Difficult and novel issues have recently been a feature of a number of applications to the court in connection with business transfer schemes under Part VII FSMA 2000. In some cases, these issues have necessitated an early approach to the court for guidance. While the court will strive to assist if possible, judges have been clear that certain parameters apply.
In Re Lloyd’s Insurance Company SA [2018] EWHC 3228 (Ch), the court was asked to make an order giving preliminary indications as to how a proposed insurance business transfer application under Part VII FSMA 2000 might progress. In light of Brexit, arrangements are being made to ensure the continuity of non-life insurance business for the 1993 to 2018 years of account conducted by Lloyd’s members in the EEA. To avoid each member (or syndicate) having to make arrangements to transfer existing business and obtain separate authorisation to write new business in each EEA jurisdiction once passporting rights cease, Lloyd’s has established a new insurance company, authorised in Belgium, which will set up branches in other EEA jurisdictions and in the UK. Under the proposals, relevant EEA insurance business for the specified years of account will be transferred en bloc to the new company, which will write all new relevant EEA insurance business from 1 January 2019 and will reinsure the new and transferred business with Lloyd’s members.
The first issue was whether the court had jurisdiction to make an order that the proposed scheme was ‘fit for consideration’ by the court and, on a provisional basis, that certain proposed steps were ‘appropriate’. Norris J noted that while it was established that the court did not issue advisory opinions or (save in very rare circumstances) consider hypothetical questions, the court did have an inherent jurisdiction to express non-binding views. The question was the extent to which the court should participate in guiding the shape and form of a scheme that it would ultimately be asked to sanction.
Norris J noted that certain of the ring-fencing transfer scheme cases (see Business transfer schemes under Part VII FSMA 2000, Q&A here) indicated the court’s willingness to give “prospective guidance”, on the understanding that this was based on the information then before the court and subject to re-examination at any later point in the proceedings. However, Norris J was wary of acceding to any invitation to give a “provisional view” with the object of ‘de-risking’ the application, on the basis that this might then have an undue influence on the way it proceeded. He was prepared to express a view as to whether, on the material currently before the court, the proposed courses of action were “obviously incapable” of satisfying the applicable requirements (ie whether there was a potential ‘roadblock’ to the application). This aligned with the approach taken in inter partes litigation on applications to strike out a claim or for summary judgment where, again, the court did not in any way express a provisional view about the outcome of the case.
Norris J was on that basis content that the application was fit for consideration by the court at a directions hearing and sanction hearing (while acknowledging that, in some circumstances, the court might insist on a preliminary issue being taken). Further, at this stage in the proceedings and on the information currently available, there was no apparent impediment arising out of the proposed method for establishing that the transfer order would achieve a substantial purpose (see Business transfer schemes under Part VII FSMA 2000, Q&A here), nor was the outline communication programme (see Business transfer schemes under Part VII FSMA 2000, Q&A here) obviously inappropriate. Norris J was therefore prepared to make an order recording that he did not at present see any feature of the proposed scheme which rendered it obviously incapable of satisfying any criterion established by statute or by the authorities as needing to be fulfilled before sanction could be granted.
This article was first published in FromCounsel's Current Awareness on 17 January 2019.