I
In the field of reinsurance, one of the issues that frequently appears and brings about controversy is the aspect related to the applicable law.
The international nature of the business usually compromises different laws that are not always compatible; in fact, they can contradict each other.
Controversies arise when the parties have not clearly expressed the applicable law in the contract or when local laws limit in some way the contractual freedom in this regard.
On the other hand, these restrictions may not apply to reinsurance but to the insurance contract. The latter leads to an even more complex issue to resolve, which is nothing more than the potential decoupling between one law and another.
Particularly in Latin America, some countries establish limitations regarding the choice of applicable law and state courts in many cases do not have adequate legislative references to resolve conflicts.
This situation generates a certain degree of uncertainty for operators regarding the application of internationally recognized uses and practices in reinsurance matters.
Faced with this state of affairs, the work concerning Principles of reinsurance contract law- PRICL- emerges as good news.
This is a project led by the University of Zurich, with the participation of important European universities and the support of UNIDROIT – International Institute for the unification of private law –, which is definitely a key partner in the task.
It is a regulatory compendium for optional use along the vein of the PICC – Principles of international commercial contracts – that aims to give certainty to contractual relationships, to apply as eligible law between parties.[1]
The PICCs have been a precedent and inspiration for the ongoing project.
As stated above, we can achieve the latter via the attempt to unify certain rules and provide guidelines for a consistent interpretation.[2]
On the other hand, when the legislations impose the adoption of the local law, the instrument can be applied subsidiary as a compendium of uses and practices that allows establishing concepts that usually are not find in the regulations.
At this point, I take for granted that in general local laws are friendly to the application of widely recognized uses and customs in matters of commerce or those to which the parties expressly refer in the contract.
II
In 2019, the group published the first part of the work, in which included essential aspects of the contract, that is to say conceptual and operational.
In this way, the paper approaches the scope of application and how regulatory gaps are resolved, referring to the PICC as supplementary and complementary legislation.
As it could not be otherwise, it treats the uses and practices and the interpretation of the contract.
Respect for local, international and supranational mandatory rules is established.
A definition of a reinsurance contract[3] and the general duties that cover the treatment of the utmost good faith and confidentiality are included.
Among the duties, the work addresses the pre-contractual duty to declare the state of the risk and to provide relevant information.
During the execution of the contract, the obligation to pay the premium, the obligation to provide the relevant documentation and the right to inspection are included.
In the claim stage, the paper defines the duties of notification and the principles of follow the fortune and follow the settlements.
Additionally, it deals with the issue related to the punctual payment of the claim, establishing the principle that it must be “reasonably prompt”.
In a specific chapter, it covers actions for contractual and pre-contractual breaches. It shows different situations and effects.
Finally, it advances on the controversial issues related to Allocation & Aggregation, specifying concepts and effects.
In the published version, you can review both the jurisprudential and doctrinal precedents as well as the comments on the topics covered. This enriches the compendium and allows us to understand the origin of the rule.
The group right now is studying and reviewing many issues to complete the regulatory tool that I am commenting. The idea is to publish by the end of 2024
Finally, it advances on the controversial issues related to Allocation & Aggregation, specifying concepts and effects.
In the published version, you can review both the jurisprudential and doctrinal precedents as well as the comments on the topics covered. This enriches the compendium and allows us to understand the origin of the rule.
The group right now is studying and reviewing many issues to complete the regulatory tool that I am commenting. The idea is to publish by the end of 2024
III
The briefly commented compendium – the citations include the link for its complete reading – has its natural habitat in the field of arbitration.
The combination of both makes it possible to establish an efficient and predictable path in the resolution of reinsurance conflicts, especially in the region.
On the other hand, its wide dissemination could make it an instrument of authority and reference even for state courts.
Carlos A. Estebenet
PARTNER, BULLÓ ABOGADOS
[1] https://www.ius.uzh.ch/de/research/projects/pricl.html
https://www.unidroit.org/instruments/reinsurance-contracts/
[2] https://www.ius.uzh.ch/dam/jcr:8de5ebeb-d50d-45de-8c36-304a82bd66f5/Heiss,%20PRICL_Scandinavian%20Studies%20in%20Law.pdf
[3] Contract of reinsurance” means a contract under which one party, the reinsurer, in consideration of a premium, promises another party, the reinsured, cover against the risk of exposure to insurance or reinsurance claims.
