Dispute Resolution

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Court of Appeal sets out correct approach to transfer of long-term Insurance.

By Victoria Sander, Jon Holland, Alex Cox, and Duncan Graves

Latham & Watkins has won an appeal on behalf of Rothesay Life Plc (Rothesay) in an unprecedented challenge to the High Court’s refusal to sanction the transfer of around 370,000 annuity policies in August 2019 (comprising total policyholder liabilities of approximately £11.2 billion) from The Prudential Assurance Company Limited (PAC) to Rothesay.

The Court of Appeal overturned the High Court’s refusal to sanction the scheme in a judgment[1] handed down on 2 December 2020, and set out the correct approach for a court to adopt when dealing with applications to sanction transfers of insurance business under Part VII of the Financial Services and Markets Act 2000 (FSMA).  The case is the first time an application under Part VII FSMA has been considered in detail by the Court of Appeal.

The Court of Appeal held that the judge was “not justified in making an adverse comparison between the financial strength, record and expectations of PAC and Rothesay”; that his reasoning had been based on a misunderstanding of the applicable financial metrics; and that he did not give adequate weight to the views of the independent actuarial expert or the on-going regulatory role of the PRA.  The Court of Appeal also held that, although non-actuarial factors may be relevant to the assessment of some Part VII applications, the subjective choice of provider by policyholders is not a relevant factor to be considered.

English law, courts and arbitral tribunals may become more relevant and popular after Brexit, not less.

By Oliver Browne, Sophie J. Lamb QC, Sanjev D. Warna-kula-suriya, and Tom Watret

Introduction

English law, courts, and arbitral tribunals may become more relevant and popular after Brexit, not less, and parties should continue to feel confident about including English governing law and jurisdiction clauses in their agreements.

In particular, the breadth of English common law jurisdiction and the powerful tools at the English courts’ disposal – notably, the anti-suit injunction and damages for breach of jurisdiction clauses – are likely to ensure that jurisdiction clauses in favour of English courts and tribunals are complied with.

The Court narrowly interprets dominant purpose to exempt general tax advice from legal privilege.

By Oliver E. Browne and Clare Nida

In Financial Reporting Council Ltd v Frasers Group Plc (formerly Sports Direct International Plc) [2020] EWHC 2607 (Ch), the High Court handed down the latest ruling in relation to the Financial Reporting Council’s (FRC) ongoing investigation into Grant Thornton’s audit of Sports Direct International. The Court’s previous ruling on this matter was discussed in this Latham.London blog post.

The Court narrowly interprets dominant purpose to exempt general tax advice from legal privilege.

By Oliver E. Browne and Clare Nida

In Financial Reporting Council Ltd v Frasers Group Plc (formerly Sports Direct International Plc) [2020] EWHC 2607 (Ch), the High Court handed down the latest ruling in relation to the Financial Reporting Council’s (FRC) ongoing investigation into Grant Thornton’s audit of Sports Direct International. The Court’s previous ruling on this matter was discussed in this Latham.London blog post.

The decision confirms that the UK government can recognise one person as de jure head of state of a foreign state and implicitly recognise another person as the de facto head of state.

By Charles Claypoole and Isuru Devendra

The English Court of Appeal’s recent decision in The “Maduro Board” of the Central Bank of Venezuela v The “Guaidó Board” of the Central Bank of Venezuela & Ors[i] concerned who controls Venezuela’s gold reserves in England: the ad hoc board of the Central Bank of Venezuela appointed by Mr. Juan Guaidó (the Guaidó Board) or the board of the Central Bank of Venezuela appointed by Mr. Nicolás Maduro (the Maduro Board).

Shijiazhuang Intermediate People’s Court declares arbitration agreement providing for ICC Rules arbitration seated in China invalid.

By Ing Loong Yang, Oliver Browne, and Isuru Devendra

In a dispute between Hebei Zhongxing Automobile Manufacturing Co., Ltd. (HZAM), a Chinese company, and Automotive Gate FZCO (FZCO), a UAE company, the Shijiazhuang Intermediate People’s Court declared invalid two related arbitration agreements that provided for arbitration in accordance with the Arbitration Rules of the International Chamber of Commerce (ICC) and to be held “in China”.

Four recent developments highlight the benefit of arbitration clauses amidst uncertainty about choice of court clauses.

By Oliver Browne and Tom Watret

Introduction

With the end of the Brexit transition period on 31 December 2020 fast approaching, four new important and interrelated developments have highlighted uncertainty about which courts will have jurisdiction in cross-border disputes and the enforcement of judgments from 1 January 2021:

  1. On 27 August 2020, the EU Commission published a revised Notice setting out its view of how various conflict of laws issues will be determined post-Brexit, including jurisdiction and the enforcement of judgments (the EU Notice).[1]
  2. On 28 September 2020, the UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements 2005 (Hague Convention 2005), ensuring continuity in application of the Hague Convention 2005 after the end of the Brexit transition period.[2]
  3. On 30 September 2020, the UK Ministry of Justice published “Cross-border civil and commercial legal cases: guidance for legal professionals from 1 January 2021” (the MoJ Guidance),[3] which is the UK equivalent to the EU Notice.
  4. On 1 October 2020, the deadline passed for the UK’s accession to the Lugano Convention 2007 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Lugano Convention 2007) to be approved in time for it to apply as of the end of the Brexit transition period, absent some work-around agreed at the time of any eventual Free Trade Agreement (FTA).

English High Court holds that alleged breaches of a director’s statutory duties can engage the ‘iniquity exception’, which disapplies legal professional privilege under certain conditions.

By Stuart Alford QC and George Schurr

In Barrowfen Properties v Girish Dahyanhai Patel & Ors.,[i] the English High Court held that the ‘iniquity exception’ to legal professional privilege will become engaged if:

  • An applicant can establish a “strong prima facie case” that a respondent director has breached at least one of their statutory directors’ duties.[ii]
  • Either of the following is true:
    • Those allegations involve fraud, dishonesty, bad faith, or sharp practice.
    • The director consciously or deliberately preferred their own interests over the interests of the company, and did so “under a cloak of secrecy”.

The court held that the appropriate standard of proof in such circumstances (“a strong prima facie case”) is a lower threshold than both (i) the balance of probabilities, and (ii) the summary judgment test (no real prospect of success).

The Convention, which entered into force this month, should allow courts in certain jurisdictions to recognize and enforce settlement agreements directly.

By Oliver E. Browne and Philip Clifford QC

Settling a dispute via mediation is one of the most time- and cost-effective approaches a party can take to resolve contentious issues. Mediation — a confidential amicable negotiation process facilitated by a third-party independent mediator — can be a very useful tool in the right circumstances.

Mediation’s effectiveness as a dispute…

A recent Privy Council decision examines the extent to which formal shareholder resolutions may be bypassed by relying on the Duomatic principle.

By Daniel Smith and Alanna Andrew

The ability for shareholders to pass resolutions — or assent to a course of action — quickly and informally is a potentially useful tool at any time, and even more so in times of financial and business uncertainty. Shareholders may wish to ensure time-pressured deals or restructurings are completed at speed. Companies may face liquidity challenges or expiring business opportunities, which require shareholder resolution. For creditors or bondholders, there may be an incentive to move swiftly, for example, if a receiver (who is appointed pursuant to the terms of a debenture and empowered to exercise the company’s voting rights) wishes to amend Articles of Association in order to effect a contentious restructuring.