that obligation may have has been debated as a potential broader basis for refusing to enforce cost consequences. an express arbitration clause, but whether this basis exists as a matter of law remains unsettled. 4.11 If a party refuses to a request to mediate, what consequences may follow? 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give A refusal to a reasonable request to mediate may be taken into examples. account by courts when determining the question of costs. The tribunal may grant interim measures as it sees fit, although such measures will not be enforceable in the courts. Nevertheless, the 5 Arbitration courts have the power to order the same forms of interim relief in support of arbitral proceedings as they do in the context of litigation 5.1 What approach do the courts take in relation to (see question 4.6 above). arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able 5.5 Is the arbitral tribunal legally bound to give detailed to intervene in the conduct of an arbitration? If so, on reasons for its award? If not, can the parties agree (in what grounds and does this happen in many cases? the arbitration clause or subsequently) that a reasoned award is required? Norwegian courts are favourably disposed to arbitration. They respect parties’ choice of arbitration as a method of dispute Arbitral tribunals are legally bound to give reasons for their awards. resolution and are generally disinclined to interfere in the conduct of As a general rule, reasoning in an arbitral award should be thorough. arbitral proceedings. A failure to provide sufficient reasons may constitute a ground for Party autonomy is one of the fundamental pillars of Norwegian setting aside the arbitral award, although such a failure must be arbitration law and, as such, great emphasis is placed on it by shown to have had an obvious impact on the tribunal’s decision for Norwegian courts. As a result, the general rule is that a party may not the award to be set aside. partake in arbitral proceedings unless it has agreed to do so. However, there are a few exceptions to this general rule. One exception arises in 5.6 Is there any right of appeal to the courts from the the context of party succession. A successor of a party to an arbitration decision of an arbitral tribunal? If so, in what agreement has the same rights and obligations in connection with the circumstances does the right arise? arbitration agreement as its predecessor, unless the arbitration agreement states otherwise. One further potential exception operates There is no right of appeal to the courts from the decision of an in the context of agreements that benefit third parties. In that context, arbitral tribunal. However, an arbitral award may be challenged in it is possible in some circumstances for the third party to sue and be the District Court no later than three months after the party received sued under the arbitration agreement it was notionally not privy to.

198 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Dla Piper norway Da norway the award, and may set aside by the court on the following limited ■ the award falls outside the scope of the tribunal’s jurisdiction; grounds: ■ the composition of the tribunal was incorrect; and ■ one of the parties to the arbitration agreement lacks legal ■ the arbitral procedure was contrary to law or the agreement of capacity; the parties, and it is evident this had an impact on the award. ■ the arbitration agreement is invalid; ■ the party bringing the action to set aside the award was not given sufficient notice of the appointment of an arbitrator or the arbitration, or was not given an opportunity to present his views on the case; norway

Alexander Plows Linn Kvade Rannekleiv DLA Piper Norway DA DLA Piper Norway DA Bryggegata 6, 0250 Oslo Bryggegata 6, 0250 Oslo PO Box 1364 Vika PO Box 1364 Vika Norway Norway

Tel: +47 24 13 15 23 Tel: +47 24 13 15 23 Email: [email protected] Email: [email protected] URL: www.dlapiper.com/en/norway/ URL: www.dlapiper.com/en/norway/

Alex Plows is a partner in DLA Piper's Oslo office. He advises foreign Linn Kvade Rannekleiv is a lead lawyer in DLA Piper's Oslo office. and domestic insurers and reinsurers on complex claims and disputes She advises foreign and domestic insurers and reinsurers on complex under insurance policies and reinsurance contracts. He has extensive claims and disputes under insurance policies and reinsurance experience in relation to financial lines, professional liability (including contracts. She has extensive experience in relation to professional FIPI), D&O, comprehensive crime, W&I insurance, product liability, liability (including auditors' liability), D&O, financial lines, W&I energy and business interruption insurance. insurance and product liability. Alex also assists international insurers and reinsurers (including those Linn assists both international and domestic insurers, reinsurers and operating in the London market) on a broad spectrum of issues, insurance intermediaries on a broad spectrum of insurance issues. ranging from regulatory questions, reinsurance commutations, the She has broad experience within the fields of litigation, dispute development of policy wordings to insurance intermediary issues. He resolution and general business law counseling, and frequently frequently represents clients in international and domestic arbitrations represents clients in both arbitrations (institutional and ad hoc) and (institutional and ad hoc) and before the courts. before the courts, mainly on insurance-related issues. Alex acts as a foreign law expert on issues of Norwegian law (including in litigation outside Norway) and as a dual-qualified Norwegian lawyer and English solicitor has been ranked by Chambers Global as Norway's foreign law expert on issues of English law.

DLA Piper Norway's insurance team provides clients with a full range of insurance services from claims and dispute resolution to transactional, regulatory, restructuring and emergency response. We provide legal expertise and practical advice to insurers, reinsurers, captives and policyholders as well as brokers and other insurance intermediaries, banks, capital providers and other participants in the insurance industry. We assist domestic and international clients in all areas of life and non-life insurance and reinsurance from developing policy wordings to handling claims and resolving disputes, whether in litigation or arbitration. In addition, we advise insurers and insurance intermediaries on regulatory issues, transactions and portfolio transfers.

iclg to: insurance & reinsurance 2019 www.iclg.com 199 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 33 Peru Francisco arca Patiño

estuDio arca & Paoli, abogados s.a.c. carla Paoli consiglieri

1 Regulatory forms are: the SOAT for liability regarding road vehicles; Payroll Life Insurance; and the SCTR for risk-involved activities.

1.1 Which government bodies/agencies regulate 2 (Re)insurance Claims insurance (and reinsurance) companies?

The Superintendencia de Banca, Seguros y AFP – SBS – regulates 2.1 In general terms, is the substantive law relating to insurance and reinsurance in Peru. insurance more favourable to insurers or insureds?

1.2 What are the requirements/procedures for setting up a The law in Peru is balanced in terms of insurers and insureds. new insurance (or reinsurance) company? 2.2 Can a third party bring a direct action against an The requirements to set up a new insurance or reinsurance company insurer? are as follows: 1. To incorporate an SAA (Sociedad Anónima Abierta – a No, they cannot. An exception may be made if an insurer loses a publicly held corporation), whose main object is to perform case brought by way of subrogation and he may be sued for (re)insurance business. damages. 2. To obtain a licence from SBS. 2.3 Can an insured bring a direct action against a 1.3 Are foreign insurers able to write business directly or reinsurer? must they write reinsurance of a domestic insurer? Yes. The most recent modification to the law states that direct Foreign insurers are only able to write business directly in certain action may be brought when there is a 100% cession of the risk and cases not forbidden by law. Further, they cannot act through a it is agreed that the reinsurer will pay the indemnity directly to the broker. Otherwise, they have to write reinsurance out of domestic insured (in force from August 2018). insurance. 2.4 What remedies does an insurer have in cases of either 1.4 Are there any legal rules that restrict the parties’ misrepresentation or non-disclosure by the insured? freedom of contract by implying extraneous terms into (all or some) contracts of insurance? According to insurance law, if there is misrepresentation and/or non-disclosure, the contract is null and void if it involves intention There are no implied extraneous terms for contracts of insurance or gross negligence by the insured. If there is no intention or gross except for the general rules contained in Law No. 29946 – the Law negligence, the insurance contract may remain in force, provided the of Insurance. insured notifies the insurer and offers an adjustment of the premium. The insurer can reject such offer and terminate the contract. 1.5 Are companies permitted to indemnify directors and officers under local company law? 2.5 Is there a positive duty on an insured to disclose to insurers all matters material to a risk, irrespective of Yes, companies are permitted to indemnify directors and officers, whether the insurer has specifically asked about but this must be in accordance with the Law of Insurance. them?

Yes, insureds have a duty to disclose all matters material to a risk. 1.6 Are there any forms of compulsory insurance?

Yes, there are three forms of compulsory insurance, which can only be offered and written by Peruvian insurance companies. These

200 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London inspection of any evidence requested by any party i togeth submitted lawsuit. and Courts have offeredthe power to order be the disclo to has evidence All Commercial casesusuallytakebetweenthreetoninemonths. jury Asystem doesnotexistinPeru. disputes. insurance commercial hear courts Commercial Peru the partieswishtoincorporatesuchrighttheycandoso. law.Should the to according automatic is subrogation of right The Isthereanautomaticrightofsubrogationupon 2.6 estuDio arca&Paoli,abogadoss.a.c. iclg to: insurance &reinsurance 2019 for thecourttonominate anexpertinthedescribed circumstances. uncommon is It witnesses. expert calling on restriction no is There Arethereanyrestrictions oncallingexpert 4.5 Yes, evidencefromwitnessesmaybegiveniftheyarenotpresent. Isevidencefromwitnessesallowedeveniftheyare 4.4 No, courts do not have powers to require witnesses to give evidence. Dothecourtshavepowerstorequirewitnesses 4.3 Yes, provideditismarkedasona“withoutprejudice”basis. (c) Yes. Yes.(b) (a) Canapartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Whichcourtsareappropriateforcommercial 3.1 Litigation–Procedure 4 Litigation–Overview 3 payment ofanindemnitybytheinsurerordoes to theaction? bring tocourtonceithasbeeninitiated? jury? insurer needaseparateclauseentitlingsubrogation? experts? expert inadditionorplaceof party-appointed witnesses? Isitcommontohave acourt-appointed not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof sure/discovery and n the lawsuit. r ih the with er

losing party, andinterestscostsareimmaterial. the by paid be costs legal that dictate to tend courts the the since No, at fees) attorney (including party discretion ofthecourt. winning the to granted The losing party pays the costs of the trial and any monetary awards Yes; therateis0.62% of appealavailableinPeru. in case of non-correct application of the law. There is only one stage or defence, or claims of points on based Yes,made be may appeals of (arrest) embargo goods orobtainingabankguarantee. include Peru in remedies interim Available Nonetheless, as per the situation generated in question 2.3 above, it above, 2.3 question in generated situation the per as Nonetheless, suffices. arbitrate to intention the evidencing wording General No. the of out bylaw. fulfilment the analyse set grounds compulsory to the of arbitrator sole or tribunal arbitration only arbitration in intervene will Courts autonomy. jurisdiction arbitral to as clear is law The See theanswertoquestion4.10above. Without it, parties cannot bring action to the Cour compulsoryconciliationa beforehearinga is There . Whatarethestandardrules regardingcosts? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 Isthereanyrightofappealfrom thedecisionsof 4.7 Whatsortofinterimremedies areavailablefromthe 4.6 . Isitnecessaryforaformofwordstobeputinto 5.2 Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 Arbitration 5 offer tosettlepriortrial? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts? is required? what groundsanddoesthishappeninmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan courts offirstinstance?Ifso,onwhatgeneral clause willbeenforceable?Ifso, whatformofwords contract of(re)insurancetoensure thatanarbitration to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty per annum

. www.iclg.com ts of Justice of Peru. ny court action. action.court ny 201 Peru 202 Peru © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com forms ofinterimrelief. as guarantee bank a or goods on embargo an grant may courts The Peru Whatinterimformsofreliefcan beobtainedin 5.4 No, thereisnosuchpossibility. Notwithstandingtheinclusionof anexpress 5.3 accepts arbitrationinwritingrespectofthereinsurancecontract. would be advisable to have a form of evidence by which the insured estuDio arca&Paoli,abogadoss.a.c. ethics, seekingcreativeandinnovativesolutions. professional of standards highest the to transparency,adhering and professionalism with them advise to is clients to commitment Our dedication. greatest the with services personalised high-quality provide we whom to clients with identification full is organisation our of characteristic main The ethics, qualityandperformance. oil abroad, from associations Our law firm has a qualified team of lawyers selected from the P&I most prestigious law schools in Peru and the world, prepared within strict concepts of insurance mutual adjusters, claim companies, insurance foreign companies andoffshore activities,terminals,freightforwarders and maritimeagents,amongothers. and national and companies shipping to law,commercial and maritime in mainly mostly services, legal providing to dedicated firm law a is Peru, – Estudio Lima in established Paoli, & Arca United Nations Asia andFarEastInstitute,Japan. the UNAFEI; the from alumni an is He Commerce. of Chamber Lima the of Center Arbitration and Conciliation International and National the at arbitrator an as acted He seminars. international and national at speaker a and Association Lima the of Commission Law Maritime the of participant a Law, Maritime in the specialising of Lima, Law of University of Faculty the of Professor former a is He Committee”. International “Maritime the of Peruvian Member and the Association Law Maritime of member a and President former the is Patiño Arca Mr. Associations. P&I Mutual for company correspondent Servicios a S.A.C., Interlog of Manager General and Abogados Estudio Paoli of & Arca Partner University Principal and the Founder by England. Southampton, revalidated degree a of University the from Law Maritime in LL.M. Madrid. of Complutense with Perú, del Católica Mr.Universidad Pontificia from graduated and lawyer a is Patiño Arca examples. courts willrefusetoenforcesuchaclause? support ofarbitrationfromthecourts?Pleasegive arbitration clause,isthereanypossibilitythatthe

R:www.arcalaw.com.pe URL: [email protected] +511 4752930 Email: Tel: Peru CORPAC –SanIsidro,Lima Calle Virtud yUnion#160 ESTUDIO ARCA &PAOLI, Abogados S.A.C. Francisco Arca Patiño

[email protected] Please refertoquestion4.7above. award. Yes, the arbitral tribunal or single arbitrator must give reasons for its . Isthereanyrightofappeal tothecourtsfrom 5.6 Isthearbitraltribunallegally boundtogivedetailed 5.5 Faculty ofLawtheUniversityLima. the in Societies of Course the for Practice of Professor as acted a She and P&I Law, Maritime Bar Mutual Association. Lima the of of Committee Law Maritime of the of member Association Director Peruvian for and the member a of company is Publications Consiglieri Paoli correspondent Ms. a Associations. S.A.C., Servicios of Interlog of Partner Manager Operations Main and Abogados a Paoli & is Arca Estudio She England. of Association” Indemnity and Owners’Protection Steamship Standard P&I “The Mutual Association the in Insurance Maritime the at internship an conducted She Lima. of University the from graduated and lawyer a is Consiglieri Paoli Ms. circumstances doestherightarise? reasoned awardisrequired? decision ofanarbitraltribunal?Ifso,inwhat the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in

iclg to: insurance &reinsurance 2019 R:www.arcalaw.com.pe URL: +511 4752930 [email protected] Email: Tel: Peru CORPAC –SanIsidro,Lima Calle Virtud yUnion#160 ESTUDIO ARCA &PAOLI, Abogados S.A.C. Carla PaoliConsiglieri chapter 34 Portugal José limón cavaco

gPa – gouveia Pereira, costa Freitas & associados – sociedade de advogados, sP, rl ana isabel serra calmeiro

1 Regulatory ■ a description of any close relationships with other entities; ■ a name and address of the Claims Representative; ■ an identification of the person responsible for the 1.1 Which government bodies/agencies regulate authorisation procedure; and insurance (and reinsurance) companies? ■ a business plan. Once the authorisation request is submitted, a decision must be According to the Portuguese Legal Framework on the Access to and taken by ASF and communicated to the applicant within the Exercise of the Insurance and Reinsurance Activity (Decree-Law maximum deadline of 12 months counting from the date of the th 147/2015 of 9 September), the Insurance and Pension Funds application. Should the communication not take place within the Supervisory Authority (Autoridade de Supervisão de Seguros e referred deadline, the application will be deemed rejected. Fundos de Pensões – “ASF”) is the national authority responsible for the regulation and supervision of insurance, reinsurance, pension funds and their management companies and insurance mediation, 1.3 Are foreign insurers able to write business directly or both from a prudential and a market conduct point of view, must they write reinsurance of a domestic insurer? including the supervision of the activity of national and international insurance and reinsurance companies in Portugal. Foreign insurers may in fact write business in Portugal as established in Decree-Law 147/2015.

1.2 What are the requirements/procedures for setting up a In case the insurer is authorised in one Member State of the new insurance (or reinsurance) company? European Union to carry out insurance activity, then it may carry out the insurance activity in Portugal through a branch or under the In Portugal, an insurance or reinsurance company is incorporated freedom to provide services’ regime, provided a notification under the form of a company by shares (“sociedade anónima”), or a procedure (carried out between the authorities of both countries) is mutual insurance or reinsurance company (a limited liability complied with. cooperative company) or a European company. Minimum capital In case the insurer is incorporated in a third country (outside EU), it requirements, which vary depending on the type of company and on may write business in Portugal through a branch provided a the risks such company will cover, must be complied with. previous authorisation is granted by ASF. The proceeding for the An authorisation to carry out the insurance or reinsurance activity concession of this authorisation is considerably more complex than must be previously requested to ASF in which concession depends the one required to incorporate a branch of a European insurer. on the fulfilment of the following requirements for the future company: 1.4 Are there any legal rules that restrict the parties’ ■ the shareholders having adequate capacity to ensure a sound freedom of contract by implying extraneous terms and prudent model of management of the company; into (all or some) contracts of insurance? ■ a business plan is submitted according to the legal rules; In Portugal, freedom of contract is restricted, among other legal ■ eligible basic own funds comply with the minimum capital th requirement; instruments, by the Civil Code and by Decree-Law 72/2008 of 16 April – the Portuguese Insurance Contract Law (hereinafter referred ■ eligible own funds are sufficient to comply with the solvency as “PICL”). capital requirement; and ■ a system of governance compliant with the applicable rules. Firstly, article 280º of the Civil Code establishes that the contents of contracts cannot be contrary to public order rules. The request for authorisation must be submitted to ASF with the following documentation: PICL establishes mandatory terms which restrict freedom of contract, namely in the cases of mass risks insurance, and generally ■ the decision for incorporation of the company; the prohibition of contracting insurances which cover certain risks ■ a project on the articles of association of the company; such as criminal, disciplinary or misdemeanour responsibility ■ identification of the shareholders; (although they may cover the civil liability associated to either of ■ a detailed description of the system of governance; them), as well as accidental death of children under 14.

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© Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com theinsurance contractforeseeing saidright;and ■ direct actionagainstaninsurerinthe followingcases: a bring also may party third a that states PICL the of 140º Article – solely insurer the against injured the by filed be must accidents car from resulting damages claim to view a with action legal the that establishes law insurance liability civil (motor) Car Canathirdpartybringdirectactionagainstan 2.2 insured may entail the exclusion of said clauses fr ma thos communicate favourable to failure the most that being insured, the in interpreted be to clauses Also Decree-Law 446/85 of 25 of thecontract,premiumpayment,groupinsurance,etc. contractual freedom of the parties, namely concerning the execution restraining including insured the and policyholder the to protection However, regarding mass risks insurance, the PICL bestows special for obligations insurers andinsureds. and rights of determination the in balanced quite generally is insurance to relating law substantive Portuguese The Ingeneralterms,isthesubstantivelawrelatingto 2.1 public civil liability insurance regarding numerou fireinsurance–Decree-Law268/94of25 ■ ■ Decree-Law – players sport regarding accidents personal labouraccidents–Law98/20094 ■ caraccidents–Decree-Law291/2007of21 ■ ■ most the insurances, compulsory emblematic casesbeingtheonescovering: of types numerous are There Arethereanyformsofcompulsory insurance? 1.6 a shareholders’ generalassemblyresolution. are damages directors company’s resulting from act or omission of the the director concerning which was based upon is that company deemed the be by may indemnified it where case only The in creditors company’sresult ofactsandomissionsinbreachtheirlegalduties. the to and shareholders the to company, civil liability of directors and officers for the damages caused to the public the foresees Code Companies Commercial Portuguese The Portugal Arecompaniespermitted toindemnifydirectorsand 1.5 in inserted clauses and standard contracts,suchasinsurancepolicies. terms standard of face the in consumers and individuals protect to view a with clauses contractual abusive Also Decree-Law 446/85 of 25 gPa –gouveiaPereira,costaFreitas&associados 64º ofDecree-Law291/200721 aae nuac rgrig ses oee b leasing by covered assets regarding insurance damage ■ (Re)insuranceClaims 2 officers underlocalcompanylaw? insurer? insurance morefavourabletoinsurersorinsureds? activities. 10/2009 of12 contracts –Decree-Law149/95of24 th January; th th October allows ambiguous standard October foresees the prohibition of st August. th September; th July; th om the contract. October;and st August; e clauses to the to clauses e s professional nr o the to nner cfr . article . nue ado te oiyodr ut elr eaty all exactly were notspecificallyaskedforbytheinsurer. declare considered they if even risk the are assess to insurer must the for which significant reasonably and of aware policyholder is he/she that the circumstances and/or the contract, insurance insured the of execution the upon or prior PICL, insurer all matters material to a risk. According to article 24º of the the to disclose to insured the on duty positive a is there Portugal, In emnt i b poig ht t ol nvr a cvrd h risk the covered associated tothefactthatwasomittedorimpreciselydeclared. had never would it that proving by it terminate may within a certain deadline propose an alteration to the contract or In case of negligent misrepresentation or non-disclosure, the insurer third parties)andtowithholdtheinsurancepremium. or insured the (to compensation relevant or capital insurance the of the non-disclosure, or payment insurer,refuse the to by entitled misrepresentation voidable being is contract intentional of case In or non-disclosure – articles 24º, 25º and 26º of PI several remedies which depend on the nature of the to duty insurers a all matters material breaches to the evaluation insured of or policyholder a Where reinsurance contractforeseessuchpossibility.the if and insurer the of insolvency of case in conditions) certain the circumstances, certain in reinsurer may be responsible directly before the that insured, namely (in allows law the Nonetheless, terms andconditions. Civil Code), generally only the parties to a contract are bound by its Pursuant to the principle of relativity of contracts (article 406º of the the insurancecontracttobeenforced. of clause a in foreseen be to need not does subrogation of right The is compensation paid insured againstthethirdpartyresponsiblefordamages. has who the of rights the in insurer paid) amount the (for subrogated automatically the that states which PICL, the of 136º article in established is subrogation of right The Generally and pursuant to the dispositions of the Civil Procedure Civil the of dispositions the to pursuant and Generally Whatremediesdoesan insurer haveincasesofeither 2.4 Cananinsuredbringadirect actionagainsta 2.3 insurance an that party third the informed insured the if ■ . Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 3 Litigation – Overview Litigation–Overview 3 misrepresentation ornon-disclosurebytheinsured? reinsurer? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? whether the insurer has specifically asked about th disputes? Does this depend on the value of the insurers all matters material to a risk, irrespecti payment ofanindemnitybytheinsurerordoes the thirdpartyandinsurer. between place took negotiation direct a and exists contract iclg to: insurance &reinsurance 2019 a risk, the insurer has CL. misrepresentation icoe to disclose se to ve of ury? rance em? © Published and reproduced with kind permission byGlobal Legal Group Ltd,London vdne a b odrd vn eoe cs hs commenced has case a before according toarticle419ºoftheCivilProcedureCode. even ordered be may evidence or expertise evidence may become impossible to obtain, the relevant testimony,certain that fear objective the inspection be there Should Authorities. Public to requested be also may the information the of referred The decision claim. the the for order important to are non-parties these that and provided to parties action, the both power regarding objects other the includes and information documents, of inspection and disclosure/discovery above-mentioned The if itwasnotsubjecttorequestofsuchkindbyaparty. to required achieve the truth diligences of the facts and the all fair composition of claim, even order to power the has court the Code, Procedure Civil the of following the and 410º article to According one yeartodecide. than less take generally Peace of Judges and Tribunals Arbitration There is no legal mechanism to shorten the referred appealAngenerally takesawardedbeyearoneto by fi the in decideddepending on bethe jurisdiction to and specific years court wh three and one between com Court Civil a in case commercial a Portugal, In In Portugal,civilclaimsmaynotbeheardbyajury. Portugal of claimsinvolvingamountsnotexceeding€15,000.00). an arbitration clause in writing); and to Judges of Peace (in the case effect that for established parties the the (when tribunal arbitration the to to brought: crime); a considered also be be event the (should also Courts Criminal may disputes insurance Nevertheless, the be where event whichgavecausetothedisputetookplace. district should the of Court value Civil instance any first the to of brought disputes insurance commercial Code, gPa –gouveiaPereira,costaFreitas&associados iclg to: insurance &reinsurance 2019 the districtofresidence. hearing final the at either personally or by a videoconference operated witness from the court of the by given is evidence Generally, Dothecourtshavepowers torequirewitnesses 4.3 moral or physical of breach a integrity and/orintrusionintofamilylife. entail would disclosure whose the course of settlement negotiations/attempts, as well as documents given by or correspondence exchanged with lawyers, or produced in advice to relating documents disclosing from withhold can party a Under the Civil Procedure Code and the Law Bar Association Rules, Canapartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Litigation–Procedure 4 to theaction? bring tocourtonceithasbeeninitiated? give evidenceeitherbeforeorat thefinalhearing? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin ere the case pends. time frame. the highthecourt. ol takes monly s instance, rst borne attheendbydefeatedparty. and parties both by advanced are expertise the of costs the Code, Pursuant to the rules of the Civil Procedure Code and the Court Fees by thenatureofexpertise(e.g.medicalexpertise). experts can only meet the parties individually if it is strictly required the context, this In claim. the in discussion under subject the with or parties the with relation any have cannot experts the case, any In each party appoints one expert, and the thirdf isthe ap onexperts three of panel aappoint mayjudge an should or,In case of particular parties complexity and if one the of the of agreement notbeachieved,indicatedbythejudge. agreement expert mutual single a by appoints judge indicated the possible, be not this Should or is alwaysperformedbythepublicInstituteofLegalMedicine. hospital service, public appropriate laboratory. an This is, for example, the by case of medical expertise which performed be to is and judge the by ordered is expertise the that is rule primary The other or sickness impediment; and(iv)bywrittentestimony. of case in of service public country or the residence personal of a authorities witness’ the from (i) the (iii) overseas; lives witness to the of: when residence, sent means rogatory letter by a given (ii) be also can videoconference operated from the court of the district of residence; evidence the Code, In the special cases established in article 500º of the Civil Procedure ■ seizure of assets, goods or documents to prevent dissipation prevent to documents or goods assets, of seizure embargo ofconstruction works;and ■ to debts ■ of payment the ensure to assets debtors’ of seizure applicable ■ (normally compensation of payment provisional ■ provisional payment of alimony (to spouses, children or other suspensionofillegalcompaniesshareholders’ resolutions; ■ provisionalrestitutionofthepossessionproperties; ■ ■ the assume also may it and following specifictypesasestablishedbytheprecedinglaw: right, threatened the of protection the for adequate is that form any assume may order protective The the CivilProcedureCode. a protective order adequate to protect such right – and irreparable loss to a legitimate right, the Civil Court may award serious suffera to someone for risk imminent an is there Whenever . Arethereanyrestrictionsoncalling expert 4.5 Isevidencefromwitnesses allowedeveniftheyare 4.4 . Whatsortofinterimremediesareavailablefromthe 4.6 amount determinedbythejudgeandtobetakenintocourt. an in fine a to subject is evidence give to refuses who witness The above. 4.1 question to answer the per as hearing final the before evidence Nonetheless, the courts have the powers to require witnesses to give experts? not present? courts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed or occultation. the creditor; to thoseinjuredincaraccidents); dependants); www.iclg.com parties require so, the pointed by the judge. see ollowingterms: article 362º of 205 Portugal gPa – gouveia Pereira, costa Freitas & associados Portugal

This type of proceeding, which is by nature urgent (it may take up to For the abovementioned purpose, alongside with court’s final and two weeks to be decided) and provisional, may be requested either definitive sentence, the winning party has the right to claim the court prior to the relevant law suit or during the pendency of said action. costs which were previously advanced by him/her from the defeated party. 4.7 Is there any right of appeal from the decisions of the Should the parties terminate the proceeding by means of an courts of first instance? If so, on what general amicable settlement, the court fees may be reduced. The proportion grounds? How many stages of appeal are there? of this reduction is arbitrarily determined by the judge and may be more relevant in high value claims. The defeated party in a law suit has the right to appeal the decision In Portugal, there is no cost protection system for parties who make of the first instance court to a higher court. The deadline to request an offer which is rejected and who then obtain a better result before Portugal an appeal is 30 days counting from notification of the decision. court. There are two levels of appeal: a first one to the Court of Appeal of the competent territorial area; and a second one to the Supreme 4.10 Can the courts compel the parties to mediate Court only for specific legal questions. disputes? If so, do they exercise such powers? An appeal to the Court of Appeal is only allowed for claims in an amount above €5,000.00, while appeal to the Supreme Court is In the Portuguese legal system, there is not a rule that allows the allowed for claims above €30,000.00. courts to compel the parties to mediate disputes. The appeal to the Court of Appeal may be based on either legal or Law 29/2013 of 19th April, which establishes the legal framework of factual grounds. Considering that the witnesses’ testimonies are civil and commercial mediation, foresees the principle that the audio-recorded, the appeal may also challenge the interpretation of mediation procedure is voluntary and is subject to the informed and such statements performed by the court. The appeal to the Supreme clear consent of the parties. Moreover, this law establishes that the Court can only be grounded on legal grounds relating either to parties are free to abandon this procedure at any phase of its course, substantial or procedural questions. and that the refusal to commence or to proceed with the mediation The request of appeal is filed with the court whose decision is being procedure cannot be deemed as a breach of the legal obligation of appealed, and its transition to the higher court depends on the cooperation of the parties. permission of the former. The granting or refusal of such permission depends purely on formal fundaments such as the 4.11 If a party refuses to a request to mediate, what amount of the claim or the fulfilment of the deadline. The eventual consequences may follow? refusal of this permission may in its turn be subject to an appeal to the higher court. According to the previous answer, there is no rule in the Portuguese The decision of an appeal normally takes up to one year. legal system allowing the courts to compel the parties to mediate disputes. 4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate? 5 Arbitration

The interest must be claimed by the plaintiff in the initial petition otherwise it is not awarded by the court. 5.1 What approach do the courts take in relation to Decree 277/2013 and Notice of 3rd January 2017 establish the arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able following interest rates calculated per year: to intervene in the conduct of an arbitration? If so, on ■ 4% for civil contractual or non-contractual credits; what grounds and does this happen in many cases? ■ 7% for credits of commercial companies or other commercial entities; and In Portugal, Voluntary Arbitration is ruled by Law 63/2011 of 14th ■ 8% for credits of commercial companies towards other December (Law of Voluntary Arbitration – “LVA”). commercial companies for commercial transactions. This Also, article 122º of PICL allows that any litigation concerning the rate does not apply to compensations paid by insurance validity, execution and non-fulfilment of insurance contracts may be companies. submitted to arbitration tribunals, even if the subject under Should the court convict the defendant to pay the debt (capital) to discussion concerns compulsory insurance. the plaintiff, it will also convict him/her to pay interest calculated Should the parties establish an arbitration clause in a contract or from the moment when the legal obligation was mature until the other written document, namely in an insurance policy, and one of moment when it is duly satisfied by the debtor. the parties submits the litigation to the state court, the state court must terminate this proceeding – article 5º of LVA. 4.9 What are the standard rules regarding costs? Are The state court may also intervene in the conduct of an arbitration in there any potential costs advantages in making an the following cases: offer to settle prior to trial? ■ to appoint (under request of one of the parties) one or more of the arbitrators whenever the other party abstains from doing In Portugal, the amount of the court costs are proportional to the so; value being discussed in the legal proceeding. These costs are ■ to destitute one or more of the arbitrators further to a advanced to the court by both parties at the beginning of the “destitution proceeding” being carried out in the context of proceeding and borne by the defeated party at the end of said the arbitration proceeding; and proceeding. Should there be a partial conviction, the court also ■ assist the arbitration tribunal with the production of certain divides the costs proportionally between the parties. types of evidence.

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Should the defeated party not comply with the tribunal award, the Should the tribunal breach this obligation, the award will be winning party in an arbitration proceeding is entitled to request the declared null and void. The state court may remit the award back to execution of the award to the state court. the tribunal so that the reasons can be given.

5.2 Is it necessary for a form of words to be put into a 5.6 Is there any right of appeal to the courts from the contract of (re)insurance to ensure that an arbitration decision of an arbitral tribunal? If so, in what clause will be enforceable? If so, what form of words circumstances does the right arise? is required? According to article 39º of LVA, the parties can only appeal from the The requisites of validity of an arbitration clause are the following: contents, legal or factual grounds of the arbitration tribunal award (i) it must be agreed in writing; and (ii) it must identify the specific should that possibility be specifically agreed by the parties in the Portugal legal relationship (between the parties) that, in case of dispute, shall arbitration clause. be submitted to arbitration. Should that not be the case, the parties can only request the state court to declare the tribunal award null and void for the following 5.3 Notwithstanding the inclusion of an express reasons: arbitration clause, is there any possibility that the ■ an invalid arbitration clause; courts will refuse to enforce such a clause? ■ a breach of the civil procedure principles of “parity of the parties” and/or “possibility to contradict” in the course of the The courts can only refuse to enforce an arbitration clause should arbitration; that clause be null and void, namely if it does not comply with the ■ a decision regarding a subject which is out of the scope of the requisites referred to in the previous answer. arbitration; The parties may agree to arbitration through an arbitration clause ■ an invalid composition of the arbitration tribunal panel; entered into either before the dispute has arisen or afterwards. ■ a final award not being produced in writing or not being duly substantiated; 5.4 What interim forms of relief can be obtained in ■ a final award being notified to the parties after the relevant support of arbitration from the courts? Please give legal or contractual deadline; examples. ■ the arbitration subject not being referable to Portuguese law; and The arbitration tribunal can generally make use of all the evidence ■ the contents of the award breaching principles of proceedings indicated in the answer to question 4.1, namely the international public order. disclosure of documents if necessary with the state court assistance. The request of annulment of the tribunal decision must be requested Furthermore, unless the parties have otherwise agreed, the arbitration to the state court within 60 days from the notification of the decision tribunal may also award protective orders generally under the to the relevant party. grounds and procedural terms indicated in the answer to question 4.6. According to article 5º of LVA, a state court cannot order an injunction preventing any of the parties to start an arbitration proceeding.

5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required?

According to article 42º of LVA, the tribunal is legally bound to give detailed reasons for its award, unless the parties had agreed to renounce such requisite.

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José Limón Cavaco Ana Isabel Serra Calmeiro GPA – Gouveia Pereira, Costa Freitas & GPA – Gouveia Pereira, Costa Freitas & Associados Associados Palácio Sottomayor Palácio Sottomayor Rua Sousa Martins, 1, 6º Andar Rua Sousa Martins, 1, 6º Andar 1050-217 Lisboa 1050-217 Lisboa Portugal Portugal

Tel: +351 213 121 550 Tel: +351 213 121 550 Email: [email protected] Email: [email protected] URL: www.gpasa.pt URL: www.gpasa.pt

Portugal José is a Partner at GPA Law Firm which he joined in 2005 and is now Ana has been a lawyer at GPA Law Firm since April 2015 and a Head of the firm’s Insurance & Reinsurance department. He is member of the Insurance & Reinsurance Department. She graduated admitted to the Portuguese Bar and graduated in tax matters from the from the University of Law of Lisbon (2012), and has completed a Instituto Superior de Ciências do Trabalho e da Empresa. postgraduate course on Civil and Insurance Law (2014). She also has a Master’s Degree in Corporate Law from the Universidade Católica José’s practice comprises a very significant international insurance & Portuguesa – School of Lisbon, having written her Research Master’s reinsurance component, including in Portugal, Angola, Cape Verde thesis on the topic of “Issues of Double Insurance” (2016), currently and Mozambique. In Portugal he has more than 20 years of being published. Ana’s practice focuses on D&O policies, analysis of experience in advising international insurance companies, including in defence costs, policy draft and revision, analysis of policy coverage, Life and Non-Life insurances, both in pre-litigation and litigation dispute resolution, pre-litigation and litigation. Ana has also authored phases, D&O litigation proceedings, arbitration, policy revision, specialised insurance law publications such as “Unfair Contract Terms insurance compliance and corporate operations. in Insurance Contracts” and “Reflexions on the Legal Regime of José is currently Client Curator of a major Portuguese credit insurance Allocation in Civil Liability Insurance”. company, has contributed as an author in several publications and served as a speaker in conferences in Portugal and overseas on different legal areas such as insurance, construction law (FIDIC Contracts) and local content in Oil & Gas legislation.

Gouveia Pereira, Costa Freitas & Associados, Sociedade de Advogados, R.L. (GPA) is an independent law firm with its head office in Lisbon whose mission is “Teaming with our Clients”. In fact, it is GPA’s commitment and concern to build and maintain a lasting relationship with its clients, becoming another member of their team. GPA’s team of lawyers provides specialised counselling in all the main areas of Law, namely Corporate, Mergers and Acquisitions, Insurance, Banking, Finance, Public Law, Real Estate, Tourism, Labour, Oil & Gas and Litigation, allowing the firm to render a rigorous multidisciplinary service based on professional excellence. With more than 80 Lawyers and with offices in Lisbon, Algarve and Madeira, GPA has created the GPA Network, a network of law firms with offices in all the district capitals of Portugal, also being present in Angola, Cape Verde, Mozambique and São Tomé e Principe.

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Jurinflot international law Firm natalia usanova

1 Regulatory (including state) insurance, in property insurance related to supplies and work for state needs, as well as in insurance of property interests of the State and Municipal Bodies. 1.1 Which government bodies/agencies regulate The Ministry of Finance announced the development of a draft law insurance (and reinsurance) companies? that would make it possible to work in Russia for affiliates of insurance and reinsurance companies from other member countries The main part of functions and powers on regulation of the market of the World Trade Organization. The Law shall come into force on of insurance and insurance (reinsurance) supervision was August 22, 2021. transferred to the Bank of Russia. Currently, the work of foreign insurance companies in Russia is prohibited by the law. Foreign insurers can enter the Russian market 1.2 What are the requirements/procedures for setting up a only by reinsurance via a Russian insurer. new insurance (or reinsurance) company? 1.4 Are there any legal rules that restrict the parties’ Only a legal entity can act as an insurer in the Russian Federation. freedom of contract by implying extraneous terms Both individuals and Russian and foreign legal entities can be into (all or some) contracts of insurance? founders of an insurance company. Russian Insurance Law contains several imperative provisions that One of the main measures of the State Regulations is licensing, i.e. restrict the parties’ freedom of contract by implying extraneous registration of insurance companies for insurance activity. No terms into contracts of insurance. Usually, such provisions contain insurance company may operate in the Russian Federation without direct prohibition for the parties to avoid prescribed regulation by duly issued licence. using extraneous terms, or declaring terms and conditions of The law also provides for the minimum amount of authorised capital contracts construed to declare the prohibited relations as null and of insurance companies. void. Among them is Art. 928 of the Civil Code of the RF providing that insurance of unlawful interests is not allowed. Insurance of 1.3 Are foreign insurers able to write business directly or losses from participation in games, lotteries and betting is not must they write reinsurance of a domestic insurer? allowed. Insurance of expenses to which a person may be forced to release hostages shall not be allowed. Terms and conditions of According to Art. 6 of the Law of the Russian Federation “On insurance contracts contrary to these provisions shall be void. Organization of Insurance Activity” only legal entities that are Another example is Art. 933 of the Civil Code which provides that licensed to carry out insurance activities in the Russian Federation under the contract of insurance of entrepreneurial risk, the latter can are recognised as insurers. Licences for carrying out insurance be insured only for the insured himself and only in his favour. The activities in the territory of the Russian Federation are not issued to insurance contract providing the insurance of entrepreneurial risk of foreign legal entities. In addition, according to Art. 4 of the Law, a person who is not the insured shall be void. The contract of insurance of property interests of legal entities located in the insurance of entrepreneurial risk in favour of a person who is not the territory of the Russian Federation (except for reinsurance and insured is considered concluded in favour of the insured. mutual insurance) and property interests of individuals – residents Further on, part 1 of Art. 940 of Russian Civil Code provides that the of the Russian Federation – can only be carried out by Russian insurance contract must be concluded in writing. Failure to comply insurers. with the written form entails invalidity of the insurance contract, Implementation of insurance activities by foreign insurance with the exception of a contract of compulsory state insurance. companies in the Russian Federation through insurance agents, There are two provisions in Merchant Shipping Insurance brokers and other intermediaries (financial consultants) does not Legislation restricting the parties’ freedom of contract, both concern comply with the legislation of the Russian Federation either. abandonment by the insured of all rights for the ship and cargo to the Foreign insurance companies are able to work freely throughout the insurer in order to claim the full insured amount. Agreement of the territory of the Russian Federation, although only through their parties contrary to these rules shall be void. subsidiaries. However, foreign insurance companies cannot There are some other imperative provisions of the Civil Legislation, participate in activity on providing for life insurance, compulsory such as time bars. Russian law establishes that the parties to any iclg to: insurance & reinsurance 2019 www.iclg.com 209 © Published and reproduced with kind permission by Global Legal Group Ltd, London 210 russia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com the of benefit the for concluded actually is contract the if even for the benefit of persons to whom harm was caused (beneficiaries), concluded as considered be shall harm causing for liability of risk on contract a Code, Civil the of of 931 3 Art. Section to According not is beneficiary the specified, butimplied. where contracts, insurance be may There concluded, areentitledtobringdirectactionsagainsttheinsurer. was contract the favour whose in persons the i.e. beneficiaries, The other of person (beneficiary). favour in or favour his in either the insured, the between and insurer concluded be may contract insurance property The Canathirdpartybringdirectactionagainstan 2.2 imposed by law are quite limited (see question 1.4 impera The obligations.and rights mutual balanced contract, the insurer and the insured may negotiate Concludi insured. the andinsurer the concludedby ins an of basis the on out carried is insurance The Ingeneralterms,isthesubstantivelawrelatingto 2.1 and someothertypesofinsurance. of insurance notaries of liability liability professional of insurance operators, tour tourist includes insurance imputed The an activity. out carrying for necessary of is policy rules insurance an of the the existence but law, which by established not for are rates insurance insurance and “imputed” insurance an also is There of owner the of liability hazardous objects. civil of the of insurance passengers obligatory of aircraft; respect in civil carrier the owners; of vehicle insurance of liability insurance liability them; to equivalent persons and servants civil state of insurance health; and life state (tourists, sightseers); state insurance of employees of tax authorities; passengers of insurance personal insurance: compulsory of Types by virtueofLaw. arise insured the and insurer the between relations insurance which Under Russian Law, compulsory insurance is a form of insurance in Arethereanyformsofcompulsory insurance? 1.6 These contracts. labour compliance with the Tax in LawoftheRussianFederation. their strictly made be in shall however, indemnifications, this and directors stipulating indemnify may officers companies the meantime, the In officers maynotbelawfullyinsured. such interests Therefore, as payments of penalties and Code). fines imputed on Civil directors and Russian under of 928 allowed (Art. Law not Russian is interests unlawful of insurance Generally, Arecompaniespermittedtoindemnify directorsand 1.5 bar time issue cannotbecoveredbytheagreementofparties. the and bar time of application the and calculating change of order cannot insurance, of contract the including contract, Jurinflot internationallawFirm (Re)insuranceClaims 2 officers underlocalcompanylaw? insurer? insurance morefavourabletoinsurersorinsureds? and achieve well- above). ng an insurancean ng urance contract urance tive provisions tive nai i te icmtne ta te nue hd ocae have concealed already disappeared. had insured the that circumstances the if invalid recognised be contract insurance the that demand to right the have not does insurer the that exception the with valid is provision This contract. essential circumstances, the insurer may request the invalidity of the if and contract concealed has policyholder the that out turns it execution its during insurance an into entered have parties the When insurer to terminate the contract or to demand to recognise the it invalid. for reason a be may this circumstances, material some insurer its after if, And conclusion, it contract. turns out that the policyholder has not a disclosed to the into enter to refuse may insurer the are circumstances such unknown and should not be if known to the insurer. amount If this is not insured done, the and event insured the of occurrence of probability the determining for essential are that circumstances of insurer the inform to obliged is insured The insured cannot bring direct actions against the rei remains thethe person in charge underof the originally insurer insu The beneficiary. a nor contract, to party a neither is insured The amount.insured insurancecontract paymenttheforinsurance of com insurer under this contract remains liable to the i consideredan insured in this last contract. In ca contract under insurer(main contract) the who Codehas entered Civil into a the rei of 967 Art. Under sprt cas ettig urgto i nt need not is subrogation subrogation right may entitlingbe excluded by clausethe contract o separate A been providedtohim. marine insurance contract on the basis that such information had not the execute to refuse subsequently cannot latter the insurer, the by marine the of conclusion of insurance contract the insured did not reply to the queries requested time the at if insurance, marine In insurance contract orinawrittenrequestofaninsurer. an of form standard the in stipulated or him, to known The insured shall disclose all essential information as to a risk either . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirect actionagainsta 2.3 of compensation for damage withintheinsuredamount(part4of Art. 931). insurer the against claim direct of right the has concluded be to considered is insurance of contract the benefit whose for person the contract, insurance the by provided or law the that its insurance is compulsory, and also in other cases specified by fact the to due insured is harm causing for liability when cases In contract doesnotspecifyinwhosefavouritwasconcluded. the or harm, causing for responsible person another or policyholder . Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer needaseparateclause entitlingsubrogation? them? payment ofanindemnitybythe insurerordoesan whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof iclg to: insurance &reinsurance 2019

nsured under the main seof reinsurance, the nsurer. nsurance contract is red. Therefore, the f insurance, as Art. pensationtheor h reinsurancethe an contract main n insurance an d bt the but ed, russia © Published and reproduced with kind permission byGlobal Legal Group Ltd,London exceed 10businessdays. Compulsory Insurance of Civil Liability of Vehicle Owners shall not that the response time to a pre-trial claims on disputes deriving from be followed before the claim is brought to the to court. The law specifies procedure claim pre-court so-called compulsory a is There considered as10–30days. is claim a of consideration for period reasonable A reasonable. be claims shall either be specified in insurance the insurance contract, of or it should consideration by for term The claims law. by initial specified not is of companies consideration for limit time The not existinRussianLaw. does cases commercial on jury a before hearing a of procedure The jurisdiction of a local Justice Court Judge. exceed 500 minimum wages established by the law sha of pricethe individual andan isinsured thewhere Court Commercial the by considered be shall dispute legal a is insured the which in contract insurance court in accordance with their competence”. If a d related to insurance are resolved by a court, arbit state Federation” Russian the in ActivityInsurance Art. 35 of the Law of the Russian Federation “On th Whichcourtsareappropriateforcommercial 3.1 had to the person responsible for the losses t compen paid indemnity obtains who the right insurer of claim thethat the polic contract, pro insurance otherwise property unless that, states Code Civil of 967 Jurinflot internationallawFirm iclg to: insurance &reinsurance 2019 not persons participatinginthecasemay befinedbythecourt. are who citizens court’s or officials guilty the the disrespectful, of as court non-fulfilment of case the by recognised reasons for in evidence, the present to requirement as well as court, the of the non-notification of event of the In receipt reasons. the of indicating request, date the from days five within this of court the in evidence general or within the time limit established requested by the court must notify the present to unable citizens or Officials who person the of possesses therequiredevidencetosenditcourt. obliging solicitation order respective and a collection issuing by in evidence assist may court the difficult, is persons these for evidence necessary the of presentation the that event the In required. if evidence additional disclose to parties the invite or submitted, is evidence additional that order may court The made. statements the of support in evidence bring shall party Each What powersdothecourtshavetoorder 4.1 How longdoesacommercialcasecommonlytaketo 3.2 Litigation–Procedure 4 Litigation–Overview 3 the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof bring tocourtonceithasbeeninitiated? jury? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin yholder (beneficiary) ration (commercial) sated by the insurer. ispute arises on an a claim does not doesclaim a e Organization of entity, then this then entity, s that “disputes that s ll be under the ie b the by vided e insurance he Disputes . ant e rsn a te ern hs rte saeet a be may statement written his obtained bythecourtandinvestigatedasevidence. hearing the witness a at If present be Statement. cannot Court the to attached is which writing in testimony his put may witness the court’sdecision by However, Session. Court the of Statement the in recorded is witness the of testimony Oral narration”. “free a of form the in orally testifies witness The from which the information provided to the court wa by the witness is not accepted as evidence if he ca case at the stage of investigating the evidence. T Witnessesmay bebrought tocourt atthe hearing on in theproceedings. party’sposition the for favourable not is disclosure the if withheld, the in produced or course of settlement negotiations/attempts are litigation, disclosed and may be of contemplation in prepared nor them. lawyers, by disclose given advice to to relating documents requirement neither Practically no is there above 4.1 question in In Civil Proceedings if the documents are not the evidence described li, a te ih t odr one-euiy rm h person the from counter-security order requesting theapplication forsecuritymeasures. to right the has claim, The court, depending on the merits of the case and the amount of the the court,measuretosecure claimshallbelifted. When adequate security is issued by the respondent and obtained by several take measures simultaneouslytosecure theclaim. to allowed persons are courts the The of case. request the the in at participating court the by secured is claim The court’sdecision. the execute to impossible or difficult it make may claim the secure to measures take to failure if procedure, of stage any at allowed is claim the Securing claim. the secure to measures take may court the case the in participating person a of request On conclusion. false deliberately a giving for liable criminally is expert court The a in and cases the in special mannerprovidedforbyprocedurallegislation. opinion always an is give to and court consideration the by under appointed in case the knowledge to special relating has matters who person an is procedural expert court independent a However, evidence. as court the to it bring and initiative own their on conclusion expert an take may Parties . Isevidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowers torequirewitnesses 4.3 Canapartywithholdfrom disclosuredocuments(a) 4.2 . Whatsortofinterimremediesareavailablefromthe 4.6 Arethereanyrestrictionsoncallingexpert 4.5 not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? courts? experts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed www.iclg.com nnot name the source he information given s obtained. the merits ofthe russia 211 russia Jurinflot international law Firm russia

4.7 Is there any right of appeal from the decisions of the 5 Arbitration courts of first instance? If so, on what general grounds? How many stages of appeal are there? 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party The persons participating in the case, as well as other persons, have autonomy adopted by the courts? Are the courts able the right to appeal the decision of the court of the first instance and to intervene in the conduct of an arbitration? If so, on cassational and high court instances. what grounds and does this happen in many cases? The appeal to the appellate court shall be made within one month since the issuing of the Decision in writing and may not contain new The parties have the right to conclude a valid arbitration agreement russia claims that were not the subject of consideration in the court of first referring all disputes to arbitration alternatively to the state court, instance. with the exception of those disputes that are lawfully assigned to the A cassation complaint may be filed within a period not exceeding competence of state courts. two months from the date on which the Decision of the First The court can not intervene in the conduct of arbitration unless the Instance, the Decision of the Appeal Instance came into legal force. parties apply to the court for resolution of a dispute going beyond The appeals shall contain grounds on which the person appeals the the arbitration clause or the competence of a concrete arbitration decision, referring to laws, circumstances of the case and the regarding the dispute and/or at the stage of enforcement of the evidence in the case. The cassation appeal shall contain the grounds award. explaining how the appealed acts breached the procedural or material law, and the cassation court has the right not to re-consider 5.2 Is it necessary for a form of words to be put into a the evidence. contract of (re)insurance to ensure that an arbitration The decisions can be further appealed to the Judicial Collegium of clause will be enforceable? If so, what form of words is required? the Supreme Court of the Russian Federation in cassation proceedings. The arbitration agreement may be concluded in the form of an arbitration clause in the contract, in a supplementary agreement to 4.8 Is interest generally recoverable in respect of claims? the existing contract or in the form of a separate written agreement If so, what is the current rate? at any stage of the dispute, including when the case is already in a state court, but before the decision on merits is taken by the court of Article 395 of the Civil Code of the Russian Federation provides the first instance. that, in case the financial obligation is not fulfilled, interest on the The arbitration agreement shall contain the exact name of the amount of the obligation shall be accrued on the basis of the average institutional arbitration or the order for formation of the arbitral rates of the bank interest on deposits of individuals (physical tribunal, the place of arbitration and the procedure to be applied. persons) at the place of residence of the creditor or, if the creditor is a legal entity, at the place of its location. 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the 4.9 What are the standard rules regarding costs? Are courts will refuse to enforce such a clause? there any potential costs advantages in making an offer to settle prior to trial? The courts may refuse to enforce the arbitration clause in case the arbitration agreement is void on the grounds provided for by Federal The procedural legislation in Russia shares the principle of Law. collecting the costs from the defeated party. There can be an agreement of the parties regarding division of costs, especially when the parties decide to settle. Pre-court settlement allows the parties to 5.4 What interim forms of relief can be obtained in avoid costs related to court fees and other related procedural costs. support of arbitration from the courts? Please give examples.

4.10 Can the courts compel the parties to mediate If the valid arbitration clause was concluded by the parties and the disputes? If so, do they exercise such powers? dispute is not referred by law to the exclusive competence of state, the dispute shall be referred to arbitration. The court cannot force the parties to mediate. Mediation (either at the court or elsewhere) is subject to the discretion of the parties. The arbitral tribunal may decide to secure the claim, but, in order to enforce such a decision, the interested party shall submit the application to the competent State Court. 4.11 If a party refuses to a request to mediate, what In cases subject to consideration by the Maritime Arbitration consequences may follow? Commission, the Chairman may, at the request of the party, determine the size and form of security for the claim and, in In preparing the case for trial the judge explains to the parties their particular, issue a decree on imposing arrest on the vessel or cargo of right to refer the dispute to the resolution of the mediator. the other party located in the Russian port. If the parties failed or refused to refer the dispute to mediation, the court will consider the case on its merits.

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5.5 Is the arbitral tribunal legally bound to give detailed 5.6 Is there any right of appeal to the courts from the reasons for its award? If not, can the parties agree (in decision of an arbitral tribunal? If so, in what the arbitration clause or subsequently) that a circumstances does the right arise? reasoned award is required? The award may not be contested in state courts and reconsidered on The award shall be made in writing and signed by the members of the merits of the case. However, certain procedural breaches may the arbitral tribunal. The award shall contain the circumstances of create grounds for refusal to recognise and enforce the award in the case, the conclusions of the arbitral tribunal and laws that the state courts (see question 5.1 above). arbitral tribunal applied. russia

Ermolaev Vadim Natalia Usanova Jurinflot International Law Firm Jurinflot International Law Firm Marksitskaja 34 Marksitskaja 34 Moscow Moscow 109147 109147 Russia Russia

Tel: +7 495 792 57 01 Tel: +7 916 613 58 22 Email: [email protected] Email: [email protected]

Ermolaev Vadim was born in Odessa in 1951. In 1974 he graduated Natalia Usanova was born in 1982 in Moscow Region. In 2006, she from High Engineering Marine School with specialty of navigation at graduated with honours from Moscow Open State University in sea. In 1984–85, he worked as the Master on BLASCO ships. In Moscow, the faculty of law. Natalia has been working as a lawyer in 1984, he graduated from the Legal Department of Odessa State Jurinflot International Law Firm since 2005 and now takes the position University, in 1988 – from Academy of Foreign Trade as an of a lawyer and junior partner of the firm. international economist. Her practice covers such areas as civil law, maritime law, insurance In 1988–1990 he worked as Deputy and Head of Oil Spill Combat law, international and international private law, corporate law, dispute Division of the State Marine Special Service at the Ministry of resolution in courts and arbitrations, and Natalia is engaged as a legal Merchant Marine Fleet, then – as a senior legal adviser of legal counsel in a large number of various litigation proceedings department of Sovfrakht. representing Russian and foreign clients in Russia and in foreign countries as well as in effecting theoretical research on various issues He has been a legal council from 1995 and from 2003 to present day of Russian law. She is a member of several international professional – a partner of Jurinflot International Legal Firm and the firm’s Deputy nets of legal firms and professionals in the transport sphere. Managing Partner. He is the author of articles and co-author of publications on International Private and Maritime Law. He is Master Mariner awarded by the Navy Honorary Worker and Honorary Legal Council.

Jurinflot International Law Firm

Jurinflot International Law Firm is Russia’s oldest and one of the leading firms specialising in maritime law. Having originally been founded in 1929 as an in-house law department of the Soviet state-owned ship agent/broker “Sovfracht”, Jurinflot started as a separate entity in 1991. At present, with 12 lawyers in the Moscow office, Jurinflot is a recommended law firm for shipping and transport sectors in the Russian national and several foreign legal ratings. The firm’s practice is diverse and covers most maritime law topics from marine insurance, dispute resolution and accident response to maritime labour, compliance and ship finance.

iclg to: insurance & reinsurance 2019 www.iclg.com 213 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 36 senegal Papa massal sow

sow & Partners codou sow seck

■ The rules of incorporation of public limited companies 1 Regulatory provided for by the OHADA’s Uniform Act on Commercial Companies will apply. 1.1 Which government bodies/agencies regulate ■ For mutual insurance societies: insurance (and reinsurance) companies? ■ They must be licensed to practice by the Life or Property and Casualty branches. Senegal is a Member State of CIMA (Interministerial Conference of ■ The social capital must be equal to 3 billion XOF at least. Insurance Markets) which includes 16 Member States. The ■ The shareholders’ equity of the company cannot be less organisations regulating the insurance sector in Senegal exist both than 80% of the minimum share capital. regionally and nationally. ■ The minimum number of members cannot be less than 500. In the regional plan: ■ The statutes must provide for the constitution of a ■ The Council of Ministers, which ensures the application of settlement fund intended to face the expenses of the first the single legislation by the Member States and constitutes three years of exercise and to guarantee the engagements the sole body of appeal against disciplinary sanctions of the society. pronounced by the regional insurance control commission. ■ For mutual reinsurance societies: ■ The Regional Insurance Control Commission is responsible ■ They are validly constituted only when they have at least for the control and supervision of insurance companies. seven member societies. ■ The General Secretariat of the Conference, which, inter alia, ■ No minimum amount is required for their settlement fund. prepares, executes and monitors the work of the Council of ■ Reinsurance acceptance transactions do not require Ministers. accreditation. In the national plan:

■ The Senegalese Ministry of Finance which is in charge of 1.3 Are foreign insurers able to write business directly or granting approvals requested by the insurance companies must they write reinsurance of a domestic insurer? after having requested the opinion of the Commission of Control of the CIMA. Article 308 paragraph 1 of the CIMA Code prohibits direct ■ The National Insurance Directorate which serves as a relay insurance of a risk relating to a person, property or liability located for the action of the Regional Control Commission in the Member States. in the territory of a Member State of CIMA, from a company that has not been in accordance with the provisions of Article 326. Article 326 requires an approval and Article 328-6 lays down the 1.2 What are the requirements/procedures for setting up a conditions for obtaining approval for foreign companies. new insurance (or reinsurance) company? With regard to reinsurance, it is specified by paragraph 2 of Article ■ For an insurance company incorporated as a public limited 308 of the CIMA Code that any assignment in reinsurance abroad company and whose registered office is in the territory of a involving more than 50% of a risk relating to a person, property or a Member State of CIMA: liability is subject to authorisation from the Minister in charge of the ■ They must have an agreement with the Life or Property insurance sector. There is one exception to this: on the one hand, and Casualty branches, issued by the Ministry of Finance damages on the bodies of rail vehicles, air, sea, lake and fluvial and, after having requested the opinion of the Regional Control on the other hand, responsibility resulting from the use of air, lake, Commission. maritime and river vehicles. ■ The share capital must be at least 5 billion XOF, excluding However, under no circumstances may the following be transferred contributions in kind. abroad: health insurance; damage to non-railway land vehicles; ■ The company’s equity cannot be less than 80% of the damage to persons transported in case of accidents; goods minimum share capital. transported; civil liability arising from the use of motorised land ■ Any transaction consisting of entrusting a shareholder vehicles (including the liability of the carrier); life and death with a stake of more than 20% must be granted insurance; insurance related to an investment fund; tontines; and authorisation from the Minister of Finance, prior to capitalisation operations. obtaining the stake.

214 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London the samewayasanyotherinsured. be will managers in loss a of occurrence the of the event the in compensation to entitled therefore and valid perfectly is company its insurance an and of operations company ordinary the of a part forming between managers contract insurance written a Thus, the courseofitsbusiness. operations are those that are routinely performed by the company in Ordinary conditions. normal under concluded operations ordinary Companies, the between Commercial passed directors and the company, agreements are on authorised since they the form part of the that Act 439 Article in Uniform specifies The companies). insurance to relating Code CIMA the Volumeof of II 301 (Article formed as public limited companies or mutual insurance companies necessarily are companies insurance that mind in borne be must It official the in written be only can language(s) ofaMemberStateCIMA (Article7). contract insurance The XOF, except Authorisation fromtheMinisterofStateInsurance. in denominated not annuities life or insurance direct signing from CIMA, of State Member a in located establishments its for entity legal any or resident person any prohibits expressly also 3 Article the CIMA Code. of 72 and 58 53, 51, 50, 46, 45, 42, 38, to 35 10, 9, 5, 2, paragraphs There are, however, exceptions to this principle, listed in Articles 4, insured againsttheinsureriscausedbyclaimofathirdparty. five-year the or the of action the when article insurer,same the by for provided prescription the against insured the by action direct of event the in in for 28 provided Article prescription biennial E.g.: the parties. from the insurance contract, cannot be modified by the agreement of arising dispute any of event the in CIMACode the by for provided periods limitation any that specifies Code CIMA the of 2 Article Arethereanylegalrulesthatrestricttheparties’ 1.4 sow &Partners iclg to: insurance &reinsurance 2019 the when operating inSenegal. fishing or trade to insurance armed contract imposes the insurance obligation on the charterer and chartered vessel any or fishing or trade to armed and flag Senegalese the flying vessel merchandise of all 18 kinds. It also imposes of an obligation to secure any 83-47 n° Act In by and goods of importation the secure to obligation an 1983 February for that. provided is provides obligation legislation this national Senegal, as far so in compulsory is faculties import of insurance the that provides also 278 Article semi-trailers, tobecoveredbyinsurance. or trailers its and vehicle motor land a by caused and property or persons to injury from resulting parties third sufferedby damage of other than the State, whose civil liability may be incurred by reason person legal or natural any requires CIMACode the of 200 Article Arethereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 freedom ofcontractbyimplyingextraneousterms officers underlocalcompanylaw? into (allorsome)contractsofinsurance? Te nue i lal ol i, s rsl o te amu event harmful made totheinsuredbyinjuredparty.”is complaint the judicial or of amicable an result contract, the a in for as provided if, only liable is insurer “The the by opposed to being provisions of Article 51oftheCIMA necessary Codeaccordingtowhich: avoid to be insured first the of will name it the mention summons of writ the in However, action an initiate may against theinsurer. victim, deceased the of beneficiaries the or injury bodily suffered has who party third aggrieved insurer,the the parties have not reached agreement on the proposal made by the where or indicated, limit time the within offer an of absence the In event ofthedeathvictim,tohisbeneficiaries. the in months eight within and person; his to damage suffered has who victim the to accident the of months 12 within offer an submit to required is vehicle land motorised a of liability the guaranteeing insurer the CIMACode, the of 231 of Article provisions the Under Member Stateinwhichtheaccidentoccurred. the of heirs the of wage the minimum annual the times 85 of exceed cannot deceased loss economic the for due compensation the condemned to pay, have become much less important. are For example, companies insurance the which to indemnities, the that meant has damages of system scaling CIMAthe the However,Code, with This hadcausedthebankruptcyofmanyinsurancecompanies. the victim, which the judge considers equivalent to the to loss suffered. interest and damages allotting of consisting compensation, full of principle the of basis the on fixed sums huge them to allocated courts national The accident. an of victims the for more advantageous was law the 1992, in Code CIMA the of advent the Before premiums duebywayofdamages andinterest. to entitled also is who insurer, the with remain paid premiums All omitted or denatured has no influence on the incide ri the insurer’sforopiniondiminishes the or risk th misrepresentationchanges or reluctance the when or reluctance 18, misrepresentation Article by the insured, results of in the nu terms the to According insured cannotinitiateactionagainstthereinsurer. responsible solely the insurer reinsures itself against the risks it has insured, it remains where cases all in that CIMACode the of 4 from Article follows It . Canathirdpartybringdirectaction againstan 2.2 Ingeneralterms,isthesubstantive lawrelatingto 2.1 . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectactionagainst 2.3 (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? vis-à-vis the insured. So, under this Article, the this Article, under So, insured. the

www.iclg.com llity of the contract sk, even if the risk the if even sk, nt. e object of the of object e senegal intentional 215 senegal 216 senegal © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Which courts are appropriate for commercial insu 3.1 extent ofpaymentsmade. third- party as payers is well subrogated in the as rights of people victim compensated to the the to owed money the pays who insurer the Code, CIMA the of 271 Article of provisions the to regard In Isthereanautomaticrightofsubrogationupon 2.6 risks the aggravate to likely assumed bytheinsurer(Article12CIMA circumstance Code). any must he of ask, him specifically not inform did insurer the if even Therefore, obsolete. or inaccurate contract the of conclusion the of time the at given had he answers the rendering thereby and risks, new creating or risks new circumstances which the have the consequence contract, of either aggravating the the of course the during declare must he Then, insurer appreciatetherisksitassumes. the by asked questions insurer, the in particular on the circumstances answer that are likely to make the accurately to has he Firstly, subscription oftheinsurancecontract. The insured is entitled to two principal obligations at the time of the Isthereapositivedutyon aninsuredtodisclose 2.5 had beencompletelyandexactlydeclared. risks the if due, been have would which premiums the of rate the to relation in paid premiums the of rate the to proportion in reduced is indemnity the incident, the after only place takes finding the When longer runs,isreturned. no insurance the time the for paid premium the of portion the Thus, made to the insured by registered letter or counter premiumincrease, orcancel thecontract 10days af th maintain either may insurer the loss, any before declafalsethe if case,this In insurance. the of faith of the insured is not established, this does In case of unintentional misrepresentation, that is sow &Partners ■ The High Court instituted also by also mentioned instituted 2015-24 Court n° High Act The ■ The Court of First Instance instituted by Decree 2015-1145 of ■ The Court of Trade disputes established by Act n° 2017-24 of from arising disputes ■ over jurisdiction commercial insurance: have Courts Three 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes them? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof of theCourtCommerce northatoftheCourtInstance. juris the in neither are which cases all in rules which above, dispute the does notexceed300,000XOF. of rate the when resort last and first and XOF; 2,000,000 exceed not does rate litigation the first when instance at matters commercial in rules which 2015, August 3 or which doesnotexceed25,000,000XOF. XOF 25,000,000 above is of rate the disputes on resort last and first and indeterminate; which of rate the disputes 28 June 2017 and which rules in first instance on commercial

not result in the nullity to say when the bad ration is establishedisration signed. ternotification is cnrc fr a for contract e ury? rance exceed one year of proceedings in circumthe first instanc such in can, court the before brought case a nullity,and that the Court designates undanother for formalities observed not has expert the because sometimes happens that the report is rejected at th maketheir observations before the judge makes his willparties the filed, is reportthe Once Court. when he is unable to perform his work within the ti carry out his expertise, and the law allows him to to two hasusually expert the person, a sufferedby a experttorequiresappointment caseanthethe of Itdepends on the nature and complexity of the case ril 4. o te ue o Poeue f h Br f Senegal of “confidential” stampcannotbeproduced incourt. Bar the of Procedure of stipulates that correspondence between lawyers bearing the Rules mention the of 40.2 Article mention the with letter “confidential”. his stamp must he procedure, judicial a in his correspondence be produced by his opponent in the context of if the lawyer of a party does not wish that the information contained Even in the context of a negotiation procedure between two lawyers, negotiation procedure. them by their lawyers in contemplation of a litigation or as part of a to given advice produce to parties on obligation legal no is There to measure, expertise the to produce it. useful information any holding enforce can party it purpose this For he expertise. measures including investigative orders, the of execution the control to power Article 54-19 of the above-mentioned Code also gives the judge the documents original the with submitted totheproceedingsorcopies. him provide to parties the enforce may the he such, As communication, documents. the the of production the for and obtaining necessary judge powers the the Procedure, all Civil exercises of Code the of 54-12 Article Under . Howlongdoesacommercial casecommonlytaketo 3.2 . Canapartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 But, since2008,thisfunctionhasbeenremoved. of context the Court. Criminal High the of jurisdiction the to in relating proceedings only courts Senegalese the in existed jury The 25,000,000 XOF. to rule on a purely civil case even if the issue of the dispute exceeds nature of the case. For example, the Court of Trade is not competent The referral of each court depends not only on the value but also the Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin iclg to: insurance &reinsurance 2019 request an extension itsreplacement. So have to read it and it read to have e request of a party e. me limit set by the ssess the damagethessess . For. example, if finaldecision. It three months to monthsthree tne, easily stances, r eat of penalty er senegal © Published and reproduced with kind permission byGlobal Legal Group Ltd,London established byoneormoreotherexpertsdesignatedhim. gives the judge the power to order to power the judge the gives Procedure Civil of Code the of 178 Article insufficient, is which of clarification the report a submits itself Court the by appointed expert the when or reports, expert contradictory file parties the If case the of treatment the when it requires technicalknowledgenotfamiliartohim. to resort to to power recourse the have judge to restriction legal no expertise. Article 156 of the Code of is Civil Procedure even gives the there principle, In handling ofthecaseisatdiscretionjudge. In any event, taking into account the testimonies of witnesses in the non-present witnesses. Court designated for that purpose and who will be able to hear those may order that the investigation will be made by the President of the case the hearing court the place, taking is trial the where area the in present not therefore and distant are witnesses when that Procedure Civil of Code the of 134 Article of provisions the from follows It Isevidencefromwitnessesallowedeveniftheyare 4.4 or morewitnessesmaybeheardtoshedlightonthecase. Civil of Code the one which of in investigations order to 152 judge the empower Procedure to 132 Articles witness, a of hearing are contrary in such a way that it is necessary to have recourse to the In the course of proceedings where the facts presented by the parties Dothecourtshavepowerstorequirewitnesses 4.3 sow &Partners iclg to: insurance &reinsurance 2019 of Courts the by rendered decisions (for Court High The High the by rendered decisions (for ■ Appeal of Court The ■ There areonlytwolevelsofcall: to appealthedecision. instance first at unsuccessful been has that party a for possible is It Isthereanyrightofappealfromthedecisions 4.7 provisionalarrestofship. registrationofaconservatorymortgage;and ■ seizureofreceivablesormovableproperty; ■ medicaloraccountingrealestateexpertiseetc.; ■ on Act ■ Uniform OHADA the by as Simplified RecoveryProcedures. We willonlymentionafew: well as Procedure Civil of Code the by for provided are measures interim of types Several What sortofinterimremediesareavailablefromthe 4.6 Are there any restrictions on calling expert wit 4.5 addition or in place of party-appointed experts? not present? give evidenceeitherbeforeoratthefinalhearing? Instance). Courts ortheofCommerce). grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral courts? Is it common to have a court-appointed expert in ex officio ex a new expert report expert new a

nesses? where therequestsmadehavenotbeengranted,etc. or or requested, was what of short far granted, falls allocated amount the when not is requested amount the when requested, one the rule on one or more demands, if he has granted an amount more than to failed he if requested, not things on decided has judge the when example, is for case, rendered the is This decision parties. the the of one when to unfavourable lodged is appeal the general, In its to submitted decision the control, haswellappliedthelaw. rendered who judge, control the to limited whether normally is office The case. the of merits the on rule not does and courts the by resort last in rendered decisions The Supreme Court is not a Court of Appeal, it only knows about the year 2018therateis4.5%. the For Senegal. of Finance of Minister the of order by year each the of as rate month following discount the date of the application. The discount the rate is set at interest bear shall reimbursed, not due, and claimed amounts all that provides 277 Similarly,Article month ofdelay. per due compensation of amount the of 5% to equal payment, late for interest to corresponding penalties to Code, CIMA the of 233 Article of provisions the to according liable is it injury), bodily of the legal period (eight months in case of death and within 12 months offer in case compensation its submitted not has insurer the When result inajudgment. and normally proceed should process the case, this In mediation. judge’sfor the request accepted not has who party a of punishment for provide not does law The him. against consequences particular the of consent the with parties, the refusal done of a party to submit to mediation does not be lead to only can mediation as long As the judgecannotorderit. So a party is free to resort to mediation or not and, in case of refusal, appoint amediator. parties, the from agreement obtaining after may, dispute a hearing 7 Article in and, general, theinsurer, party frompayingthecosts. unsuccessful the save thus could offer an make To the processsuchascostsofregistry, theexpertisefees,etc. to pay the costs; that is to say, all the costs that have been incurred in The principle is that any party who has been unsuccessful is ordered . Isinterestgenerallyrecoverable inrespectofclaims? 4.8 .1Ifaparty refusestoarequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregardingcosts? Are 4.9 If so,whatisthecurrentrate? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan ter of the Code of Civil Procedure provides that the judge the that provides Procedure Civil of Code the of www.iclg.com senegal 217 senegal sow & Partners senegal

5 Arbitration In any event, where the State’s jurisdiction refuses to apply the arbitration clause by considering it to be manifestly void, it must show how that clause is manifestly void. 5.1 What approach do the courts take in relation to Similarly, when it comes to ordering provisional or protective arbitration and how far is the principle of party measures at the request of one of the parties, the state judge may, in autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on case of a recognised and motivated emergency, or where such a what grounds and does this happen in many cases? measure must apply in a State not party to the OHADA treaty, order such measures as long as those measures do not involve an National courts cannot, in principle, intervene in arbitration examination of the dispute on the merits.

senegal proceedings that fall within the jurisdiction of the arbitral tribunal formed in accordance with the Arbitration Rules of the Common 5.4 What interim forms of relief can be obtained in support Court of Justice and Arbitration of OHADA (Organization for of arbitration from the courts? Please give examples. Harmonization of Business Law in Africa). Article 23 of the OHADA Treaty provides that any court of a State It follows from the provisions of Article 13 of the Uniform Act on Party hearing a dispute which the parties have agreed to submit to Arbitration that even in the presence of an arbitration agreement, the arbitration shall declare itself incompetent if one of the parties State Judge may, in case of a recognised and reasoned emergency, requests so, but incompetence cannot be raised ex officio by State order provisional or conservative measures, since these measures do jurisdiction (Article 13 of the Uniform Act on Arbitration). not imply an examination of the dispute on the merits. This is the However, in strict compliance with the principle of consensualism case, for example, of an accounting measure on a partners’ current or the free will of the parties, the national courts may hear of a account or a provisional seizure of receivables on the bank account dispute in which an arbitration clause by reference to a document of a debtor company. which stipulates it valid is considered as not opposable to the party to which it is opposed when the latter was not aware of the clause 5.5 Is the arbitral tribunal legally bound to give detailed and therefore did not show his willingness to be bound by the reasons for its award? If not, can the parties agree (in arbitration agreement. The Court of Appeal of Ouagadougou the arbitration clause or subsequently) that a Commercial Chamber, judgment n° 037, of 19 June 2009. reasoned award is required?

Article 20 of the Uniform Act on Arbitration requires the Arbitral 5.2 Is it necessary for a form of words to be put into a Tribunal to give reasons for its decision. contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words The lack of reasoning of the arbitral award renders it even subject to is required? an action for annulment under the provisions of Article 26 of the abovementioned Uniform Act. For an arbitration clause to be applicable, it does not need to be necessarily included in the insurance or reinsurance contract. 5.6 Is there any right of appeal to the courts from the Article 3 of the Uniform Act on the Law of Arbitration provides that decision of an arbitral tribunal? If so, in what the arbitration agreement may be made in writing or by any other circumstances does the right arise? means allowing the proof to be administered; in particular, by reference to a document stipulating it. The arbitration award is not subject to opposition, appeal (before a The writing consists of any document signed by the parties, or letters, court of appeal) or cassation; it is only subject to three types of action: e-mails, telegrams or even exchanges of conclusions alleging the ■ The third-party proceeding action, which is brought before existence of an arbitration agreement not disputed by the parties. the arbitral tribunal having rendered the award, by the third Therefore, no particular form is required in relation to the validity of party who was not a party to the arbitral proceedings and the arbitration agreement. A reference in the insurance or when the execution of the arbitration award could harm his interests (Article 25). reinsurance contract, to a document stipulating it, may even suffice to establish its validity. However, as stated before, the party to ■ The action for review which is also brought by one of the whom it is opposed must have actual knowledge of this document parties before the arbitral tribunal in the event of discovery of a fact which could have had a decisive influence on the and have given his consent to be bound to it. decision and which before the pronouncement of the arbitral award, was known by the court arbitral tribunal and by the 5.3 Notwithstanding the inclusion of an express party making the request. arbitration clause, is there any possibility that the ■ The action for annulment to be brought before the competent courts will refuse to enforce such a clause? judge in the State Party in the following cases: ■ The court has ruled without an arbitration agreement or on Article 13 of the Uniform Act on the Law of Arbitration provides the basis of a null or expired arbitration agreement. that in the case of an express arbitration clause and prior referral to ■ The arbitral tribunal was irregularly composed or the sole the arbitral tribunal, the national court, at the request of a party, must arbitrator irregularly appointed. declare itself incompetent. ■ The court ruled without complying with the mission When the national jurisdiction is seized previously to the arbitral entrusted to it. tribunal, it must also declare itself incompetent unless the arbitration ■ The adversarial principle has not been respected. clause is manifestly null. ■ The arbitral tribunal violated an international public The notion of manifest nullity, however, must be interpreted policy rule of the signatory states of the treaty. restrictively, that is to say, it must have resulted from a mere ■ The arbitration award is not motivated. extrinsic examination of the clause.

218 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London sow & Partners senegal

Papa Massal Sow Codou Sow Seck SOW & PARTNERS SOW & PARTNERS Lot 49, Rue El Hadji Ibrahima Niasse Lot 49, Rue El Hadji Ibrahima Niasse Mermoz Dakar, 3 e étage Mermoz Dakar, 3 e étage Senegal Senegal

Tel: +221 33 824 1926 / +221 33 824 1983 Tel: +221 33 824 1926 / +221 33 824 1983 +221 77 645 1479 +221 77 659 6635 Email: [email protected] Email: [email protected] URL: www.sowlawyers.sn URL: www.sowlawyers.sn senegal Papa Massal SOW is a lawyer specialised in insurance law. With Codou SOW SECK is a founding partner of SOW & PARTNERS Law more than 12 years’ experience in the sector and a very thorough offices. knowledge of the CIMA legislation "Interministerial Conference of She has been qualified to the Senegalese Bar since 2006 and has a Insurance Markets", he advises both domestic and international clients strong legal practice including in civil litigation. in the insurance sector before and during the litigation period. She graduated from University of Gaston Berger in St Louis (Senegal) His expertise in this area includes advising institutional clients in all with an LL.M. in Business and Economic Law as well as University of phases of their implementation in Senegal and in the OHADA Paris-1 Panthéon-Sorbonne (France) with an LL.M. in International (Organization for Harmonization in Africa of Business Law) region, the Transportation. merger-acquisition transactions, transfer of portfolio, joint ventures and negotiations in the claims process. Codou SOW SECK has successfully advised and assisted clients in major investment projects related to trade finance and energy deals. His proven experience in litigation and insurance sector legislation has also enabled him to advise and successfully represent many She has also assisted foreign investors on international trade issues, individuals and insurance companies, in the framework of pre-litigation with a particular focus on negotiating concession contracts in the negotiations, the follow-up of judicial proceedings, until the definitive transport sector and PPP contracts especially in energy projects. settlement of the case. She has guided her clients to achieve optimal transactions, because of Papa Massal SOW is now a founding partner of SOW & PARTNERS her practice of negotiations with government entities and investors. where he heads the team in charge of the insurance sector. She is ranked in Global Chambers since 2017.

SOW & PARTNERS is a firm set up by lawyers of various experiences and skills, devoting all their energy to advise, support and represent their clients in the achievement of their objectives both in Senegal and in many OHADA’s jurisdictions. With teams specialised in business law such as project financing, private equity, PPP and public markets, insurance, transport, company law, labour law, but also maritime law, SOW & PARTNERS Law Firm is driven by the optimal satisfaction of its clients. As a result, the firm has been able to gain the trust of many national and international financial institutions, multinational corporations, but also many internationally renowned firms with whom they maintain a working relationship based on trust and quality.

iclg to: insurance & reinsurance 2019 www.iclg.com 219 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 37 spain ruth Duque

rcD amara odériz

1 Regulatory provided in Article 55 and following of Law 20/2015, of July 14, on the Management, Supervision and Solvency of Insurance and Reinsurance Companies (“LMSSIRC”). Insurers domiciled in 1.1 Which government bodies/agencies regulate other Member States may pursue their activities in Spain under the insurance (and reinsurance) companies? right of establishment (“ROE”) and under the freedom to provide services (“FOS”). The Spanish regulatory authority is the Directorate-General for In addition to the corporate process needed to establish a branch, Insurance and Pension Funds (“DGSFP”). The DGSFP operates under the ROE, an EU insurer cannot take up activities until the under the Secretary of State for Economy and Business Support home State regulator informs the DGSFP of this insurer’s intentions attached to the Ministry of Economy and Business. to open a branch. Meanwhile, the DGSFP may inform the company The DGSFP has regulatory and supervisory powers over the of the conditions under which it must conduct its business in Spain companies that make up the sector. One of its main functions is to within a two-month period. The branch may start its business in adequately protect customers’ rights. In this regard, the DGSFP has Spain when the supervisor of the home Member State notifies the a complaints service for dealing with and resolving complaints conditions specified by the DGSFP or starting from the moment submitted by customers against companies and persons subject to when the two-month period has elapsed without having been supervision. Among other functions, the DGSFP authorises notified. The financial supervision of the branch will be carried out companies to take up insurance and reinsurance activities and by the home State supervisor. supervises and monitors portfolio transfers and merger and With regard to the FOS regime, EU insurers may start business in acquisition cases. Spain following receipt of the home State communication in which it reports having sent its notification to the DGSFP.

1.2 What are the requirements/procedures for setting up a Additionally, EU reinsurers may pursue their business in Spain new insurance (or reinsurance) company? under the ROE or FOS, without the need for administrative authorisation or prior notification. Setting up a new (re)insurance company requires compliance with Third-country insurers need prior authorisation in order to take up corporate procedures and obtaining administrative authorisation business in Spain. Reinsurers from third countries may pursue from the DGSFP. business in Spain by establishing a branch and obtaining Spanish (re)insurers shall be set up by a notarial instrument that authorisation from the DGSFP or from the country of the registered must be registered before the Spanish Commercial Registry office, but not from branches located outside of Spain. (“SCR”). Insurers must take the legal form of (European) limited companies, mutual, (European) cooperatives and mutual social 1.4 Are there any legal rules that restrict the parties’ welfare associations. Reinsurers may only take the legal form of freedom of contract by implying extraneous terms (European) limited companies. into (all or some) contracts of insurance? Once the (re)insurer is registered before the SCR, they then need to request the relevant authorisation for pursuing this activity before The Insurance Contract Act (“ICA”) (Act 50/1980) will apply to the DGSFP. To do so, the company must submit a programme of risks located in Spain when the policyholder has their habitual activities, comply with capital and own funds requirements, report residence or registered office in Spain and also when a contract is any close links, comply with fit and proper requirements, and concluded in compliance with an obligation under Spanish law. promote a governance system. There are also specific requirements In general, mass risks are subject to the mandatory rules under the depending on the line of business in which the company intends to ICA. However, contractual clauses that are more beneficial to the operate. insured will be considered valid. Concerning large risks, the provisions of the ICA could be avoided 1.3 Are foreign insurers able to write business directly or and, therefore, the principle of freedom of choice would prevail. must they write reinsurance of a domestic insurer?

Apart from the possibility of acting as the reinsurer of a Spanish ceding insurer, foreign insurers can also write business in Spain as

220 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London action is covered by Article 76 of the ICA, arising as an “ an as arising ICA, the direct of 76 Article a by covered is Bringing action claims. liability insurance for case the is This the confirmed have principle “ doctrine and jurisprudence Spanish or unclear vague, is contracts insurance regulating clauses the of any If considered theweakerpartytocontract. are they since insureds to favourable more is ICA the general, In penalties beingimposed. in result will insurance compulsory the out taking without business said in engaging Therefore, performance. trial clinical for as well liability for cover as breeds, animal dangerous particularly vehicles, providing motor by caused others, Among business. of types certain in engaging before insurance) of liability types (usually specific insurance out take to people requires legislation Spanish Arethereanyformsofcompulsoryinsurance? 1.6 of badfaith. cases in except occupation, an pursuing in negligence or omissions out to cover essentially the economic damages resulting from errors, taken be can insurance liability professional practice, in However, Spanish legislation does not provide companies with this possibility. Arecompaniespermittedtoindemnifydirectorsand 1.5 rcD iclg to: insurance &reinsurance 2019 said insurerwiththereinsurer. special privilege on the credit balance determined by the account of a have will insured the insurer, direct the of liquidation forced or for indemnity or compensation. However, in the event of voluntary reinsurer the sue directly cannot insured the ICA, the of 78 Article reinsurer.a against brought to be According Acannot action direct Cananinsuredbringadirectactionagainst 2.3 Canathirdpartybringdirectactionagainstan 2.2 In generalterms,isthesubstantivelawrelatingto 2.1 osdrbe om o itrrtto, h ms favourable most the interpretation, for interpretation fortheinsuredshallprevail. room considerable at a wl a proa ecpin o te nue aant the against insurer the of injured thirdparty. exceptions personal as well as party to the direct action. Among others, the exclusive fault of the injured There are specific means of defence available to the insurer to object insurance any about party contract anditscontent. injured the inform to obliged be will insured the contract, insurance liability a under which covered claim be liability could civil a of event the In refund. relevant the right in favour of the injured third party (or his/her heirs) to facilitate (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? officers underlocalcompanylaw? reinsurer? in dubio pro insured

”, which means that if a clause leaves

ex lege ex ” eotd hog te usinar. pca rls pl on apply rules Special questionnaire. disclosing healthconditions. the through reported during the term of the contract, aggravate or reduce the risk initially the insured must inform the insurer about all the circumstances that, the According to Articles informing 11, 12 and 13 of the ICA, the policyholder and for liable to correctlyassesstherisk. insurer the known be to need that circumstances or factors about policyholder hold regulations statement. The voluntary a issue will policyholder the mean not does duty this so questionnaire, insurance answers the on The depend will provided insurer. the by prepared questionnaire the answer to risks contained in Article 10 of the ICA works as an obligation to related information pre-contractual provide to duty the practice, In contractual informationrelatedtorisks. on the part of the policyholder any in a breach of the duty to from provide pre- released be will payment obligation in the event of intentionally or gross negligence insurer the Likewise, policyholder. should a claim occur before sending the termination statement to the the Additionally, insurer insurer.will have the right to reduce the its compensation proportionally of part the on negligence gross or intentionally of cases in except progress, in and received premiums time it becomes the aware of this breach, as terminate well as the right to retain to the the from month right one within policyholder pre-contractual the informing its by contract exercise provide risks: to to duty related information their breaches policyholder a Pursuant to Article 10 of the ICA, an insurer may do the following if the questionnaireprovidedbyinsurer. to truthfully respond to duty pre-contractual a has policyholder The whether theliabilityiscoveredbyaninsurancecontract. or misconduct wilful of cases in except insured, the with live who relatives certain to respect with or civilly respond must insured the The itself. exclusion the whom to persons against right subrogation the have not will insurer to exceptions as well as subrogation, of right the pursuing for exclusions ICAcontains Additionally,the may be caused to the insurer while pursuing the subrogation action. that damages for liable be will they insured, the for As same. the legal a is the insured and which in no case may it be pursued to the detriment of regard, this In subrogation that will take place once the payment has been made to party. third liable the from assets insured’sits to sustained damage the recover to action subrogation Article 43 of the ICA grants the insurer the possibility of pursuing a . Isthereapositivedutyon aninsuredtodisclose 2.5 Whatremediesdoesan insurer haveincasesofeither 2.4 . Isthereanautomaticrightofsubrogationupon 2.6 them? misrepresentation ornon-disclosurebytheinsured? insurer needaseparateclauseentitlingsubrogation? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof payment ofanindemnitybytheinsurerordoes

www.iclg.com spain 221 spain 222 spain © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com to entities public and bodies disclose non-confidential informationinproceedings. administrative request to parties shall be duly grounded. This provision is usually convenient for the requests Said court. the to possession their in documents relevant submit to proceedings to non-parties request also can parties The description ofthesame. detailed a or document the of copy a provide must party requesting the To so, documents. do original specific of disclosure the parties other the from request to proceedings to parties CPA allows The document wasunknownorifitunavailable). of rejected by the court (except in the event start that the existence of such a the at be will stage later a at filed be filed to attempted is that but proceedings not document supporting any perspective, general a From defendant. the the by writ by defence the in writ and plaintiff claim to the in parties court the contrary, to information the and documents On provide and dispute the of dispute. subject-matter the delimit the proceedings to relevant be may a for general obligation provide of the parties to disclose all the documents not which does (CPA) Act Procedural Civil Spanish The Whatpowersdothecourtshavetoorder 4.1 Supreme Court, said appeal itself may take between app eventofthe in aroundmonthstake7–10and may General Council of the Judiciary, civil courts of f aggregateanlevel, publishAtdatapursuantthe to tend toexperiencelongertermsandpossibledelays. Barcelona) Madrid, (e.g. cities big experience, our In claim. the of complexity the and assigned are proceedings the where court the of The length of the proceedings may vary depending on the workload Howlongdoesacommercialcasecommonlytaketo 3.2 In Spain,juriesonlytakepartinsomecriminalproceedings. the insured,andanyagreementtocontraryisnullvoid. of residence of place the of that be shall contract insurance an from to Pursuant nevertheless will court. Article 24 of the the ICA, dispute the judge competent to before hear any action the arising procedure of specific the value determine The action. and claim does not depend on the value of the dispute, but on the nature of the The jurisdiction of the civil, administrative, criminal or labour court involved inorasaresultofthecourtproceedings. become to insurer the cause could end the in which courts, labour or administrative criminal, by determined be can liability Likewise, before others. among insurance, brought lines financial or be transport and aviation can disputes some specialised commercial courts, courts, which is usually the case for marine, civil of the Within scope claims. insurance of charge in often are courts Civil Whichcourtsareappropriate forcommercial 3.1 rcD Litigation–Procedure 4 Litigation–Overview 3 jury? to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof irst instance in Spain ed in 2017 by theby 2017 in ed 2–3 years. eal beforetheeal vn ta te ins cud o apa a te eea stipulated general the procedural time. at appear not could witness the that event the in especially hearing, final the after or before evidence examine to court the request may parties the needed, if but, hearing oral the at usually is court the before heard be to witness a for moment The that acivilcourtitselfsummonswitness. unusual is it experience, our In needed. if clarifications additional the leads who party request also can court the witness, the with interact parties the after requesting the is Usually, witness. said from evidence it for request and questionnaire and request party a under court the by summoned are witnesses that is rule general The by protected regarding litigationtendtobeoral. are discussions conversations or negotiations Therefore, these rules. secrecy case, professional any in and parties intervening the all from consent and notice prior without their recorded or parties opposing clients, lawyers, in person or by telephone or other remote means cannot be with held conversations The other party, unlessexpresslyauthorisedbythelatter. the of lawyer the from received notes or communications letters, with client his or courts the provide to able be not will lawyer The and stronglyprotected. privileged are communications lawyer-client therefore terminated, secret. kept has be relationship service legal must the after applies lawyer, also Confidentiality party’s opposing the his by by clients. or lawyer client, to a to duty confidentiality in confidentiality revealed is strict that Everything a by bound are Lawyers jointly bearthecostofanyexpert appointed bythecourt. Usually each party bears the cost of its own expert and all the parties each party, butthisisnotusualinourexperience by submitted reports expert the in discrepancy technical possible a the before days solve to expert own its appoint five to court the ask also can parties The least at event, any preliminary hearing. in and, possible as available at that time, it should be announced and submitted as soon not is report expert the If defence. or claim of writ the with courts civil before filed generally is report expert the timing, to regards There is no limit to the number of experts that a party can call. With be formally questioned in their domicile, or by ele in the event of an illness) pursuant to court crite as an expert report or written statement of fact. testimony can be provided in the form of documental theeventInwitnessthat a cannot appear before th . Dothecourtshavepowerstorequirewitnesses 4.3 Canapartywithholdfrom disclosuredocuments(a) 4.2 . Are there any restrictions on calling expert wit 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? addition or in place of party-appointed experts? not present? Is it common to have a court-appointed expert in contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin iclg to: insurance &reinsurance 2019 If duly reasoned (e.g. ria, the witness could . ctronic means. e court,eher hisor evidence, such nesses? spain

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London ae curd o te eod uget a i bec o the the of when claim valueisoverEUR600,000. breach and matters in similar on was criteria general judgment Court Supreme second the or occurred, have infringements legal violated, been have rights fundamental either if not A second subsequent appeal can be made before the Supreme Court reasons for presented which occurredafterthefirstinstancetrialdate. not was facts to refers evidence the if or court, party requesting the to attributable instance first the by rejected was evidence said that event the in except presented, be can evidence new no perspective, general a From party. appealing the by claim the of basis nature/legal or amount the to made be can amendment no limitations: some with allegations legal and factual be can 3,000 EUR over appealed before the court of amount appeal, which allows for a an review of the for decisions instance First be may that protection judicial granted intheaffirmative judgmentthatmaybeissued. the of effectiveness the ensure to necessary deemed or rights certain of protection the for law the the a not listed is company; and (k) or any other is measures expressly when established defendant by the not or whether on agreements depending capital, share the of corporate cent per five or cent per one least at challenged hold claimant(s) of suspension the (j) production; their for employed material the of deposit the as well property,as industrial and intellectual on rules the to contrary produced allegedly objects or work the of deposit temporary the (i) deposit of income obtained through an cease activity considered unlawful; to and or audit certain the (h) out; carried suspend being was that action an out in to carrying prohibition engaging temporary the from or behaviour refraining temporarily i.e. activity, an cease provisionally to order the (g) notations; registry other (f) Registries; public in inscription to subject rights or assets to refers latter the when claim the of notation registry precautionary the (e) the (b) assets in accordance with the conditions to be specified by the court; judgments; of the deposit of moveable assets; (d) the drawing-up of inventories of enforcement (c) the assets; productive of receivership court-ordered or intervention ensuring at assets, of seizure aimed or attachment pre-judgment the (a) including: The CPA provides a wide range of interim remedies and injunctions, Whatsortofinterimremediesareavailablefromthe 4.6 rcD iclg to: insurance &reinsurance 2019 not was liability insured properly grounded). the if claims, liability in instance, (for avoided if the insurer has valid solid grounds to postpone settlement the in event of unjustified delay in usual the settlement of the claim but it quite can be is courts by interest penalty of imposition The applicable interestrateshallbenolessthan20percentyear. the Thereafter, cent. per 50 by increased interest of rate legal the at interest pay shall insurer the loss, the from years two first the for ICA, in the event of unjustified late payment of the insurance claim, the of 20 section to Pursuant ICA. the in established as applied be Yes. The delay in the settlement of the claim could cause interest to Isinterestgenerallyrecoverableinrespectofclaims? 4.8 Isthereanyrightofappealfromthedecisions 4.7 grounds? Howmanystagesofappealarethere? courts? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral

redress. cannot compel the parties to opt for this out of court mechanism for about the possibility to mediate the dispute. Nevertheless, the courts disputes. solve Matters to Act, in the preliminary hearing the courts remind the parties way Commercial and Civil court in Mediation the of to pursuant Nevertheless, out voluntary a is Mediation adverse legalcostsissignificantlydiminished. pronounce on both criminal and civil liabilities and the risk of facing would court the scenario, this In proceedings. criminal the within compensation civil a request they and court criminal a before case the bring to choose claimants some Therefore, party. the condemned against issued be can order court a but proceedings, criminal in uncommon very are plaintiff the against orders cost practice, In guiding feerulesoftherelevantlocalbarassociation. the to limited are they as incurred, actually expenses all a cover not From doubts. reasonable to might order cost a under cost recoverable rise the perspective, practical give not does case the that finds latter the that provided decision its within court the by them the all should losing party’s Nevertheless, claims be rejected, a cost order may be issued against procedures. civil in incurred costs Pursuant to the CPA, the general rule is that each party pays the legal arbitral awardsordecisions. foreign recognising and award, the aside setting for application the adopting on ruling decisions, arbitral or assistance, awards enforcing measures, interim court providing arbitrators, dismissing and except AA, appointing covers: the this particular, In the Act. by in provided whereso governed matters in intervene will court No defence andtheprincipleofequality. to right parties’ the of limitations the to only conduct arbitrators’ of the parties’ independent choice, which is subject together with the during implementation. Therefore, this Act is based on the primacy in order to further the use of this tool and the consistency of criteria responds to the calls for harmonising legal provisions on arbitration International Trade Law of 21 June 1985 (UNCITRAL Model Law), on Commission Nations United the by prepared Law Model the on (“ 2003 December 23 of 60/2003 Act Arbitration The court willpronounceitsjudgment. The proceeding shall continue with no further consequences and the .0Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrules regardingcosts? Are 4.9 . Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Arbitration 5 disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? what groundsanddoesthishappeninmanycases? consequences mayfollow? there anypotentialcostsadvantagesinmakingan to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty

www.iclg.com AA spain ”), based ”), 223 spain rcD spain

5.2 Is it necessary for a form of words to be put into a 5.5 Is the arbitral tribunal legally bound to give detailed contract of (re)insurance to ensure that an arbitration reasons for its award? If not, can the parties agree (in clause will be enforceable? If so, what form of words the arbitration clause or subsequently) that a is required? reasoned award is required?

Seeing as the willingness of the parties is the keystone of the Yes, under Article 37 of the AA any award must be in writing and arbitration system, arbitration clauses are becoming increasingly signed by the arbitrators, who may record their vote in favour or varied and complex to reflect the specific needs of each contract. against, and shall always state the reasons on which it is based, No specific form of words is required to be put into an insurance or unless the award is made on terms agreed upon by the parties. spain (re)insurance contract to ensure that they are subject to arbitration. Within 10 days of the notification of the award, unless the parties Where applicable, the arbitration agreement may take the form of have agreed otherwise, either party may, with prior notice to the either a separate agreement or an arbitration clause in a broader other, request the arbitrators to: a) correct any computation, clerical, contract and must express the parties’ willingness to submit all or or typographical errors or other similar errors; b) clarify any some of the disputes arising with respect to a given legal particular point or part of the award; c) make an additional award in relationship, contractual or non-contractual to arbitration. The respect of requests presented and not resolved therein; and d) arbitration agreement must be in writing, and this includes a partially extend the award proceedings for covering a question not document signed by the parties or an exchange of letters, telegrams, submitted to the arbitrators or questions on a matter not subject to telexes, faxes or other means of telecommunication that provide a arbitration. record of the agreement. This requirement is deemed to be met if After hearing the other parties, the arbitrators shall decide on the the arbitration agreement is stored and accessible for subsequent requests for correction of errors and clarification within 10 days, reference on electronic and optical mediums or on other types of and the request for additional awards and partial extension within 20 mediums. days. In addition, within 10 days following the date of the award, the arbitrators may correct ex officio any errors of the nature referred 5.3 Notwithstanding the inclusion of an express to in sub-item a). Regarding international arbitration, these limits arbitration clause, is there any possibility that the will be increased to one and two-month periods. courts will refuse to enforce such a clause?

5.6 Is there any right of appeal to the courts from the The principle of party autonomy provides for an arbitration decision of an arbitral tribunal? If so, in what submission clause to be established, which means no court can circumstances does the right arise? ignore this clause. It would be a different scenario if the clause was not drafted in accordance with the provisions set out in the AA, and Awards acquire the effects of res judicata and only annulment this could lead to the court declaring the clause invalid. actions may be brought in relation to them; in exceptional cases, where applicable, awards may be subject to revision in line with 5.4 What interim forms of relief can be obtained in CPA rules. support of arbitration from the courts? Please give In order to set aside an award, the applicant must allege and furnish examples. proof that: a) the arbitration agreement does not exist or is not valid; b) they have not been duly notified of the appointment of an Under arbitration procedure, competence to adopt interim measures arbitrator or of the arbitral proceedings or have not been able, for will be incumbent upon the court with jurisdiction in the place any other reason, to assert their rights; c) the arbitrators have ruled where the award is to be enforced, and failing that, upon the court in on matters not submitted to their decision; d) the appointment of the the place where the measures are to result in legal consequences. At arbitrators or the arbitral procedure was not in accordance with the the request of a party, the arbitrators may grant any interim measure agreement between the parties, unless such agreement was in deemed necessary regarding the object of the dispute. Although the conflict with an imperative provision of this act, or, failing such arbitrator may adopt precautionary measures, they may not agreement, was not in accordance with the AA; e) the arbitrators implement them because they do not have delegated authority from have ruled on matters that are not subject to arbitration; and/or f) the the State to do so. award is contrary to public policy. Interim measures must be in accordance with the periculum in mora The action for setting aside an award must be brought within two and fumus boni iuris principles. Examples include preventive months from the time it was notified or, if correction, clarification or seizures of goods, temporary deposits of copies of works deemed to an additional award has been requested, from the time the decision have been produced in violation of intellectual and industrial on this request was notified, or starting from the deadline for such property regulations, preventive seizures of moveable property, notification. deposits of moveable assets or establishing asset inventories.

224 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London rcD spain

Ruth Duque Amara Odériz RCD RCD Serrano 116 Serrano 116 28006 Madrid 28006 Madrid Spain Spain

Tel: +34 91 758 39 06 Tel: +34 91 758 39 06 Email: [email protected] Email: [email protected] URL: www.rcd.legal URL: www.rcd.legal spain

Ruth is a State Insurance Inspector on leave of absence and has Amara is a lawyer with a wealth of experience providing regulatory and extensive experience advising insurance companies, as well as life tax advice to insurance companies, intermediaries, pension plans and and non-life reinsurance companies on regulatory and compliance funds, and financial institutions concerning how they operate their matters, regarding their business in Spain or their international business domestically and internationally. activities, especially concerning their right of establishment or the Her expertise covers anything from providing ongoing regulatory and freedom to provide services. tax advice to designing insurance products, or advising on With a wide range of knowledge of the European and Latin American restructuring and mainstreaming networks and partnerships in the insurance market, Ruth advises on corporate operations, including banking-insurance industry. authorisation procedures, transfers of portfolio, mergers and She is also an expert on complementary social security and specialises acquisitions, joint ventures or group reorganisations, as well as in implementing liabilities for pensions, remuneration schemes for business development or distribution strategies. executives and directors, and other employee remuneration schemes. Ruth has also specialised in contentious matters, mainly in relation to Her track record also includes designing and developing financial large risk insurance. products, investment and financing transactions, collective investment Member of the Madrid Bar (ICAM), the Institute of Accounting and institutions, venture capital, and other services and products specific Account Auditing (ICAC) and the Association of Professional State to the financial sector, and she also has experience providing tax/asset Insurance Inspectors (APISE). planning and advice for managing financial and corporate investments. Ruth was previously the Deputy Director-General of Insurance and Legislative Policy at the Spanish insurance regulatory authority (DGSFP) and is currently a registered account auditor at the ROAC.

RCD is a leading independent, dynamic and innovative law firm and a reference for providing comprehensive legal advice. Ranked by the Financial Times as one of the most innovative law firms in Europe, RCD offers comprehensive advice to life and non-life insurance and reinsurance companies, insurance intermediaries and other operators within the sector at both national and international level. A team of renowned professionals provide advisory services in relation to the management and resolution of claims through mediation, arbitration and the courts of justice, with extensive experience in handling major, complex cases. The firm advises insurance companies on corporate and regulatory issues. The multidisciplinary approach of its regulatory, commercial, tax and insurance labour teams has allowed RCD to carry out cross-border mergers, portfolio assignments, establishment of branches and other business operations relevant to the insurance market. The firm also has a wealth of experience in advising national and international leaders within the sector on drafting all types of policies and distribution agreements, their relations with the Directorate General of Insurance and Pension Funds (DGSFP), proceedings before the insurance supervisors, the consumer authorities and data protection authorities (among others), as well as dealing with global insurance programmes, questions on coverage, etc.

iclg to: insurance & reinsurance 2019 www.iclg.com 225 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 38 sweden Fabian ekeblad

advokafirman Vinge KB Paulina malmberg

■ The persons who shall be involved in the management of the 1 Regulatory undertaking (including deputies) or be responsible for any key function have sufficient knowledge and experience and are otherwise fit and proper for the assignment. 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? 1.3 Are foreign insurers able to write business directly or The Swedish Financial Supervisory Authority (Sw. Finansinspektionen) must they write reinsurance of a domestic insurer? (the “Swedish FSA”) is responsible for the supervision of insurance and reinsurance undertakings in Sweden. The Swedish FSA, inter alia, 1.3.1 Foreign insurers authorised and established within the authorises insurance and reinsurance undertakings to conduct insurance EEA or reinsurance business, supervises the business and may impose A foreign insurer or an institution for occupational retirement sanctions in case the undertaking fails to comply with the Swedish established and authorised within the EEA – and which is not a Insurance Business Act (2010:2043) (the “IBA”) or other laws and reinsurance undertaking – may establish a branch or general agency regulations applicable to the insurance business. The Swedish (secondary establishment) or carry on business on a cross-border basis Consumer Agency may also impose sanctions in case the undertaking in Sweden without applying for an authorisation; however, before fails to comply with Swedish consumer protection laws. doing so, the undertaking must notify its home supervisory authority. Passive provision of services would also require a prior notification.

1.2 What are the requirements/procedures for setting up a A foreign insurer intending to carry on motor insurance business in new insurance (or reinsurance) company? Sweden must certify that it is a member of the Swedish Association of Motor Insurers (Sw. Trafikförsäkringsföreningen). A foreign Insurance business may only be carried on by an undertaking which insurer intending to carry on motor insurance business on a cross- has been granted an authorisation by the Swedish FSA. Authorisation border basis must also appoint a representative in Sweden. may only be granted to a company limited by shares (Sw. aktiebolag), A foreign insurer authorised and established within the EEA may a mutual insurance undertaking (Sw. ömsesidigt försäkringsbolag) or carry on reinsurance business in Sweden from a branch or general an insurance association (Sw. försäkringsförening). If the application agency or write business on a cross-border basis without applying for authorisation is complete, the application will generally be for an authorisation or notifying its home supervisory authority. processed by the Swedish FSA within five months. 1.3.2 Foreign insurers authorised and established outside the The IBA, the Swedish Companies Act and the Economic EEA Association Act set out the relevant provisions regarding the A foreign insurer authorised and established outside the EEA may formation and incorporation of an insurance undertaking. not write insurance or reinsurance business concerning risks An undertaking may only be granted an authorisation to conduct situated in Sweden without authorisation by the Swedish FSA. insurance business if it satisfies the following criteria: The foreign insurer may apply for an authorisation from the ■ The articles of association or the by-laws are compliant with Swedish FSA to: the IBA and other laws and regulations, and otherwise ■ carry on insurance business in Sweden by establishing a include provisions which are required having regard to the branch or general agency in Sweden (whereby the foreign scope and nature of the proposed business. insurer becomes authorised to carry on insurance business in ■ The proposed business is deemed to be compliant with the Sweden); or requirements under the IBA and other laws and regulations ■ market insurances (a form of provision of services on a cross- governing the business of the undertaking. border basis) concerning risks situated in Sweden, if the ■ The qualifying holder of shares in an insurance company is insurances are mediated by an insurer which has been granted deemed to be suitable to exercise a significant influence over an authorisation in Sweden and is either affiliated with the the management of the insurance company, which would foreign insurer or has entered into a cooperation agreement include considerations regarding the good standing and with the foreign insurer. capital strength of the qualifying holder. An insurer, authorised and established in Switzerland, may benefit from the terms of the Agreement between the European Economic

226 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London concerning insurance and reinsurance distribution. It also aims to aims also It provisions distribution. reinsurance national and insurance harmonise concerning to is IDD the of object main The comprehensive thanitspredecessors. IDAthe and IDD the in forth set IDA. provisions the The more are intermediaries as well as insurance companies. The same applies to insurance to applies IDD the directive, old the Unlike mediation. insurance on 2002 December 9 of Council the of and Parliament European the of 2002/92 (EC) directive old the replaced IDD The insurance on 2016 distribution (the“IDD”). January 20 of Insurance Council the European of the the and Parliament of 2016/97 implements (EU) directive regulations Directive, Distribution other alongside IDA, lag (2018:1219) om försäkringsdistribution On 1 October 2018, the Insurance Distribution Act (the “IDA”) (Sw. exclusion declaration bythecourtthatrelevantexclusionclauseisvoid. important or a in result could cover information adequate provide to Failure insurance clauses. the in limitations out also, shall information The insurance. the of, scope a include shall customer should be aware of in order to assess the costs for, and the information the which contract, The insurance the of terms main the of description contract. insurance an into enters she or he before sufficientcustomer provide a to information to obligation an under is undertaking insurance An policyholders. provide pre-contractual or contractual information to customers and Swedish FSA would, for example, apply regarding the obligation to affärslokaler utanför f Peie Cnrcs c ( Act Contracts Premises Off Various mandatory provisions of the ICA, the Swedish Distance and applicable law to the insurance contract. parti the (R of right 593/2008 the restricts No which Regulation), (EC) Regulation by governed be would a sit risks concerning in contracts Insurance terms contract. discriminatory certain prohibit also may disallowcertainexclusiontypes of clauses. D The means that the ICA may restrict the terms of an ins assigneeor the insured (unless otherwise provided pol the of favour in mandatory are which provisions (the“ICA”) is applicable to insurance contracts an The Swedish InsuranceSwedishContractsThe( Act contracts, goodinsurancemediationpractice,etc. insurance protection, data protection, consumer marketing, on Swedish laws mandatory to subject be would activities insurance The in respect of one single insurance policy (whether “passive” or not). the addition, In authorisation an for apply to required be not cover.would insurer foreign insurance the procure to initiative own its on insurer foreign the approaches policyholder the be if would required authorisation no that means This cover. insurance the procure to initiative, own have their on insurer, who foreign the policyholders approached to Sweden in situated services risks provide concerning passively to order in authorisation an for apply to required not however, is, country third a from insurer foreign A does not apply to the provision of services on a cr outsideauthorisedinsurersforeign on imposed are agency in Sweden, may be exempted bran from acertain establishing requ by Sweden in businessinsurance auth insurer, An establishedSwitzerland,carry amended).inintends whichto (as assurance life than ins directConfederation on Swiss the andCommunity advokafirman VingeKB iclg to: insurance &reinsurance 2019 Arethereanylegalrulesthatrestricttheparties’ 1.4 into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms ) (the “DDSA”) and regulations issued by the by issued regulations and “DDSA”) (the ) Sw . a o dsasva oh avtal och distansavtal om lag Sw . ) entered into force. The Försäkringsavtalslagen oss-border basis. dincludes various urance contract or inthe ICA). This on directnon-lifeon iscrimination Act s o hoe the choose to es ae i Sweden in uated the EEA. This EEA. the irements which inter alia inter h r general or ch chle, its icyholder, urance otherurance insurance n rsd and orised m I ome , set , ) is currentlydebatedanddiscussedwithinthelegalcommunity. or wilful intent would be enforceable under Swedish law. This topic general a a director or officer for acts or in omissions caused by gross negligence shareholders the by meeting. However, it is unclear whether an agreement to indemnify approved be or should directors officers indemnify to agreement an requirement, express an duty.not of is breach it any though from Even resulting party third damages for any loss suffered by a shareholder, creditor or any other pay to liable is officer or director relevant the case in officer other or director a indemnify to permitted be generally would company law,a company but Swedish under restrictions some be may There requirements must be fulfilled by the entity that meets the customer. needs and demands The customer. of type the and proposed being product insurance the of complexity the on dependent is customer contract. The extent of the information that must be provided to the insurance an of conclusion the to prior customer the to information disclose to distributors insurance requires IDA The customer. the than other party any from remuneration receive not may distributor If the advice is given on the basis of a fair and personal analysis, the best interestofthecustomers. honourably,act must distributor the fairly, the in and professionally that entails practice distribution insurance Good customers. the of interest best the in act to any duty its impair which to interest of conflicts rise give not does or practice distribution insurance good own any with conflict not does it extent from the to customer the than other party distributor’s remuneration receive only the may distributors or Insurance customer the remuneration systemorotherincentives. than other anyone from benefits other or remuneration from originate that conflicts IDD’s the to, pertain beyond deviations go Such that provisions. provisions few a includes IDA The provisions. stringent more introducing or maintaining from States Member preclude not does IDD The protection. customer increase nuac i acrac wt te ue o te wds Bar Swedish the of rules the Association. with accordance in indemnity professional insurance a by covered be to required are Lawyers occupational pension, injury insurance,etc. pay sick pension, age old occupational as insurance provide to such agreement, bargaining obligation collective a of terms the under benefits an under be may employer An Agents Estate Act (2011:666) orPublic Accountants Act (2001:883). (2005:405), Act Intermediary Insurance (1994:1009), Act Air (1968:45), Act Liability Traffic Plant Act (1957:297), Railway Traffic Act (2004:519), Sea also Traffic Nuclear the are example, for of, There provisions the insurance. under insurance compulsory maintain to obligations indemnity professional maintain must accountants and agents estate insurance. real intermediaries, traffic Insurance by covered be must vehicles motor of Owners insurance cover whichismandatoryunderlaw. i.e., insurance, compulsory of forms several are There Arethere anyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 nuac-ae ivsmn pout. hs nal, entails, for This out set products. requirements investment the insurance-based to subjected are market which to volatility, exposed are that pensions occupational for prescribes In addition, Sweden has introduced stricter regulations than the IDD from thirdpartiesandmarketing. officers underlocalcompanylaw? ne alia inter www.iclg.com remuneration , sweden ne alia inter , 227 sweden 228 sweden © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com could potentiallybechallengedin court. it that and endorsement the of validity the recognise not may estate the It bankruptcy the of administrator against the insurer.that noted be however, (insolvent) should, directly its at claim claim a a making make of instead to reinsurer right a have then would the insured becomes a party of the reinsurance contract. 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Any term of an insurance contract which certain disallow or contract insurance an of terms the restrict may ICA the that means This ICA). are the in provided otherwise which (unless provisions various includes insured the or policyholder,assignee the its of favour ICAin mandatory The insured. the to favourable more generally are Sweden of laws substantive The contract wasenteredinto. på the after arisen have thereto rättshandlingar rise giving unreasonable, circumstances the deemed if even are andra contract the of terms the och if principles avtal område om förmögenhetsrättens (1915:218) lag be modified or set aside pursuant to the Swedish Contracts Act ( may contracts) reinsurance and insurance (including contract Any Ingeneralterms,isthesubstantivelawrelatingto 2.1 advokafirman VingeKB (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? reinsurer? insurer? composition; or insurance cover (i.e. a compulsory liability insurance policy); (SA) n gnrl equitable general and (“SCA”) ) Sw. (b) In the case of a business insurance contract, the policyholder the contract, insurance business a of case the In (b) information any that aware becomes policyholder the If (a) circumstances: information, unless requested by the insurer the to do provide so, except in to some duty positive a under not generally is policyholder insurer.the of questions any to answers complete and accurate The provide must policyholder The contract. insurance the of issuance the to relevant be may which information disclose to obligation an under – insurer the by requested if – is contract) insurance an vary or renew (or contract insurance an into enter to intending Aperson insured eventorfortheextentofdamage. the inaccurate information had no that significance for the occurrence of the demonstrated is it extent the to liable only is alternative, an as insurer, the that provide may contract insurance the of terms higher a the amount reflected by the premium at and other terms agreed to. The issued to been limited be shall obligation the terms, have modified with or premium would policy insurance the that demonstrate can insurer the If occurs. which event insured any for obligation its from released be may insurer the obligation, its with complied policyholder the had issued been have not would policy to obligation its disregarded disclose information, and has where the insurer can demonstrate that the negligence by or intent wilful with policyholder the policy,if insurance business a of p case the In to failed not she or he information). The indemnity had payment may be reduced to th entitled been disclose have to failure the information to(for example, 50 per cent proportionof what the p in reduced payme indemnity the that means This circumstances. assessmentriskthe relationinformation to thein reduced by a reasonable amount, pay showing indemnity regard to the t information, disclose to duty any otherwise acted with wilful intent or by negligence the policy,insuranceifconsumer a of case the In be void. in information accordance with the provision of the ICA, the insurance policy may disclose to obligation an with connection in faith good to contrary or fraudulently acted has policyholder the case In covered by the insurance policy and has been indemnified by the by indemnified been has and policy insurance the by covered is claim such extent the to insured’sloss, a the from arising to damages for subrogation claim of right statutory a has insurer The . Whatremediesdoesaninsurerhaveincasesofeither 2.4 . Isthere an automaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to discl 2.5 misrepresentation ornon-disclosurebytheinsured? insurer needaseparateclause entitlingsubrogation? whether the insurer has specifically asked about th insurers all matters material to a risk, irrespecti payment ofanindemnitybytheinsurerordoes provide theinformation. to policyholder the requested not has insurer the where also insurer, the of assessment risk the to importance material of is under a positive duty to disclose such information which is the then assessment, the insurer. risk the policyholder is under to a duty to disclose correct information to importance of matters material regarding inaccurate was disclosed previously iclg to: insurance &reinsurance 2019 in connection with and other relevantotherand olicyholder would policyholderhas he importance of to zero. et a be may ment sweden ose to t a be may nt relevant e oie the rovide ve of em? © Published and reproduced with kind permission byGlobal Legal Group Ltd,London Jury hearingsdonotexistininsurancedisputes. clause. jurisdiction a in court specific a of jurisdiction exclusive on agree to possible is However,it general dispute. in the of value the of regardless Court, District competent the at commenced actions, insurance in specialised are civil all for as are, disputes insurance commercial Instead, disputes. that courts no are there Sweden, In arelimited. However, on the request ofa party, t initiative,orderdisclosure discoveryor andinspe ( Appeal of Court Stockholm the to appealed were which disputes commercial all of cent per 60 approximately in granted was appeal the Supreme Court. Recent statistics from 2015 show that a leave to by instance, last the in as well as of Appeal, Court the by instance, A leave to appeal is required for a civil case to be tried in the second as thefinalhearingatanearlystage. for exchanging pleadings and by scheduling oral preparation as well up the process, such as making the parties agree to a rather tight plan a speed to measures get adopt courts The instance. to first the in years judgment one-and-a-half to one it about hearing, take final probably the would to prior settled is case the unless However, case. commercial a of length average the indicate to easy not is It not settlethecasewithoutconsentofinsurer. may insured the and defendant, the against evidence providing by insurer,example, the for assist to obligation an under is insured An insurance Swedish all, not but companies. many, between applies which ( Agreement Subrogation so-called the of terms the under or contract insurance limited the of terms be the under however, may, insurer an of subrogation of right The defendant thantheinsured. the to relation in position better a achieve never can insurer the but Claims are brought by the insurer and not in the name of the insured, insurance contract. the of under insurer right the by paid statutory expenses other the and costs insurance, life care medical of for compensation to limited however, is, case subrogation the In insurer. advokafirman VingeKB iclg to: insurance &reinsurance 2019 to means court’s the law, Swedish Under Whatpowersdothecourtshave toorderthe 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 Which courts are appropriate for commercial ins 3.1 of terms in interest constituting aprecedent. of are which cases such for granted be only will appeal to leave a as limited, are case commercial a in appeal of leave a granted be to possibilities however,the instance, last the In Sw. Sveahovrätt Litigation–Procedure 4 Litigation–Overview 3 bring tocourtonceithasbeeninitiated? dispute? Is there any right to a hearing before a j to theaction? respect of(a)partiestotheaction, and(b)non-parties disclosure/discovery andinspection ofdocumentsin disputes? Does this depend on the value of the ). Sw.Regressöverenskommelsen x officio ex hecourts may issue ctiondocumentsof o is own its on , urance ury? ), reasons ( ar there that shows production requesting party the that include professional secrets would not need to Howe case.supportingtheir not are documents that non-parties to the proceedings. The parties can be significancedispute,evidencethetowari.e.asin assum be can that documents of possession in anyone commenced. Swedish law is that disclosure should not be ordere gener The fine. ev conditional a by sanctioned be themay specify and importance carefully of the documents. An order for documents producti the identify In general, the party requesting disclosure of cert an orderan forproduction documentsof ( their production. prepared for exist reasons notes extraordinary unless personal use, private other for exclusively any not or does memorandums documents to written extend produce to obligation the Further, or attempts. negotiations settlement of course the in produced or litigation of contemplation in prepared documents lawyers, from advice to A party is entitled to withhold from disclosure documents that relate the adversaryparty. an expert report with the court, which should be communicated with hearing of the expert witness, the party stating the evidence must file reliability of his testimony can be questioned. However, prior to the to the matter in dispute or to any of the parties in such a way that the opinion, besides the fact that an expert witness should not be related There are no restrictions for a party on providing evidence by expert Please seetheresponsetoquestion4.3above. ultimately or a court detaining thewitnessincustody. to imposing witness as the the summoning such fine, have measures, conditional courts compulsory the take evidence, to give possibility to refusing witnesses For special meetingatthecompetentcourtoraforeigncourt. a at place take may evidence of taking the events, such In hearing. final the in of outside testimony give may not witness the hearing, main inconvenience the at or held being examination the costs of importance the to proportion occasion should hearing final the at attendance her or his if or hearing final the attend to witness witness written rule, general a as however,If, submitted. be cannot statements a for possible not is it and, evidence give to duty a final hearing. Witnesses that are summoned to appear in court have the at evidence give to courts the by called normally Witnessesare . Canapartywithholdfromdisclosuredocuments(a) 4.2 . Are there any restrictions on calling expert wi 4.5 Isevidence fromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 Is it common to have a court-appointed expert in course ofsettlementnegotiations/attempts? addition or in place of party-appointed experts? not present? give evidenceeitherbeforeoratthefinalhearing? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin Sw. synnerlig anledning ) for disclosing the documents. Sw.edition www.iclg.com ain documents must be produced unless ordered to disclose ds both partiesbothandds ), directed), towards d until a case has on of documents extraordinary e ver,documents al view under view al sweden d o have to ed tnesses? identiary 229 sweden advokafirman Vinge KB sweden

In our experience, court-appointed experts are, in general, (b) the accuracy of the judgment cannot be judged on the basis of uncommon, especially in civil cases. The fees for court-appointed the reasons for the judgment; experts are paid out of public funds. (c) the case is of interest in terms of constituting a precedent; or, alternatively

4.6 What sort of interim remedies are available from the (d) there are extraordinary reasons for the case to be tried in the courts? second instance. Recent statistics from 2015 show that a leave to appeal was granted There are several forms of interim remedies available. The courts in approximately 60 per cent of all commercial disputes which were may order provisional attachment (Sw. kvarstad) of so much of the appealed to the Stockholm Court of Appeal (Sw. Svea hovrätt).

sweden adversary’s property that the relevant money claim may be assumed For any judgment of the Court of Appeal to be tried by the Supreme to be secured on execution, provided that the party requesting it Court, the Supreme Court must grant a leave to appeal. In civil shows probable cause (Sw. sannolika skäl) to believe that he has a cases, the only ground for a leave to appeal is that the case is of money claim that is or can be made the basis of legal proceedings or interest in terms of constituting a precedent. determined by another similar procedure. The courts may also order A decision by the Court of Appeal not to grant a leave to appeal may provisional attachment on certain property, if a party shows also be appealed to the Supreme Court. probable cause that he has a superior right to that property. Provisional attachment requires that the party requesting it shows 4.8 Is interest generally recoverable in respect of claims? that it is reasonable to expect that the adverse party would evade If so, what is the current rate? payment of the debt by absconding, removing property or other means, or, in relation to certain property, that the adversary party Interest of a claim must be requested in order to be recoverable. will conceal, substantially deteriorate or otherwise deal with or dispose of the property to the detriment of the applicant. If a claim with a fixed due date is not paid in time, interest will run from the due date. In other events, interest will start running 30 days A court may also, if requested by a party, make an order for after the claimant has sent an invoice or otherwise made a claim measures suitable to secure the applicant’s right, such as a which sets out that non-payment will cause interest to run, unless prohibition, under penalty of a fine, of carrying on a certain activity both debtor and creditor are proprietors of business and the debt is or performing an act or an order. This would require that the party originated within their business activity, in which case, it is not requesting it shows that it is reasonable to expect that the adverse necessary to specify that non-payment will cause interest to run. party, by carrying on a certain activity, by performing or refraining However, the debtor is not obliged to pay interest in relation to the from performing a certain act, or by other means, will prevent or time prior to him receiving the claim. render more difficult the exercise or realisation of the claimant’s right or substantially diminish its value. The rate of interest for one year corresponds to the current reference rate, at present minus one half (0.5) per cent, with an addition of Generally, a request for provisional attachment or other sanction eight (8) percentage units. may not be granted unless the adverse party has been given the opportunity to express his opinion. However, in cases where there Interest in respect of litigation expenses will run from the date of is an imminent danger, the courts may order such sanctions judgment, regardless of if interest has been claimed. provisionally without hearing the adverse party. In cases where a provisional attachment or other sanctions have 4.9 What are the standard rules regarding costs? Are been ordered separate from a legal proceeding, the claimant is there any potential costs advantages in making an required to bring an action before the court or initiate an arbitration offer to settle prior to trial? within one month of the order; otherwise the order will lapse. A requirement for interim remedies is that the claimant deposits The standard rule regarding litigation costs is that the losing party sufficient security with the court to compensate the adversary party for must pay the costs of the winning party. However, if the claimant the potential losses he may suffer. Exceptions from this requirement only wins partially, the costs should, in principle, be proportionally can be made if the claimant is unable to provide such security and is allocated in relation to the degree of success. able to show that he has extraordinary reasons for his claim. The reimbursement of litigation expenses should fully cover the party’s costs for preparing and performing the action, such as attorneys’ fees and expenses for witnesses. However, a party would 4.7 Is there any right of appeal from the decisions of the only be ordered to compensate the opposite party’s costs if the costs courts of first instance? If so, on what general grounds? How many stages of appeal are there? are considered reasonable. If the parties in a dispute are reconciled prior to trial, the parties In Sweden, there are two stages of appeal from decisions of the would, in general, carry their own litigation costs. Yet, how to courts of first instance: the Court of Appeal; and the Supreme Court. apportion the litigation costs could of course be a part of the settlement agreement. All final judgments or judicial decisions of the courts of first instance may be appealed at the Court of Appeal, the second instance. As for intermediate decisions of the first instance, some 4.10 Can the courts compel the parties to mediate decisions may be appealed independently, and certain types of disputes? If so, do they exercise such powers? decisions may only be appealed in connection with the appeal of a final judgment or decision. No, the courts have no powers to compel the parties to mediate A leave to appeal is required for any judgment or decision in a civil disputes. case to be tried in the second instance. The general grounds for a leave to appeal in the second instance are that: (a) there are reasons to doubt the accuracy of the judgment;

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4.11 If a party refuses to a request to mediate, what 5.2 Is it necessary for a form of words to be put into a consequences may follow? contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words is required? This is not applicable; please see the response to question 4.10 above. Since general contractual principles apply to the arbitration clause,

involving freedom of contract, no specific form of words is 5 Arbitration required. The parties are free to agree on the arbitral agreement, with the exception of disputes relating to consumers (please see question

5.3 below). sweden 5.1 What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able 5.3 Notwithstanding the inclusion of an express to intervene in the conduct of an arbitration? If so, on arbitration clause, is there any possibility that the what grounds and does this happen in many cases? courts will refuse to enforce such a clause?

A valid arbitration agreement serves as a bar to court proceedings. Generally, Swedish courts recognise and enforce arbitration The courts are also prevented from hearing certain types of disputes agreements, and a valid arbitration clause serves as a bar to court which must be determined by arbitration exclusively. proceedings. That being said, Swedish courts sometimes tend to The Swedish Arbitration Act (Sw. lag om skiljeförfarande have a somewhat more restrictive approach when interpreting the (1999:116)) states that a court may not, over an objection of a party, scope of an arbitration agreement compared to the interpretation in rule on an issue which, pursuant to an arbitration agreement, must other countries. be decided by arbitrators. It should be noted that a party must Parties may agree on arbitration prior to, as well as after, the dispute. invoke an arbitration agreement on the first occasion that a party As provided in section 5 of the Arbitration Act, a party may, pleads his case on the merits in the court. Invocation of an however, lose its right to rely on the arbitration agreement if it has: arbitration agreement raised on a later occasion has no effect unless (a) opposed a request for arbitration by the other party; the party had a legal excuse and invoked the arbitration agreement as soon as the excuse ceased to exist. (b) failed to appoint an arbitrator in time; or (c) failed to pay, within due time, his share of requested security Irrespective of the arbitration procedure, the courts are not for compensation to the arbitrators. prevented from deciding certain matters with respect to the arbitration agreement, such as the arbitrators’ jurisdiction to decide These circumstances can be characterised as breaches of the the dispute. The arbitrators may rule on their own jurisdiction to arbitration agreement, which allows the other party to treat the decide the dispute. However, this does not prevent a court from agreement as terminated. determining such a question at the request of a party. Previously, a A situation not specified in section 5 which entitles a party to treat the party could initiate a separate court proceeding challenging the arbitration agreement as terminated, and to initiate court proceedings arbitrators’ jurisdiction while the arbitral proceedings continued – instead of arbitration, is that the adversary party during the procedure and not seldom an arbitral award was rendered before the court has asserted that no valid arbitration agreement exists. It is possible could produce a final ruling (which could be appealed) on the that there are other material breaches of the arbitration agreement question of the arbitrators’ jurisdiction. which would entitle the opposite party to terminate the arbitration As the Swedish Arbitration Act was amended in 2019, one of the agreement. However, as the Arbitration Act is silent on this matter, it major changes is that a party that wishes to challenge the arbitrators’ would probably be difficult to terminate the agreement on other jurisdiction can now, without initiating a separate legal claim in a grounds which are not specified in section 5, and which do not relate court proceeding, raise objections against the arbitrators’ to general grounds for invalidity of contract, such as fraud or duress. jurisdiction within the arbitral proceeding. Thus, the arbitrators first An arbitration clause may also be set aside pursuant to section 36 of rule on their own jurisdiction. If the arbitrators conclude that they the Contracts Act if it is considered to be unconscionable, having have jurisdiction, a party may within 30 days challenge this ruling regard to the contents of the agreement, the circumstances directly before the Court of Appeals. The arbitrators may continue prevailing at the time the agreement was entered into, subsequent the arbitral proceedings pending the determination by the court. circumstances and circumstances in general. It should, however, be This procedure is similar to the provision laid down in article 16.3 stressed that although section 36 is often asserted in various kinds of of the UNCITRAL Model Law. relationships, it is most rare that the article will be applied between Under certain circumstances, the courts are also entitled to appoint equal commercial parties. arbitrators or appoint new arbitrators where an arbitrator resigns or If a dispute between a business enterprise and a consumer concerns is discharged. For example, if the respondent fails to appoint an goods, services, or other products supplied principally for private use, arbitrator within the stipulated time, the District Court may make an arbitration agreement may not be invoked if it was entered into prior the appointment upon request by the claimant. Nor does the to the dispute. However, this restriction does not apply where the arbitration agreement prevent a court from, upon request by a party, dispute regards an agreement between an insurer and a policy-holder deciding on security measures with respect to claims under concerning insurance based on a collective agreement or a group consideration by the arbitral tribunal. agreement which is handled by a representative of the group. Nor does this restriction on agreeing to settle disputes through arbitration apply where Sweden’s international obligations provide the contrary.

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5.4 What interim forms of relief can be obtained in 5.6 Is there any right of appeal to the courts from the support of arbitration from the courts? Please give decision of an arbitral tribunal? If so, in what examples. circumstances does the right arise?

Both a court and an arbitral tribunal may, at the request of a party, Generally speaking, arbitral awards are final and the merits of the order provisional measures. There are several reasons why it is case may not be appealed. more advantageous for a claimant to turn to a court if he wants to be However, under certain circumstances provided in the Arbitration secured without delay. Firstly, the court’s decision is enforceable, in Act, an award could be regarded as either invalid or challengeable. contrast to the decision made by arbitral tribunals. Additionally, a Invalid awards are ab initio and forever, which means that no

sweden court can order conditional fines or otherwise use compulsory activity from any of the parties is required for the award to be measures to secure the claimant’s right. Further, the court can order invalid. Challengeable awards may be set aside by a court of law provisional measures, such as attachment, without hearing the under certain circumstances, at the request of a party. In such cases, opposite party in case there is an imminent danger. The provisions an action must be brought by a party within three months from the of the Code of Judicial Procedure determine what types of date the party received the award in its final wording. provisional measures that can be ordered (please see our response to Under the Arbitration Act, there are three exhaustive grounds for question 4.6 above). invalidity of an arbitral award: A party may obtain an attachment order or other interim measures (a) it includes determination of an issue which may not be when it is foreseen or there is proof that the adverse party will decided by arbitrators; remove his assets and make them inaccessible for future attachment. (b) the award or the manner in which the award has been A Swedish District Court is competent to order provisional rendered violates Swedish public policy; or attachment if the respondent is domiciled in Sweden. (c) the award has not been made in writing and it has not been Another example of obtainable interim measures is that the court, in signed by the arbitrators. case there is a risk of a contractor cancelling work that must be As to challengeable awards, an arbitral award will, at the motion of completed to avoid more extensive damage, may decide on suitable a party, be wholly or partially set aside if: provisional measures to safeguard the claimant’s legal rights. (a) it is not covered by a valid arbitration agreement; (b) the arbitrators have rendered the award after the expiration of 5.5 Is the arbitral tribunal legally bound to give detailed the period decided on by the parties; reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a (c) the arbitrators have exceeded their mandate in a manner reasoned award is required? which is likely to have influenced the outcome of the case; (d) arbitral proceedings should not have taken place in Sweden; The Arbitration Act does not require that an arbitration tribunal give (e) an arbitrator has been appointed contrary to the agreement reasons for its award or decision. The parties can agree that a between the parties or the Arbitration Act; reasoned award is required, both in the arbitration clause and (f) an arbitrator was unauthorised; or subsequently. However, even without such an agreement, it has (g) without fault of the party, there otherwise occurred an become common practice in Sweden to give detailed reasons for irregularity in the course of the proceedings which is likely to awards and decisions of arbitral tribunals. have influenced the outcome of the case.

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Fabian Ekeblad Paulina Malmberg Advokatfirman Vinge KB Advokatfirman Vinge KB Stureplan 8 Stureplan 8 Box 1703 Box 1703 SE 111 87 Stockholm SE 111 87 Stockholm Sweden Sweden

Tel: +46 10 614 3097 / +46 70 714 3097 Tel: +46 10 614 3057 / +46 70 714 3057 Email: [email protected] Email: [email protected] URL: www.vinge.se URL: www.vinge.se sweden Fabian Ekeblad is the head of Vinge’s insurance practice group. Paulina Malmberg has been part of the insurance group since the Vinge’s insurance practice group was founded in 1990, which made beginning of 2016. Paulina graduated in law in 2016 (LL.M., University Vinge the first law firm in Sweden with an insurance business law of Stockholm). Paulina’s assignments have included advising clients specialisation. Vinge’s insurance practice is insurer-led and is that are under the supervision of the Swedish Financial Supervisory particularly strong in the field of insurance-related transactions and Authority on various regulatory matters pertaining to their authorisation regulatory work. Fabian graduated in law in 1998 (LL.M., University of as insurers and clients in the financial services industry within the EEA Stockholm), joined Vinge in 1997 and has been a partner with the firm that wish to conduct business in Sweden, especially regarding the since 2006. He is a member of the Swedish Bar Association. On the Swedish regulatory environment. Further, Paulina has assisted clients initiative of the Swedish Financial Supervisory Authority, Fabian in transactions within the insurance sector. Ekeblad has been appointed, and is acting as, liquidator of the only two Swedish insurance undertakings that have lost their licence. Fabian Ekeblad’s practice focuses on transactions within the insurance sector, regulatory as well as insurance contracts and policy matters. He is responsible for the client relationship with several leading national and international life and non-life insurance companies and insurance intermediaries. Fabian is listed as a leading lawyer by Chambers & Partners and other major ranking institutes.

Vinge is one of Sweden’s leading independent commercial law firms with approximately 450 employees. We continuously receive top ranking by institutes such as Mergermarket, Chambers & Partners, The Legal 500 and IFLR. Vinge’s business concept is to be the leading Swedish business law partner, contributing to the success of its clients through its level of commitment, simplicity in approach and focus on results. We have established a unique level of competence and provide a full business law service. We are privileged to work with a large number of major international public and private companies, financial institutions and governments on some of the most complex and challenging mandates and transactions in the Nordic region. Vinge is a member of Lex Mundi, an international association of independent law firms. In addition, we have an extensive global network of business contacts which we have established throughout the years and which is available to our clients.

iclg to: insurance & reinsurance 2019 www.iclg.com 233 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 39 switzerland Peter Haas

eversheds sutherland ltd. Barbara Klett

■ demonstrate that they hold appropriate professional 1 Regulatory qualifications (Article 184 ISO); and ■ hold professional indemnity insurance or provide an 1.1 Which government bodies/agencies regulate equivalent financial surety (Article 186 ISO). insurance (and reinsurance) companies? Once registered, insurance intermediaries are then not subject to ongoing monitoring. However, FINMA will conduct spot checks to The regulatory body in Switzerland is the Swiss Financial Market verify whether the intermediaries comply with the regulatory Authority (FINMA). Its mandate is to supervise banks, insurers, requirements. insurance intermediaries, collective funds and the financial markets. The operation of reinsurance in Switzerland also requires a licence To ensure its institutional independence, FINMA was established as from FINMA. Insurance supervision law treats, with some a public law institution in its own right. exceptions (such as the renunciation of tied assets), reinsurers in the On the other hand, the Swiss Federal Office of Social Insurance is same way as primary insurers. FINMA applies the provisions competent for social insurance business (in particular old-age and accordingly, which gives FINMA a certain margin of discretion to survivors’ insurance, disability insurance, mandatory health and take account of the special features of reinsurance business. accident insurance as well as occupational pension funds). 1.3 Are foreign insurers able to write business directly or 1.2 What are the requirements/procedures for setting up a must they write reinsurance of a domestic insurer? new insurance (or reinsurance) company? Under Swiss insurance supervisory law, the freedom to provide All insurance companies are obliged to obtain a licence from services between Switzerland and abroad is only possible in FINMA for their business activities. Each company must submit a reinsurance, in some limited areas of direct insurance as well as business plan as part of the application. The insurers can commence under the FL/CH Convention on direct insurance and insurance their activities as soon as they have been licensed by FINMA. mediation in the exchange of services between Switzerland and the The Insurance Supervision Act (ISA) determines the basic Principality of Liechtenstein. requirements for the licensing of an insurance company. Further This means that foreign insurance companies must establish a branch requirements and provisions are described in more detail in the office in Switzerland, appoint a general agent as their head, deposit a Insurance Supervision Ordinance (ISO) and FINMA’s circulars. surety and apply for authorisation according to Article 15 ISA. The basic requirements include: ■ legal form: limited company or cooperative; 1.4 Are there any legal rules that restrict the parties’ ■ minimum capital requirement: CHF 3 to 20 million, freedom of contract by implying extraneous terms depending on the sector; into (all or some) contracts of insurance? ■ equity capital: sufficient free and unencumbered equity capital (solvency); The Federal Act on Insurance Contracts (ICA) governs the civil law ■ establishment fund: covered costs of foundation, organisation relationship between insurers and insureds. The ICA contains and extraordinary expansion of business activities; and provisions which must not be modified by contractual agreement or ■ object of the company: activities directly associated with by general conditions of insurance (Article 97 ICA), provisions insurance. which must not be modified to the disadvantage of the insured (Article 98 ICA), and provisions which may be modified at will. Whereas non-tied insurance intermediaries who offer or conclude The characteristic of the absolutely imperative provisions (Article insurance contracts on behalf of insurance companies or other 97 ICA) is that they completely deprive the parties of their freedom individuals must be registered in the public register of insurance of contract. Articles 97 and 98 ICA list several provisions which are intermediaries, registration for tied insurance intermediaries is to be assigned to the respective category. However, these lists are voluntary. not exhaustive. To register (see Article 44 ISA), tied and non-tied insurance intermediaries must: ■ meet the personal requirements set out in Article 185 ISO;

234 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London rtcin t h E lvl s etil mr dvlpd hn t is it than currently underSwisslaw. consumer developed more Accordingly, certainly is level EU the Parliament. at protection in failed have protection consumer more with revisions law insurance various hand, other into force to strengthen consumer come protection. In Switzerland, has on the Directive Distribution” “Insurance EU the 2016, Since in individualspecialfields. 100 over are there and level cantonal and federal both at insurances compulsory additional list exemplary an only variousprofessionalliabilityinsurances,etc. is this However, aviationinsurance;and ■ marineinsurance; ■ insuranceforrailways; ■ ■ (AI/AVS/EO/ insurance unemployment and security social fireinsurance(usuallypartofbuildinginsurance); ■ buildinginsurance(propertyownersonly); ■ carsandothervehiclesmustbeinsuredtooperatelegally; ■ basichealthandaccidentinsurance; in ■ required legally are ■ insurance of Switzerland: types following The Arethereanyformsofcompulsoryinsurance? 1.6 allowed. 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Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 qualify aspaymentinstructionsorsecurityassignments. principle, in shall, clauses Such clauses). “cut-through” (so-called agreed are clauses contractual deviating however, cases, some In unable tomeetthecoverageobligationforotherreasons. is or insolvent is insurer primary the if applies also This reinsurer. misrepresentation ornon-disclosurebytheinsured? insurer needaseparateclauseentitlingsubrogation? them? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof www.iclg.com switzerland 235 switzerland 236 switzerland © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com in for provided is secrecy professional Article mandate. This his of exercise a mandate or which the lawyer has received in the exercise which the client has entrusted to the lawyer in order to enable him to The lawyer shall, due to professional secrecy, not disclose any facts Canapartywithholdfromdisclosuredocuments(a) 4.2 third party the costs caused by the refusal (Articl compulsoryCriminalofuseCode, orderthemeasures up to 1,000 francs, threaten sanctions under j Articl without cooperate to refuses pursuant to these non-party Articles, the court a may impose a If CPC. as well as a limited right to refuse according to A Thirdparties have, however, anabsolute right tor CPC). 164 (Article evidence However, thecourtmaynotimposeanyconstraintsonparties. the appraising when account into this take will court the reasons, valid without cooperate to refuses party certain a if But associate. under the close a expose if would cooperate evidence example, of taking for to CPC; 163 refuse Article may to pursuant action circumstances the to party A physical recordsuponrequestbythecourt. in the taking of evidence; in particular they have the duty to produce cooperate to duty a have non-parties and parties both that principle Article 160 of the Swiss Code of Civil Procedure (CPC) provides in Whatpowersdothecourtshavetoorder 4.1 bring tocourt. to months six and three between takes normally it court, particular the of workload the and case the of complexity the on Depending Howlongdoesacommercialcasecommonlytaketo 3.2 30,000 francs. least at is value dispute the if Court Supreme to Federal the to appeal subject are decisions final Court High and Court Commercial Court and the ordinary court. reached,valueisclaimantthe choose may between t abovementi the and registered is defendant the only foreiequivalent an in or RegistryCommercial r Swiss parties involves and francs 30,000 least at of is proceedingsconsideredareinsurance thematters if for commercial disputes (so-called Commercial Court Zu in Aargau and St. Gallen) (as that has jurisdiction as court sol special a designate may cantons The Whichcourtsareappropriate forcommercial 3.1 eversheds sutherlandltd. Litigation–Procedure 4 Litigation–Overview 3 jury? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c) producedinthe relating toadvicegivenbylawyers,or(b)preparedin to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof e 167 CPC). rticles 165 and 166 e cantonal instance disciplinary fine of e 262 of the Swiss efusetocooperate value in disputeinvalue gsee i the in egistered he Commercialhe ). Commercial gn registry. If registry. gn or chargeor the nd dispute oned ih Berne, rich, ustification knowledge for the perception or assessment of legally relevant facts. party necessary two the misses court if the if or process other each the contradict opinions in involved often is witness expert sufficiently An not has who opinion intime. party a substantiated the facts of the to case or who has not requested an expert preference give to unjustified not order in restraint exercise should court the evidence, restrictions. further of production no of principle the are to subject there proceedings in However, but first parties the hear court must The CPC). 183 (Article experts more or one from opinion med ofrecordings, etc.) that are produced context within the fram the tothe mediation aswell asall documents (protocol in provided Confidentialityrefers alsomediationto interviews, all is exploitation arbitrationsimilAproceedings CPC). (Article205 par the declarationsby “Statements”madeallmeans arbitr the in later used be they may procedure, nor parties’The recordedstatementsthebein not may produced are that etc.) documents within theframeworkofmediation. recordings, all audio as and well video as (protocols, mediation the to related information of mediation. Confidentiality refers to the mediation interviews, all context the in provided also is exploitation of Aprohibition similar the by made parties duringtheconciliationproceedings(Article205CPC). court declarations in all later means “Statements” used be proceedings. they may nor authority, conciliation the before hearing the in recorded be not may statements parties’ The litigation. unnecessary avoid to and settlement a on agree to CPC) t h rqet f pro o or person a of request the At be must parties notified thereofinadvance. The residence. of place her or his at questioned is it addition, In be may witness the that CPC 3 such. para. 170 under Article permissible as declared be to has which assistance, legal of way by interrogation an of context the in possible is This for takingwitnessesareregulatedin Article 171CPC. procedure and a conditions The or CPC). party 1 para. a 160 as (Article witness deposition truthful a make to duty the have they particular, In evidence. of taking the in cooperate to duty a have of taking the during parties third and Parties hearing. final the in only not and evidence heard generally are witnesses Otherwise, measure precautionary a as witness according to Articles 158and261 a on agree may court The . Dothecourtshavepowerstorequirewitnesses 4.3 197 (Article authority conciliation a before conciliation at In Switzerland, litigation shall in general be preceded by an attempt later incourtproceedings. Statements from out-of-court settlement negotiations cannot be used 321 oftheSwissPenalCode. by Article law criminal under protected and Lawyers Act the of 13 . Arethereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnessesallowedeveniftheyare 4.4 experts? not present? give evidenceeitherbeforeoratthefinalhearing? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed iclg to: insurance &reinsurance 2019 x officio ex et seq . CPC. te or my ban an obtain may court the , switzerland ework of mediation. information related s,video and audio actualarbitration ar prohibitionofar to procedure. ation ties during theduring ties et seq et ain iation. . © Published and reproduced with kind permission byGlobal Legal Group Ltd,London due toactualcreditcosts). proving that the injured party has incurred higher interest costs (e.g. by adjusted be can and presumption a represents 5% The charged. date invoice the interest of 5% on with the damage and on the interest on ends damages shall be and impact (judgment date). 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Howmanystagesofappealarethere? courts? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan courts offirstinstance?Ifso,onwhatgeneral et seq cf . Article 107 CPC). . CPC). et seq . CPC, an appeal before the High Court x fii officio ex Atce 0 CC. CPC). 105 (Article for organising andconductingthemediation. mediation (Article 214 para. 2 CPC). for The parties request will joint be responsible a make time any at may parties the Furthermore, assesses appeals against precautionary arbitration decisions. adopts evidence, of provision the in arbitraltribunal, decides on their rejection and d somecases, for example, the state court appoints t offunctions which the State wishes toreserve for if the arbitral tribunal is blocked by the disputin they cannot completely replace their functions. Th on plac rulethe takegenerally tribunals toarbitral Although courts state of place in arbitration of The parties may at any time appoint arbitral tribun the CPCapplicable(Article176para.2IPLA). of provisions the declare and proceedings arbitration international in provision IPLA the the of application However, the exclude also may matters. parties international for applied is (IPLA) for Law applied is CPC Private International on The Federal Act the whereas matters, domestic situations. international and national The questions under this section will be answered in the light of both with regardtothedistributionofcosts. nor proceedings, the of outcome the to regard with disadvantage or of non-observance, the court event may not order the any substitute performance In binding. not is court the of recommendation The rud ht h picpl otat s nai (ril 18 aa 3 para. 178 IPLA). (Article invalid is contract principal the that ground The validity of an arbitration agreement may not be contested on the interest maybethesubjectofaninternational arbitration. economic an involving disputes only to IPLA, pursuant 177 Article does not provide such a condition regarding the free disposition, but concerning personal and family proceedings relationships are therefore excluded. The IPLA Arbitration CPC). 354 (Article dispose freely may parties the which over tribunal, arbitral an to submitted In the case of internal relations, only such legal relationships may be formal further any requirements. provide not does law Swiss The IPLA). 178 CPC, Article 358 (Article text by evidenced be to it allowing form other any in or writing in done be must agreement arbitration The . Whatapproachdothecourtstake inrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 . Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 Arbitration 5 what groundsanddoesthishappeninmanycases? consequences mayfollow? courts willrefusetoenforcesuchaclause? is required? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration www.iclg.com g parties or in the case switzerland ismissal,participates als as private courts hemembers of the itsown bodies. In is may be the case e of state courts, state of e cvl ipt. dispute. civil a esrs and measures 237 switzerland eversheds sutherland ltd. switzerland

5.4 What interim forms of relief can be obtained in 5.6 Is there any right of appeal to the courts from the support of arbitration from the courts? Please give decision of an arbitral tribunal? If so, in what examples. circumstances does the right arise?

Legal remedies are quite limited and Swiss national courts exercise Articles 390 CPC provides that the parties may agree by express restraint in interfering with private proceedings. The parties may, declaration, or in a subsequent agreement, that the arbitral award however, ask the state court to adopt a precautionary measure may be contested by way of objection to the cantonal court that has (Article 374 CPC). On the one hand, it comprises the precautionary jurisdiction under Article 356 para. 1 CPC. measures regulated in Article 261 et seq. CPC and, on the other Unless the parties have agreed otherwise, an arbitral award is hand, the protective measures of the Federal Act on Debt subject to objection to the Federal Supreme Court (Article 389

switzerland Enforcement and Bankruptcy (DEBA), including attachment CPC). (Article 271 para. 1 DEBA), as well as any interim measures of interim legal protection provided in other laws.

5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required?

Article 384 para. 1 (e) CPC provides that, unless the parties have explicitly dispensed with this requirement, the award must contain details of the statement of the facts, the legal consideration and, if applicable, the considerations in equity.

238 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London eversheds sutherland ltd. switzerland

Peter Haas Barbara Klett Eversheds Sutherland Ltd. Eversheds Sutherland Ltd. Stadelhoferstrasse 22 Stadelhoferstrasse 22 8001 Zürich 8001 Zürich Switzerland Switzerland

Tel: +41 44 204 90 90 Tel: +41 44 204 90 90 Email: [email protected] Email: [email protected] URL: www.eversheds-sutherland.ch URL: www.eversheds-sutherland.ch

Peter Haas is a Founding Partner and Managing Partner of Eversheds Barbara Klett (LL.M.) is a Certified Specialist for torts and Insurance Sutherland in Switzerland. His practice area is mainly national and Law (SBA – Swiss Bar Association), her practice areas are liability and switzerland international litigation and arbitration, as well as contract law. For insurance law, as well as Swiss and international logistics and many years, Peter specialised particularly in insurance matters. He transport law. Barbara provides legal advice, conducts litigation and worked for several years as in-house counsel in one of the largest acts as mediator in the areas of national and international commercial Swiss insurance companies and also worked as an associate attorney and contract law and international private law. Her prior experience in a business law firm. Peter has been recognised as one of the includes several years as an in-house counsel in the head office of one leading insurance and reinsurance attorneys in the world. of the largest Swiss insurance in the claim and underwriting department. Barbara established the national claim centre of the Peter holds an LL.M. degree in European law from the University of Swiss Federal Railways (SBB CFF FFS), which she directed until Essex (UK) and was admitted to the Bar in Switzerland in 1994. He is 2002. a member of the executive board of the Bar Association of the Canton of Berne and a member of the Swiss Bar Association. He is also a Barbara is mediator of the Swiss Bar Association (SBA) and of the member of the Insurance Committee of the IBA and the Swiss Society German lawyer academia (DAA). Furthermore, she is a lecturer at the of Civil Liability and Insurance Law, as well as the Association of University of Lucerne and a member of the expert commission Torts Insurance Law (Swiss Chapter). and Insurance Law Swiss Bar Association (SBA). She is vice- president of the European Law Society (ELS) and member of the editorial board of the publication HAVE (liability and insurance). She speaks German, Italian, English and French and is recommended by The Legal 500.

Eversheds Sutherland is a global brand with over 66 offices in the world’s major economic centres in 32 different countries, with a proven track record of delivering consistently high-quality legal services across jurisdictions. Attorneys in all locations share the same values, ways of working and understanding of what clients really want. An understanding of the sector and business culture which each client operates in, is a given. Collaboration is seen as a way of providing the most effective advice. Trust and accountability are the bedrock of all the firm’s client relationships. With over 400 experienced litigation attorneys in the U.S., Europe, Middle East, Africa and Asia, our global team is able to handle the largest and most complex cross-border disputes and regulatory challenges.

iclg to: insurance & reinsurance 2019 www.iclg.com 239 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 40 taiwan Daniel t. H. tsai

lee & li, attorneys-at-law trisha s. F. chang

1 Regulatory meet certain requirements or obtain the approval from the FSC, or both. A shareholder who holds more than 50 per cent (major shareholder) must: (1) guarantee the rights and benefits of the 1.1 Which government bodies/agencies regulate insurance company’s policyholders and employees; (2) comply with insurance (and reinsurance) companies? applicable laws and regulations in Taiwan with regard to his, her or its funding sources; (3) be equipped with the professional ability to The insurance regulator in Taiwan is the Financial Supervisory operate an insurance/reinsurance company; and (4) indicate its Commission (“FSC”). intent of long-term operations (including a long-term operation commitment and adequate financial ability to meet the capital injection needs of the company in the next 10 years). 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? With the view to establish a new insurance company or reinsurance company, the following steps are required to be taken: The foreign insurers that have not completed the registration A. apply with the Ministry of Economic Affairs (“MOEA”) for process above and deposit the sum of the operating bond cannot to reservation of the new company’s Chinese name and business scope; write business directly in Taiwan. Such foreign insurers, however, could write reinsurance of a domestic insurer. B. apply with the Investment Commission (“IC”) for a foreign investment approval (“FIA”) for foreign shareholders’ equity investment in the new company (please note that this step is 1.4 Are there any legal rules that restrict the parties’ only required for investments funded by foreigners or foreign freedom of contract by implying extraneous terms entities); into (all or some) contracts of insurance? C. apply with the FSC for a special permit to establish a new insurance company or reinsurance company in the ROC Article 144 of the Insurance Act provides that the competent (“Special Permit”); authority may, taking the development conditions of each insurance D. apply with the IC for verification of the new company’s enterprise into consideration, regulate the provisions contained in capital; insurance policies by implementing regulations governing matters E. apply with the MOEA for incorporation registration; such as procedures to be carried out before a policy is marketed; F. apply with the FSC for the issuance of a business licence; product review; and the actions to be taken when the content of a G. apply for business registration with the local tax authority; policy is incorrect, false, or in violation of the law. Such regulations include “Regulations Governing Pre-sale Procedures for Insurance H. apply for being a member of the Life Insurance Association of Republic of China (“Life Insurance Association)/the Non- Products”, “Guidelines for the Examination of Non-life Insurance Life Insurance Association of Republic of China (“Non-Life Products” and “Guidelines for the Examination of Life Insurance Insurance Association”) in Taiwan; and Products”. Under such regulations, the insurer is required to specify I. apply for the issuance of a certificate to operate foreign certain clauses and provisions in the policy. Such restrictions limit exchange business (“FX License”) from the Central Bank of the parties’ freedom of contract. Republic of China (Taiwan) (“CBC”) (if the new company will sell insurance policy denominated in foreign currency). 1.5 Are companies permitted to indemnify directors and Please note that certain restrictions are imposed upon the officers under local company law? shareholding structure of an insurance/reinsurance company. According to Article 7 of the Regulations Governing the Same Companies are not prohibited from indemnifying directors and Person or the Same Concerned Person Holding a Certain Percentage officers under Taiwan’s Company Act. In fact, under Article 199 of or More of the Outstanding Voting Shares of Insurance Company, the Company Act, in the case that a director is discharged during the the same person or same concerned person who plans to solely, term of his/her office as a director without a reasonable cause, the jointly or collectively hold more than 10, 25 or 50 per cent of an said director may make a claim against the company for any and all insurance/reinsurance company’s outstanding voting shares must damages sustained by him/her as a result of such discharge.

240 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London even ordered to suspend its business activities. admini to subject be regulationsmay suchviolating restaurants)as (such public the to drinks and food plac stores); department as (such frequently change metres exceed for exhibitions area or commerce floorand in which totalcom whose places bars); karaoke entert for placescinemas); as (such area stage and include: performance or public venues that contain insurance liability public compulsory by covered be example, Taipei City government listed the public p counti individual in applicable insurance liability compul governing regulations issued have insurance regulators liability public compulsory to respect In third partyoutsidethevehicle. such a manner as to cause injury or loss of life to a passenger or to a Act the in to means an accident in which an referred automobile is used or manoeuvred in accident” traffic “Automobile The 1998. January 1 on effect took and 1996 December 27 on promulgated was Act Insurance Liability Automobile Compulsory the victims, the indemnify directly and efficiently and accidents car protect of victims to insurance, liability automobile compulsory Regarding agency multipleliability. travel have to required are agencies travel public and insurance hold liability to required are enterprises particular some addition, as such insurance, policy is compulsory motor liability and residential earthquake insurance. In other social the insurance; is health One farmer insurance. and compulsory insurance, labour insurance, health national as of such insurance, types two are there in Taiwaninsurances compulsory certain are There principle in and Arethereanyformsofcompulsoryinsurance? 1.6 lee &li,attorneys-at-law iclg to: insurance &reinsurance 2019 determined been has insured the where the provides of 94 Act Article Insurance of 2 Paragraph insurance. liability of case the is which however, rule, such under exception an is There insurer. insurance contract is not permitted to bring a direct action against an Generally speaking, a third party that is not a contractual party to the Canathirdpartybringdirectaction againstan 2.2 fav in interpreted be consumers when there is any ambiguity should within such c contract insurance the th should and not parties,adhere blindly the to the of language intentemployed, true the seek to made con insurance of interpretation circumstances, most Therefore void. be shallcontract the of part such unreasonablythatare advantageous towardsinsuthe theconsumers, theeventinorthat such contract c contractcontains conditiontermanyor unfthatis insured. Further based on Article 54-1, in the cas there is doubt, interpretations should, in principl parties, and may not adhere blindly to the language interpretationthinsurancecontractsseekshallof the insureds’ advantage. Article 54 of the Insuran Generally speaking, the law of Taiwan relating to i In generalterms,isthesubstantivelawrelatingto 2.1 (Re)insuranceClaims 2 insurer? insurance morefavourabletoinsurersorinsureds? e, be favourable to the ce Act provides that es that an insurance nsurance is more to e true intent of the ofintent true e avourabletowards ontainsprovisions an audience space employed; where s r iis For cities. or es ; etc. Any entity Any etc. ; ainment (such as (suchainment the provisions of laces which shall , although underalthough , strative fines or finesstrative policyholders e rancecompany, ontract. mercial tenants rcs hl be shall tracts . Such places Such . s o serving for es mn local many , 50 square 500 s oy public sory u o the of our

regardless ofwhetherthecauseforrescissionexists. rescinded be not may contract the contract, such of execution the or misrepresentation. In addition, after once two years have elapsed month since a nondisclosure, within concealment, of involvement insured’s contract the learning the rescind must insurer be the that to risk the apply even after the risk has occurred. Please be mindful, however, of such shall same estimation The contract. and the rescind insurer’s may insurer the undertaken, the concealment, diminish any or made alter to sufficient has is misrepresentation or insured nondisclosure, concealment, the if that the rules Insurance Act that the of 64 provide, Article to failed prove or falsely provided it to that fact any able upon based is not was risk proposer the of the occurrence that case the in Except on Article 242oftheCivilCode. based insurer the of behalf on reinsurer the against lawsuit the file may insured the requirements, certain with the meeting after to insured, obligation its fulfilling in delayed insurer the if However, to claim indemnification from a reinsurer under the laws of Taiwan. right no has contract insurance original the of insured the contract, otherwise unless Act, reinsurance the and contract insurance original the Insurance under stipulated the of 40 Article to According rvds n h cs ta a isrd a a ih t claim to right after may, a insurer the liability, has insurance bears for insurer loss insured the of which occurrence to an due party that third a Act from case Insurance indemnification the the of 53 in Article provides insurer. the by indemnity an of payment upon subrogation of right automatic an has insurer The requested bytheinsurer. reasonably and specifically not information any disclose to obliged proposal). or application Ainsurance however,is, policyholder not (i.e., writing in insurer the by posed questions answer to obliged is the by inquired not facts insurer. disclose According to not Article 64 to of the Insurance is Act, duty a policyholder to but positive insurer obliged the the imposed only by raised is questions policyholder the the answer in truthfully words, practice other established In the is Taiwan. Principle” Inquiry “Written The . Whatremediesdoesaninsurerhaveincasesofeither 2.4 Cananinsuredbringadirectaction againsta 2.3 . Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 such of scope the however, undertake undertheliabilityinsurance. note, Please indemnification is restricted to the sum that the insurer has agreed to suffered. has it damage the for indemnification provides insurer the demand may that the insured is liable for a third party’s damages, such third party circumstances, the under say, to is That insurer. the from directly entitled, is party third the which to insured ratio the on the based and of amount scope the within indemnification, of payment for claim may party third the loss, for party third a indemnify to liable misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer needaseparateclause entitlingsubrogation? them? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof www.iclg.com

taiwan 241 taiwan 242 taiwan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com will the usually effect of such documents in the lack of checking the documents. judge the fact, persuade in the party to provide the documents rather than to conclude Nevertheless, party’s opposing document. the such truth the as by proved be to fact the or document such to take regard with allegation discretion, its in may, court the reason, justifiable to a order giving an without disobeys documents party produce a if ruling. that a rules further by (1) document 345 the Article produce to party opposing the order shall such it justified, is motion the produce that and material is document to such party by proved be opposing to fact disputed the considers court the the if document; ordering court’s the for move may party a the party’spossession, opposing the where in is document that, rules Procedure Civil of Code the of 343 Article Whatpowersdothecourtshavetoorder 4.1 notice of the first hearing within one to two month After the lawsuit is filed with the court, usually cl insurancean oflimitation time the sinceyears, to the insurer, or even years. But it will not usu mayandtakeitseveral months afterthe claimant s dependtheonclaimant after therejection paymeof However, in fact, when the lawsuit will be filed wi i time of periodpayment has noto be effected Where within 15 days policy. from insurancerece the in insurer has to pay for indemnification documents within supportingthe perio all submitted has insured after Act, Insurance the of 34 Article to According Howlongdoesacommercialcasecommonlytaketo 3.2 the judicial system. factor in deciding the competent court. In Taiwan, ju having court the commercial insurance disputes. is The value of the insureddi the or buyer) policy In general, the court covering the domicile of the Whichcourtsareappropriate forcommercial 3.1 apply andthustheinsuredhasrightofclaimbysubrogation. of misconduct such family member or employee, the aforementioned rule wilful does not the from resulted damage or loss such that case the However,in payment. upon subrogation of right the have not does insurer the insured, such of employee or member family a is insured the by suffered damage or loss the causing party third aforementioned the that case the in that ruled also is it addition, In the indemnificationpaidtoinsured. of amount the exceed not subrogated shall claim may the insurer the which of claim amount the However, party. third the against paying indemnification, be subrogated to the insured’s right of claim lee &li,attorneys-at-law Litigation–Procedure 4 Litigation–Overview 3 to theaction? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin bring tocourtonceithasbeeninitiated? jury? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof

ally be longer than two the judge will give the proposer (insurance d of time stipulated s. th court will really there is no jury in ipt of notification. aim is two years. years. two is aim ubmittedthecase spute is not a key nt by thebyntinsurer, pooe or proposer a idcin on risdiction cam the claim, a stipulated, s thus bedifficult topredictthedevelopmentinfuture. the will Taiwan,it in to rule clear due no is there is Since this self-control. judge’s believe we But prejudice. the without and of privilege concept client-lawyer of concept the to due is this said scholars Some negotiations/attempts. settlement of course the in lawyers, (b) prepared in contemplation of litigation, or (c) produced by given advice the to relating (a) documents the provide to party the ordered court the which in case any see not did we practice, In the if and party orthethirdparty. party, that third to damage material the bringing of or risk a party cause might disclosure that of secret a an the or have to related privacy is not it if does documents 5 party item the a produce to that obligation rules (2) 344 Article However, documents which are created regarding matters relating to the commercialaccountingbooks;and 5. 4. opposing the of interests the in created are which documents the require may 3. party opposing the which documents the in reference made has 2. party such which to documents 1. a dutytoproducethefollowingdocuments: Article 344 (1) of the Code of Civil Procedure rules that a party has bouey ndisbe Te rbtv vle f h hearsay the of value probative The inadmissible. absolutely not is evidence hearsay the so-called procedure, civil the In is evidence. hearsay court in presented not witnesses from Evidence parties to address the argumen evidence and oralfurther investi the reopen to discretion the has court evidencetheevidence.Ifarrives courtafter t at willalso be given the opportunity to present argum Further hearing.final thebeforeevidence provide order to court the for usual quite is testimony, it when them with evidencebring not do witnesses the and the court has the power to proceed. Since it i To order the witnesses to provide evidence is part . Canapartywithholdfromdisclosure documents(a) 4.2 the fine only or ask the party to provide other evi However, such kind of ruling is seldom. Usually th compulsoryrulingorderthirdprovithepartytoto necessary,court theIf party. third the on 30,000 reason,thecourt may, ruling,aby imposefine an producedocumentstoorderdisobeys withoutan givi produce the document. Article ruling, 349 a (1) by order, further may justified, itrule is motion the disputedthe provedbefactsuchtodocumentby is rule Proceduredocument Civil is ofin a Codethird party’s the possession, of and (1) if t 347 Article . Is evidencefromwitnessesallowedeveniftheyare 4.4 Dothecourtshavepowerstorequirewitnesses 4.3 course ofsettlementnegotiations/attempts? not present? give evidenceeitherbeforeoratthefinalhearing? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin action. party; laws; applicable the to pursuant thereof inspection an or delivery course ofthelitigationproceeding; iclg to: insurance &reinsurance 2019 he court considers that dence. he finalhearing,he the s that, if a third party gate the evidence. of the investigation, s often the case that e court will impose h tid at to party third the ot exceedingot NTD de the documents.thede may also issue a issuealso may entsregarding the h wtess to witnesses the more, the partiesthe more, materialthatand ng a justifiablea ng t alw the allow to t ta, f the if that, s taiwan making their making

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London .Wee h epr wtes s r a te statutory the was Where the expert witness is acting or acted as the advocate or or is 5. witness expert the Where 4. spouse, witness’s expert the or witness, expert the Where 3. relative blood a either was or is witness expert the Where spouse, witness’s expert the 2. or witness, expert the Where 1. Civil following circumstance: of Code the the of of any in witness expert an as act 32 not shall person a Procedure, Article and 330 Article to According selected fromindependentinstitutes. expert court-appointed the have to prefers court the party, adverse usually will experts party-appointed the the by trusted be not will and parties the from remuneration receive since But first. court investigation, and thus the party need to make the application to the the cause of a fire. Calling the party-appointed experts is part of the special knowledge or experience is needed; for instance, to establish It is quite common in Taiwan for a court to appoint an expert where Arethereanyrestrictionsoncallingexpert 4.5 ancillary on based discretion its evidence, itsownknowledgeandexperience. at judge the by determined be will evidence hearsay of value probative the short, In acceptance. the justify to evidence ancillary other is there if evidence hearsay the accept still may court the the However, to court. in compared given testimony as weight same the given be not may evidence lee &li,attorneys-at-law iclg to: insurance &reinsurance 2019 (the Court High Taiwan the second instance). to appealed be can Courts District Court). Usually District Supreme Courts are courts of the the first instance. and Judgments of Court, High Taiwan the Court, District (the system court the for instances trial three are there Taiwan, In Isthereanyrightofappealfromthedecisions 4.7 also requiresthebondtobedepositedwithcourt. the debtor to temporarily act or not to act. The provisional measure The attachment. provisional creditor the may apply for the provisional measure (injunction) to order of execution the before court usually, the court will ask the applicant to deposit the bond with the And, future. the in execution compulsory by claim the satisfy to difficulty extreme or impossibility the of showing a is there unless the Code of Civil Procedure, no provisional attachment is to be granted securing the of 523 Article under of that noted be should purposes it However, future. the for the in judgment extent final a of execution compulsory the of satisfaction some to debtor the creditor may apply for provisional attachment to freeze the assets of a claims, monetary for changeable claims or claims monetary For Whatsortofinterimremediesareavailablefromthe 4.6 assistant ofapartytotheproceeding. or head member oftheparty’s the household. or proceeding, the to party a of representative with, oranindemnifierto,apartytotheproceeding. co-obligor co-obligee, a is fiancé/fiancée or spouse, former fifth degree,toapartytheproceeding. the within marriage by relative a or degree eighth the within former spouse,orfiancé/fiancéeisapartytotheproceeding. expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed experts? grounds? Howmanystagesof appealarethere? courts offirstinstance?Ifso,onwhatgeneral courts?

must paydefaultinterestattherateof10% it period, time the within payment make to fails insurer insurer,the the to attributable reasons for If, notification. 15 of receipt from days within effected be must payment stipulated, is time of period time. of period stipulated the within indemnification pay no Where must insurer the claim, a for documents supporting all submitted under Article 34 of the Insurance Act, after a proposer or addition, insured has In claims. of respect in recoverable generally is Interest and untilthemediationfailed. unless procedure lawsuit the start not will court the circumstance, a mediation for application the as according to Article deemed 424 of the Code of Civil be Procedure. Under such will thereof filing the directly, lawsuit the filed parties the If lawsuit. to proceeding before dispute the mediate to obliged are parties the than NT$500,000, less is thereof price/value a the is and concerned dispute rights dispute proprietary the if Code, same the in ruled except otherwise Procedure, Civil of Code the of 403 Article to According court costspaidforthecurrentaction. the of two-thirds of return the for move date, settlement the after that, may,months parties three the within reached, is settlement provides a where also Procedure Civil of Code the of (2) 84 Article months three from thedayofsuccessfulmediation. within action court current the for paid costs court to referred was action mediation, the plaintiff may move for the the return of two-thirds of the after mediation successful a of cases in that, provides Procedure Civil of Code the of 420-1(3) Article fee tothepartiesinproportion. court the distribute will court party,the one to favourable fully not be borne by the shall party losing the fee lawsuit. If court the result of the the judgment is principle, In court.) the by decided be for will respectively amount amount claimed exact (The instance. third the the and second the to appealing of 1.65% around be will appeal for fee court the and amount claimed the of 1.1% around to amount will instance first the in lawsuit the filing for fee court The . Whatarethestandardrulesregardingcosts? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 .0Canthecourtscompelpartiestomediate 4.10 be appealedtotheSupremeCourt. amounts exceeding NT$1.5 million claim (approximately US$50,000) with can cases the only addition, In laws. the of contravention in is judgment original the that ground the on Court) Supreme (the instance third the to appeal only may instance second the losing of party the However, circumstances. arguments exceptional new some the in make except and evidences new provide to parties legal and the allow usually also will instance second the in court The points. points factual the investigate second and the in review court will the instance instance, first the in as Same appeal fee. the pays court it and it to unfavourable judgment the finds it if instance second the to appeal may instance first of party losing The If so,whatisthecurrentrate? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan

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243 taiwan lee & li, attorneys-at-law taiwan

of the arbitration institute, the number of arbitrators, the language to 4.11 If a party refuses to a request to mediate, what be used in the arbitral proceeding, the place of arbitration, and the consequences may follow? governing law.

As mentioned above, since the filing of a lawsuit will be deemed as an application of mediation for those specific cases, there is no so- 5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the called “refusal to request to mediate”. Nevertheless, the mediation courts will refuse to enforce such a clause? will fail if either party explicitly refuse the mediation. If one party failed to appear, the court may consider the mediation as failed or If a policyholder is a consumer, an arbitration clause that designates convene another mediation meeting according to Article 420 of the

taiwan arbitration as the sole dispute resolution mechanism might be Code of Civil Procedure. If the mediation did fail, the time of deemed by court as unfair and void (please refer to the Consumer application for mediation will be deemed as the time of filing the Protection Act). However, if an arbitration clause only provides lawsuit according to Article 419 of the Code of Civil Procedure, and arbitration as one of the dispute resolution mechanisms (i.e., the the court will proceed the lawsuit procedure. policyholder has options), such a provision is less likely to be deemed as unfair and void by the court. 5 Arbitration 5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give 5.1 What approach do the courts take in relation to examples. arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on The interim reliefs which may be obtained from the courts during what grounds and does this happen in many cases? the arbitration proceeding are the same with the interim reliefs which may be obtained in a lawsuit proceeding. That is, provisional According to Article 4 of Arbitration Act, if one party refuses to attachment or injunction. Provisional attachment is to temporarily follow the arbitration agreement and thus files a lawsuit, the court freeze the assets of the defendant in securing the future compulsory shall, under the request of the adverse party, give an order to execution. The injunction is to temporarily force the defendant to suspend the lawsuit and order the plaintiff to apply for arbitration act or not to act. within a specific period of time. However, if the defendant has already made an argument on the merit of the case, it will be deemed 5.5 Is the arbitral tribunal legally bound to give detailed as waiving its right and the defendant cannot request the court to reasons for its award? If not, can the parties agree (in give the above orders. If the plaintiff failed to apply for arbitration the arbitration clause or subsequently) that a within that specific period of time, the court shall dismiss the reasoned award is required? lawsuit. If the court did suspend the lawsuit and the plaintiff did apply for the arbitration, the lawsuit will be deemed as being According to Article 33 (2) of the Arbitration Act, an arbitral award withdrawn at the time when the arbitration award was made. shall contain the relevant facts and reasons, unless the parties have However, if the wording of arbitration clause is considered as agreed that no reasons shall be acceptable. Therefore, in Taiwan the “optional” (i.e. the party may choose to apply for arbitration or file arbitral tribunal, in principle, is legally bound to provide the reasons the lawsuit at its free will), the majority opinion of the court is that for the arbitral award. it depends on who exercises the option (arbitration or lawsuit) first, and the other party can only follow. 5.6 Is there any right of appeal to the courts from the If the arbitration clause is valid, since the arbitration clause is based decision of an arbitral tribunal? If so, in what on the mutual consent of the parties, the court would not intervene, circumstances does the right arise? generally speaking, and will respect the principle of party autonomy, such as the number of arbitrators, the appointment of arbitrators, the In principle, an arbitral award is binding on the parties and has the place of arbitration and the other matters stipulated in the arbitration same force as a final judgment of court. However, under certain contract. The court generally will not intervene in the conduct of circumstances, the parties may appeal to the courts for the arbitration, except during the revocation procedure after the arbitral revocation of the arbitral award. award was made. Regarding revocation of the arbitral award please Article 40 of the Arbitration Act provides that a party may apply to refer to question 5.6 below. The number of court cases to a court to set aside the arbitral award in any one of the following successfully revoke the arbitral award is lower than 5%. Most of the circumstances: courts will respect the arbitral award. 1. The existence of any circumstances stated in Article 38, such as the arbitral award has nothing to do with the dispute, the 5.2 Is it necessary for a form of words to be put into a arbitral award is beyond the scope of arbitration agreement, contract of (re)insurance to ensure that an arbitration or the award orders the party to do what is not allowed under clause will be enforceable? If so, what form of words the laws. is required? 2. The arbitration agreement is nullified, invalid or has yet to come into effect or has become invalid prior to the conclusion There is no specific form of words necessarily required by law to be of the arbitral proceedings. put into an arbitration clause to make it enforceable. However, to 3. The arbitral tribunal fails to give any party an opportunity to avoid a pathological arbitration clause that affects the validity of the present its case prior to the conclusion of the arbitral arbitration, it is advisable to include certain information into the proceedings, or if any party is not lawfully represented in the arbitration clause, including but not limited to the name and location arbitral proceedings.

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4. The composition of the arbitral tribunal or the arbitral 9. If a judgment of a criminal or civil matter, or an proceedings is contrary to the arbitration agreement or the administrative ruling upon which the arbitration award relies, law. has been reversed or materially altered by a subsequent 5. An arbitrator fails to fulfil the duty of disclosure and appears judgment or administrative ruling. to be partial or has been requested to withdraw but continues The foregoing items 6 to 8 are limited to instances where final to participate, provided that the request for withdrawal has criminal conviction has been rendered or the criminal proceeding not been dismissed by the court. may not be commenced or continued for reasons other than 6. An arbitrator violates any duty in the entrusted arbitration insufficient evidence. and such violation carries criminal liability. The foregoing item 4 concerning circumstances contravening the 7. A party or any representative has committed a criminal arbitration agreement and items 5 to 9 referred to are limited to the taiwan offense in relation to the arbitration. extent sufficient to affect the arbitral award. 8. If any evidence or content of any translation upon which the arbitration award relies, has been forged or fraudulently altered or contains any other misrepresentations.

Daniel T. H. Tsai Trisha S. F. Chang Lee & Li, Attorneys-At-Law Lee & Li, Attorneys-At-Law 7th Fl., No.201 Tun Hua North Rd. 7th Fl., No.201 Tun Hua North Rd. Taipei Taipei Taiwan Taiwan

Tel: +886 2 2715 3300 Ext. 2630 Tel: +886 2 2715 3300 Ext. 2195 +886 7 537 2188 Ext. 318 Email: [email protected] Email: [email protected] URL: www.leeandli.com URL: www.leeandli.com

DANIEL T. H. TSAI is the partner leading the insurance law practice Trisha Chang worked for non-life insurance companies to handle group at Lee and Li, and was the active member of the Insurance Law underwriting, claims, legal compliance and products filing matters for Committee of the Inter-Pacific Bar Association since 1994. He has almost 10 years. She is regularly invited to be a lecturer for insurance successfully represented domestic and international clients in training courses by Insurance Institute of the ROC (IIROC) and The handling numerous insurance cases. He has co-authored numerous Non-life Underwriters Society of the ROC, and she also participates in articles for many insurance law publications. He is also active in meetings organisd by IIROC and Insurance Bureau, Financial diversified practice areas, such as maritime, international trade, IP, Supervisory Commission, to provide comments on the revision of corporate governance, M&A transactions, investor protection, etc. insurance laws and regulations.

As one of the leading law practices in the world, Lee and Li has been recognised as the leading advisor of insurance law practice in Taiwan. Lee and Li has a practice that focuses on insurance law, with expertise and extensive experience in handling establishment of insurance companies, the legal compliance of insurance companies, compensation under the insurance or reinsurance, dispute resolution, etc. We provide effective representation and strategic advice and have successfully represented local and international clients in most of the landmark cases in Taiwan. Lee and Li has unmatched capabilities and experience in insurance practice in Taiwan and has handled many cases, worth a total of more than USD 200 million within a five-year period, for various multinational companies and Taiwanese companies on insurance and related deals and litigations.

iclg to: insurance & reinsurance 2019 www.iclg.com 245 © Published and reproduced with kind permission by Global Legal Group Ltd, London chapter 41 thailand sui lin teoh

r&t asia (thailand) co., ltd. saroj Jongsaritwang

1 Regulatory 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance? 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Yes. There are provisions of law which restrict the parties’ freedom of contract, insofar as they require that all insurance policies and the OIC The Office of Insurance Commission (“ ”) (under the calculation of insurance premiums must be reviewed and approved MOF supervision of the Ministry of Finance (“ ”)), is the main by the Secretary-General of the OIC. Provisions in an insurance authority regulating insurance and reinsurance companies in policy which are considered by the OIC as having an adverse impact Thailand. on the insured would generally not be approved.

1.2 What are the requirements/procedures for setting up a 1.5 Are companies permitted to indemnify directors and new insurance (or reinsurance) company? officers under local company law?

An insurance company can only be established as a public limited Yes, this is permitted. company or a branch of a foreign insurance company. To set up a local insurance company, promoters of the new company 1.6 Are there any forms of compulsory insurance? are required to apply for a licence to operate insurance business with the MOF. If the application is approved, the promoters must incorporate a public limited company. The company must place a Yes, there are two forms of compulsory insurance in Thailand; security deposit and maintain a capital fund of the amount required namely insurance under the Motor Accident Victims Protection Act under relevant regulations within six months from the registration of B.E. 2535 (A.D. 1992), and the Social Security Act B.E. 2533 (A.D. the public limited company. The Minister of the MOF will issue the 1990). insurance licence upon completion of the said requirements. In setting up a branch of a foreign insurance company, the foreign 2 (Re)insurance Claims insurance company would be entitled to apply for a licence to operate insurance business, with the MOF, only if it has held an operating licence (overseas) for not less than three years. Its branch 2.1 In general terms, is the substantive law relating to would be permitted to operate insurance business in Thailand within insurance more favourable to insurers or insureds? the scope of its existing overseas licence. If the application is approved, the branch of the foreign insurance company must place a There are three main substantive laws regulating insurance business security deposit and maintain a capital fund of the amount required in Thailand; namely the Civil and Commercial Code (“CCC”), the under relevant regulations. The Minister of the MOF will issue the Non-Life Insurance Act B.E. 2535 (A.D. 1992) (“NLIA”) and the insurance licence upon completion of the said requirements. Life Insurance Act B.E. 2535 (A.D. 1992) (“LIA”). The CCC is generally neutral, as its provisions are based upon the principles of freedom of contract. On the contrary, the provisions of the CIA and 1.3 Are foreign insurers able to write business directly or the LI are more favourable to insureds because their objectives are must they write reinsurance of a domestic insurer? to enable governmental entities to control and protect the interest of the general public; for instance, to control and regulate the rate of Foreign insurers are not entitled to write business directly with an insurance premiums. insured person/organisation. If a foreign insurance company wishes to write insurance directly, it would be required to establish a branch to conduct insurance business in Thailand. Alternatively, the 2.2 Can a third party bring a direct action against an foreign insurance company may write reinsurance of a domestic insurer? insurer. Yes, a third party can bring a direct action against an insurer.

246 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London h isrd mt t dsls mtra fcs r ae false makes or facts material voidable, is contract disclose insurance the to statements, omits insured the knew of the facts or should have known have should or facts the of knew Municipal Courts have jurisdiction over a civil case where the claim However, jurisdiction also depends upon the value of the claim. The a domicilein Thailand. cause of action arose, regardless the of whether or not which the defendant has in (ii) or domiciled, is defendant the which in (i) place insurance disputes is either the court which has jurisdiction over the Under Thai law, the court which has jurisdiction to hear commercial asked aboutthosefacts. specifically had insurer the not or whether of irrespective contract, insurance an into enter to refuse to or premium insurance an raise to insurer an induce may which facts material disclose to required Yes. At the time of entering into an insurance contract, an insured is facts caused material have would which disclose to required is insured an CCC, the Under Whatremediesdoesaninsurerhaveincasesofeither 2.4 the reinsurer. and insured the between relationship contractual no is there as No, Cananinsuredbringadirectactionagainst 2.3 r&t asia(thailand)co.,ltd. iclg to: insurance &reinsurance 2019 Which courts are appropriate for commercial insu 3.1 the lossfromathirdperson. of remainder the for claim to beneficiary the or insured the of right the prejudice to right its exercise cannot insurer the compensation, the of part only paid has insurer the if Therefore, insurer. the by paid compensation of amount the the to limited is of subrogation of right extent the that provided insured, an to compensation paid has who insurer an by subrogation of right automatic an is There Isthereanautomaticrightofsubrogationupon 2.6 Isthereapositivedutyonaninsuredtodisclose 2.5 or to refuse to enter into an insurance contract with the insured the with contract insurance an into enter to refuse to or odto (n wee t s o psil t rsoe h pris as parties the restore to required, theymustbeindemnifiedwithanequivalent). possible not is it where (and condition former their to restored be must parties the and beginning the from void been have to deemed is it voided, is contract voidable a When insurance contract. for avoidance, or within five years from the date of execution of the month from the time when the insurer became aware of the grounds one within avoidance of right its exercise to required is insurer The diligently asareasonableperson. 3 Litigation – Overview Litigation –Overview 3 disputes? Does this depend on the value of the them? misrepresentation ornon-disclosurebytheinsured? reinsurer? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof

an insurer to raise an insurance premium insurance an raise to insurer an

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nes h insurer the unless ury? rance . . If the process in any specialised court or other dispu procedural rules set out in the Civil Procedure Cod Procedure however, Civilchapterare,uponbasedthis responses in the of provisions the from deviate proceeding appeal and court instance first to apply specifichaveprocedumaycourt oftype (Note: Each Thailand doesnothaveajurysystem. the provisionsof Thai Arbitration Act. under award the challenge or enforce to entitled are parties the and The OIC. the before arbitration arbitration proceedings would be conducted to by an officer of the claim OIC its submit the to entitling provision insured a have to policies) cargo marine and hull marine (except policies insurance all requires law the event, any In Trade Court(“ the jurisdiction of the Central Intellectual Property and International within fall transportation, and services instruments, financial trade, However, disputes which involve insurance relating to international exceeds THB 300,000. amount claim the where case civil a over jurisdiction have courts courts/civil provincial and 300,000, THB exceed not does amount of appeal. stage each complete to years two and one-and-a-half between take could it and only submissions written upon based considered are judgment. Proceedings in the Appeal Court and the Supreme Court its issues court the until complaint the filing of date the from years two to one take usually Instance First of Court the in Proceedings rfsinl (uh s ayr) rm icoig information disclosing from lawyers) received by them in the course of exercising their profession. There as (such professionals protects Code Penal Thai the and Code Procedure Civil Thai The denying theexistenceofdocument. the application and the party on whom the court summons is served document the of description requested, doing so would increase the chance of the court rejecting broad a only cite to prohibited not document, and the person who possesses the document). Whilst it is the of the of date the name document, the to parties the the of name the document, (i.e., detail in document or evidence requested the identify to In required be would party the application, the making evidence. produce to Thailand of outside persons demand to authority no has court the However, documents. of production the for applications considering when discretion its exercise will court the proceedings or third parties to produce specific documents. The application in party an either demand to summons submit a issue to may court the requesting dispute a to party a law, procedural Thai under However, Thailand. in process discovery no is There . Howlongdoesacommercialcasecommonlytaketo 3.2 . Can apartywithholdfromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c) producedinthe relating toadvicegivenbylawyers, or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin IPIT Court ”), regardlessofthevalueclaim. www.iclg.com te resolution forum.) e and do not cover the generalcivilthe thailand ral rules whichrulesral , hc may which s, oe Our Code. 247 thailand 248 thailand © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com An order directing the competent official or any other person (3) from defendant the restraining injunction temporary the A or dispute in property the (2) of attachment or Seizure (1) available interimmeasuresareasfollows: of filing the plaint or any time before the judgment is rendered. The measures from the court, by filing a motion with the court at the interim time several seek may party a Code, Procedure Civil the Under Whatsortofinterimremediesareavailablefromthe 4.6 evidence incourtproceedings. give to experts own their appoint to parties the for common more expert, this is not a common practice in a Thai court. It is, however, an appoint to power the court has itself court the in Although proceedings. witnesses expert calling on restrictions no are there No, Are there any restrictions on calling expert wit 4.5 the writtenstatementasevidenceofwitnessinquestion. or does not require cross-examination, the court is required to admit a given has court who in evidence give to attend witness to need not does a statement written that agree parties the if addition, In witness physicallyattendingthecourttogiveevidence. a that order an for apply written witness statement be submitted, without the necessity of the to court, the to request joint a making by in entitled, domiciled are not parties is the witness Thailand, a If video- by witness conference. the from evidence take to court the request to entitled is party a evidence, give to present not is witness Yes.a If Isevidencefromwitnesses allowedeveniftheyare 4.4 considers necessary for the completion of the evide as topower the hascourtrendered, thejudgment is at any time during or after the witness has given t in any hearing during the course of the court proce issue a subpoena to order any person in Thailand hato courtparty, the a by requestHowever,upon No. Dothecourtshavepowerstorequire witnessesto 4.3 no is right towithholddisclosureofthesaiddocuments. there therefore, speaking, Strictly documents negotiations. lawyers, settlement by given advice of course the in produced or litigation of contemplation in prepared of proceedings to party a by disclosure protects expressly which provision no however, is, r&t asia(thailand)co.,ltd. Is it common to have a court-appointed expert in give evidenceeitherbeforeoratthefinalhearing? stopping orpreventingdamageto the propertyinquestion. order an or property,defendant’s the or dispute in property the the of disposal or removal sale, restraining transfer, the from defendant injunction temporary a or the act, from defendant’s suffer to continue may minimise of plaintiff would the breach which which injury order or other or act act, the wrongful or contract any continuing or repeating courts? addition or in place of party-appointed experts? not present? ipt o te eedn’ poet, r ocrig h act the complained ofon aninterimbasis. concerning or property, defendant’s the or dispute in property the to pertaining registration of cancellation or modification, registration, extinguish to power legal having defendant’s property. estimony but before edings. In addition, give oral evidence nce of the witness. k questions as itquestions as k s the power to power the s nesses?

annum. If the interest rate is not specifically provided for in the in relevant contract,arateof7.5% for provided specifically not is rate interest the If loan annum. a per of 15% is respect interest of in rate maximum the except which under rate, agreement, capped no relevant is the There in specified contract. rate the at recoverable is interest Yes, policy). public or interest public to relating issues on example, (for grounds A further appeal can be made to the Supreme Court on limited legal disputed amountintheappealstageexceeds THB 50,000. the if only made be can fact of points on appeals However, fact. of points and law of points both on permitted are Instance First of are filed with the which Appeal Court. Instance, Appeals against First being decisions of the Courts of first Courts the of judgments Thailand; against in appeals appeal of stages two are there Yes, to setthecasedownfortrial. If a party refuses a request to mediate, the court would then proceed to generally prior settlement court amicable setting thecasedownfortrial. an the find practice, to parties in both encourages However, disputes. mediate Under Thai law, the court is not empowered to compel the parties to of time the at case the of progress settlement). the upon depend would would generally refund a part of the court fees (the amount of which If the case is settled prior to the court issuing its judgment, the court very smallportionofthesuccessfulparty’s lawyers’ fees. In practice, the court would generally order the losing party to pay a the in claim the of amount the of Court. Supreme and Court Appeal 5% of the amount of the claim in the Court of First Instance, and 3% law provides that the maximum which a court is entitled to award is the fees, lawyers’ of respect In 50,000,000. THB above and over THB first the for 50,000,000 of the claim amount, plus (ii) 0.1% of the claim amount 200,000 THB exceeding not but claim, the of amount the of 2% (i) are proceedings court civil of commencement the upon payable fees court law, Thai Under costs. bear to losing party the order generally fees. would lawyers’ court the and practice, fees in However, court the including proceedings, any in costs bear would party which decide to discretion the has court The . Whatarethestandardrulesregardingcosts? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 Isthereanyrightofappeal fromthedecisionsof 4.7 .1Ifapartyrefusestorequestmediate, what 4.11 Canthecourtscompelpartiestomediate 4.10 4 Anordertoarrestandtemporarilydetainthedefendant. (4) If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? there anypotentialcostsadvantagesinmakingan courts offirstinstance?Ifso,onwhatgeneral iclg to: insurance &reinsurance 2019 per annum wouldbeapplied. thailand

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London (2) The arbitration contract is not binding under the law of the of law the under binding not is contract arbitration The (2) incapacity some under was contract arbitration an Ato party (1) to an refuse to enforce court enforce anarbitrationclause,asfollows: to the by refuse upon relied to be could court award refuse arbitration a entitle to which that court likely grounds is a it certain However, allows clause. that arbitration an provision of enforcement express no is There The arbitration. required wording,translatedintoEnglish,states: to policy insurance the under dispute any refer specific wording agreeing that the insured has the right to choose to include to required are insurers LIA, the and NLIA the Yes,under as (such relief the conductofanarbitration. interim or subpoenas in intervene generally not would court the Otherwise, injunctions). issuing to extend only court’s involvement during arbitration proceedings would generally The court would uphold an arbitration agreement in a contract. The Whatapproachdothecourtstakeinrelationto 5.1 r&t asia(thailand)co.,ltd. iclg to: insurance &reinsurance 2019 Notwithstanding theinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 Arbitration 5 to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty courts willrefusetoenforcesuchaclause? is required? what groundsanddoesthishappeninmanycases? arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration osns o ete h dsue y rirto under arbitration by dispute Arbitration the Rules of the Office of the settle Insurance Co c to the arbitration,consents by dispute such settle to wishes such if company,and the and policy the under claim thisinsurance policybetween personthethhaswho cla any or disagreement, or dispute of event the In in which the award is rendered in case there is no country no agreed upon. is there case in rendered is award the which in country the of law the or parties, the by upon agreed country under thelawapplicabletothatparty. “ Settlement ofDisputesby Arbitration

mmission.” im under im e righttoe ompany person the injunction ismadetothecourt). interim the for application the before or time same the at filed be process under normal civil proceedings, where the main claim has to the from different is this that (note injunction interim the on order court’s the receiving of date arbitration the from the days 30 file within proceedings to party required the be would so, application doing the in making but proceedings, arbitration the filing to prior injunction interim an for court the to apply to able are parties out in our response to question 4.6 above. It is worth noting that the set are law procedural Thai under available measures interim The policy, thecourtmayrefusetoenforceaward. recognition or enforcement of the award the would be that contrary to public or law, the under arbitration by settlement of capable not In addition, where the court finds that the award deals with a dispute arbitral the or tribunal arbitral the of composition The (5) scope the outside dispute a with deals award The (4) proper given not was application the making party The (3) the of law the under binding not is contract arbitration The (2) A party to the arbitration contract was under some incapacity (1) able prove oneofthefollowing: is motion the filing party the where award arbitral the aside 90 within days from receipt award, of a copy the of the award. aside The court set is required to to set court motion competent a the filing requesting by award arbitral an against appeal may party A agree otherwise. parties the unless award, the in decision its making for reasons its state clearly must tribunal the Act, Arbitration Thai the Yes,under . Isthereanyrightofappealtothecourtsfrom 5.6 Isthearbitraltribunallegally boundtogivedetailed 5.5 What interim forms of relief can be obtained in 5.4 circumstances doestherightarise? reasoned awardisrequired? of arbitration from the courts? Please give example decision ofanarbitraltribunal?Ifso,inwhat the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in may set aside only the part that is outside of the the part that is within the scope of arbitration co matter which is beyond the scope thereof can be sep scopeof the arbitration contract. However, if the arbitration contract or contains a decision on matt ate o, nes tews are b te ate, in parties, the by agreed otherwise accordance withthe Arbitration Act. unless or, parties the of contract the with accordance in not were proceedings the caseinarbitralproceedings. defend to unable otherwise was or proceedings arbitral the or tribunal arbitral the of appointment the of notice advance there isnocountryagreedupon. case in law Thai under or parties, the by to agreed country under thelawapplicabletothatparty.

www.iclg.com thailand ntract, the court scope thereof. ers beyond the award on the arated from support f the of s. 249 thailand r&t asia (thailand) co., ltd. thailand

Sui Lin Teoh Saroj Jongsaritwang R&T Asia (Thailand) Co., Ltd. R&T Asia (Thailand) Co., Ltd. 973 President Tower, 12th Floor 973 President Tower, 12th Floor Units 12A–12F Ploenchit Road, Lumpini Units 12A–12F Ploenchit Road, Lumpini Pathumwan, Bangkok, 10330 Pathumwan, Bangkok, 10330 Thailand Thailand

Tel: +66 2 656 1991 Tel: +66 2 656 1991 Email: [email protected] Email: [email protected] URL: th.rajahtannasia.com URL: th.rajahtannasia.com

thailand Sui Lin Teoh is a partner of R&T Asia (Thailand) Limited (a member firm Saroj Jongsaritwang is a partner of R&T Asia (Thailand) Limited. He of the Rajah & Tann Asia network). She was a founding member of the was a founding member of the Bangkok office. Saroj has more than Bangkok office, and its former managing partner. She graduated with 19 years of legal experience in Thailand, acting for a broad range of a Bachelor of Laws from the University of London, and is a qualified corporate and financial clients, acting as a legal counsel for a group of solicitor in England and Wales. Sui Lin has more than 23 years of companies representing the largest consumer finance business experience in Thailand, acting for a broad range of corporate and (including credit card and personal loans) in Thailand including financial clients, and advising on general corporate and commercial, advising various commercial banks in various banking and project consumer protection, insurance, and employment matters in Thailand. finance matters. Saroj is recognised as a recommended lawyer in The She straddles the Thai/international business communities effectively Legal 500 (2019 edition) in banking and finance, employment and as a result of her bilingual skills and her training in England. She also technologies, and media and telecommunications. possesses the unique ability to communicate Thai law advice in a way that is accessible and comprehensible to international clients. Sui Lin is recognised as a recommended lawyer in The Legal 500 (2019 edition) in employment and labour practice.

R & T Asia (Thailand) Limited is part of the Rajah & Tann Asia network of firms and offers the highest standards of legal service by bringing together leading law firms in nine regional countries. The firm has wide-ranging experience in Thai law matters right across the commercial spectrum, including representing clients in civil, criminal or administrative proceedings; in international and domestic arbitration; and in government investigations and trade, customs and compliance matters. The firm is also highly rated for its expertise in structuring and advising on foreign investment approvals, public and private company mergers and acquisitions, and in general corporate commercial matters for foreign investors. The firm comprises more than 50 lawyers who have the ability to also represent clients in highly regulated industries, such as telecoms, automotive, food and beverage, liquor, tobacco, insurance and manufacturing, and is able to provide full support in large-scale litigation matters, corporate transactions and investigations.

250 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Chapter 42 Turkey

Esenyel|Partners Lawyers & Consultants Selcuk Sencer Esenyel

1 Regulatory 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance? 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? There is freedom of contract in accordance with the Turkish Code of Obligations. However, there are some obligatory regulations as The General Directorate of Insurance, which operates under the well. According to Art. 1404 of the Turkish Commercial Code Minister of Treasury and Finance, is the state body that makes (TCC), a contract cannot be against the mandatory rules, moral arrangements related to insurance. To prepare general conditions, values, public policy or rights of personality. In case there is such tariffs and instructions related to insurance and to carry out the contract, the same shall be considered null and void. necessary activities for an effective functioning private pension system in Turkey, et cetera, are examples of the organisation’s Generally, the Turkish Commercial Code regulations are composed of activities. In addition, Insurance Supervisory Boards, which are rules to be applied if there is no provision in the contract, nonetheless operating under the same Ministry as a supervisory mechanism, there are issues that will be deemed invalid when written. whose main functions are to take necessary measures to protect For instance, according to Art. 1429, if the policyholder directly policyholders and conduct inspection and investigation activities on causes the risk to occur, the insurer will be discharged from liability them and to prepare consolidated reports on insurance and the and contracts against this provision are invalid. private pension sector, amongst others. 1.5 Are companies permitted to indemnify directors and 1.2 What are the requirements/procedures for setting up a officers under local company law? new insurance (or reinsurance) company? There is no such regulation provided regarding this matter in Insurance companies operating in Turkey should be established as Turkish Law. Therefore, there is no legal barrier for indemnifying joint-stock companies or cooperative companies. Besides that, directors and officers. these companies are not allowed to work in any sector other than insurance. 1.6 Are there any forms of compulsory insurance? For the founders of insurance companies established as a joint-stock company, the law introduces certain requirements. According to the Yes. Some types of insurance are compulsory under Turkish Law. Insurance Code Art. 3, these requirements are mainly related to the Examples of compulsory insurance are traffic insurance, earthquake financial status and the criminal records of the founders. insurance, land transportation financial liability insurance, compulsory Special requirements are regulated by law for the entities who plan liability insurance for dangerous substance and hazardous wastes, etc. to carry out insurance/reinsurance activities in Turkey. In general, there is compulsory insurance in cases where there is a high likelihood of harm.

1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? 2 (Re)insurance Claims

The activities of foreign companies are regulated under the Foreign Direct Investment Code. According to Art. 3, foreign companies 2.1 In general terms, is the substantive law relating to have the liberty to make investments in the Turkish Law System insurance more favourable to insurers or insureds? unless otherwise provided by international conventions or special provisions of law. The conditions are the same for foreign insurers The insureds are considered to be the weak party of a legal relation and domestic insurers. and the Turkish Law system gives priority to the rights of the weaker party as it aims to ensure equity.

ICLG TO: INSURANCE & REINSURANCE 2019 WWW.ICLG.COM 251 © Published and reproduced with kind permission by Global Legal Group Ltd, London 252 turkey unless the policyholder has hidden an important iss contaiquestionsthe of scope the outsideremaining answered,policyholdertheliablefor be shallnot of list a policyholder the to given has insurer the con conclusionwithdifferent the terms (hadthe insurer ofkn non-conclusion the to lead could they if insufficiently or wrongly to the insurer shall be d con of disclosedCircumstancessocontract. not time are that the at aware be to 1435, ought or is it Art. which Code Commercial Turkishpolicyholder shall inform the the insurer of all import to According © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Which courts are appropriate for commercial insu 3.1 defendan or Court’s provided that it proves the payment effected the to the without subrogation of rule continueinsurerpartiesprocthesemayliable,the initiat been already had proceedings enforcement or the insured upon payment of the insurance indemnity shall insurer the TCC, the of 1472 Art.to Pursuant Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to disclo 2.5 contract. policy holder, the the insurer shall be discharged by of its obligation regarding the days 10 within accepted not is premium additional 15 days or request an additional premium. In case the request for an within contract the terminate may insurer incorrectly,the disclosed circumstances of importance to the insurer are not disclosed at all or if 1439, Art. Code Commercial Turkish of principle the on Based Whatremediesdoesan insurer haveincasesofeither 2.4 does notaffect aninsured’s rightsandclaimsfromaninsurer. turkey reinsurance However, reinsurer. a from directly rights any claim cannot insured an that states Article the of 2 Sub-article TCC. the of 1403 in Art. regulated are reinsurance regarding terms The No. Cananinsuredbringadirectaction againsta 2.3 the within insurer the to period oflimitationstheinsurancecontract. directly amount insured the to up loss its claim may victim the TCC, the of 1478 to Art. Yes. According Canathirdpartybring directactionagainstan 2.2 esenyel|Partners lawyers&consultants codn t At 5 f h TC te optn cut for This courts competent Courts. the Commercial TCC, are the disputes insurance of commercial 5 Art. to According 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the insurers all matters material to a risk, irrespecti reinsurer? insurer? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes whether the insurer has specifically asked about th misrepresentation ornon-disclosurebytheinsured?

eemed of importance ant circumstances of any circumstancesany eedings as per theper eedings as insured. ue in bad faith. at all or disclosedor all at ownthetruth). If usin t be to questions legally succeedlegally ned in that list, that in ned . If legal action ed against the against ed lso o the of clusion rc o t its to or tract s consent ts’ se to ve of ury? rance

the em? ihr at; n dcmn ta frs bs t ay li or claim any to base a forms evidence alreadypresentedtotheparties. that document any party; either transactions by any received or sent is that document any of parties; the between made proof be may and related is that document a submit: to entity legal a or person real a request may also court The claims. side’s opposing the or theirs of proof are documents those whether evidence, of submission with documents the all include to to the Turkish Code of Civil Procedure Art. 219, parties are required Due to the attribution made in the Turkish Commercial Code Art. 83 petitions. court to appoint a hearing date within that period of exchange of the simple the for months two (unless about takes usually it and applied) stage is procedure first this in total in petitions Parties four exchange week. a within defendant(s) the to served and examined After the first petition is presented before the Commercial Court it is party, real person or a legal entity. If the court decides on that and that on decides court the If entity. legal a or person party,real proven, the court can require information or documents from a third court renders a judgment that a document is needed for a claim to be the if 221, Art. Procedure Civil of Code Turkish the to According to withholdthosedocumentsforethicalreasons. confidential and considered as business secrets or parties may prefer course of settlement negotiations/attempts, those documents may be to the Attorneys Act. Furthermore, if a document is produced in the a Only instance. attribution with document a of submission from refrain may lawyer this for remedy these certain than no Other is there proven. provisions, is counterparty the of claims the that assume may with court the excuse document, an the submitting show not not for evidence does party relevant the If document. such regarding heard be to witnesses require may court found. The be cannot or exist not does document this that party third such to oath offersan court the demand, the with required is that document In the case of a party or a third party refusing the submission of any . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcase commonlytaketo 3.2 . Do thecourtshavepowerstorequirewitnesses 4.3 Canapartywithholdfromdisclosuredocuments(a) 4.2 time thanthealternativeproceeding. less takes procedure that means which case, instant the in applied is procedure” “simple Lira, Turkish thousand hundred a under is dispute the of value the If dispute. such to applied be to procedure differencethe and dispute the of value the regarding made been has a alteration, recent a with that noted be should it However, Law. in Turkishjury a not court the in judge a before place take hearings the and dispute the of value the on depend not does authorisation Litigation–Procedure 4 to theaction? bring tocourtonceithasbeeninitiated? give evidenceeitherbeforeorat thefinalhearing? course ofsettlementnegotiations/attempts? respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin iclg to: insurance &reinsurance 2019

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London difficult im to obtain berights due to wouldchanges in the cu it or occur, might damage serious where injunct preliminary the regulates Procedure of Code Furthermore,389 party.Art. third a orDebtor the and immovable properties of the debtor, which are p due,requestmayis precautionary the for attachmen tothis article, thecreditor debt,ofa which has regulates the precautionary lien for the money rece BankrEnforcementnumberedand2004 the of 257 Art. expe such findings cannot of be on the same level as the court-a opinions evidence, an as yet, experts, the haveParties report. theregardingstatements sub to weeks two parties the grants also and report i courtthe file, the submittedtoreport expert an authority to decide whether or not to appoint an ex co the consequence, a as However, request.party’s o its on either experts appoint may court The law. exp of appointment the on restrictions no are There explanations sufficient, the court may hear the thi reason for failure of such non-disclosure. If the parties are obliged to disclose such documents b and, ordered If parties. the of allegations the prove de documentisentity, suchlegal if or partythird turkey Thecourts mayorderthedisclosure thedocumentof regulatedTurkishissueisThisCivilPrin ofCode Isevidencefromwitnessesallowedeveniftheyare 4.4 stages ofthelitigationprocess. further the in witnesses other amend to allowed not are parties and final is parties the to given Time time. given a within lists witness present to expected are they and cases their prove to witnesses use to allowed are parties Accordingly,the actions. civil in cases their prove to required are parties the Procedure, Civil of Code Turkish not are parties the the witnesses. per third-party As summon may court sufficient,the by provided documents and information the esenyel|Partners lawyers&consultants iclg to: insurance &reinsurance 2019 the relevant First Instance Court or consider the c ofthe First Instance Courts. Afterthat, it may e Regional Courts of Appeal may either remove or appr non-pecuniary damage as per the Turkish Code of Civil Procedure). of respect in limits monetary no are (there 01.01.2018 of as TRY the before orders 3,560.00 over is amount disputed of the Courts if Regional Appeal, attachment precautionary to objections upon Instance Courts, interim injunction of decisions and decisions rendered Court the and First the of decisions the appeal to entitled are parties Appeal; The Appeal. of Courts Regional First Courts; namely: Instance Law; Turkish in system court three-tier a is There Isthereanyrightofappealfromthedecisions 4.7 What sortofinterimremediesareavailablefromthe 4.6 Are there any restrictions on calling expert wit 4.5 courts? addition or in place of party-appointed experts? not present? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral Is it common to have a court-appointed expert in court does not find the notbeen pledged and ithersend the case to rrent situation. rd party as a witness. ase itself. s not bound by this by boundnot s ivables. According pert. In the case of emed necessarytoemed chance to appoint to chance if not, explain the ppointed level. ossessed either by te or, third court, the y ocedure 221. Art. of TurkishCivilof mit their writtentheir mit t of the movabletheof t ove the decision possessed aby erts in Turkish in erts urt is the final the is urt n r pn a upon or wn o fr cases for ion t ad their and rts uptcy Codeuptcy osbe or possible nesses? eiin o isfiin eiec idctn te ai o the of basis the the indicating decision. in evidence statements insufficient contradictory or e.g. decision, appeal, such limited for are there grounds limit, amount the as well As Appeal. of Court the before Appeal of to Courts Regional right the the of decisions have the appeal will parties 01.01.2018, of as TRY 41,530.00 As a third system, in certain cases where the disputed amount is over event ofrejectionthecasebyCourt. the in even fee such refund cannot party the attorney, the to paid is fee such and proceedings court the to prior party such of attorney determined there is an agreement regarding is the attorney fee between a party and it fees, attorney However,if Lawyers. of Fees TariffMinimum the the of to according For the pay costs. to party’s required be winning will party losing the proceedings, the of a requesting party the decide procedural transaction should pay the relevant expenses. may At the end court the proceedings, trial During plaintiff. the by paid be should costs litigation principle, In court. the at costs main the are fees attorney and expenses litigation as fees witness fees, expert expenses, on advance fees, Application actual payment. of date the to date due the from requested be might Banks State the by accounts deposit maturity year one to paid rate interest highest the debts, currency foreign to relating disputes for 3095, numbered the of to 01.07.2018. Act 4/a According of Art. as disputes general in 9% and disputes commercial in The 19.5% is interest claims. legal current of respect in recoverable generally is interest Yes, ate; nevnin f h Cut my apn ny n some in only happen may Courts the of intervention the parties; of agreement the upon conducted is which system resolution dispute alternative an is arbitration the as that stressed be should It shall Court the mediate, to continue theproceedingsasmediationisnotmandatory. refuse parties the if Hence, action. of cause the regarding article no is there but mediate to parties the encourages Court the 4.10, question to answer in mentioned is As settle ortomediateinapreliminaryhearing. to parties the invites court the But action. of cause a as mediate to parties force to entitled not are Courts Courts, Commercial the For . Whatarethestandardrules regardingcosts? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 . Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 Arbitration 5 offer tosettlepriortrial? If so,whatisthecurrentrate? what groundsanddoesthishappen inmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan to interveneintheconductofan arbitration?Ifso,on autonomy adoptedbythecourts? Are thecourts able arbitration andhowfaristheprincipleofparty

www.iclg.com 253 turkey esenyel|Partners lawyers & consultants turkey

circumstances and party autonomy is given a priority. The Courts may intervene when the parties fail to agree on the appointment of 5.4 What interim forms of relief can be obtained in the arbitrators, upon the application of either party, or the parties support of arbitration from the courts? Please give examples. may apply to the Courts so as to obtain interim relief, or the Court may extend the period that the arbitration process should be concluded, upon the application of either party. It should also be The TCCP and CIA provide that the parties have the right to apply noted that in case there is an arbitration agreement between the to the Courts in order to obtain interim forms of relief which are parties and one of the parties commences a law suit before the provided in Art. 389 of the TCCP and Art. 257 of the Code of Courts, the other party has the right to object the law suit and, upon Enforcement and Bankruptcy. The requirements to obtain such the objection, the Court should refer the matter to arbitration. reliefs are explained in detail above in the answer to question 4.6. turkey Furthermore, the CIA in Art. 6 regulates that such request will not constitute a breach of the arbitration agreement. 5.2 Is it necessary for a form of words to be put into a contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words 5.5 Is the arbitral tribunal legally bound to give detailed is required? reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required? The provisions of the Turkish Code of Civil Procedure and Code of International Arbitration, which are in relation with the arbitration, do not specify any form of words so as for an arbitration clause to be Art. 436 of the TCCP sets out the rules regarding the formal enforceable. An arbitration clause in written form containing the requirements of an award. According to which, an award ought to party’s unambiguous intention to arbitrate and stating the award contain the legal reasons and grounds upon which the decision is shall be final and binding upon the parties and shall be adequate made. Similarly, Art. 14 of the CIA provides that an award is to regardless of whether the agreement is concluded before or after a contain the legal reasons and grounds upon which the decision is dispute arises. A reference to another agreement and/or document, made and the amount of compensation if requested. Even though which contains an arbitration clause, shall also constitute an the Insurance Code does not provide any rules regarding the formal enforceable arbitration agreement as per the TCCP and CIA if there requirements of an award, the Code itself refers to the TCCP in the is an intention to make such clause a part of the underlying event that there are no specific provisions for a matter. Therefore, agreement. where there is an insurance arbitration award, it should also contain the legal reasons and grounds. According to Art. 30 of the Insurance Code numbered 5684, if there is an insurer that is a member of the insurance arbitration system, persons, who have any disputes with such insurer, may benefit from 5.6 Is there any right of appeal to the courts from the the arbitration even there is no such special agreement between the decision of an arbitral tribunal? If so, in what parties. circumstances does the right arise?

The 5684 numbered Insurance Code in Art. 30 provides that the 5.3 Notwithstanding the inclusion of an express decisions relating to disputes amounting to less than 5,000.00 TRY arbitration clause, is there any possibility that the are final. In the event that a decision relates to a dispute amounting courts will refuse to enforce such a clause? to more than 5,000.00 TRY but less than 40,000.00 TRY, such decision can be objected before the Insurance Arbitration As stated above, the requirements of an adequate arbitration clause Committee. The decisions in relation with the disputes amounting are provided within the TCCP and CIA. Therefore, in the case that to more than 40,000.00 TRY may be appealed before the Courts and there is an arbitration agreement or clause in writing, containing the can also be objected. intention of the parties to arbitrate for the disputes which are specifically defined and capable of being settled by arbitration, that The TCCP and CIA regulate that only an action of set aside may be arbitration agreement shall be valid and enforceable. commenced against the awards given by the arbitral tribunal on the grounds provided in Art. 439 and 15 respectively, such as one of the As per the provisions of the TCCP and CIA, disputes arising out of parties is incapacitated or the arbitration agreement is null and void or in connection with the rights in rem in relation to immovables in as per the law applicable to such agreement or the decision rendered Turkey and matters which are not concerned with the intention of is against public policy or the dispute is not arbitrable under Turkish the parties, are not capable of being settled by arbitration. law.

254 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Esenyel|Partners Lawyers & Consultants Turkey

Selcuk Sencer Esenyel Esenyel|Partners Lawyers & Consultants iTower, Merkez Mah. Akar Cad. No.3 K.19 D.135 Bomonti, Sisli Istanbul Turkey

Tel: +90 212 397 1991 Email: [email protected] URL: www.esenyelpartners.com Turkey Selcuk Sencer Esenyel is the founding partner of Esenyel|Partners Lawyers & Consultants and is a qualified lawyer admitted to the Istanbul Bar Association after completing his LL.B. in Turkey and studying for an LL.M. in the United Kingdom. He primarily focuses on maritime, admiralty, dispute resolution, banking and finance and asset finance and securitisation. He has acted for a wide range of clientele, from P&I Clubs to H&M insurers, to international banks, to ship charterers and owners. He is currently in charge of the Shipping, Finance and Litigation team in Esenyel|Partners Lawyers & Consultants.

Esenyel|Partners Lawyers & Consultants owes its ongoing growth to its reputation for providing swift, practical and high-quality service to its clients. The highly trained and capable lawyers of Esenyel|Partners Lawyers & Consultants take a hands-on approach to the practice of law and provide both legal and technical assistance by virtue of their dedication to understanding the clients they represent, and their expertise in the specific sectors in which they work. The firm observes the highest ethical and professional standards, combined with its rich depth of understanding of the law, to help it deliver better and more innovative solutions for clients. We consistently develop and expand our depth for the prosperity of our clients. Our solution-driven approach combines excellence of legal assistance with commercial awareness. Esenyel|Partners Lawyers & Consultants counsel the world’s leading companies in every area of the law, including international and domestic corporate and financial matters, corporate governance, international arbitration, technology, intellectual property, business litigation, appellate matters, white-collar criminal defence, federal and state legislative matters, energy and oil and gas matters, real estate, administrative, regulatory matters, shipping and transport, insurance, environmental and international trade. Lawyers at Esenyel|Partners Lawyers & Consultants are qualified and experienced, working in an internationally challenging environment. The firm owes its success to its devotion to handling matters by avoiding unnecessary litigation for its clients by adopting a customer-centric approach. The aim of the firm is to reach the most advantageous result for its clients through tailor-made solutions.

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BlacK sea law comPanY anastasiia sukacheva

1 Regulatory 1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance? 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? The parties must comply with the legal requirements for insurance agreements. The national commission that provides state regulation for the financial services market is a government body authorised to Article 4 of the Law “On insurance” defines the subject of an regulate insurance/reinsurance company activity. insurance agreement as property risks that are connected with: ■ life, health, working ability and retirement security; ■ possession, use and disposal of property; and 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company? ■ damage incurred by a physical or legal person. According to Article 16 of the Law “On insurance”, insurance Any joint-stock company, limited partnership or partnership with agreements must consist of: additional liability registered under the Ukrainian Law “On ■ title of the document; commercial partnerships” may obtain a licence for provision of ■ name and address of the insurer; financial services to act as an insurer/reinsurer in Ukraine. ■ name, address and date of birth of the insured; The company registration procedure lasts from three to five working ■ name, address and date of birth of the beneficiary; days. The entity must consist of at least three founders. The procedure ■ subject of the agreement; period is needed to draft necessary documents, apply for registration and receive an extract from the Register of Commercial Partnerships. ■ sum of the insurance; ■ list of insurance cases; To obtain a licence, an entity must comply with the demands stipulated in the Decree of the Cabinet of Ministers of Ukraine “On ■ amount of detriment and terms of payment; the licence terms for commercial activity of financial services ■ insurance tariff; provision (except activity on the securities market)”. ■ term of the agreement; Foreign insurers that have obtained the right to act as a legal ■ the conditions for change/termination of the agreement; insurer/reinsurer according to the laws of the country of registration ■ the conditions for insurance payment; may provide insurance services through a subsidiary branch in ■ a list of grounds for refusal of the insurance payment; Ukraine. ■ rights, obligations and liability of the parties; and To act as an insurer under Ukrainian law, the subsidiary branch of a ■ other terms agreed. foreign insurer must obtain a licence for provision of insurance services under Ukrainian law. 1.5 Are companies permitted to indemnify directors and officers under local company law? 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? Companies are permitted to indemnify directors and officers under local company law. Foreign insurers are able to write business directly. Foreign insurers are permitted to act as insurers/reinsurers/agents/ 1.6 Are there any forms of compulsory insurance? brokers exclusively in marine transportation, commercial aviation, space rocket launches, freight for the transportation of cargo and liability connected thereto, stated as an object of an insurance. Article 7 of the Law “On insurance” stipulates the 47 types of compulsory insurance. Accompanying services, such as consultation, risks calculation and claims handling, and reinsurance services may also be provided by In practice, significant “part out” of insurance types is nominally foreign insurers. compulsory.

256 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London propertyinconcessioninsurance. ■ The substantivelawismorefavourabletoinsureds. for liable persons and exporters for scientific insurance and liability medical state of workers ■ for insurance ■ property risks insurance under provisions of the Law “On oil product of agreement the under ■ insurance risks damage property the for investor an for insurance ■ liability civil ■ respect in station power nuclear a for insurance liability civil insuranceofwatertransport; ■ civilliability insuranceforownersofgroundvehicles; ■ ■ of respect in carrier transport marine a for insurance liability personalinsuranceincase ofatransportaccident; ■ healthand lifeinsuranceforveterinarians; ■ insuranceforsportsmen of thehighestcategories; ■ personal insuranceforworkersoffire-fightingstations; ■ ■ workers pharmaceutical and medical for insurance personal medical insurance; ■ ■ activities: commercial for compulsory are insurance of types following The BlacK sealaw comPanY iclg to: insurance &reinsurance 2019 types ofremediesmaybestipulated bytheinsuranceagreement. Other insured. the by of non-disclosure case or in misrepresentation payments either insurance provide to refuse can insurer An Whatremediesdoesaninsurerhaveincasesofeither 2.4 insurance an agreement. of parties the unless between reinsurer, agreed a is against procedure another action direct a bring can insured An Cananinsuredbringadirectactionagainst 2.3 rights. Any party can bring a direct action in case of a violation of a party’s Canathirdpartybringdirectactionagainstan 2.2 Ingeneralterms,isthesubstantivelawrelatingto 2.1 (Re)insuranceClaims 2 insurance morefavourabletoinsurersorinsureds? misrepresentation ornon-disclosurebytheinsured? reinsurer? insurer? and utilisation; or export waste’s hazardous the of moment the ipsl f aadu wse n epc o te damage the of respect in person the on inflicted waste hazardous of disposal institutions forcasesofinfection; and gas”; distribution; incurred ontheenvironmentandperson’s health; of damageinflictedbyanuclearaccident; carriers andthirdpersons; other cargo, post, luggage, passengers, on inflicted damage of privateorganisations forcasesofHIV infection; ’ s health, property or environment at environment or property health, s

jury. a before dispute insurance commercial a hear to right no is There and persons physical another partyareadjudicatedbythecivilcourt. between are disputes insurance persons Commercial legal between disputes adjudicated bythecommercialcourt. insurance Commercial with cooperate or insureds inbringingaclaimagainstthirdparty. interests represent to obliged not are Insurers of subrogationforinsurers. right automatic the stipulates insurance” “On Law the of 27 Article insurance risks assessments. insurer’s the affect may that information all present to obliged is insured an insurance”, “On Law the of 21 Under Article thereason forwhichthe otherpartypossessesthedocument; thefactthatcanbeproven bythedocument; ■ theconnectionbetween the documentandcase; ■ thenameofdocument; ■ ■ information tothecourt: following the express must parties disclosure, document Toobtain the casehascommenced. before/after disclosure document for court the to apply can Parties the why explaining later, documents hadnotbeenpresentedearlier. documents other present may Parties the casebeforeactualisadjudicated. Parties may present original documents or accurate copies related to case andthefunctioningcapacityofcourt. The length of a commercial case adjudication depends on the type of . Whichcourtsareappropriateforcommercial 3.1 Isthereanautomaticrightofsubrogation upon 2.6 Isthereapositivedutyon aninsuredtodisclose 2.5 . Whatpowersdothecourtshavetoorder 4.1 Howlongdoesacommercialcasecommonlytaketo 3.2 3 Litigation – Overview Litigation–Overview 3 Litigation–Procedure 4 jury? insurer needaseparateclauseentitlingsubrogation? them? to theaction? bring tocourtonceithasbeeninitiated? the dispute?Isthereanyrighttoahearingbefore insurance disputes?Doesthisdependonthevalueof payment ofanindemnitybytheinsurerordoes whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

www.iclg.com ukraine 257 ukraine 258 ukraine © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com rata be shall expert’sthe fees cover parties the expert, an appoints court a If expert additional an expert, appointed. the to stated questions the on answers contain not does expert an of conclusion the When expert, anotherexpertshallbeappointed. When parties have reasonable doubts as to a conclusion made by an appointed isbiased. expert the when court the to doubts reasonable express may Parties court hasnopowerstoappointanadditionalexpert. The parties. by or court the by appointed be can witnesses Expert Arethereanyrestrictionsoncallingexpert 4.5 to Ukrainianbyacertifiedtranslator. translated or Ukrainian in concluded be must applications Witness demand, asignatureshallbecertifiedbynotary. court’s the the on personally When evidence the present to unable is witness. witness the by signed be form, must applications Witness written in evidence the according to present Article 88oftheCommercialProceeding Code. to application witness a conclude to allowed are witnesses proceeding, commercial a In Proceeding Code. Civil the of 212 to Article according court, the by defined building court another at present while conference video a in part take may Witnesses conference. video via evidence present can Witnesses evidence fromwitnessesinwriting. In civil proceedings, there is no prescribed procedure for presenting Isevidencefromwitnessesallowedeveniftheyare 4.4 to thewitnesses’ evidencepresentedinwriting. require to power the as doubts reasonable has court the when evidence give to witnesses has court the proceedings, commercial In under civil proceedings. witness a for call to right the have exclusively parties The Dothecourtshavepowerstorequire witnessesto 4.3 court the to documents within fivedaysofreceiptthecourtruling. disclose to inability an state can Parties by acourtruling. provided when disclosure document from withhold not may Parties Canapartywithholdfromdisclosure documents(a) 4.2 document the provide to ruling court disclosure. a makes then theattemptsofpartytoobtaindocument. court The document; the ■ obtain cannot party the which for reason the ■ BlacK sealaw comPanY . course ofsettlementnegotiations/attempts? experts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed not present? give evidenceeitherbeforeoratthefinalhearing? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin and

pro new evidence, that could have not been presented to the court not newcircumstancesofthecasemustbeinvestigated; and was ■ case the theprovisionsoflawwereusedimproperly; to ■ related evidence ■ presented the ■ unreasonably was case the to related evidence presented the vital circumstances of the case were not defined by the court; ■ thecasecircumstanceswerenotinvestigatedbycourt; ■ ■ following grounds: the on appealed be can courts commercial or civil the of Decisions court canbeappealedtotheHighCourt. appeal commercial court. Decisions of the local appeal commercial Decisions of the local commercial court can be appealed to the local Proceeding Code. Commercial the of to 256 according Article decision, the of receipt the from days 20 appealed be can courts commercial of Decisions Court. High the to appealed be can court appeal the of Decisions court. appeal local the to appealed be can courts civil local of Decisions the decision, according to Article 354 of the Civil Proceeding Code. Decisions of the civil court can be appealed 30 days from receipt of obligations wereaffected bythedecision. appealed by parties to the case or a third person whose rights and/or be can instance first the of courts commercial or civil of Decisions prohibition for any person to perform a specific action related obligationforthepartytoperformaspecificaction; ■ prohibitiononthepartytoperformaspecificaction; ■ arrestofpropertyormonetaryassets; ■ interim following ■ the apply can remedies: courts commercial or Civil neet s band ne a or jdmn o acrig o the to according or parties’ judgment agreement. court a under obtained is Interest shall bestipulatedintheagreement. agreement the with non-compliance for penalties additional Any period ofnon-completionuponthe creditor’s demand. the for annually +3% index inflation the pay shall obligation their Article 625 of the Civil Code stipulates that debtors who fail to fulfil . Isthereanyrightofappealfrom thedecisionsof 4.7 Whatsortofinterimremedies areavailablefromthe 4.6 . Isinterestgenerallyrecoverableinrespectofclaims? 4.8 otherremedies. vesselarrestinrespectofmaritimeclaims;and ■ cessationofcustomsclearance; ■ transferofthedisputedsubjecttostorage; ■ cessationofanenforcementprocedure; ■ forcedcessationofsale; ■ ■ grounds? Howmanystagesofappealarethere? courts? If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral of firstinstance,mustbeinvestigated. investigated bythecourt; rejected bythecourt; to thesubjectofdispute; iclg to: insurance &reinsurance 2019

ukraine

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London Disputes mediationisnotyetanobligatoryprocedureinUkraine. The courtdoesnotcompelpartiestomediatedisputes. expenses court the of sum general the cover parties The The losingpartyisresponsibleforpaymentofcourtfees. Whatarethestandardrulesregardingcosts? Are 4.9 BlacK sealaw comPanY iclg to: insurance &reinsurance 2019 of contract on a agreement additional into arbitration before/afterthedispute arises. an clause conclude arbitration or an insurance/reinsurance put can parties The Isitnecessaryforaformofwordstobeputinto 5.2 forum. arbitration dispute, right the to themselves the by case the send in not may courts for provided is arbitration If jurisdiction. wrong the chose (plaintiff) party the if court right the to case the transfer to courts for possibility the allowing jurisdiction, territorial about clauses new provide which force, into came Code Proceeding Civil On 15 particular any take approach inrelationtoarbitration. not do courts Government the solve and to disputes, parties for clause arbitration an have contracts Usually, Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Canthecourtscompelpartiestomediate 4.10 rv te u o te or epne icre bfr te court the before incurred expenses debates stagestarts. court the of sum the prove to court the to evidence expensesforotherprocedural actions. other and documents present must Parties expenses forevidenceorderingandinvestigation; ■ expensesforwitnesses,experts andtranslators; ■ attorney fees; ■ courtfees; ■ ■ Court feesconsistofthefollowing: the satisfactionofparties’ demands. Arbitration 5 th there anypotentialcostsadvantagesinmakingan consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? is required? clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration what groundsanddoesthishappeninmanycases? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty

December 2017, the new Commercial Proceeding Code and prorata to expenses, todisclosedocuments,ceaseaspecificaction,etc. The arbitration court may oblige parties to pay the costs of the court not are that persons parties tothecaseprovidenecessaryrelief. other oblige not may court arbitration The international commercialarbitration”. “On Law the of 17 Article to according relief, of form reasonable The arbitration court may oblige any party of the case to provide any violates the court regulations and applicable law p The court may refuse to enforce the clause if such h abtain eiinabtain poeue xed the exceeds procedure decision/arbitrations arbitration arbitration the the on properly reported not was ■ party the thearbitrationclause/arbitrationagreementisinvalid; ■ ■ An arbitraldecisioncanbeappealedonthefollowinggrounds: The termofappealisthreemonthsfromreceiptthedecision. Article 34oftheLaw“Oninternationalcommercialarbitration”. under court appeal local the to appealed be can decision arbitral An additional award30daysfromreceiptofanaward. an for court arbitration the explanation of to the award, a correction to apply the award, or issuance of can an party the arbitration”, commercial international “On Law the of 33 Article to According decision groundedontheapplicablelawprovisions. reasonable a make to courts arbitration of obligation the arbitration” stipulates commercial international “On Law the of 31 Article . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcan beobtainedin 5.4 Notwithstandingtheinclusion ofanexpress 5.3 . Isthereanyrightofappealtothecourtsfrom 5.6 a as or parties the clause thatisanintegralpartofthedocumentsignedbyparties. by signed document a as formed and writing in concluded be shall clause/agreement arbitration the arbitration”, commercial international “On Law the of 7 Article to According examples. courts willrefusetoenforcesuchaclause? limits defined by the arbitration clause/arbitration agreement. circumstances doestherightarise? reasoned awardisrequired? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive arbitration clause,isthereanypossibilitythatthe decision ofanarbitraltribunal?Ifso,inwhat initiation/arbitrator nomination;and www.iclg.com clause enforcement rovisions.

ukraine

259 ukraine 260 ukraine © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com BlacK sealaw comPanY fast andeffective cross-jurisdictionalspecialisedlegalsolutionsinthebestinterestsofourclients. deliver to way best the is law,service insurance “boutique” SEAand the BLACK maritime As LAWof aspects COMPANYin only focused been has The Companyhastwooffices inUkraine:headoffice inOdessaandfilialoffice inKherson. arbitration, transport,insuranceandmaritimedisputes. BLACK SEA LAW COMPANY has a team of qualified lawyers with profound knowledge and unique regional experience in commercial litigation and leading the of one becoming market, legal the of share maritime lawfirmsinUkraine. major a gained rapidly has and 2008 in established was COMPANYLAW SEA BLACK the of representative in Agents Ukraine (FONASBA). and the Brokers Ship been of Associations National has of Federation Maritime Sukachev Mr. Comité 2016, Since the on Ukraine Bar International. represents Maritime Ukrainian and the of Member Association Board a is LAW Sukachev Mr. SEA BLACK at Partner Senior a COMPANY. became he 2013 in and working in the Court, in 2011 he became the head of G.A.S. Law Firm, of the Commercial Court of Appeal of the Odessa region. After initially Tradethe Union of Head the as acting also whilst years, seven about for Sukachev region Odessa Mr.the of Appeal of Court cases. Commercial the in release worked and arrest before ship in experience courts litigation Ukrainian extensive has He business. maritime and factories shipyards, seafarers, insurance ship-repair companies, banks and other owners, parties of and ship as Ukrainian such and assisting clients international arrest and ship insurance, to rights, seafarers’ related release, particularly law, maritime in practising COMPANY,LAWSEA BLACK at Partner Senior the is Sukachev Mr. Administrative Law. High School of Judgement, where he got his Master of Laws degree in In Law. Law National Odessa from – graduated Academy Sukachev Mr 2010, Maritime in degree Laws of Master his received Academy, he Maritime where National Odessa in studied Sukachev Evgeniy R:www.blacksealawcompany.com URL: e.sukachev +380503902424 Email: Tel: Ukraine Odessa, 65009 66/2, FrenchBoulevard BLACK SEA LAW COMPANY Evgeniy Sukachev @blacksealawcompany.com r. uahv i a ebr f h Uriin aiie Bar Maritime Ukrainian the of member a Association andtheUkrainianBar Association. is Sukacheva Mrs. since 2015. SEALAWBLACK COMPANY at Partner a been has Sukacheva Mrs. the against shipowners of behalf Ecological EnvironmentalandGovernment. on claims ecological a solving of from number results positive has She ports. Ukrainian in activity Environmental’s Ecological the of regulations the of development the maritime in and solving infrastructure cases. In 2018, Mrs. Sukacheva took individuals part in and litigation commercial in experience significant has also companies and insurance assists Sukacheva Mrs. (2006) andOdessaNationalEconomicUniversity(2006). Anastasiia Sukacheva graduated from Odessa National Law Academy iclg to: insurance &reinsurance 2019 R:www.blacksealawcompany.com URL: a.sukacheva +380 50 390 2424 / +38 050 390 5654 Email: Tel: Ukraine Odessa, 65009 66/2, FrenchBoulevard BLACK SEA LAW COMPANY Anastasiia Sukacheva @blacksealawcompany.com ukraine chapter 44 united arab emirates

Hamdan alshamsi lawyers and legal consultants Hamdan alshamsi

1 Regulatory relation to contracts of insurance. Furthermore, there are decisions made by the Board of the Insurance Authority that require insurance contracts to adhere to certain requirements. 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? 1.5 Are companies permitted to indemnify directors and officers under local company law? Currently, the Insurance Authority is the statutory body responsible for licensing and regulating UAE insurers and insurance brokers. Yes, the law allows for such insurance contracts. However, within the Dubai International Financial Centre (DIFC), the Dubai Financial Services Authority (DFSA) is the competent authority in matters concerning the regulation of insurance within the DIFC. 1.6 Are there any forms of compulsory insurance?

Yes, the most common examples for compulsory insurance in the 1.2 What are the requirements/procedures for setting up a UAE are motor insurance and construction all risk insurance, and new insurance (or reinsurance) company? recently health insurance became mandatory in Dubai for employees and many others. There are also various government Setting up a new insurance company requires an application to be bodies that require insurance, and such government bodies require made to the Insurance Authority. The cost of registration is initially that a party obtains insurance otherwise it will refuse to register AED 10,000. The Insurance Authority, in turn, requires that certain applications in that body. documents are submitted by the applicant as part of the application.

The most important documents to note are: ■ An economic feasibility study and the company’s business 2 (Re)insurance Claims plans. ■ A certificate from an actuary in the case of personal insurance 2.1 In general terms, is the substantive law relating to and fund accumulation operations, including: approval on the insurance more favourable to insurers or insureds? basis of calculating the insurance premiums; adequacy of technical provisions; the possibility of compliance with the solvency margin; and the minimum guarantee amount. The law protects both parties. There are certain principles that are for the protection of the insured and certain others for the protection of the insurer. It is a matter of opinion and circumstance of the 1.3 Are foreign insurers able to write business directly or parties that would ultimately determine which laws are more must they write reinsurance of a domestic insurer? favourable to which party. Additionally, there are certain pressures from compulsory insurance that make insurers able to enforce Foreign insurers may write business directly in the UAE through an harsher boilerplate clauses and policies; nevertheless, the Insurance agent or a branch. Branches of foreign insurers are able to write Authority, along with other laws, protect the insured from such business directly without any restrictions, providing they are economic pressures. The introduction of the Insurance Authority registered with the insurance authority. Entities licensed by the from the previous Insurance Supervision Board has proved that Dubai International Financial Centre (DIFC) may only write there is more interest from policymakers to ensure that market is business directly for entities situated within the DIFC jurisdiction carefully monitored and the correct policies are introduced. A set of and are subject to licensing restrictions, the regulating body for laws that provide the perfect solution for different circumstances DIFC insurance or reinsurance companies is the Dubai Financial and a changing world is a challenging equilibrium. The law does Services Authority (DFSA). not prohibit the insured from claiming against the insurer, neither does it allow the insurer to get away with not covering a policy in 1.4 Are there any legal rules that restrict the parties’ instances where he was aware of the risk. There are provisions of freedom of contract by implying extraneous terms the law which place a duty on the insured to act in “good faith” into (all or some) contracts of insurance? towards the insurer and answer any inquiries he may receive in full, including the disclosure of relevant information when issuing the Yes, the Civil Code in the UAE contains specific provisions in policy. Although the laws are general, they contain provisions that iclg to: insurance & reinsurance 2019 www.iclg.com 261 © Published and reproduced with kind permission by Global Legal Group Ltd, London 262 united arab emirates wr o ad a nt en pcfcly se. h isrr must insurer The declare anyotherrisksnotmentioned. asked. specifically been is not has insurer and the of facts aware other any as well by as risks underwriters, assessing insurance to relevant to are insured that the facts by material undertaken all disclose faith good of duty a is there Yes, © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com Which courts are appropriate for commercial ins 3.1 any damage. relation to the claim or risk insured against the party that has caused in insured the of place the in act to or damage, the caused has that party the against claim to insurer the of right automatic an is There Isthereanautomaticrightofsubrogationupon 2.6 Is there a positive duty on an insured to discl 2.5 in accordancewiththelaw. the insured the by non-disclosure in or misrepresentation was there risk event the insure to responsible being avoid may insurer the However, in relation to a certain claim or the responsibility of a risk, a lower premium, then the insurance must be proport incorrect information was provided at the time of t a breach of disclosure obligations. Furthermore, f AccordingtotheCivil Code, aninsurer maytermina Whatremediesdoesaninsurerhaveincasesofeither 2.4 may bebroughtagainstareinsurer. actions therefore distinction reinsurance; clear and insurance a of contracts provide between not does UAE the in Law Insurance Cananinsuredbringadirectactionagainst 2.3 available in respect of the damages and losses sust either the insured or the person that should benefi insurer. obligationThe CiviltheinCoderequires Pursuant to the Civil Code, a third party may bring Canathirdpartybringdirectactionagainstan 2.2 process ofinsurerunderstandingtherisks. unitedarabemirates the and/or risks communicating of insurer and relationship insured the between the and risk of knowledge the with deal specifically Hamdan alshamsilawyersandlegalconsultants Court of Cassation or the Supreme Court would be the final Court final the be would Court Supreme the or Cassation the of Court Appeals, of Court the of decision the challenge to wants still respondent the if Furthermore, Appeals. of Court the to go would such for Court initial the disputes, then, if a be respondent wants to appeal that would decision, the case Instance First of Court The 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the insurers all matters material to a risk, irrespecti reinsurer? insurer? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? payment ofanindemnitybytheinsurerordoes whether the insurer has specifically asked about th misrepresentation ornon-disclosurebytheinsured?

t from the insurance or life insurance, if he contract to gain a claim against an the insurerthepay to ained by him. ionately reduced. te a contracttea for ose to ve of urance ury? em?

Wales, which have one hearing after several months proceduresCourts,alikeDIFCmorethewhichisof is This months. nine to up take may instancefirst manycanasbehearings thatjudgea deems necessar su be statementswill and claims other anddefence, the Defendant to respond to the claim. The parties defendant,ahearing would follow two to three week i and Court the submittedto been has claim a After a party to the dispute to give oral evidence; however, it is rarely is it however, evidence; oral give to dispute the to party a not is who witness a request to authority the have Courts Civil The person withholdingsuchdocuments. the by shared provided be to are documents such for which requests counter-party settlement Documents of course documents between the parties may not be withheld in withheld. the event the the be during may produced parties the between not was common that litigation of contemplation in prepared Documents they advice the law.by to required are documents such unless lawyers, from obtained relate that documents withhold may party A party requests)finetheforcausingsuchdelay. an adjournment to another hearing, the court may (or if the counter- not able to submit such documents beforehand and as a result causes was respondent, or claimant a if that is rule general The Evidence. of Law the in rules certain following documents produce to party under possession their third a oblige may Courts the in Furthermore, circumstances. certain the documents obligate provide that rules to certain counter-party sets Evidence of Law UAE The . Howlongdoesacommercialcasecommonlytaketo 3.2 . Dothecourtshavepowerstorequirewitnesses to 4.3 Canapartywithhold fromdisclosuredocuments(a) 4.2 Whatpowersdothecourtshavetoorder 4.1 claim. There is no jury in UAE Courts that will be involved in an insurance has or resides domicile. respondent the that city or state the in established be also may However,it occurred. loss or damage the where place the in located is generally, and, dispute the hear to jurisdiction on The correct forum and Court to hear the dispute will follow the rules less than AED 200,000. cases entertain not will Court Supreme the or Cassation of Court claim any The 500,000)). Dubai hear AED (in 200,000 of AED amount the to under presiding judge one is other the and 500,000, above amount any for judges three of Dubai (in 200,000 AED AED courts in the first instance that hear a dispute, one comprises a panel two are there addition, In judgment. final the determine would and Litigation–Procedure 4 bring tocourtonceithasbeeninitiated? give evidenceeitherbeforeorat thefinalhearing? course ofsettlementnegotiations/attempts? to theaction? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

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y; however,y; the to Englandtoand © Published and reproduced with kind permission byGlobal Legal Group Ltd,London peiy n ih o te ik n h cag o crusacs and circumstances of change various otherordersrequiringcertainpartiestoact. the in risk evidence the of retaining certain light prove in or speedily to orders obtaining assets, movable bans, of travel possession Courts, assets, the from freezing available including remedies interim several are There the reportsprovidedbycourt-appointedexperts. independent expert reports are less likely to have as much weight as be whilst UAE, the in judges by upon relied heavily are reports generally expert will Court-appointed expert experts. of the list court-approved a then from appointed evaluated, or clarified be to need which areas technical are there that believes Court the If one. A court-appointed expert is usually favoured over a party-appointed receive. For the DIFC, the evidential method is by considered to have less weight than other evidence statevidenceas ofweight themindful about be may s as evidence of weight the about mindful be should ca the of facts certain prove to parties third from testimony. A party to a dispute may provide the Co the Law of Evidence, it will not be considered as w Evidence from a witness may be provided in writing; Isevidencefromwitnessesallowedeveniftheyare 4.4 be decided. unitedarabemirates be made by either parties to a dispute in the event the matter cannot practised. Furthermore, a court may direct a testimony under oath to Hamdan alshamsilawyersandlegalconsultants iclg to: insurance &reinsurance 2019 5% interestrate. a attract sometimes will it claims, property for and rate, interest 9% a attract will insurance) (including claims commercial where claim Courts. The rate of interest will differ in respect of the nature of the the before brought is claim the date the from generally and claim the date right was initiated; however, the interest is applied on the from amount of the claimed be may interest that provides law The Isinterest generallyrecoverableinrespectofclaims? 4.8 request ofappealtobeapprovedbytheCourts Appeals. the to opposed as appeal an of requirements the to conforms is it as long so appeal to right automatic an is There date. judgment the of issues of fact or issues of law, and must be submitted within 30 days to relation in be should Instance First of Court the against Appeals Isthereanyrightofappealfromthedecisions 4.7 Whatsortofinterimremediesareavailablefromthe 4.6 Arethereanyrestrictionsoncallingexpert 4.5 courts? experts? not present? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? courts offirstinstance?Ifso,onwhatgeneral expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed

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full. than those situated in the DIFC) do not compensate the legal fees in (other Courts UAE the because is This DIFC). (excluding Courts UAE of fees legal the to due trial before settle to advantageous is It fees. fewer drastically involve which Courts, Claims Small included not not for small claims), the fees can reach up to USD 20,000. We have (but case straightforward simple a In fees. other several as well as fees for any application submitted and fees for each day of the trial, for each part of the case; for example, there are fees for registration, fees different several are there as lot a vary DIFC the in fees Court the claimwithnomaximumcap. of amount the of 3% are Court Instance First the for fees court the recoverable or may be claimed from the losing party. In Abu Dhabi reach, in the highest of claims, AED 60,000, a large part of which is Abu Dhabi) for the First Instance, Appeal and Cassation Courts can for (expect Emirates the most in fees) other (including fees Court The DIFC. the and standard ruleregardingcostisthatthelosingpartypays. Emirate to Emirate from differ fees Court them. Furthermore, the parties may request from the Courts interim may intervene in arbitration decisions by rejecting or authenticating Courts The procedural. mostly are which arbitration to relation in The conduct of the arbitration must conform to the laws of the UAE parties. particularly between agreed and and conducted be autonomy to arbitrations for party allow for allow UAE the of law The a the party thatrefusestomediate. for consequences in no are however, before there mediate, to dismissed; mediate rules any may of to absence claim party the trial, a to require proceeding others) or contract signed a parties of result between a (as claims certain that event the In First InstanceCourts. the to proceeding before mediation attempt must parties the cases, stage mediation these a in judge; a by heard dispute the have have to allowed being before Courts the a cases, seek certain to In parties the settlement. request may Courts the adjournment, in is the Courts certainly have done so in certain instances. When a case The courts may not compel the parties to resolve a dispute; however, .0Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregardingcosts? Are 4.9 . Whatapproach do thecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Arbitration 5 offer tosettlepriortrial? what groundsanddoesthishappeninmanycases? consequences mayfollow? disputes? Ifso,dotheyexercisesuchpowers? there anypotentialcostsadvantagesinmakingan to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty www.iclg.com 263 united arab emirates 264 united arab emirates © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com parties which may require the Courts to reject the arbitration clause. the by omissions or acts and circumstances possibilities, are There Notwithstandingtheinclusionofanexpress 5.3 be will award arbitration any that ensure enforceable intheUAEafterwards. to laws other and rules arbitration UAE thenumberofarbitrators. the to adhere to important is it Furthermore, institutionalrulesgoverningthearbitration;and ■ by (determined centre ■ or arbitration of place legal or seat a aclearagreementtoarbitrator; ■ the include ■ should clause arbitration following: is the It lawful. that clause arbitration recommended an make will that provides law UAE the that provides law the that requirements rather, contract; a into put be should that phrase a or wording specific not is There Isitnecessaryforaformofwordstobeputinto 5.2 UAE inrespectofthearbitration. the by set rules the oppose actions, their by parties, or arbitrator the party.another with arbitration where instances other also are There into entering avoiding actively and responsive not is party a where are interference Court such require that authenticate Grounds thereafter decisions. arbitration and arbitration into enter to parties obligate and arbitrators appoint to Courts the in case a open to as unitedarabemirates far so go can parties The orders. interim such for right a have does party such event the in proceedings arbitration of respect in orders Hamdan alshamsilawyersandlegalconsultants is required? courts willrefusetoenforcesuchaclause? arbitration clause,isthereanypossibilitythatthe procedural law); clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration

hud nld a umr o te li, h dfne n other and defence the claim, statements anddocuments. the of summary a include should and award, their for reasons give to bound are tribunal arbitral The into arbitration. enter to parties obligate to Courts the from seek may claimant the at hand. As an example, if a party is refusing to conduct arbitration, be obtained that would be suitable for certain cases or circumstances As explained above, there are many interim forms of relief that may merits, anditissubjecttoproceduresbeingcarriedoutcorrectly. There is no right to appeal to the decision of an arbitral award on its . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 will entertainedbytheCourts,subjecttoprocedurallaw. case the and clause arbitration the dismiss will Courts the hearing, first the at case such to object not does party other the and Courts the with suit a file to decides parties the of one if However, filed. a is there when include common principle in an arbitration dispute and no other suit may be examples Other award. arbitration the of rejection the mean ultimately will law procedural of breach Any . Isthereanyrightofappealtothecourtsfrom 5.6 reasoned awardisrequired? examples. circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat iclg to: insurance &reinsurance 2019

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London adnasas ayr n ea oslat unitedarabemirates Hamdan alshamsilawyersandlegalconsultants iclg to: insurance &reinsurance 2019 nelcul rpry a, akn, opne lw n ohr atr lcly ad t ddcto twrs feig naalld hg-ult and high-quality unparalleled, offering towards dedication its and locally, matters culturally sensitivelegalservices,whileadheringtothehigheststandardsofintegrityandexcellence. other and law companies banking, law, property intellectual law,family diligence, due insurance, issues, commercial on advising in specialisation its to due is firm law the of success The circuit. legal the in Hamdan AlShamsi Lawyers & Legal Consultants was established in 2011. It has since become a name synonymous with success and is well-known young achieveraward,amongstmanymore. the and East Middle the in leaders young influential our most the of one in resulted ultimately outcome successful which confidence strategy, and with challenge professionalism each faced Hamdan – efficient highly and “… being as described been has Mr.AlShamsi Court. Supreme UAE’sFederal as well as Cassation, of Court the and Court the before Appeals regularly appears He litigation. complex involving cases in entities governmental and companies international and local both advises Mr.AlShamsi law. insurance and finance and banking corporate, in experience extensive with Courts, Dubai the in litigator most Dubai’s of reputable and respected law practices. one He is widely regarded as a built top has AlShamsi Mr. Emirates, Arab the United across experience litigation successful of decade a nearly With ”. It is no surprise that he has been awarded as awarded been has he that surprise no is It ”. e: 9143622 www.alshamsilegal.com URL: [email protected] +97143469262 Email: Tel: United Arab Emirates Dubai Al Abraj St.BusinessBay Office 1611, Al Manara Tower Consultants Hamdan AlShamsi LawyersandLegal Hamdan AlShamsi very thorough very www.iclg.com 265 united arab emirates chapter 45 usa

Paul, weiss, rifkind, wharton & garrison llP H. christopher Boehning

1 Regulatory 1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company?

1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? Each state has its own unique requirements for setting up a new insurance company, but all states accept the Uniform Certification of Authority Application (“UCAA”), a model application offered by The regulation of insurance companies is split between the states and the NAIC. The UCAA requires the applicant to provide information the federal government. Each of the 50 states regulates the operations about its business plan, corporate bylaws, financial statements, and of insurance businesses within its borders and has its own laws officers, as well as to identify the type of insurance it plans to offer concerning the appropriate contractual terms that parties to an (e.g., life, disability, property). Each state imposes requirements in insurance contract are allowed to enter into. For example, states are addition to the UCAA. For example, states generally require a responsible for regulating insurance rates, licensing insurance certain level of financial health before licensing a corporation. Each companies and brokers, employing financial examiners to investigate state has different capital and surplus requirements, and some may an insurer’s accounting methods, and providing consumer service require a corporation to have prior experience or pass accreditation support to their residents. State insurance regulators are also members standards before being allowed to sell certain forms of insurance. of the National Association of Insurance Commissioners (“NAIC”), an States will also usually require companies to pay fees to fund organisation that standardises the regulation of insurance among the regulatory agencies depending on the type of insurance an applicant states and facilitates the sharing of best practices among them. wishes to offer. For example, to conduct business with workers’ In comparison, the federal government has a more modest footprint in compensation or automobile insurance, many states require insurance regulation because the McCarran-Ferguson Act, passed in companies to pay fees to an oversight board. 1945, assured that states would have the primary role in regulating insurance. Nevertheless, there are some significant federal regulations concerning interstate insurance commerce. The 2015 National 1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer? Association of Registered Agents and Brokers Reform Act streamlined approval for non-resident insurance sellers to operate across state lines. The 1986 Liability Risk Retention Act allowed individuals and The NRRA allows foreign insurers to conduct business within the businesses with similar risk profiles to form groups in order to lower states without being admitted if they are included in the “Quarterly costs and increase market choice for insurance consumers by making Listing of Alien Insurers”, which is maintained by the NAIC. it easier to compare policies that fit their profiles. Among other requirements, the NAIC requires applicants to file financial statements, copies of auditors’ reports, names of their US Furthermore, since the 2008 financial crisis, the federal government attorney or other representative, and details of their US trust account has started to regulate the financial elements of insurance companies. to show that they have (1) a minimum shareholders’ equity amount The 2010 Wall Street Reform and Consumer Protection Act (“Dodd- of $45,000,000, (2) a US-based trust fund, and (3) a management Frank”) created two review councils within the Department of team with “a proven and demonstrable track record of relevant Treasury – the Financial Stability Oversight Council and the Federal experience, competence, and integrity”. Insurance Office – to monitor the stability of the insurance industry. The Financial Stability Oversight Council has the ability to designate A company may also choose to become licensed by a state certain insurers as “Systemically Important Financial Institutions” government. Alternatively, a non-admitted insurer can, subject to (“SIFI”) so they may be regulated by the Federal Reserve Board. certain requirements, write a policy on a surplus line basis in cases SIFIs are subject to heightened financial oversight – they must meet where the insured’s risk is too high for an admitted insurer to higher capital requirements, take stress tests, and submit “living will” underwrite. For example, catastrophe insurance for natural disasters bankruptcy plans for review. (Currently, there are six insurers that is frequently bought on a surplus line basis due to its risk. are identified as being “systemically important”.) Dodd-Frank also included the Nonadmitted and Reinsurance Reform Act (“NRRA”), in order to make it easier for surplus-line insurers and brokers to conduct business across states.

266 www.iclg.com iclg to: insurance & reinsurance 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published and reproduced with kind permission byGlobal Legal Group Ltd,London rirto cass n nuac areet, o eape are example, for Mandatory agreements, enforced byonlyabouthalfofthestates. insurance divisive. quite in are clauses Others arbitration faith. good in insured these of an against claim a settle insurer Some an that requirement the of some version impose jurisdictions dealing. all – fair accepted broadly and are faith restrictions good of covenant the and unconscionability,rights, substantive of and assignment proper procedural like concerns law common include These implicated. 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For insurance insurance other life with As (in clauses insurance). property or fire (for clauses appraisal (4) and policies); incontestability loss of notice (3) (2) terms; requirements; renewal to and required cancellation often mandatory (1) are contain: policies contain insurance to example, For policies clauses. insurance require states Many Each state has its own rules limiting the parties’ freedom of contract. Arethereanylegalrulesthatrestricttheparties’ 1.4 Paul, weiss, rifkind,wharton &garrisonllP iclg to: insurance &reinsurance 2019 refrain fromtakingcertainactions byanyfederalbankingagency. or take to required or office, from deposit removed fined, been have prevent who to individuals to power payments indemnification making the from institutions has also Corporation Insurance Bureau the order.settlement WithinDeposit Federal the context, insurance the in Protection indemnification seeking Financial from executive an Consumer bar sometimes the Exchange and and Securities Commission the proceedings, enforcement civil in This limitation is intended to create a deterrent effect. 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A party minority of jurisdictions allow injured for suit the if insurer statutes, allowing for an injured party to sue the tortfeasor’s liability action direct have also states most Second, assignable. not is and insured the by only pursued be can settlement bad-faith a for claim statutory Georgia,a in example, For rights. certain of assignability the limit states few a although claim, insurance an for assignment Paul, weiss, rifkind,wharton &garrisonllP reinsurer? insurer needaseparateclause entitlingsubrogation? payment ofanindemnitybythe insurerordoesan them? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof misrepresentation ornon-disclosurebytheinsured? insurer fails to ask. urer intervenes in the ve duty of good faith ch as New Jersey,New as ch a . These clauses are representationmay from an insurance action against the againstaction for the reinsurer’s b initio ab td n particular in ated aprimary insurer urer controls the controls urer r,insurers havea of a material fact t a “fronting” a nto o t rsid a rescind to ion y a dutyay ofgood icy. srne firms,nsurance n ol have would on eoe taking before direct insurer’sdirect e contractualher ot in privity of privity in ot direct insurer.direct n the and complex and median lengthofmulti-districtinsurance litigationis386days. statutes other implicates commercial dealings may last significantly longer. that For instance, the case insurance an but days, 265 is court federal in case insurance an of length median The dispute. the for responsible judge the and court the as well as The time a civil case may take depends on each case’s unique factors trial forlegalclaims. to the States, nearly every state guarantees some form of a civil jury apply not does Seventh right the Amendment while comparison, In jury trial for remedies like an injunction, garnishment, or rescission. to right no has party a meaning relief, equitable to pertain not does those for money damages. However, the Seventh including Amendment right claims, legal some for cases civil in trial jury a to right a provides Constitution States United the of Amendment Seventh The right to a jury trial varies between federal and state courts. The the underlyingdispute. that state, a test of a defendant’s ties to the forum state in relation to with contacts minimum significant has or court federal the of state the in domiciled is defendant the if jurisdiction personal federal has A court $75,000. over is controversy in amount the and states different of members are parties the if or action of right a with law subject matter jurisdiction either if the parties are litigating a federal subject matter and personal jurisdiction over the parties. A court has must meet. The suit most foundational of these requirements are proper a to parties the requirements jurisdictional of number a of have manner all hear to courts federal comparison, In disputes. insurance including claims, of empowered courts are are and courts jurisdiction State general requirements. jurisdictional as well between choice the Instead, federal and state courts is often driven by strategic considerations as jurisdiction. for thresholds dollar minimum various have courts state and federal though courts, state is and forum federal both in what litigated are determine disputes high-value not – appropriate does dispute a of value the By itself, disputes. insurance of sites are courts federal and state Both Which courts are appropriate for commercial ins 3.1 also providearightofsubrogation. may ERISA), as known (commonly 1974 of Act Security Income certain Third, Retirement subrogation. Employee the and Medicare/Medicaid as granting such statutes, whether by to done as be inquire will also injustice will court the remedy, equitable legal an some of its because as Moreover, paid only debt. the for liable secondarily is debt (3) and (1) obligation; its subrogation: paid claiming (2) debt; party underlying the whether to look generally Courts discretionary. is subrogation equitable of grant the Louisiana, except states as all in third-party known available a Although sue tortfeasor. remedy to insurer crafted an allows judicially that subrogation a equitable for move may insurer . Howlongdoesa commercialcasecommonlytaketo 3.2 3 Litigation – Overview Litigation–Overview 3 dispute? Is there any right to a hearing before a j disputes? Does this depend on the value of the bring tocourtonceithasbeeninitiated? iclg to: insurance &reinsurance 2019 urance ury? © Published and reproduced with kind permission byGlobal Legal Group Ltd,London certain documentsmaychillsettlementdiscussions. of production the if privilege the of application limited a endorsed the of assertion The majority of courts the do not recognise the privilege, but some have rule, evidentiary an settlement rule as a “settlement privilege” as varies from court to court. trial at generally protected are they While production. from protected always not are negotiations settlement of course the in produced Documents the of equivalent materials byothermeanswithoutunduehardship. substantial the obtain to inability the and need substantial a demonstrates it if documents such of disclosure seek may party discovering a and absolute not is privilege work-product litigation, of the However, anticipation attorneys. by created are they in whether of regardless created materials disclosure from privilege. the breaks Similarly, a that party can assert the work-product protection party to withhold third a involves the communication if or advice legal reflect otherwise or provide, seek, not does communication the if privilege the claim cannot party a However, clients are shielded from disclosure by the attorney-client privilege. their and lawyers between communications containing Documents reasonable take to steps toavoidimposingundueburdenorexpenseonnon-parties. discovery third-party seeking party a require geographical courts Moreover,are sensitive to the costs imposed and on non-party discovery and subpoena. a service executing and certain obtaining in requirements detail rules procedural state and federal Both subpoena. a requires non-parties from Discovery the producing of burden information outweighsitsbenefits. the when or information, the obtain less to a from obtained opportunity prior significant be a had has party a source, can burdensome or duplicative is that information times, a court must limit discovery if it determines that a party seeks At request. valid a of production compel may and disputes any on parties are the discovery discovery, begin usually exchange authorising and negotiate Todiscovery requests. A court rules will rule expansive. State similarly generally benefit. its outweighs discovery of of burden the whether importance and issues, the resolve to discovery resources, parties’ the to access information, relative parties’relevant the controversy, in amount the stake, needs of the case, taking into account the importance of the issues at is the to proportional and that action the in defence or matter claim a to usa relevant non-privileged any regarding in discovery documents obtain to of discovery parties order allow Procedure of Rules Federal The actions. commercial to powers significant States have United the in courts jurisdictions, foreign to compared As Whatpowersdothecourtshavetoorder 4.1 Paul, weiss, rifkind,wharton &garrisonllP iclg to: insurance &reinsurance 2019 li is power this However, subpoena. a through case generalaAs matter, courtacanrequire witness a Dothecourtshavepowerstorequirewitnesses to 4.3 Canapartywithholdfromdisclosuredocuments(a) 4.2 Litigation–Procedure 4 respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin course ofsettlementnegotiations/attempts? to theaction? give evidenceeitherbeforeorat thefinalhearing? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin to testifytocivil ain ie by mited

rvd hlfl pcaie kolde sc a cluaig the calculating as magnitude ofdamagesorreconstructingaccidents. such knowledge, can dispute specialised insurance helpful an provide in Experts approval. for experts own that power. Instead, it is more likely that the parties will submit their Although courts are allowed to appoint experts, they rarely exercise from testifying. prispousalself-incriminationagainstthe right or a witness can assert various privileges – such as t transacts business unless certain other conditions within 100 miles of where a witness resides, is emp Civil Procedure 45 limits a court’s subpoena power jurisdictional and evidentiary concerns. For insta a party admission independent of hearsay concerns. employee within the scope of that relationship, are asaddition, introduced statements be made usually by canan depositionopposing party, her or or his significantphysical distance, orrefuses toattend example,witnessaif cannot presentbe courtatdu offe be to it for order in rules hearsay to subject berelevant and fall within anexception tothe hea Federal permis Rules is of Evidence. use the In thatother words, is whichthe dep of significant most sati use their as long conditions enumerated as under Federal court Rules of Civil federal in evidence In general, depositions of witnesses not present at uce o te eis f h udryn cs ad ol suffer would and case underlying irreparable harmwithoutsuchrelief. the of merits the on succeed to likely is it that show generally vary,must relief party equitable a award. an for them preserve of forms these for standards the While future to adversary’sassets its of portion a freeze to prevent move also may party to injunction preliminary occurrences of the alleged breach before the end of the litigation. A temporary or a for order court the restraining petition can party a dispute, contract the preserve to relief provisional of form the takes often relief Interim York and California use the common-law New like states some contrast, In case. the of facts the to reliably and principles reliable methods and principles the of applied has expert the (4) and methods; product the is testimony the (3) data; or facts sufficient upon based is testimony the (2) issue; in fact a will help the trier of fact to understand the evidence or to determine expert’sthe (1) knowledge specialised other or technical, scientific, the follow states of majority the and courts Federal certification. for standard proper the over diverges law federal and State testimony. expert A court must certify an expert before he or she is allowed to present . Arethereanyrestrictionsoncallingexpert 4.5 Isevidencefromwitnesses allowedeveniftheyare 4.4 . Whatsortofinterim remediesareavailablefromthe 4.6 hte te xets etmn i bsd n cetfc methods scientific on based “sufficiently establishedtohavegainedgeneralacceptance”. is testimony expert’s the whether status quo status not present? courts? experts? expert inadditionorplaceofparty-appointed witnesses? Isitcommontohaveacourt-appointed Daubert before a final judgment. For example, in a breach of breach a in example, For judgment. final a before test, a four-part standard that inquires whether: inquires that standard four-part a test,

Frye www.iclg.com test that only looks to even ifsubpoenaed, he Fifth Amendment trial may be used as nce, Federal Rule of are met. Moreover, often admissible as osition must at least that party’s agent or rsayrules ornot be vilege – to abstainto – vilege e fr rt. For truth. for red loyed, or regularly e to death,toe illness,

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269 usa 270 usa © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com The default rule, often referred to as the “American rule” to contrast Whatarethestandardrulesregardingcosts? Are 4.9 rates. interest states’ post-judgmentinterestratesrangefrom7to11%. post-judgment and pre- Currently, there is significant variation from state to state, but many for ceilings and floors own their created have states various contrast, In the value. judgment with along judgment the of entry of date the preceding week calendar the for yield Treasurymaturity constant one-year average the calculating on based is rate interest post-judgment federal The that will compensate the plaintiff for the defendant’s use amount of its an funds. of determination court’s a on based a basis case-by-case on determined instead is it – rate interest pre-judgment federal no is There courts. state and federal from differs rate interest The date untilpaymentisreceived. judgment the from monies of use the for award an creates interest Post-judgment date. judgment the and trial a before date a between judgment interest creates an award to compensate the use of monies Pre- and post-judgment interest are generally both recoverable. Pre- Isinterestgenerallyrecoverableinrespectofclaims? 4.8 reviewed“ le a of analysis or interpretation contract as such standards of review to different types of decisions foun of appellatecourtMoreover,an appeal. on timefirst exception the With procedural and jurisdictional issues, challenged.a party canno being issue Aparty’s grounds forappeal aresimilarly constrai some part of the merits” to be appealed. r substantial a “affect[] that ordersinterlocutory interlocutoryordersappealedbe to New – York, for usa allostatesSome litigation. the ofconduct the to to reversal on appeal if decided erroneously or is issueoflaw. A“controlling issue oflaw” isan i only on a reviewing court’s discretion and if they issuesonmeriitsdisposecasenotthaton doa of p permanent ainterlocutoryinjunction. Most decisions refusing or modifying, granting, orders for and A party has the right of appeal for final decisions Isthereanyrightofappealfromthedecisions 4.7 Paul, weiss, rifkind,wharton &garrisonllP final court of appeal, and appeal to the Supreme Court is largely discretionary.is Statescourtshaveasimilarthree-tieredstructure. Court Supreme the to appeal and appeal, of court final the as serves Court Supreme States United The judges. of panels the by reviewed Court of are Appeals, a set of regional circuit decisions courts that review cases in Court District or magistrate court. a bankruptcy as such court, specialised a by decisions also review may Court District A instance. first of courts the as serve – Courts District the as known also – courts trial the court, federal In structure. court three-layer a by governed are appeal of stages The deference to the decision in the court of first ins discretion”, a more lenient standard of review that likeevidentiary discoveryor rulings arereviewed gives a trial court substantial deference. Other d questions of fact are reviewed for “clear error” an grounds? Howmanystagesofappealarethere? offer tosettlepriortrial? there anypotentialcostsadvantages inmakingan If so,whatisthecurrentrate? courts offirstinstance?Ifso,onwhatgeneral de novode ” withdeferenceno” thetrialto court.contras In iscretionary standards tance. to an appellate court ssuethat would lead contain a controlling otherwise important d an appellate court t raise issues for the gt o “involve[] or ight” . Questions of law, gives considerable w a broader set of setbroader a w ts – are appealableare– ts ned by thenedtypebyof onlyfor“abuse of a sadr, are standard, gal applies differentapplies instance, allows – those decidedthose– eiiay or reliminary dational

t, parties tocomeasettlementinmediation. the force cannot they mediation, in participation compel to ability the have may courts Although mediation. compel to authority the have also courts state Many districts. various of rules local the and pursuant to Federal Rule of Civil Procedure 16(f), 28 U.S.C. process, § 1927, the compel in participation faith only good require not also but may mediation courts Federal varies. to mediation courts of compel power the mediation, encourage often courts While prior, mutual arbitrationagreementonepartyrefusestofollow. a is there if arbitration force may court is a Similarly, arbitration consolidated. multi-party a when or enters party third unplanned an when arbitrator an selecting in example, for reasons; procedural to ability court’s a intervene in a proceeding. limits of However, courts sometimes intervene for expressly enforcement and favours agreements that arbitration policy a establishes (“FAA”) Act itself is an alternative to the judicial system. The Federal Arbitration Court intervention in arbitration is generally rare because arbitration to accepttheoffer. impose not does mediation court and one party a merely requests it, the when other is not course, obligated Of faith. good in dispute refuses their of resolution a reach to attempting are parties who the if determine party a against mediation. Similarly, a court may monitor the mediation process to sanctions monetary impose may courts mediation, of favour in point litigation the in stake at sums and attempts, settlement past of success the the dispute, the of determine nature often will the if reasons, court other Among choice. party’s a the of reasonableness mediation, refuses party a If .0Canthecourtscompelpartiestomediate 4.10 State proceduralruleshavesimilarcost-shiftingmechanisms. court attorneys’include to costs fees. defines action and of cause the creating printing miscellaneous statute the unless attorneys’fees include not do they and to expenses, limited are arrangement defendant’s costs incurred after making the offer. “Costs” under this is equal to or less than the settlement offer, the plaintiff must pay the Civil judgment final the offerand the plaintiffrejects the and trial before of days 14 rules than Rule more settlement offers Federal procedural defendant a if Under 68, Procedure some Moreover, settlement. can pre-trial insurer incentivise the fees. by recover contract of sometimes breach a demonstrates or faith prevails in a coverage action and shows that the insurer acted in bad attorneys’ fees in some circumstances. For example, an insured who In the insurance context, most states allow a policyholder to recover it with other systems, requires each side to pay for its own legal fees. . Whatapproach dothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Arbitration 5 disputes? Ifso,dotheyexercisesuchpowers? what groundsanddoesthishappeninmanycases? consequences mayfollow? to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty iclg to: insurance &reinsurance 2019 © Published and reproduced with kind permission byGlobal Legal Group Ltd,London h abta areet s nai o i te rbnl xedd its exceeded tribunal the if authority. or invalid is agreement arbitral the Convention itself allows a party to resist enforcement of an award if the Moreover, matter. the for venue proper a not is States United federal some example, courts have declined to enforce an award based on concerns For that the award. the with concern procedural a be to there believes it if award arbitral foreign a enforce to refuse and Enforcement of Foreign Arbitral Awards, US federal courts Recognition will the on Convention Nations United the of signatory a mixed approach in enforcing foreign arbitral awards. Although it is similarly a has also States United the law, domestic its of Outside to theory this applied have invalidate variousinsurancearbitrationagreements. Appeal of Courts Federal Several federal even if its regulations over other forms of the arbitration clauses are not. applicable over still is agreements arbitration insurance law over regulation insurance state’s of a that concluded have courts some Therefore, regulator government. primary the as states leaves specifically Act McCarran-Ferguson the agreements, arbitration through regulation. mandatory Although the FAA restricted broadly applies have to arbitration three least at and contracts insurance within clauses arbitration mandatory banned have states valid. still are agreements arbitration insurance limiting 13 least At regulations state that concluded have courts federal some Second, original contractwasvoid. so do when a litigated issue was to outside the arbitration clause or when the declined have agreements arbitration enforce generally of grounds of unconscionability or duress, albeit with narrow readings the on clauses arbitration invalidated subsequently have Missouri, implicate and Washington California, not like states, do Certain concerns itself. arbitration these that suggesting by possibility ih oe xetos mn jrsitos il noc express in Court enforce Supreme The clauses. will arbitration jurisdictions many exceptions, some With usa addressing provisions when arbitrationmaystart,andproceduresforselectingarbitrators. for limit include time a arbitration, of party other the notify to agreements procedures arbitration disputes. their arbitrate Many to intent parties’ the expressing in clear The only requirement is that a contract’s arbitration clause should be Isitnecessaryforaformofwordstobeputinto 5.2 Paul, weiss, rifkind,wharton &garrisonllP iclg to: insurance &reinsurance 2019 Notwithstandingtheinclusionofanexpress 5.3 lrd, lios Txs ad icni hv ra read have Wisconsin and Texas, Illinois, Florida, Ohio, in courts States (2011). 344 333, U.S. 563 FAA. the with interfere they because unenforceable are arbitration” of attributes Concepcion rirto areet. h certain The down strike agreements. to arbitration unconscionability or duress, fraud, like First, at least some courts have applied general contractual concepts agreements. arbitration in someinstances. all nearly enforce Nevertheless, courts have still declined to uphold arbitration clauses to judges require Concepcion clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration courts willrefusetoenforcesuchaclause? is required? arbitration clause,isthereanypossibilitythatthe held that state regulations that disrupt the “fundamental . Moreover, even states like Ohio or Alabama that Alabama or Ohio like states even Moreover, . ocpin Concepcion AT&T Mobility LLC v. LLC Mobility AT&T or lf oe this open left Court Concepcion to

reasoned decision. arbitration an in a provide to arbitrator However,an require can parties both itself, agreement conclusion. a provide to arbitrator the for obligation no law,is of there conclusion or fact of finding a affirmative general, a have not obligation to provide a reason for their do awards. If the parties request arbitrators FAA, the Under pending acourt’s determination. is at issue, a party might often move to stay other court proceedings dispute a of arbitrability the Moreover,if arbitration. of support in judgment a pay to need may it that funds using from adversaries its prevent to attachment of order an or contract of breach in is claims it activity an prevent to injunction an issue to court a request may status quo the preserve help to serves primarily it proceedings: court for does it like functions arbitration in relief interim jurisdictions, most For Associates, LLC v. LLC Associates, in Court to Supreme The right grounds. other an these no beyond as appeal has party serves a but disregard appeal, of manifest ground whether independent over split are courts circuit Federal law. established clearly disregarded and of was aware arbitrator an show can party a if applies standard disregard” “manifest The law”. the disregarded “manifestly award arbitral the claim to parties the allowing appeal, for ground another a recognised render to failed they mutual, final and definite award. Moreover, the Supreme Court has that powers their executed imperfectly the by corruption material evidence; or (4) the arbitrators exceeded their powers, or or so partiality evident arbitrators; (3) there was arbitral misconduct, such was as refusal to hear there (2) undue means; or fraud corruption, by procured was award the (1) show: must party A courts. to appeal of right narrow a FAAcreates The N. Teng fortheirinvaluableassistanceinpreparingthischapter. Chris thanks Paul, Weiss associates Andrew J. Markquart and James Acknowledgment 576, 584,592(2008). U.S. the 552 invalid. on is right that based – reasoning her award or his arbiter’sof substance an overturn Court District a have to option the as such – appeal for avenues other themselves grant . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofreliefcanbeobtainedin 5.4 . Isthereanyrightofappealtothecourtsfrom 5.6 reasoned awardisrequired? examples. circumstances doestherightarise? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat before the arbitration judgment is rendered. Thus, a party

Mattel, Inc. Mattel, confirmed that even if two parties two if even that confirmed www.iclg.com Hall Street Hall 271 usa 272 usa © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com usa Paul, weiss, rifkind,wharton &garrisonllP tr ad “oa Ltgto Sa” o Isrne n General and Insurance for Star” Litigation “Local by Litigation Commercial a and Star” “Future a as tapped been has Chris investigations. government and disputes reinsurance litigation, coverage in companies and insurance reinsurance leading represents he practice, insurance active his civil In investigations. and internal and inquiries commercial regulatory matters, litigation complex arbitrations, international and counselling litigation, insurance on focuses Boehning Chris Garrison, & A partner in the Litigation Department at Paul, Weiss, Rifkind, Wharton Paul, Weiss, Rifkind, Wharton & Garrison LLP (www.paulweiss.comLLP Garrison & Wharton Rifkind, Weiss, Paul, in representing the world’s leading companies in their critical legal matters and most significant business transactions, as well as individuals and individuals organisations inneedof as well as transactions, business significant most and matters legal critical their in companies leading world’s the representing in pride great Wetake challenges. business and clients’legal our complex to effectivemost solutions and innovative provide who interests and ideas from Washington UniversitySchoolofLaw. pro bono R:www.paulweiss.com URL: [email protected] +12123733061 Email: Tel: USA New York, NY 10019-6064 1285 Avenue ofthe Americas Paul, Weiss, Rifkind, Wharton & Garrison LLP H. ChristopherBoehning Benchmark Litigation Benchmark assistance. . He received his J.D. his received He . ) is a firm of more than 1,000 lawyers with diverse backgrounds, personalities, backgrounds, diverse with lawyers 1,000 than more of firm a is ) iclg to: insurance &reinsurance 2019 chapter 46 uzbekistan Homi motamedi

cis risk consultant company (insurance brokers) llP (cis) Valentina Pan

■ suspends the validity of licences of insurers and insurance 1 Regulatory brokers in full or in respect of certain types (classes) of insurance in accordance with the procedure established by law, and also appeals to the court to terminate their actions; 1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies? ■ applies measures and sanctions in respect of insurers and insurance intermediaries in accordance with the legislation, in case of violation of legislation on combatting the The insurance industry in Uzbekistan is supervised by the State laundering of proceeds from crime and financing of Insurance Supervisory Inspection Department (Gosstrakhnadzor), terrorism; which was established on 8 July 1998, by the Cabinet of Ministers, ■ publishes, within six months after the end of each fiscal year, under Resolution No 286 On Measures for the State Supervision of annual reports on activities for the regulation and supervision Insurance Activity. Gosstrakhnadzor began working as the of insurance activities, as well as statistical data on the insurance supervisory authority in February 1999. activities of the insurance market during the fiscal year; The Ministry of Finance: ■ establishes the procedure and conditions for the ■ establishes binding standards for solvency and the procedure implementation of investment activities by insurers, as well as for determining them, a methodology for calculating the their financing of measures to prevent the occurrence of maximum permissible amount of insurers’ liabilities for insured events, except for the order of agreeing a list of individual risks and the total amount of liabilities, and the preventive measures financed from the reserve for procedure and terms for providing information on the precautionary measures of the insurer; solvency of insurers; ■ establishes the procedure for providing actuarial services; ■ controls the compliance of professional participants in the ■ develops and approves training programmes and the insurance market with legislation on insurance activities, procedure for obtaining qualification certificates for actuaries; ensuring established solvency ratios and other requirements ■ in accordance with the established procedure, issues, for their financial stability; terminates and revokes actuaries’ qualification certificates, and ■ licenses the insurance activity of insurers and insurance maintains a register of actuaries with a qualification certificate; brokers; ■ requests information from professional participants of the ■ establishes the procedure and conditions for the formation insurance market; and and placement of insurance reserves of insurers, as well as ■ exercises other powers in accordance with the law. the procedure for recording and reporting on such, with the exception of the procedure for agreeing the placement of The Ministry of Finance and its employees have no right to insurance reserves in government securities of foreign participate in the statutory fund and in the management bodies of countries; professional participants in the insurance market, and also to act as ■ establishes the qualification requirements for the director and an insurance intermediary, with the exception of participation in the chief accountant of the insurer, insurance broker and their statutory fund and management bodies of the JSCs separate subdivisions; ‘UzAgroSugurta’, ‘Kafolat’ and the national export-import ■ establishes the form of the financial statements provided by insurance company ‘Uzbekinvest’. the insurers and the annual financial statements they publish, The Uzbek government is improving the economic and political as well as the procedure and terms for its provision and environment as compared to previous years. The President and publication; government are bringing the country back to the level it was some ■ establishes the form of the financial statements provided by time ago. This can be seen in each and every aspect of society. the insurers and the annual financial statements they publish, There have been substantial improvements to the banking, as well as the procedure and terms for its provision and insurance, education, medicine and pharmaceutical sectors. publication; A special expert council is being created under the Foreign Trade ■ in accordance with the established procedure, imposes a Ministry of Uzbekistan, tasked with boosting the development and penalty in the amount of up to 0.1% of the minimum amount of the statutory fund of the insurer for violation by the insurer implementation of programmes for comprehensive support of of legislation on insurance activities, including established domestic exporters. Independent experts as well as the direct economic standards; representatives of export businesses, together with the specialists of the Ministry, will be a part of the council, according to the concept. iclg to: insurance & reinsurance 2019 www.iclg.com 273 © Published and reproduced with kind permission by Global Legal Group Ltd, London 274 uzbekistan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com exclusively is which the finalpointrelating toinsurancerules(conditions). of subject the reinsurance, must submit the documents specified above, except for licence, a of Applicants numbered. and bound be must which copies, two in presented are applicant, Rules (conditions) of insurance, approved by the head of the licence Examples ofinsurancecontractsmustbeattachedtotherules. a which for insurance of types the for (conditions) rules ■ a including activities, insurance of justification economic ■ capital authorised the of payment confirming documents licence the by ■ submission the confirming document a ■ chief and head the of compliance the confirming documents ■ the of registration state of certificate the of copies notarised ■ and name the indicating licence, a issuing for application an following ■ the submit must applicant documents tothelicensingauthority: the licence, a obtain To than theminimumstatutoryfundamountestablishedbylaw. less be the cannot it by and received, is formed licence the be time the must by founders insurer the of fund exclusivelyforreinsurance–UZS30billion. statutory initial The incompulsoryinsurance–UZS15billion;and ■ inthelifeinsurancesector–UZS10billion; ■ inthegeneralinsurancesector–UZS7.5billion; ■ ■ of Republic the The minimum authorised capital for of insurance companies operating: Ministers of Uzbekistan. Cabinet the by established by the Ministry of Justice of the Republic of Uzbekistan in the order The state registration of insurers and insurance brokers is carried out Whataretherequirements/procedures forsettingupa uzbekistan 1.2 cis riskconsultantcompany(insurancebrokers)llP(cis) new insurance(orreinsurance)company? o a udr nuac cnrcs ad h odr of order the and contracts, insurance consideration ofclaimsundertheinsurancecontract. under pay to parties under insurance contracts and possible cases of failure the additional of obligations mutual the premiums, insurance of (rates) and the (basic which insurer is for discharged from performance of obligations, tariffs property) arises or (risks exemptions payments conditions), insurance for liability insurer’s the which of event the in of events, insurable conclusion the on insurance contracts, a definition of insurable objects, a list of restrictions and subjects insurable of scope the of definition a containing requested, is licence for plan a and calculating insurancereserves;and transactions, reinsurance prospective for a plan a operations, containing insurance of development the class, for forecast insurance licensed a for plan business minimum authorisedcapital; of the than less not amount transfer an in documents) property,other or and acceptance of acts bank, the of (certificate for theapplication; applicant of a fee for consideration by the licensing authority foreign a from received educational institution,andaworkrecordbook); documents education higher form, (application from the authorised state body recognising the equivalence of and activities regulation certificates or diplomas education insurance higher of copies notarised for of body state supervision authorised specially the accountant with the qualification requirements established by legal entityanditsregisteredconstituentdocuments; implement; and the type of licensed activity that the legal entity intends to bank, the of number account and name the address), (postal entity,location legal the the of form legal and organisational the RepublicofUzbekistan. the with financial accordance for stability. requirements Insurers have the in right to reinsure their obligations outside other and reinsured ratios solvency is established obligations these fulfil aggregate amount of liabilities, except for cases when their ability to permissible maximum the and risks, individual for size allowable Local insurers cannot assume obligations that exceed the maximum a of risk the reinsure domestic insurer. only can insurers foreign Foreign by allowed. not insurance is of Execution Uzbekistan of Republic the of territory the in companies insurance admitted. is market The directors andofficers. indemnifying company a to relating restrictions no are Yes.There bodies’ state guidelines. authorised the with line in independently company insurance each by developed insurance of rules internal are There . Areforeigninsurersabletowritebusinessdirectlyor 1.3 of insurance ofemployers’ city civilliabilityorannuitycontracts. the and compulsory for contracts oblasts conclude to authorised all are that Tashkent in Karakalpakstan, of Republic the in insurer the of divisions separate other and branches of presence the confirming documents submit additionally must above, list the in specified documents the with liability,together employers’civil of insurance obligatory includes activity whose applicants Licence other and branches of presence the confirming documents ■ the of membership the on agreement the of copy notarised a ■ documents the with together owners, specified inthissubparagraph,mustadditionallysubmit: vehicle of liability civil for insurance compulsory also is subject whose applicants Licence Employers’ liability. Motorthird-partyliability. ■ ■ the in insurance obligatory of types Republic ofUzbekistan: the of list a is Hereunder a into enter to obliged is contract withaninsurerunderthe terms ofthelegislationinforce. insured an insurance, obligatory For and voluntary of system obligatory insurance. a is there Uzbekistan, of Republic the of Code Civil the of of meaning 914 the Article with accordance In Arethereanyformsofcompulsoryinsurance? 1.6 Arecompaniespermittedtoindemnifydirectorsand 1.5 Arethereanylegalrulesthatrestricttheparties’ 1.4 must theywritereinsuranceofadomesticinsurer? officers underlocalcompanylaw? into (allorsome)contractsofinsurance? freedom ofcontractbyimplyingextraneousterms insurance paymentsthemselves. contracts, insurance of consideration compulsory of claims of victims to insurance payments and Republic conclude the to in authorised insurer the Karakalpakstan, in all oblasts and the of city of Tashkent that are divisions separate Motor Compulsory for Third PartyLiabilityInsurance;and Fund Guarantee the with insurer iclg to: insurance &reinsurance 2019

© Published and reproduced with kind permission byGlobal Legal Group Ltd,London and Liability, Employers’Liability sectionsofthisreport. and Compensation Workers’ Motor, individual the laws implementing the class. from Further information is provided in the separate resolutions in at Ministers of accidents Cabinet for liability the by set are classes these of respect environmental in tariffs and limits Statutory and third-party carriers’ third-partyliability;and ■ employers’ liability; ■ motorthird-partyliability; ■ ■ The fourmaintypesofcompulsorycoverare: legislation. insurance in Uzbekistan; they are all referenced in separate places in of types compulsory all of list comprehensive official no is There Supplementary InformationonCompulsoryInsurances trials clinical in participants for insurance health and Life Exportcontractinsurance. ■ Tourist insurance. ■ Insuranceofvaluablesin thepost. ■ Insurance ofrisksunderconcessionaires’ contracts. ■ Insuranceofmortgaged property. ■ Insurance ofpropertyoffered assecurity. ■ Insuranceofleasedequipment. ■ Insurance ofitemstakenasloanpledges. ■ or funds state with built objects ■ for risks all Contractors’ Ecologicalinsurance. ■ Third-party liabilityforhazardouscargo transportation. ■ ■ State insurance of the life and health of workers in the energy ■ customs valuers; following: the for liability Professional at accidents for liability environmental and ■ party and Third injury bodily (death, liability ■ third-party Carriers’ uzbekistan ■ cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 agreement cannot bringadirectactionagainst aninsurancecompany. insurance an in title any have not does which party A Canathirdpartybringdirectaction againstan 2.2 complaints withrespecttotheirpoliciesandrelatedclaims. make to insureds enable will which Uzbekistan), of Republic the of of Majlis of Oliy interest the process of representative the (authorised ombudsmen in the creating is body protect authorised The agreements companies. insurance (re)insurance general, In Ingeneralterms,isthesubstantivelawrelatingto 2.1 (Re)insurance Claims 2 insurer? insurance morefavourabletoinsurersorinsureds? hazardous productionfacilities. legal requirement). (required by trial sponsors in order to obtain a licence – not a under stateguarantee. rescue servicesandtaxpersonnel. and mining industries, court officials, the military, emergency estate agents;andnotaries. real auditors, consultants; services financial agents; clearing hazardous productionfacilities. property damageofpassengers).

reject theclaim,ifany, andnotreturnthepremiumaswell. can company insurance the Otherwise, cover. the and, of inception the company insurance at stated those from the change circumstances the case in period policy the during to company insurance the transferred update should he be furthermore, to going are that risks the regarding of, aware is he which information, material Yes. As per the principles of insurance, the client has to disclose all the insured. against action legal take required, if and, not premium claim, the the return reject can company insurance the law, the per As if reinsurer, the against action take required. to insured the enable will this contract, reinsurance a to attached is clause a such However,if the Cut-through clauses are not popular to with local insurance companies. directly go to right no reinsurance company. has insured the and insured, the of front in responsible fully is contract insurance the issues which company insurance fronting the legislation, insurance the per As insurance an within clause standard agreement unlessotherwiseagreed. a is clause subrogation A . Isthereapositivedutyonaninsured todisclose 2.5 Whatremediesdoesaninsurer have incasesofeither 2.4 Cananinsuredbringadirect actionagainsta 2.3 decision becomes effective). the (after court cassation the to effective)and becomes decision the (before court appellate the to appealed be may decision court Any defendants islocated. If there are several located. defendants, the claim is may be filed defendant where one the of the where court the with filed be should claim a determined, not is jurisdiction such If dispute(s). their hear to competent court the determine to free are parties the Generally, Uzbek counterparts. their as duties and rights procedural same the have entities Foreign court willdismissthecase. the Otherwise, court. to go parties the may then only failed, have negotiations If court. to going before procedure that follow should pre-trial they negotiations), a through upon (e.g. resolution agreed dispute have for procedure agreement, their in parties, the If Which courts are appropriate for commercial insu 3.1 Isthereanautomaticrightofsubrogationupon 2.6 3 Litigation – Overview Litigation–Overview 3 disputes? Does this depend on the value of the them? misrepresentation ornon-disclosurebytheinsured? reinsurer? dispute? Is there any right to a hearing before a j insurer needaseparateclauseentitlingsubrogation? whether theinsurerhasspecificallyaskedabout insurers allmattersmaterialtoarisk,irrespectiveof payment ofanindemnitybytheinsurerordoes

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ury? rance 275 uzbekistan 276 uzbekistan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com the prosecutor’s office. by prosecuted being not to of subject period imprisonment the or avoid confinement, to fine a pay to right the with imprisonment fine, a include may vary,and can remedies case, the on Depending What sortofinterimremediesareavailablefromthe 4.6 common tohaveacourt-appointedexpert. not is It in. called be can witness expert an case, the on Depending Are there any restrictions on calling expert wit 4.5 in is process. case the where country the to version legalised the sending then and public notary a to referring by or lawyer his via evidence No. In cases where the party is not present, he is able to provide his Isevidencefromwitnessesallowedeveniftheyare 4.4 used bythecourttoenforcethis. date to provide their evidence, and local law enforcement bodies are the country, the court can request parties to attend court on a specific of residents are parties the where cases In evidence. his provide an to send to territory his in embassy him for order in court the to him inviting court local via application the ask to able is court the Yes, they do. In cases where one party is reluctant to give evidence, Dothecourtshavepowerstorequirewitnesses 4.3 No. A partycannotwithholddocumentsfromdisclosure. Canapartywithholdfromdisclosuredocuments(a) 4.2 to questiontheconcernedparties,etc. evidence, the all documents, the all examine to necessary is it this, court in For case. representation the of circumstances the Legal all of analysis deep a involves objections. and claims their for grounds the as to refers it circumstances the prove shall party Each The courtshavefullpowerinthisregard. Whatpowersdothecourts havetoorderthe 4.1 lawyers or firm law a specialised ininsuranceaffairs. appoint parties the Usually months. six and three between take may it dispute, of value the on Depending Howlongdoesacommercial casecommonlytaketo uzbekistan 3.2 cis riskconsultantcompany(insurancebrokers)llP(cis) Litigation–Procedure 4 Is it common to have a court-appointed expert in to theaction? bring tocourtonceithasbeeninitiated? courts? addition or in place of party-appointed experts? not present? give evidenceeitherbeforeoratthefinalhearing? course ofsettlementnegotiations/attempts? contemplation oflitigation,or(c)producedinthe relating toadvicegivenbylawyers,or(b)preparedin respect of(a)partiestotheaction,and(b)non-parties disclosure/discovery andinspectionofdocumentsin

nesses? enforcement authoritiestomakeaparty/partiesobey. legal use can court The mediators. their introduce to them ask and invite them to the court, to advise them on have the purpose of the they invitation involved, parties all or party one for either mediator a use to decides court the However,if practice. usual a not is This general trendistorefercasesthecourt. be will there case in trial to benefits for the parties prior due to the status of the settled claim. But usually the be can Cases tariffs. regulated the per as clients chargetheir solicitors and lawyers Civil Yes, itisrecoverable. The currentrateisbetween0.1%and0.5%. a accepts appeal of court the maximum ofbetweenthreeandfiveappeals. usually possible; is appeal Yes, ■ an arbitrator must be a citizen of the Republic of Uzbekistan of Republic the of citizen a be must arbitrator an ■ the dispute may be considered by the arbitration court only if ■ follows: as are Uzbekistan in courts arbitration of features distinctive The labour/employment and disputes. family, administrative, involving cases well as where they are business entities. The courts cannot consider as individuals are parties the where disputes hear courts Arbitration the Republican Universal Agro-Industrial House, etc Arbitratithe courts”),“third-party as to referred arbitratio as such available, mechanisms resolution Along with the State judicial bodies, there are als A party will receive a court application with the deadline to mediate. .0Canthecourtscompelpartiestomediate 4.10 Whatarethestandardrulesregarding costs? Are 4.9 Isinterestgenerallyrecoverable inrespectofclaims? 4.8 Isthereanyrightofappeal fromthedecisionsof 4.7 . Whatapproachdothecourtstakeinrelationto 5.1 Ifapartyrefusestorequestmediate,what 4.11 Arbitration 5 disputes? Ifso,dotheyexercisesuchpowers? offer tosettlepriortrial? If so,whatisthecurrentrate? grounds? Howmanystagesofappealarethere? what groundsanddoesthishappeninmanycases? consequences mayfollow? there anypotentialcostsadvantagesinmakingan courts offirstinstance?Ifso,onwhatgeneral to interveneintheconductofanarbitration?Ifso,on autonomy adoptedbythecourts? Are thecourtsable arbitration andhowfaristheprincipleofparty who hasalawdegree; separate agreement; a of form the in or contract a in clause resolution dispute a there is an arbitration agreement, which can be in the form of iclg to: insurance &reinsurance 2019

o alternative dispute on Commission of Commission on . cut (also courts n © Published and reproduced with kind permission byGlobal Legal Group Ltd,London award mustfirstberecognised. the contradicts arbitral foreign a enforcement, its before that, provided is specifically it practice which in Such treaties and agreements, conventions, international decisions. the of enforcement court foreign for executors court send to directly recognition, their without courts decisions, economic certain example, for Thus, unified a have not do courts methodology forconsideringsuchcases. economic Uzbek the that shows courts (arbitration) foreign by rendered decisions of enforcement and recognition regarding practice judicial the of review recent A be should inserted withintheinsuranceagreement. clause arbitration an of insurance, concerning However, exchange an of based onthegeneralrulesofcontractformation. way by apply should principle same the details, these contain not does Law Arbitration formed Domestic the although means; any by be correspondence may agreement or in the form of a standalone agreement, and that such a standalone such that contract a in states clause arbitration an of form the in be may agreement specifically Law Arbitration International The arbitration. to dispute the refer to parties the of consent the specify the insurance agreement. Such an agreement must be in writing and in clause such adds company, fronting the local i.e. company, insurance the contract, the in clause such includes reinsurer a case In are uncertainaboutitsefficiency. Uzbekistan. of people and resolution dispute for mechanism courts new relatively a is it economic the a to However, to arbitration courts are still in low demand, mostly because case the apply taking shall than expensive party less and time-consuming the less be may purposes, arbitration Such enforcement for ■ to subject not is decision a such decision, its rendering upon uzbekistan ■ cis riskconsultantcompany(insurancebrokers)llP(cis) iclg to: insurance &reinsurance 2019 Notwithstandingtheinclusionofanexpress 5.3 Isitnecessaryforaformofwordstobeputinto 5.2 courts willrefusetoenforcesuchaclause? is required? arbitration clause,isthereanypossibilitythatthe clause willbeenforceable?Ifso,whatformofwords contract of(re)insurancetoensurethatanarbitration competent Statecourtforobtainingawritofexecution. of case in court State violation oftheproceduralrulesarbitration;and competent a by cancelled be only can decision the parties, the of any of request upon appeal; ih cnimto ta te rirto poedns ae been have proceedings arbitration properly commencedinorderforthecourttoreviewrequest. the that confirmation a with court the provide must petitioner The measures. security for interim court the to apply may proceedings arbitration to parties The can bechallengedbyanarbitralheadappointedbothparties. Courts cannot appeal the decision. However, the arbitral conclusion arbitration tothetribunal. be can this However, foreseen within the documents before submitting details. the application for provide must tribunal The Yes. public. notary a by notarised be also must translation a Such documents. and recognition the of translation Uzbek an produce must award the of enforcement for applying party the Uzbekistan), of official (an language Uzbek in dispute made not the is agreement to or award parties said the the If between agreement original the ■ the duly authenticated original award or a duly certified copy ■ document alongwiththeapplication: following the submit must applicant an enforced, subsequently and recognised be to award arbitral foreign a for Convention, NY the not do of 4 under Article often Thus, requirements. pre-enforcement the follow courts economic the that is decisions court foreign Another example of irregularities in cases involving enforcement of . Isthearbitraltribunallegallyboundtogivedetailed 5.5 Whatinterimformsofrelief canbeobtainedin 5.4 . Isthereanyrightofappealtothecourtsfrom 5.6 examples. circumstances doestherightarise? reasoned awardisrequired? the arbitrationclauseorsubsequently)thata reasons foritsaward?Ifnot,canthepartiesagree(in support ofarbitrationfromthecourts?Pleasegive decision ofanarbitraltribunal?Ifso,inwhat which containsanarbitrationclause. thereof; and

www.iclg.com 277 uzbekistan 278 uzbekistan © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com uzbekistan cis riskconsultantcompany(insurancebrokers)llP(cis) identification, analysis and assessment of our clients’ business activities are central to our operations and our Risk Management Directors are Directors Management Risk our and operations our to available tobecalleduponassistinidentifying,securing,planningandprovidingriskmanagementadvice/solutionsminimiseexposure. central are Risk activities business programs. clients’ ‘hedging’ our or of derivatives assessment as and generally analysis described identification, instruments financial complex and sophisticated the to insurance vehicle basic As a progressive organisation, we are proud to have built up a wealth of knowledge on the subjects of insurance and reinsurance, from the essential known internationally other as core well The as school) MBA risks. universities here. leading of (Kazakhstan’s assessment KIMEP from and Management/Finance reinsurance in insurance, graduates of MBA are knowledge members extensive with personnel experienced diverse comprises team Our London andotherprimeglobalInsurance/ReinsuranceMarkets. The Directors and Shareholders of CIS have over 20 years of experience in Kazakhstan’s Insurance Market and 40 years of direct involvement in the courses withinvariousuniversitiesforMBA departments. management risk and insurance teaches also He 2005. in member Kazakhstan in 1994. He started working with Willis again as a network and risk management consultant in prime markets until he relocated to broker insurance as acted then He years. four for JV Grassvoye and Hubener and Jauch Higgins, and Johnson Faber, Willis a in worked His experience of working with Willis goes back to early 1971, when he LL.D. graduateinInternationalLaw. an is He etc. Arabia, Saudi in Gas British and UAE; Dugas Neka, in plant power their in Berger+Babcock of ABB+Bilfinger consortium the such as: Floor Thyseen in their oil and gas refinery in the Middle East; places various in companies multinational for services provided has He etc. France, in Grasavoye and Germany; in Hubener and Jauch USA; the in Marsh UK; the in Willis as: such years 30 last the during Brokers brokers Reinsurance Insurance and Management Risk the international major with of member worked has He a 1989. since London been in (IBRC) Counsel Registration has He 1970. since consultant insurance and manager risk a been has Motamedi Homi mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Homi Motamedi

Consultant Company. Bank National examination and has been approved the to act as the passed CEO of the CIS Risk successfully has and insurances liability and property risk, locally all construction medical, energy,aviation, in expert per as them harmonised and approved legislations and internationally similar lines regulations. She is an insurance the servicing of of most capable became and company the within grew rapidly She clients. international and local with dealing executive, account Valentina Pan joined CIS Insurance Brokers in September 2008 as an iclg to: insurance &reinsurance 2019 mi:[email protected] +77273384174 Email: Tel: Kazakhstan Office 500/1,2,4, Almaty 105, Dostykav., BCPremier Alatau (insurance brokers)LLP (CIS) CIS RiskConsultantCompany Valentina Pan Current titles in the ICLG series include:

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